A firm produces three products in a repetitive process facility. Product A sells for $50; its variable costs are $25. Product B sells for $180; its variable costs are $70. Product C sells for $30; its variable costs are $20. The firm has annual fixed costs of $340,000. Last year, the firm sold 1200 units of A, 2500 units of B, and 12,000 units of C.
a) Calculate the break-even point of the firm.
b) The firm has some idle capacity at these volumes, and chooses to cut the selling price of A from $50 to $40, believing that its sales volume will rise from 1200 units to 2400 units. What is the revised break-even point?
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