Answer to Question #34253 in Economics of Enterprise for Lailatul

Question

Offshore Petroleum's fixed costs are $2,500,000 and its debt repayment requirements are
$1,000,000. Selling price per barrel of oil is $18 and variable costs per barrel are $10.
b) Assuming all other factors remain unchanged, determine how the firm’s breakeven point is affected by each of the following:
i) The firm finds it necessary to reduce the price per unit because of increased foreign competition
ii) The firm’s direct labor costs are increased as a result of a new labor contract
iii) The Occupational Safety and Health Administration (OSHA) requires the firm to install new ventilating equipment in its plant. (assume that this action has no effect on worker productivity)