18. MHM produces lawn chairs which it sells for $40 each. Its total fixed costs are...

18. MHM produces lawn chairs which it sells for $40 each. Its total fixed costs are $2,800,000 per year, its variable costs are $18
per lawn chair, and its corporate tax rate is 25%. In a strong economy, it expects to sell 200,000 lawn chairs whereas in a weak
economy, it will only 150,000 chairs. How much lower will MHM's profits be in a weak economy compared to a strong economy?

Expert Solution

Profits = Total revenue - (Total costs + Corporate Tax)

So, after calculation we get that MHM's profits are down by $200,000 if they sell in a weak economy.

The working for the above answers is shown in the figures below.

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Rahul Sunny answered 2 years ago

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