Answer:
Option A. $792,000
Option B. $211,800
Explanation:
At the level 106,000 Units, the price per unit and variable cost per unit will remain at $16 and $8 per unit.
<u>Option A.</u>
Sales (106,000 Units * $16) $1,696,000
Variable cost (106,000* $8) $848,000
Fixed costs <u> $56000 </u>
Operating Profit $792,000
<u>Option B.</u>
When the production exceeds 106,000 units level, the price per unit and variable cost per unit will remain at $9.8 and $8.5 per unit.
Sales (206,000 * $9.8) $2,018,800
Variable cost (206,000 * $8.5) $1,751,000
Fixed costs <u> $56,000 </u>
Operating Profit $211,800
The profit has been decreased substantially due to increase in Marginal cost.
