Use the revenue and cost graphs for the Webster Cell Phone Company in Example 6

Question

Use the revenue and cost graphs for the Webster Cell Phone Company in Example 6 to solve #48. The cost graph: See image 48. The company must replace its aging machinery with better, but much more expensive, machines. In addition, raw material prices increase, so that monthly costs go up by dollar 250,000. Owing to competitive pressure, phone prices cannot be increased, so revenue remains the same. Under these new circumstances, find the approximate profit from manufacturing the given number of phones. ( a) 20,000 ( b) 36,000 ( c) 40,000

Explanation / Answer

a) At 20K revenues appear to be 1.75 and costs 1.25, so if costs are going up .25 profit will be 1.75-1.25-.25= .25 b) At 36K we have 3.25 and 1.75 so 3.25-1.75-.25= 1.25 c) At 40K we have 3.75 and 2 so we have 3.75-2-.25= 1.5.

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