6) For the past few years your company has sold 50,000 units of goods each year at a selling price of $26/unit. Fixed production costs were $300,000 and variable costs were $9 per unit. The Marketing Department expects 58,000 units for next year due to a new advertising campaign. Assume they are correct about the sales expectation and the costs remain the same. (a) What will be your company’s average total cost per unit next year? (b) What will be the marginal contribution rate? (c) What will be the profit margin next year? (d) What is the breakeven volume?

Explanation:

Expected sales(S) -58000 units

Variable cost ( VC) = $9/unit

Fixed cost ( FC) =$ 300000

Sales price =$26/unit

a) Average total cost next year

ATC=(TFC+TVC)/number of units sold = TC/number of units sold

TFC-Total fixed cost; TVC - Total variable cost; TC-Total cost

TVC= 9×58000= 522000

TC=300000+522000=822000$

ATC= 822000/58000= 14.17$

b) Marginal contribution rate = contribution per unit of quantity sold

Contribution = SP-VC = = 26 - 9= $ 17

SP - Selling price; VC -Variable cost

marginal contribution is $17

C) Profit margin = Total sales - total cost

Total sales =  58000*26; Total cost = 58,000*14.17

PM= 1508000-821860 = $ 686140

d) Break even volume =( Fixed cost/profit volume ratio)

P/ v ratio =( Contribution /sales ) = 17/26

Break even volume = 300000/( 17/26)  = 458824$

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know