Question

If the company can produce and sell no more than ​units, should it do​ so? A. . Since is equal to the​ break-even quantity, production of the product produce a profit. B. . Since is than the​ break-even quantity, production of the product produce a profit. C. . Since is than the​ break-even quantity, production of the product produce a profit. D. . Since is than the​ break-even quantity, production of the product produce a profit.

Answer 1

Answer: D.No. Since 26 is less than the break-even quantity, production of the product cannot produce a profit

Explanation:

At Breakeven the company will be making $0 in profit. The break-even number of units will therefore be;

0 = Revenue - costs

0 = 520x - (390x+15,340)

0 = 520x - 390x - 15,340

0 = 130x - 15,340

130x = 15,340

x = 118 units

As the break-even point is 118 units, anything below this will yield a loss. As the company has a capacity of 26 units, this is below the breakeven point so the company should not produce the good as they will surely make losses.