Question

3,680,000 units

New Selling Price: $0.55
New Fixed Costs: $920,000

Contribution Margin = Selling Price - Variable Cost
$0.55 - $0.30 = $0.25 (Contribution Margin)

Breakeven # of Units = Fixed Costs / Contribution Margin per Unit
$920,000 / $0.25 = 3,680,000 (Breakeven # of Units)

Answer 1

To find the profit-maximizing quantity, compare the marginal cost and marginal revenue curves and determine the quantity at which they intersect.

Step-by-step explanation:

Total revenue, marginal revenue, total cost, and marginal cost can be calculated for each output level using the given information. On one diagram, a sketch of the total revenue and total cost curves can be made. On another diagram, the marginal revenue and marginal cost curves can be sketched. To find the profit-maximizing quantity, we compare the marginal cost and marginal revenue curves and determine the quantity at which they intersect.