What is the minimum number of units that the company needs to produce and sell to avoid any loss?
Explanation:
Observing the values through the years, we can say that Material, Labour and Operating costs directly vary with the change in volume of production.
The other costs are almost constant.
If the production is x units, the variable cost for material, labour and operation is 50x, 20x and 30x respectively.
∴ Total variable cost = 100x
Total fixed cost (using information for 2006) = 1400 + 1200 + 400 + 800 + 5800 = 9600
∴ Total cost of producing x units = 100x + 9600
Now, x = 1400
From the explanation given in the first question, to avoid any loss, 100x + 9600 ≤ 125x
∴ x ≥ 384
Hence, option (c).
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