Practice Calculations P.355 #1A) the Essay

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b) 1) ($20-$5) = $15; $1,200,000 / 15 = 80,000 units

2) if the company wants to sell just 70,000 units, then the price needs to be calculated again using the same formula as was used above:

70,000P -- (70,000*5) -- 1,200,000 = 0

70,000P = 1,550,000

P = $22.15

c) 1) This question is a bit silly.

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The formula would have one variable, x, to represent both the old and new sides:

19x -- 5x -- 1,200,000 = 20x -- 8x -- 840,000

14x -1,200,000 = 12 x -- 840,000

2x = 360,000

x = 180,000 units should give the same level of profit for either plant. The profit at this level would be:

19(180,000).....

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