Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit.Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs.QuantityTotal RevenueVariable CostsFixed CostsTotal CostsProfits (Loss)0 500 1,000 1,500 2,000 2,500 3,000 Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output.PQB = FC + VQBPQB - VQB = FCQB (P-V) = FCQB = FC P-VWhat would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management determined that fixed costs would be $10,000 instead of $6,000?

Answered: Management believes it can sell a new…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 46E: Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is...

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Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit.

Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs.

Quantity	Total Revenue	Variable Costs	Fixed Costs	Total Costs	Profits (Loss)
0
500
1,000
1,500
2,000
2,500
3,000

Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output.

PQ_{B =}FC + VQ_B

PQ_{B -} VQ_{B =}FC

Q_B(P-V) = FC

Q_B= FC

P-V

What would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management determined that fixed costs would be $10,000 instead of $6,000?

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