Question

Moonwalker's CVP income statement included sales of 4,000 units, a selling price of

$100, variable expenses of $60 per unit, and fixed expenses of $88,000. Contribution
margin is
A) $400,000.
B) $240,000.
C) $160,000.
D) $72,000.

Answer 1

To find the profit maximizing quantity for Doggies Paradise Inc., we need to calculate the total revenue, marginal revenue, total cost, and marginal cost for each output level. The profit maximizing quantity is 3 units, where marginal cost equals marginal revenue.

Step-by-step explanation:

To find the profit maximizing quantity for Doggies Paradise Inc., we need to calculate the total revenue, marginal revenue, total cost, and marginal cost for each output level. Total Revenue (TR) can be calculated by multiplying the selling price ($72) by the number of units sold. Marginal Revenue (MR) can be calculated by finding the change in total revenue as output increases by one unit. Total Cost (TC) is the sum of fixed costs and variable costs. Marginal Cost (MC) is the change in total cost as output increases by one unit. Based on the table, the profit maximizing quantity can be determined by finding the output level where marginal cost equals marginal revenue.

Table:

Output LevelTotal RevenueMarginal RevenueTotal CostMarginal Cost1727216416421447224884321672362114428872546184536072820270

The profit maximizing quantity is 3 units, where marginal cost equals marginal revenue.

Keywords: Doggies Paradise Inc., profit maximizing quantity, total revenue, marginal revenue, total cost, marginal cost, output level