What is the profit per unit

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Reference no: EM133279561

Case 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

The manufacturer is considering production quantities of 40,000 units or 80,000 units. For the 40,000 unit plan, assume 95% of product will be sold and 5% will be salvaged; for the 80,000 unit plan, assume 80% of product will be sold and 20% will be salvaged. What is the profit per unit? Which option would you select and why?

Reference no: EM133279561

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