A Small Business Owner Is Contemplating the Addition of Another

question 26

Essay

A small business owner is contemplating the addition of another product line.Capacity increases and equipment will result in an increase in annual fixed costs of $50,000.Variable costs will be $25 per unit.
(i)What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year?
(ii)Because of market conditions,the owner feels a revenue of $47 is preferred to the value determined in part a.What volume of output will be required to achieve a profit of $16,000 using this revenue?

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Definitions:

Probability .60

This refers to a likelihood or chance of something happening, expressed as sixty percent.

Chicken

A type of domesticated bird commonly raised for meat and eggs, and also a term used in various cultural contexts.

Payoff

The return or reward received from an investment or decision, often analyzed in financial and game theory contexts.

Pure Strategy Equilibria

A concept in game theory where each player chooses a single strategy that results in the best outcome for them, given the strategies chosen by other players in the game.