Question: A retail store sells a product that has a variable cost of $3 a unit. Fixed costs are $10,000 per month. The store manager

A retail store sells a product that has a variable cost of $3 a unit. Fixed costs are $10,000 per month. The store manager estimates that if the price is set at $5 a unit, the sales volume will be $10,000 units per month; whereas if the price is reduced to $4 a unit, the sales will rise to $15,000 per month. 1. After presenting the related equations, draw, on the same diagram, the lines of total revenue, total cost and profits as functions of the output. Do not forget to provide the scale used. 2. What are the budgeted profits when the prices are $5and $4 respectively? 3. Find the break-even quantity of each of the possible sales prices. 4. Which price is the most attractive to the manager? Justify your answer.

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