In its first year, Abol buna Company had the following experience.

Question

Sales = 25,000 units Selling price = Birr 100
Total variable cost = Birr 1,500,000 TFC = Birr 350,000
Required:
Develop revenues, cost, and profit functions for the company in terms of quantity.

Answer 1

for x units,
revenue r(x) = 100x
cost c(x) = x*AVC + TFC = 1500000/25000 x = 60x + 350,000
profit p(x) = r(x)-c(x)