Final answer:
The company should produce 190 units given the projected sales and desired inventory levels, excluding the mismatched options. In the WipeOut Ski Company example, the firm faces a loss because the total costs exceed the total revenues from selling 5 units at $25 each.
Step-by-step explanation:
Understanding Production Quantities and Business Costs
A company plans to sell 220 units, with a beginning inventory of 50 units and desires an ending inventory of 20 units. To determine how many units should be produced, we perform the following calculation:
- Projected Sales + Desired Ending Inventory = 220 units + 20 units = 240 units
- Available Inventory - Beginning Inventory = 240 units - 50 units
- Units to be Produced = 190 units
The answer appears to not match the provided options, indicating that there might be an error in the choices given or in the calculation process. Please double-check the figures.
To address a different part of finance and economics, consider the example of the WipeOut Ski Company:
- The firm's total revenues for producing 5 units at $25 each are $125.
- The total costs when producing five units are $130, leading to losses.
- This means the company would experience a loss of $5, as costs exceed revenues.
To quickly assess profitability, compare the unit price to the average cost. If the price exceeds the average cost, the product is profitable; if not, it leads to a loss. Whether the marginal unit adds to profits depends on if the revenue from selling one more unit exceeds the cost of producing that unit. Without additional data on the cost structure for each additional unit, we can't conclusively answer part c.