1. An ice cream producer has fixed costs of $70,000 per month, and it can produce up to 15,000 icecream tubs per month. Each tub costs $10 in the market while the producer faces variable costs of $3per tub. (a) What is the economic breakeven level of production? (b) Calculate the ice cream producer'smonthly profits at full capacity. What would happen to the monthly profits if another ice creamproducer entered the market, driving the price of the ice cream tubs down to $7 per unit? Support yourcalculations graphically.

Break even point production level is where there is no profit and no loss for Company.

Answered: am tubs per month. Each tub costs $10…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A firm has fixed operating costs of $100,000 and variable costs of$4 per unit. If it sells the product for $6 per unit, what is the breakeven quantity? (50,000)
LMN Ltd sells 2.0m units of its product Y per year at a selling price of R200 per unit. Variable costs are R125 per unit. Fixed costs are R100m per year. What is the degree of operating leverage (DOL) at the current level of sales? DOL = 3.50 b. DOL = 2.00 c. DOL = 1.50 d. DOL = 2.25 e. DOL = 3.00
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