Demand fucnction and total cost function.?
A company knows the cost to produce 1000 items is $8000, while the cost to produce 5000 items is $16000.
(a) Find the total cost function given that it is linear.
(b) If the items sell for $4.00 respectively, what is the break-even point/quantity?
(c) If the demand function is q = 4000 - 200p and the Total Cost function is as in (a), what amount will maximise the profit? What is the corresponding price and profit?
Answers: y=a.x+b is equation of linear function
(a) Y=2X+6000 where Y is total cost and X is quantity (number items produced) and 6000 is fixed costs and a=$2 is unfixed cost per one item produced
(b) 4X = 2X + 6000 => 3000 items
(c)
spreadsheet:
price/sales rev/ quantity/cost/profit
11/19800/1800/9600/10200
1800 items sold at $11 for max profit of $10200
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(a) Find the total cost function given that it is linear.
(b) If the items sell for $4.00 respectively, what is the break-even point/quantity?
(c) If the demand function is q = 4000 - 200p and the Total Cost function is as in (a), what amount will maximise the profit? What is the corresponding price and profit?
Answers: y=a.x+b is equation of linear function
(a) Y=2X+6000 where Y is total cost and X is quantity (number items produced) and 6000 is fixed costs and a=$2 is unfixed cost per one item produced
(b) 4X = 2X + 6000 => 3000 items
(c)
spreadsheet:
price/sales rev/ quantity/cost/profit
11/19800/1800/9600/10200
1800 items sold at $11 for max profit of $10200