Question

Avocado Company sells guitars to Mexican restaurants. The guitars sell for $700, and the fixed monthly operating costs are as follows: Avocado understand that for every dollar of sales, $0.65 went to cover fixed costs, and anything above that point was profit. What is the amount of revenue that Avocado should earn each month to break even? (Round your answer to the nearest dollar.) $4308 $3963 $5040 $9360 Fruit Sushi Corporation sells delicious fruit sushi at a wholesale price of $4.00 per unit. The variable cost to manufacture is $1.75 per unit. The monthly fixed costs are $8500. Its current sales are 29,000 units per month. If the company wants to increase its operating income by 30%, how many additional units must it sell? (Round any intermediate calculations to two decimal places and your final answer up to the nearest whole unit.) 36,567 glass vases 8500 glass vases 7567 glass vases 116,000 glass vases

Answer 1

To calculate total revenue, we multiply the price per unit by the quantity sold. Marginal revenue is equal to the price per unit. Total cost is the sum of fixed costs and variable costs. The profit-maximizing quantity of output is where marginal revenue equals marginal cost.

Step-by-step explanation:

To calculate total revenue, we multiply the price per unit by the quantity sold. For each output level, the revenue is calculated as follows:

• One unit: $20
• Two units: $40
• Three units: $60
• Four units: $80
• Five units: $100

Marginal revenue is the change in total revenue when one additional unit is produced and sold. For each output level, the marginal revenue is equal to the price per unit:

• One unit: $20
• Two units: $20
• Three units: $20
• Four units: $20
• Five units: $20

Total cost is the sum of fixed costs and variable costs. For each output level, the total cost is as follows:

• One unit: $40
• Two units: $45
• Three units: $55
• Four units: $70
• Five units: $100

Marginal cost is the change in total cost when one additional unit is produced and sold. For each output level, the marginal cost is as follows:

• One unit: $40
• Two units: $5
• Three units: $10
• Four units: $15
• Five units: $30

The profit-maximizing quantity of output is where marginal revenue equals marginal cost. From the table, we can see that this occurs at two units. On the diagram, the total revenue and total cost curves start at the fixed cost level and increase with the quantity of output, but the total cost curve is steeper because of the variable costs. The marginal revenue and marginal cost curves are horizontal lines at the price per unit and the variable cost per unit, respectively.