A certain factory makes a widget at a marginal cost of $45 per item. There are f

Question

A certain factory makes a widget at a marginal cost of $45 per item. There are fixed costs of $6000 to keep the equipment operating whether or not any item is made. The widget is later sold for $60 apiece.

(a) What is the cost equation C(x) where x is the number of widgets?

(b) What is the revenue equation R(x)?

(c) Plot these two equations on a graph.

(d) Estimate the break-even point from your graph.

(e) Calculate the break-even point analytically.

(f)Do your answers from (d) and (e) match? (yes or no)

Explanation / Answer

Ans a: cost equation= fixed cost/ contribution 6000/60-45 6000/15=400unit cost Equation= variable cost+fixed cost 45*X+6000 Ans2 Revenue = X*60 Ans4 Break even point cost(X)=revenue(X) 45*X+6000=X*60 X=400 unit

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