A firm believes a product’s sales volume (S) depends on its unit selling price (P) as S = $100 − P. The production cost (C) is $1000 + 10S. (a) Graph the sales volume (S) from 0 to 100 on the x axis, total cost and total income from $0 to $2500 on the y axis, C = $1000 + 10S, and plot the curve of total income. Mark the breakeven points on the graph. (b) Determine the breakeven point (lowest sales volume at which total sales income just equals total production cost). (c) Determine the sales volume (S) at which the firm’s profit is a maximum.
A firm believes a product’s sales volume (S) depends on its unit selling price (P) as S = $100 − P. The production cost (C) is $1000 + 10S. (a) Graph the sales volume (S) from 0 to 100 on the x axis, total cost and total income from $0 to $2500 on the y axis, C = $1000 + 10S, and plot the curve of total income. Mark the breakeven points on the graph. (b) Determine the breakeven point (lowest sales volume at which total sales income just equals total production cost). (c) Determine the sales volume (S) at which the firm’s profit is a maximum.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 5E
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A firm believes a product’s sales volume (S) depends on its unit selling price (P) as S = $100 − P. The production cost (C) is $1000 + 10S. (a) Graph the sales volume (S) from 0 to 100 on the x axis, total cost and total income from $0 to $2500 on the y axis, C = $1000 + 10S, and plot the curve of total income. Mark the breakeven points on the graph. (b) Determine the breakeven point (lowest sales volume at which total sales income just equals total production cost). (c) Determine the sales volume (S) at which the firm’s profit is a maximum.
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