Calculate breakeven quantities at a price of $65000 vehicle

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Reference no: EM133661943

Use this refresher on Breakeven Quantity to answer the following questions.

a. (Suppose an automobile manufacturer has fixed costs equal to $300 million, and variable costs per unit (aka marginal costs) equal to $45,000 per vehicle. Calculate the breakeven quantities at a price of $65,000/vehicle and at a price $50,000/vehicle.

b.) Suppose the firm is considering investing $20 million in a new marketing campaign. If the price is $65,000/vehicle, they estimate they would sell an additional 2,000 vehicles; If the price is $50,000/vehicle they estimate they would sell an additional 3,000 vehicles. Calculate the company's profits under both scenarios.

c.) Given your calculations above, should this firm invest the $20 million in the marketing campaign or not? If so, what price should they charge per vehicle?

Reference no: EM133661943

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