Circle Corporation makes a product that sells for $400 per unit. The variable costs to make this product are $220 per unit. Fixed costs total $750,000 for the year. Circle currently sells 5,000 units each year.
A. Calculate the number of units Circle must sell to break even.
B. Calculate the number of units that Circle must sell to make $350,000 in profits.
C. Circle can expand its operations by purchasing the building next to it. That purchase the renovations needed to get the expansion up and running will raise Circle's fixed costs to $780,000 per year. The efficiency the second plant will add will drop Circle's variable costs to $190 per unit from $220 per unit. How many units will Circle need to sell to make $350,000 in profits if this building and expansion is completed?
D. Circle estimates that $45,000 in TV advertising would increase the company's sales by 15%. Should the company purchase the TV ads? Use the original data to calculate this question, do not consider the building expansion in this decision.
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