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For a certain product, the cost function is linear with fixed costs of $480. If the product will sell for $25 per unit and the break even quantity is 80 units, find the marginal cost and marginal profit for the product.

Respuesta :

Answer:

Marginal Cost = $19

Marginal Profit = $6

Explanation:

Break even quantity = [tex]\frac{fixed cost}{contribution per unit}[/tex]

80 = [tex]\frac{480}{contribution}[/tex]

Contribution = [tex]\frac{480}{80}[/tex] = 6 per unit

Contribution = Sales - Variable cost = $25 - VC = $6

$25 - $6 = VC = $19

Marginal cost is cost incurred for every additional unit produced, i.e. variable cost = $19, as fixed cost remains constant.

Marginal revenue is additional revenue on sale of every unit = contribution per unit = $6

Marginal cost = $19

Marginal Profit = $6

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