Purchase Solution

Determining a Firm's Annual Profit or Loss

Not what you're looking for?

Ask Custom Question

A firm has the capacity to produce 1,000,000 units of a product each year. At present, it is operating at 70 percent of capacity. The firm's annual revenue is $700,000. Annual fixed costs are $300,000, and the variable costs are $0.50 per unit. The following equations will be useful.
Profit = Revenue - Costs
Revenue = Price each * quantity
Costs = Fixed Cost + Variable Costs = Fixed Cost + (cost each * quantity)
At the break even point, Profit = 0

a. What is the firm's annual profit or loss?
b. What is the price for each unit?
c. At what volume of sales does the firm break even?
d. What will be the profit or loss if the plant runs at 90 percent of capacity?

Purchase this Solution
Solution Summary

The following posting helps determine a firm's annual profit or loss. Step by step calculations are given.

Solution Preview

a. What is the firm's annual profit or loss?
Revenue = $700,000
Variable expense = units produced*variable cost per unit = Capacity *capacity utilization*variable cost per unit=1000000*70%*$0.50
=$350,000
Contribution margin = Revenue - ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Firm's Annual Profit or Loss

    244455 Firm's Annual Profit or Loss Hello, I have the following problem: A manufacturing firm has the capacity to produce 650,000 units of an electronic product per year.

  • Accounting problems for National Industries, Inc.

    i.What criteria should be applied in determining whether a gain or loss should be excluded from the determination of net earning?

  • Finance Exercises

    The gross profit or (loss) for year 1 is $___ (round to the nearest dollar) The gross profit or (loss) for year 2 is $___ (round to the nearest dollar) The gross profit or (loss) for years 3 is $___ (round to the nearest dollar) Q 4 As a project

  • Report to investors in the annual report on firm's litigation risks

    FASAB (1998) defines a contingent liability as an existing situation that involves uncertainty on whether a company will receive a gain or incur a loss thus is loss contingency and gain contingency.

  • Should the company shut down?

    Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. I need to provide a report and not sure if it should be shut down or continue to operate at a loss.

  • firm's marginal revenue

    A firm's marginal revenue is achieved.

  • Output, costs and profits

    For both cases, calculate the firm's profit or loss. For both sets of calculations, compare the firm's output price and the calculated average variable cost and average total cost.

  • game theory and two companies

    Each firm's market share and profits are a function of the size of its advertising and promotional campaigns. If the two firms engage in limited campaigns, each will earn an annual profit of $10 million.

  • Managerial Economics for Remox Corporation

    Calculate the annual deadweight loss to society due to the drug firm's market power in Zatab. What exactly does this deadweight loss represent? d.

View More Related Solutions