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 birr 2 per unit.Variable costs are estimated to be 40% of the selling price.Fixed costs are estimated to be $ 600 A)Develop the revenue,cost and profit functions interns of sales and quantity B) What is the break even point in units and in $? C) If the company faces a loss of 4000 $ what will be the sales? D)Support your answer using the break-even chart (Show all the necessary lines and points E) If the company is sure of selling 5500 units every year,Determine the least price that should be charged in order to guarantee no loss.

Answer 1

From the first sentence, you know that if x units are produced,
cost = 600 + 0.4x
income = 2x

Why 2x? You say they sell for birr 2 each. Yet you note all other amounts in terms of $, so I assume that 1 birr = 1 $. So I assume a birr is not some small fraction of a $. If that is wrong, then nake the necessary changes. And in the future, use the same currency terms throughout, or do not assume that everyone knows what the relationships are. If I did a similar problem using florins and farthings, would you know what to do?

Now, knowing that profit p(x) = income-cost,
B) find x when p(x) = 0
C) find the change in x when p = -4000
E) solve p(x) >= 0