Future Business Leader Achievments (FBLA) Economics Practice Exam

A bakery has fixed costs of $5,000 per month and variable costs of $1.00 per load of bread. How much profit will the bakery earn if it sells 5,000 loaves of bread per month at $2.00 per loaf?

1. $1,000 per month

2. $500 per month

3. $0 per month

4. -$1,000 per month

The correct answer is: $0 per month

To determine the profit earned by the bakery, we first need to calculate the total revenue, total costs, and then find the profit by subtracting the total costs from total revenue. The total revenue can be calculated by multiplying the number of loaves sold by the price per loaf. In this case, the bakery sells 5,000 loaves at $2.00 each, resulting in a total revenue of: 5,000 loaves × $2.00/loaf = $10,000. Next, we need to calculate the total costs, which include both fixed and variable costs. The fixed costs are given as $5,000 per month, and the variable costs are $1.00 per loaf. Since the bakery sells 5,000 loaves, the total variable costs are: 5,000 loaves × $1.00/loaf = $5,000. Now, we sum the fixed and variable costs to get the total costs: Total costs = Fixed costs + Variable costs Total costs = $5,000 + $5,000 = $10,000. Finally, we calculate the profit by subtracting the total costs from the total revenue: Profit = Total revenue - Total costs Profit =