r work for full credit. attach a page with your work on it. You may want to Prof

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r work for full credit. attach a page with your work on it. You may want to Profitable Behavior. Suppose the following information is known about a company that makes staplers. The company has fixed production costs of $30,000 and it costs them $3 to make each stapler. The company's marketing department find that the company will sell 4800 staplers per month at a unit price of $9 each, but will sell 6500 staplers per month if it lowers the unit price to $7.50 each. . The company needs to determine whether their monthly profit will be higher if they sell their staplers at the price $9 each or $7.50 each. 1. Suppose the company decides to sell its staplers for $9 each. Find the Cost, Revenue, and Profit Functions which correspond to this selling price. a. b. How many staplers must the company sell to break even? c. What is the monthly profit to sell 4800 staplers per month? Now suppose the company decides to sell its staplers for $7.50 each. 2. a. Find the Cost, Revenue, and Profit Functions which correspond to this selling price. How many staplers must the company sell to break even? What is the monthly profit to sell 6500 staplers per month? b. c. 3. Is the company better off selling fewer staplers at a higher price or more staplers at a lower price? Give a reason for your answer. 4. Find the demand equation for this commodity. Math 34

Explanation / Answer

1. Cost = fixed cost + variable cost

fixed cost = 30000

variable cost per unit = 3

If company decides to sell at $9, no. of units = 4800

Cost = 30000 + 3*4800 = 30000+14460 = 44400

Revenue = 9*4800 = 43200

Profit = revenue -cost = 43200 - 44400 = -1200

hence loss of 1200.

To break even, company needs to sell x staplers.

9*x = 30000+3*x

6x = 30000

x = 5000

company needs to sell 5000 staplers to break even.

there is monthly loss of 1200 for selling 4800 staplers.

2. similarly if decides to sell at 7.5.

fixed cost = 30000

variable = 3

demand = 6500

cost = 30000 + 3*6500 = 49500

revenue = 7.5*6500 = 48750

profit = 48750-49500 = -750

Loss of 750

to breakeven let x be the staplers sold,

7.5*x = 3*x + 30000

4.5x = 30000

x = 6666.67 = 6667 staplers.

Loss of 750.

SInce the company is making lesser loss at the rate of 7.5, it is better off selling at a lower price of 7.5.

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