1. Assume that a firm produces an industrial product at a variable cost of $8,500 and has a fixed costs of $25,000 per week. Currently, the firm sells 20 units per week priced at $10, 625 per unit.

What is the current profitability of the firm?

What is the improvement to profitability if variable costs are reduced by 1 percent, holding all else constant?

What is the improvement to profitability if fixed costs are reduced by 1 percent holding all else constant?

What is the improvement to profitability if units sold are increased by 1 percent on average, holding all else constant?

What is the improvement to profitability if the price is increased by 1 percent, holding all else constant?

In isolation, improving which aspect of the firm will have the largest positive impact on profits variable costs, fixed costs, units sold or price?

2. Assume that a firm produces a consumer product at a variable cost of $7.25 and has a fixed costs of $75,000 per month. Currently, the firm sells 14,000 units per week priced at $14 per unit.

What is the current profitability of the firm?

What is the improvement to profitability if variable costs are reduced by 1 percent, holding all else constant?

What is the improvement to profitability if fixed costs are reduced by 1 percent holding all else constant?

What is the improvement to profitability if units sold are increased by 1 percent on average, holding all else constant?

What is the improvement to profitability if the price is increased by 1 percent, holding all else constant?

In isolation, improving which aspect of the firm will have the largest positive impact on profits variable costs, fixed costs, units sold or price?