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A US company has revenue of $5.5 million and total costs of $7.5 million, which are or can be broken down into the total fixed
A US company has revenue of $5.5 million and total costs of $7.5 million, which are or can be broken down into the total fixed cost of $3 million and total variable cost of $4.5 million. The net loss on the firm's income statement is reported as $2,000,000 (ignoring tax implications). In prior periods, the firm had reported profits on its operations.
- What decision should the firm make regarding operations over the short term?
- What decision should the firm make regarding operations over the long term?
- Assume the same business scenario except that revenue is now $5.0 million, and total costs of $7.5 million, which are or can be broken down into the total fixed cost of $3 million and total variable cost of $4.5 million, which creates a net loss of $1.2 million. What decision should the firm make regarding operations in this case?
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