The costs and revenue projections for a new prod­uct are estimated. What is the estimated profit at a production rate of 20% above breakeven?

Fixed cost = $500,000 per year
Production cost per unit = $200
Revenue per unit = $250


QBE = 500,000/(250-200)
= 10,000 units per year
1.20QBE = (1.20)10,000 = 12,000 units

Profit = 50(12,000) – 500,000 = $100,000 per year

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