Question Description

I’m working on a business multi-part question and need an explanation to help me understand better.

MHM produces lawn chairs which it sells for $40 each. Its total fixed costs are $2,800,000 per year, its variable costs are $18 per lawn chair, and its corporate tax rate is 25%. In a strong economy, it expects to sell 200,000 lawn chairs whereas in a weak economy, it will only sell 150,000 chairs. How much lower will MHM’s profits be in a weak economy compared to a strong economy?

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