How can break-even analysis be used to project the level of operation needed to achieve a targeted profit level?
What will be an ideal response?
The targeted level of profit can be factored into the break-even equation as a fixed cost, and then determine the level of output and sales at which the operating costs plus fixed costs plus desired profit would just equal sales revenue: Q = (TFC + Desired Profit)/(P - AVC), where Q = output, TFC = total fixed cost, P = sales price, and AVC = average variable cost.
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How is the lemons problem in the used car market an example of asymmetric information?
What will be an ideal response?
A factor of production with unique attributes is able to command a scarcity rent determined by market demand
Indicate whether the statement is true or false
The opportunity cost of government purchases is greater when financed by borrowing than when financed by taxes.
Answer the following statement true (T) or false (F)
Empirical economics refers to the
A. exclusion of irrelevant data when analyzing a model. B. belief that what is true for a part is necessarily true for the whole. C. model of economics used prior to the Industrial Revolution. D. collection and use of data to test economic theories.