SOLUTION: (Break-even point and operating leverage) Allison Radios manufactures a complete line of radio and communication equipment for law enforcement agencies. The average selling price o

Question 277913: (Break-even point and operating leverage) Allison Radios manufactures a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison
Radios incur fixed costs of $540,000 per year.
$54 is the answer.
What would be the firm�s profit or loss at the following units of production sold:
12,000 units? 15,000 units? 20,000 units?

Answer by ankor@dixie-net.com(22740) (Show Source): You can put this solution on YOUR website!
Complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison
Radios incur fixed costs of $540,000 per year.
$54 is the answer.
:
What would be the firm�s profit or loss at the following units of production sold:
12,000 units? 15,000 units? 20,000 units?
:
Rev = 180x
Cost = 126x + 540000
:
Profit = Rev - Cost
P = 180x - (126x + 540000)
When x = 12000 units
P = 180(12000) - (126(12000) + 540000)
P = 2160000 - 1512000 - 540000
P = $108,000 profit
:
When x = 15000 units, do same as above
D
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