Question

The chisha company produces a product for which the variable cost per unit is k6 and fixed cost is k80 000. each unit has a selling price of k10. determine the number of units that must be sold for the company to earn a profit of k60 000.

Answer 1

To determine the profit-maximizing quantity of output, calculate total revenue, marginal revenue, total cost, and marginal cost for each output level (one to five units). Analyze the data and identify the quantity that results in the highest profit. The profit-maximizing quantity of output for AAA Aquarium Co. is 3 units.

Step-by-step explanation:

To determine the profit-maximizing quantity of output for AAA Aquarium Co., we need to calculate total revenue, marginal revenue, total cost, and marginal cost for each output level (one to five units). We can then analyze the data and identify the quantity that results in the highest profit. The table below summarizes the calculations:

QuantityPriceTotal RevenueMarginal RevenueTotal CostMarginal Cost1$20.00$20.00$20.00$40.00$40.002$20.00$40.00$20.00$65.00$25.003$20.00$60.00$20.00$100.00$35.004$20.00$80.00$20.00$150.00$50.005$20.00$100.00$20.00$230.00$80.00

The profit-maximizing quantity of output occurs when marginal revenue equals marginal cost. From the table, this happens at a quantity of 3 units. Therefore, the profit-maximizing quantity of output is 3 units.