Problema Solution
The fixed cost of producing a product is $18,000 and the variable cost is $153 each. If the company believes they can sell only 575 at $170 each, should they produce it?
Answer provided by our tutors
The total cost of producing 575 units is
C = 153*575 + 18000
C = $105,975
The revenue obtained by selling 575 units is
R = 575*170
R = $97,750
They should produce if there is no loss at least that is R >= C but in our case R < C so the answer is: they should not produce it.