Answer to Question #257249 in Economics of Enterprise for moatasem

Question

An engineer collected average cost and revenue data for Arenson’s FC1 handheld financial calculator. Fixed cost $ 300,000 per year Cost per unit $40 Revenue per unit $70 a. (2 questions) What is the range of the breakeven quantity to variation in the fixed cost from $200,000 to $400,000 per year? Use $50,000 increments. What is the incremental change in the breakeven quantity for each $50,000 change in fixed cost?

b. (2 questions) Show the sensitivity of profit to variation in revenue from $55 to $75 per unit using a $5 increment. Perform this analysis at two sales quantities: (1) the breakeven quantity for the collected data, and (2) 20% greater than this breakeven quantity. (Note: Be sure to use the original estimates for FC and cost per unit.)

Answer 1

Breakeven quantity=$\frac{fixed \space cost}{revenue-variable\space cost}$

a.

b.