ABC, Inc. recently acquired a factory that incurs fixed costs of P540,000 annually. The normal production capacity of the factory is set at P250,000 units of product XYZ per year at a variable cost of P9.0 per unit. Assuming that ABC, Inc. is able to sell its products at P3.00 above variable cost, at what level should the company operate?

a. It would not matter, ABC, Inc. would not be able to earn a profit even at full capacity.

b. ABC, Inc. should produce at a level of 125,000 units a year in order to minimize variable costs.

c. ABC, Inc. can produce at any level because it can realize a profit of P3.00 per unit over variable cost.

d. ABC, Inc. should produce at a level 250,000 units a year in order to fully utilize the fixed costs.