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Assume that a firm produces a consumer product at a variable cost of $7.25 and has fixed cost of $75,000 per month. Currently the firm sells 14,000 units per month priced at $14 per unit.
What is the current
Profitability of the firm?
What happens to profitability if:
a) Variable costs increase by 1%?
b) Fixed costs increase by 1%?
c) Units sold decreased by 1%?
d) Price decreases by 1%?
e) Which of the above has the greatest impact to profitability?
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