3. A fi rm has the capacity to produce 1,000,000 units of a product each year.

At present, it is operating at 70 percent of capacity. The fi rm’s annual revenue is $700,000. Annual fi xed costs are $300,000, and the variable costs are $0.50 per unit.

a. What is the fi rm’s annual profi t or loss?

b. At what volume of sales does the fi rm break even?

c. What will be the profi t or loss if the plant runs at 90 percent of capacity assuming a constant income per unit and constant variable cost per unit?

d. At what percent of capacity would the fi rm have to run to earn a profi t of

$90,000?