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Cany Photo Equipment Ltd. is operating at 65 percent of its normal capacity of 40...

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Accounting

Cany Photo Equipment Ltd. is operating at 65 percent of its normal capacity of 40 000 automatic zoom lenses per year. The annual fixed cost is S1 850 000, the variable costs, constant within the plant's capacity, are $60 per unit, and the selling price is currently $130 per unit. Cany is the sole producer of automatic zoom lenses, and the current market demand for the product is about equal to the firm's production level. A market survey shows that the price elas ticity of demand for the product is 3.5 as long as the price remains below $150.

i) Determine the break-even production rate and associated before-tax profit. ii Considering the high price elasticity of the product, how could Cany improve its situation?

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