Question

XYZ company plans to market a new product. based on its market studies, the company estimates that it can sell 5500 units in 2004. the selling price will be $2 per unit. variable costs are estimated to be 40% of the selling price. fixed costs are estimated to be $6000. develop the revanue, cost and profit functions in terms of sales and quantity.

Answer 1

revenue = units * price/unit
r = 2x for x units

var cost = .2r
fix cost = 6400

total cost c = 6400 + .2(2x)
total revenue = 2x

breakeven when cost = revenue
2x = 6400 + .4x
1.6x = 6400
x = 4000

so, at 4000 units,

revenue = 8000
cost = 6400 + .2(8000) = 8000

Answer 2

Just use the formula