A manufacturing plant has the capacity to produce 1,000,000 widgets per year. Each sells for $20. The variable cost to produce each widget is $5 per widget. Annual operating costs are fixed regardless of production volume, and are $2,000,000 per year.
A) If the factory is operating at 25% of capacity, how much profit or loss is achieved? B) What percent of capacity is required for the plant to break even?
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