Gaming Corp. produces and sells the “Game-Box 720”, a digital gaming device. The market selling price...

Gaming Corp. produces and sells the “Game-Box 720”, a digital gaming device. The market selling price is $190 per unit.The firm’s regular costs are as follows:

Fixed production costs $1,000

Variable production costs per unit $50

Variable marketing costs per unit sold in the normal market $10

The firm’s production facilities provide it with the capacity to produce a total of 15 units of product per period. Given current market conditions, the firm expects to produce and sell 10 units.As a result of a special order received and accepted last year, Gaming Corp. leased additional production facilities which are available for use this year. For this year, the rent for these leased facilities is $300 and they will provide the company with the capacity to produce an additional 5 units.

1)At the expected level of output, what is the firm’s average production cost per unit?

2)At the expected level of output, what will the firm’s total profit be?

3)During the year, the firm received a special order from Cassar Inc. for 5 units at a price of $130 per unit. Cassar wants to give the devices away next period as a part of an advertising promotion. Should the firm accept or reject the offer?(Provide the calculations that support/justify your answer.)Should the firm accept or reject the offer?

4) Before reaching a decision regarding the Cassar order described above, Gaming Corp. received a second special order from Baiman Corp. Baiman offered to purchase 8 units at a price of$129 per unit. In addition, Gaming Corp. was approached by the company that leased it the additional factory space last year. It offered to cancel Gaming Corp.’s lease for a cancellation fee of $80. What is the maximum profit that Gaming Corp. can achieve?

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