A firm has the capacity to produce 1 359 240 units of a product each year....

A firm has the capacity to produce 1 359 240 units of a product each year. At present, it is operating at 81 percent of capacity. The firm's annual revenue is $1 396 130. Annual fixed costs are $214 191 and the variable costs are $.32 cents per unit. The following equations will be useful.

Profit = Revenue - Costs
Revenue = Price each * quantity
Costs = Fixed Cost + Variable Costs
Variable Cost = Variable Cost per unit * number of units
At the break even point, Profit = 0

What is the firm's annual profit or loss?

Expert Solution

Variable Cost = Variable Cost per unit * number of units

= $0.32 x (1,359,240 x 81%) = $0.32 x 1,100,984.40 = $352,315.01

Costs = Fixed Cost + Variable Costs

= $214,191 + $352,315.01 = $566,506.01

Profit = Revenue - Costs

= $1,396,130 - $566,506.01 = $829,623.99

jeff jeffy answered 2 years ago

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