A firm makes 500 units of a part. If the demand is only 400, determine the profit, given that the selling price is $12/unit, fixed costs are $1000, and variable costs are $2/unit. Excess inventory can be sold at an online auction for $3/unit on average. If demand cannot be met, there is a cost of unmet demand (dissatisfied customers, customers who go to a competitor) that is estimated at $2.50/unit.
1. What is the profit?
2. For the previous problem, determine profit if the demand were 600 units, all other things being the same as before.