1. Sven has decided to make and sell his grandmother\'s pasta. He rents a buildi

Question

1. Sven has decided to make and sell his grandmother's pasta. He rents a building for $600/month and pasta equipment for $300/month. The pasta costs $.20 /pound in raw materials to make. Sven can make up to 3000 pounds a month by himself. If he exceeds this he will have to pay his sister Lena $0.25 for each additional pound to help him. Sven plans on selling his pasta for $1.25/pound. Write equations for A) fixed, variable, and average costs B) revenue C) profit (loss) D) How much does he need to sell to make $3000/month?

Explanation / Answer

A) Fixed Costs = Building rent + equipment cost = $600 + $300 = $900/month

Variable Costs = $0.20/pound

Pasta made in a month = 3000 pounds

Variable cost per month = 3000 * 0.20 = $60/month

Average Costs = Total Cost / 3000 = 960/3000 = $0.32/pound

B) Selling price = $1.25/pound

Revenue = 3000 * 1.25 = $3750

C) Profit = Revenue

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