A firm makes and sells a computer for $1000. The variable cost to produce A comp

Question

A firm makes and sells a computer for $1000. The variable cost to produce A computer, for the range of production of the firm, is $300 per unit. The total fixed cost per year to make the computer are $4.0 million. How many computers must me made and sold, given this information, before the firm makes a profit? How many must be made and sold to earn a $1 million pretax profit? A firm makes and sells a computer for $1000. The variable cost to produce A computer, for the range of production of the firm, is $300 per unit. The total fixed cost per year to make the computer are $4.0 million. How many computers must me made and sold, given this information, before the firm makes a profit? How many must be made and sold to earn a $1 million pretax profit? A computer, for the range of production of the firm, is $300 per unit. The total fixed cost per year to make the computer are $4.0 million. How many computers must me made and sold, given this information, before the firm makes a profit? How many must be made and sold to earn a $1 million pretax profit?

Explanation / Answer

Break even sale (no profit condition) = fixed cost/ contribution per unit = fixed cost / (price - variable cost unit)

= 4000000/ (1000-300)

= 4000000 / 700

= 5,714.29 units

Profit ( $1 million) quatity =

fixed cost/ contribution per unit =( fixed cost+profit )/ (price - variable cost unit)

= (4000000+1000000)/ (1000-300)

= 5000000 / 700

= 7,142.86 units

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