Problem
Consider the following scenario. The costs of production are $5 per unit. The fixed costs are $400,000.
i. Compute the break-even volumes at $9/unit.
ii. Assume that the firm can sell 120,000 units at $9. By investing an additional $200,000 in fixed costs to be spent on advertising the firm can sell an additional 20,000 units the firm make this investment in advertising? Explain your answer.