Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit.Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs.QuantityTotal RevenueVariable CostsFixed CostsTotal CostsProfits (Loss)0 500 1,000 1,500 2,000 2,500 3,000 Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output.PQB = FC + VQBPQB - VQB = FCQB (P-V) = FCQB = FC P-VWhat would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management determined that fixed costs would be $10,000 instead of $6,000?

The break-even output (Qb) is the one where the firm's profits are reduced to zero. That is , its…

Answered: Management believes it can sell a new…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit.

Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs.

Quantity	Total Revenue	Variable Costs	Fixed Costs	Total Costs	Profits (Loss)
0
500
1,000
1,500
2,000
2,500
3,000

Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output.

PQ_{B =}FC + VQ_B

PQ_{B -} VQ_{B =}FC

Q_B(P-V) = FC

Q_B= FC

P-V

What would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management determined that fixed costs would be $10,000 instead of $6,000?

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