A plant operation has fixed cost of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $70 per unit, and the product sells for $120 per unit. a) What is the annual break even volume of this product? b) Compare annual profit when the plant is operating at 90% capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $120 per unit and that the remaining 10% of production is sold at $100 per unit.
A plant operation has fixed cost of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $70 per unit, and the product sells for $120 per unit. a) What is the annual break even volume of this product? b) Compare annual profit when the plant is operating at 90% capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $120 per unit and that the remaining 10% of production is sold at $100 per unit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A plant operation has fixed cost of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $70 per unit, and the product sells for $120 per unit.
a) What is the annual break even volume of this product?
b) Compare annual profit when the plant is operating at 90% capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $120 per unit and that the remaining 10% of production is sold at $100 per unit.
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