Question
Amman Company produces educational games for kids since year 2008. A new educational game has come onto the market by another company. The Company is
Amman Company produces educational games for kids since year 2008. A new educational game has come onto the market by another company. The Company is keen to produce and sell the new game. The selling price will be $3 per game. Enough capacity exists in the companys factory to produce 16,000 units of the new game each month. Variable costs to manufacture one unit of the game would be $1.25, and the fixed costs of the new game is $35,000 per month. The company estimated that the demand for the game will exceed the 16,000 units that the company is able to produce. To produce additional quantities, a new space area should be rented and this will cost the company $1,000 extra fixed costs per month and the variable costs will also increase by $0.15 per unit.
Required: The General Manager of the company has decided to rent the new space and produce additional quantities of the game but he asked you "As a Senior Manager" to determine the monthly units the company should sell to cover all fixed and variable costs for the new game.
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