Michael Cohen is a factory manager at Company XYZ that manufactures refrigerators. For the sake of simplicity, suppose:

Manufacturing costs for a new QR31 refrigerator consist entirely of fixed manufacturing overhead costs ($5,000 regardless of the production level).

Michael receives a year-end bonus of 10% on the plants net income.

A company focus group indicates initial sales for the QR31 refrigerator in the next year will be 1 unit for $1,000.

Michael must decide how many units of the new refrigerator (QR31) to produce next year. Michael is considering 2 options:

OPTION 1 - Produced 1 unit; sold 1 unit

OPTION 2 - Produced 5,000 units; sold 1 unit

Because Michael is not very comfortable with numbers, he consults with his personal accountant (you) about what he should choose.

OPTION A: leads to a net loss of 4,000

How do I calculate option B????