Question

6. A company sells its products at the rate of 6 per unit. The variable costs are estimated
to run 25% of the total revenue received. If the fixed costs for the product are 4500 find
(i) the total revenue function (ii) the total cost function
(iii) the profit function
(iv) the break even point
(v) the number of units the company must sell to cover its fixed cost.
​

Answer 1

Given :  A company sells its products at the rate of 6 per unit. The variable costs are estimated to run 25% of the total revenue received.

the fixed costs for the product are 4500

To find

(i) the total revenue function

(ii) the total cost function

(iii) the profit function

(iv) the break even point

(v) the number of units the company must sell to cover its fixed cost.

​

Solution:

A company sells its products at the rate of 6 per unit.

number of units = x

R(x) = 6x    revenue function

Fixed cost = 4500

Variable cost = (25/100) R(x)  = (25/100)6x  =  1.5x

the total cost function = 4500 + 1.5x

the profit function  = 6x - (4500 + 1.5x)

= 4.5x - 4500

4.5x - 4500  = 0  for break even

=> x = 1000

the number of units the company must sell to cover its fixed cost. = 1000

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