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Consider the following scenario. The costs of production are $5/unit. The fixed costs are $400,000 1- Compute the break-even volume at $9/unit. 2- Assume that
Consider the following scenario. The costs of production are $5/unit. The fixed costs are $400,000 1- Compute the break-even volume at $9/unit. 2- Assume that the firm can sell 120,000 units at $9. By investing an additional $200,000 in fixed costs to be spent on advertising the firm can sell an additional 20,000 units at the same price. Would you recommend that the firm make this investment in advertising? Explain your answer.
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