A firm has the following total revenue and total cost schedules: TR= $

QUESTION

A firm has the following total revenue and total cost schedules: TR= $2Q, TC= $4,000 + $1.5Q. a.) What is the break-even level of output? What is the level of profits at sales of 9,000 units? b.) As the result of a major technological breakthrough, the toal cost schedule is changed to: TC= $6,000 +
Given information:- Total Revenue = $2Q Total cost = $4000 $1.5Q What is the break-even level of output? What is the level of profits at sales of 9,000 units? Total cost = Fixed cost Variable Cost = $4000 $1.5Q Total Revenue = $2Q Breakeven point (Q) = Fixed cost / Price per unit Variable cost = 4000 / 2Q 1.5Q = 4000/0.5 = 8000 B E P Level of out put = 8000 units

Level of profit at sales 9000 units is BEP of out put = Total fixed cost Target profit / Contribution margin 9000 = 4000 Target profit / 0.5 4000 Target profit = 9000 * 0.5 4000 Target profit = 4500 Target profit = 4500 4000 Target profit = $500

ANSWER:

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