Question

Last year, perry company reported profits of $4,200. its variable expenses totaled $66,000 or $6 per unit. the unit contribution margin was $3.00. the break-even point in units for perry company is:

Answer 1

To maximize profits, Doggies Paradise Inc. should produce 4 units of winter coats for dogs.

Step-by-step explanation:

To calculate total revenue, we multiply the quantity sold by the price per unit. For example, if Doggies Paradise Inc. sells one unit, their total revenue is $72. The table below shows the total revenue, marginal revenue, total cost, and marginal cost for each output level:

Output Level (units)Total RevenueMarginal RevenueTotal CostMarginal Cost1$72$72$164$1002$144$72$248$843$216$72$362$1144$288$72$546$1845$360$72$830$270

The profit-maximizing quantity is the level of output where marginal revenue equals marginal cost. From the table, we can see that at an output of 4 units, marginal revenue is $72 and marginal cost is $184. Therefore, producing 4 units is the profit-maximizing quantity for Doggies Paradise Inc.