Question
1. (12) Read the following article on Breakeven Quantity from Harvard Business Review: https://bit.ly/3eXmq2J then use it answer the following questions. a. (6) Suppose an
1. (12) Read the following article on Breakeven Quantity from Harvard Business Review:https://bit.ly/3eXmq2J then use it answer the following questions.
a. (6) Suppose an automobile manufacturer has fixed costs equal to $300 million, variable costs per unit (aka marginal costs) equal to $45,000 per vehicle. Calculate the breakeven quantity at a price of $65,000/vehicle and at a price $50,000/vehicle.
b.) (6) Suppose the company is considering investing $20 million in a new marketing campaign. They estimate they would sell an additional 2,000 vehicles if the price is $65,000/vehicle or sell an additional 3,000 vehicles if the price is $50,000/vehicle. Calculate the company's profits under both scenarios. Should they invest the $20 million in the marketing campaign? If so, what price should they charge?
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