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Scenario: Carrier sells air conditioning units to distributors. Ahead of the upcoming summer, demand probability is 40,000 units (25%), 55,000 units (35%), 70,000 units (25%),

Scenario: Carrier sells air conditioning units to distributors. Ahead of the upcoming summer, demand probability is 40,000 units (25%), 55,000 units (35%), 70,000 units (25%), and 80,000 units (15%).

  • Fixed cost of production = $500,000
  • Variable cost of production per unit = $1,200
  • Per unit selling price= $1500
  • Salvage value for unsold products = $900

Answer the following question:

  1. If the manufacturer chooses to produce 70,000 units but there is demand for 80,000 units, how much total profit and per-unit profit would be lost?

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