The Sherston Brick Company manufactures a standard stone block for the building industry. The production capacity for the year is $100,000$ standard blocks. The selling price per block is $$1\mathrm{.}60,$ variable costs are $$0\mathrm{.}60$ per brick and fixed costs are $$60,000$ per annum. Conduct breakeven analysis. What is the breakeven point, and what is the revenue at that point.

The market for blocks becomes much more competitive, and SBC reduces its price to $$1\mathrm{.}50$ per brick. Sales still decline to $80,000$ bricks, whilst costs rise relentlessly. Variable costs rise to $$0\mathrm{.}66$ per brick and rises in business taxes and other contributions increase fixed costs to $$80,000$ per annum. Conduct the breakeven analysis. Comment on the changes. Illustrate with graphing.

Question $2$

Mina is considering investing some money that She inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives

Status of Nature

Alternatives Good Economy Poor Economy

Stock Market $80,000-20000$

Bonds $30,00020000$

CD$,$s $2300023000$

P $0\mathrm{.}50\mathrm{.}5$

What decision would maximize expected profits $($EMV$)?$

If the p for Good Economy changes to $0\mathrm{.}2,$ how does that effect the maximum expected profit $($EMV$)?$ explain.

What is the best decision based on the pessimistic approach?

What is the best decision based on the optimistic approach?

Develop the opportunity loss table.

What is the best decision to minimize the EOL?