Question

4,950,000 units

New Fixed Cost: $990,000

Contribution Margin = Selling Price - Variable Cost
$0.50 - $0.30 = $0.20 (Contribution Margin)

Breakeven # of Units = Fixed Costs / Contribution Margin per Unit
$990,000 / $0.20 = 4,950,000 (Breakeven # of Units)

Answer 1

To calculate total revenue, multiply the quantity of units sold by the selling price. The profit maximizing quantity can be determined by finding the point of intersection between the marginal revenue curve and the marginal cost curve.

Step-by-step explanation:

To calculate total revenue, multiply the quantity of units sold by the selling price. For example, when one unit is sold, the total revenue is $72. The marginal revenue can be calculated by finding the change in total revenue as output increases. For example, when one more unit is sold, the marginal revenue is $72.

To calculate total cost, add the fixed cost to the variable cost. For example, when one unit is produced, the total cost is $164. The marginal cost can be calculated by finding the change in total cost as output increases. For example, when one more unit is produced, the marginal cost is $50.

The profit maximizing quantity can be determined by finding the point of intersection between the marginal revenue curve and the marginal cost curve.