The fixed cost at Harley Motors is $5 million annuÂally. The main product has revenue of $89 per unit and $45 variable cost. Estimate the following: (a) Breakeven quantity per year; and (b) annual profit if 100,000 units are sold, and if 200,000 units are sold.
What will be an ideal response?
(a) 89x = 5,000,000 + 45x
44x = 5,000,000
x = 113,636
(b) At 100,000 units: Profit = revenue - cost
= 89(100,000) - [5,000,000 + 45(100,000)]
= $-600,000 (loss)
At 200,000 units: Profit = 89(200,000) - [5,000,000 + 45(200,000)]
= $3,800,000 (profit)
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