Question: Management believes it can sell a new product for $10.00. The fixed costs of production are estimated to be $5,000 and the variable costs are $5.00 per unit.
a. Complete the table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs.
|
Quantity
|
Total Revenue
|
Variable Costs
|
Fixed Costs
|
Total Costs
|
Profits
(Loss)
|
|
0
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
b. Determine the breakeven point using the table and use the following equation to calculate breakeven point:
Q = (FC)/(P-V)
c. What would happen to the total revenue schedule, the total cost schedule, and the breakeven level of output if management determined that fixed costs would be $8,000 instead of $5,000?