A firm has the capacity to produce 1000000 units of a...

A firm has the capacity to produce 1,000,000 units of a product each year. At present, it is operating at 70% of capacity. The firm's annual revenue is $700,000. Annual fixed costs are $300,000, and the variable costs are $0.50 per unit. a. What is the firm's annual profit or loss? b. At what volume of sales does the firm break even? c. What will be the profit or loss if the plant runs at 90% of capacity assuming a constant income per unit and constant variable cost per unit? d. At what percent of capacity would the firm have to run to earn a profit of $90,000?

Transcript

0:00 Hello.

00:03 Let's start with part a.

00:08 Part a, what is the firm's annual profit or loss? it's given that, let me first calculate the quality produced, so this firm is operating at 70 % of capacity, so 70 % of 1 million is 700 ,000.

00:37 But for now, for now, for now, for now, for now.

00:38 It's not necessary we need we already have the annual revenue revenue is so here we calculate the profit or loss we'll see so profit is revenue which is given and as we can see price is one dollar because the quantity is equal to total revenue and we subtract the fixed cost and variable cost.

01:08 Variable cost is 50 cents per one unit and we multiply variable cost by the quantity and we subtract fixed costs which are 300 ,000 and we can find that profit is 50 ,000 dollars.

01:37 Okay, now we can calculate the answer to the part b at what volume of sales it will be the break -even quantity now we calculate the break -even quantity so for this we divide the fixed cost fixed cost is given it's a three hundred thousand dollars we divide this by the difference between price and we can find the price by dividing total revenue over quantity it will be one dollar so one minus variable cost per unit which is 0 .5 and this quantity will be equal 600 ,000 dollars and lastly what will be the profit or loss for the plant let me understand this.

03:02 I hope it's written better so give me a second.

03:07 I simply don't understand what is written here.

03:11 I hope you can write better but i don't understand what is the question.

03:24 Give me a second...

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