1. Exxon Manufacturing produces chips for computers. The cost of producing x chi

Question

1. Exxon Manufacturing produces chips for computers. The cost of producing x chips is given by C(x) -15x 12,000. The company sells each chip for $20. Based on the given information, please answer the following questions. a) What is the fixed cost of producing the chips? b) Find R(x) -the revenue function of the company. c) Find P(x) - the profit function of the company. d) What is the break-even point? How does the break-event point analysis help the company? e) What is the (i) average cost per unit and (ii) the revenue if the company produces exactly the number of chips needed to break even?

Explanation / Answer

As per chegg guidelines when there are more than 4 parts to the question then we have to answer first 4 parts a) Fixed cost of Producing the chips is $12000 b) As x represents the number of chips and selling price is $20 so revenue function is R(x)= 20x c) P(x)= R(x)- C(x)             = 20x- (15x+12000) P(x)= 5x-12000 d) Calculation of break even point: Fixed cost= $12000 Selling price=$20 Variable cost per unit= $15 Contribution margin per unit= 20-15= $5 Break even point= Fixed cost/ contribution margin per unit                                   = 12000/5= 2400 units Break even point= 2400 units Break even point analysis helps to know a company about the minimum number of units a company should produce to be in a no profit no loss situation. At break even point there is no profit no loss situation.

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