Answered Essay: Sunk Costs Save Question 7 (1 point) Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by \$10,000 then thei

Sunk Costs Save Question 7 (1 point) Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by \$10,000 then their profit increases/decreases by how much? Sales Variable Costs Fixed Costs Your Answer: \$50,000 \$8,100 \$28,000

Current profit=(Sales-Variable costs-Fixed costs)

=(\$50000-\$8100-\$28000)=\$13900.

Hence if sales increases by \$10000 ie an increase of =(\$10,000/50,000)=20%.;

Variable costs would also increase by 20% ie :

New sales=(\$50,000*1.2)=\$60,000

Less:Variable costs(\$8100*1.2)=\$9720

Less:Fixed costs=\$28000

New profits=\$22280.

Hence increase in profits=(\$22280-\$13900)=\$8380.

Fixed costs do not change with change in units sold .

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