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scoundrel [369]
3 years ago
15

Merowak Missiles has developed its Democratizer Offensive Weapon System (DOWS) for the US military. After sinking $1 billion int

o R&D and design, it spent $0.5 billion building the tools and production facility that are unique to DOWS production. It houses these in standard factory floor space that costs $1 million. Each missile has a marginal cost of $2,000. The Pentagon is thinking of discontinuing the program because the missiles are too expensive. If Merowak were to get an order for 50,000 missiles, what would its breakeven price be?
Business
1 answer:
balu736 [363]3 years ago
4 0

Answer:

$100,000,000

Explanation:

To calculate relevant break even cost point we ignore all the sunk funds and fixed costs that have already been paid.

This includes,

R&D funds of $1 billion

Tools of $0.5 billion

Factory of $1 million

None of these are the relevant or incremental costs and thus to calculate break even for this order, they will be avoided.

The Break even cost = 50,000 * 2000 = $100,000,000

We only account for the cost of producing each additional unit that is the Marginal Cost of $2,000/missile.

Hope that helps.

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Answer:

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One thing is certain, the quantity demanded and supplied increased, so the total quantity sold definitely increased. The price issue is not certain because you would need additional information about which shift was larger, the shift of the supply curve or the demand curve.

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Solution:

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Explanation:

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