Build a model to help a company determine gross profit. Gross profit is simply the excess of revenues over expenses. The company’s total costs contain both fixed and variable costs. Fixed costs are the same no matter how many units they sell, and variable costs fluctuate with sales volume.
It can be determined that this company's fixed costs are $150,000 per year.
Its variable costs are $20/unit.
If it sells 25,000 units at $60 each, what would its gross profit be?
Please show your work and formulas used to get to the answer.