A Firm Produces Three Products in a Repetitive Process Facility

question 199

Essay

A firm produces three products in a repetitive process facility. Product A sells for $60; its variable costs are $20. Product B sells for $200; its variable costs are $80. Product C sells for $25; its variable costs are $15. The firm has annual fixed costs of $320,000. Last year, the firm sold 1000 units of A, 2000 units of B, and 10,000 units of C. Calculate the break-even point of the firm. The firm has some idle capacity at these volumes, and chooses to cut the selling price of A from $60 to $45, believing that its sales volume will rise from 1000 units to 2500 units. What is the revised break-even point?

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Definitions:

Discretionary Bonuses

Additional pay that is awarded at the employer's discretion and is not guaranteed, often based on company or individual performance.

Executive Profit Sharing

A compensation mechanism where executives receive a portion of a company's profits in addition to their regular salary.

Decertification Request

A formal application to remove the certification or recognition of a labor union as the bargaining representative of a group of employees.

Collective Bargaining

The process of negotiating employment terms between an employer and a group of employees, often represented by a union, to reach a labor agreement.