A small business sells reconditioned gearboxes. They buy all the component parts required for 350 and sell the gearboxes for 650. The total fixed costs per year have been identified to be 80,000.

(a) What is the marginal profit and how many gearboxes does the company need to sell to break-even?

(b) If the company sells 400 gearboxes per year, what is the total annual production cost and the average cost per gearbox?

(c) If the company receives a new one-off order for 10 gearboxes at 500 per unit and has the capacity to produce these gearboxes using existing facilities and labour, should the order be accepted? If so, why and what are the potential problems in taking such one-off orders?