For the coming year, Louder milk Inc. anticipates fixed costs of $600,000, a unit variable cost of

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Question:

For the coming year, Louder milk Inc. anticipates fixed costs of $600,000, a unit variable cost of $75, and a unit selling price of $125. The maximum sales within the relevant range are $2,500,000.

a. Determine the maximum possible operating loss.

b. Compute the maximum possible operating profit.

c. Construct a profit-volume chart on paper. Indicate whether each of the following levels of sales is in the operating profit area, operating loss area, or at the break-even point

4,800 units

8,000 units

12,000 units

16,000 units

20,000 units

d. Estimate the break-even sales (units) by using the profit-volume chart constructed in part (c).