How many units per year must be sold with each process to have annual profits of $50,000 if the selling price is $6.95 per unit?
Three production processes—A, B, and C—have the following cost structure:
Q = (profit + FC)/(price - VC)
Process A: Q = ($50,000 + $120,000)/($6.95 - $3.00) = 43,038 units
Process B: Q = ($50,000 + $ 90,000)/($6.95 - $4.00) = 47,458 units
Process C: Q = ($50,000 + $ 80,000)/($6.95 - $4.50) = 53,062 units
Process A requires the lowest production volume for an annual profit of $50,000.
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