A business produces a product where its annual costs are $50,000 for rent that is unavoidable and $30,000 on fixed overheads that could be avoided with shut down. There are also variable costs that amount to $40 per unit of output produced. Unfortunately, demand has been declining, and now the owner is considering whether to shut the business down, perhaps temporarily. The owner comes to you (one of their newly hired managers) and asks for your advice. You are told to assume three possible levels of sales over the next year – a low level of 3000 units, an expected level of 5000 units, and a high level of 8000 units. To provide your advice you should:

a) Determine the price where the business would need to break even at each of the output levels

b) Determine the price below which the business would choose to shut down at each of the output levels.

c) Given your results, what advice would you give the owner?