Question

If a retail store has fixed cost of $150 and variable cost of $175 per unit and sell its product at
$500 per unit. (8 Marks)
a. Find the cost function
b. Find revenue function,
c. Find profit function.
d. Find break-even level of output.​

Answer 1

Given:

Fixed cost (F) = $150

Variable cost (V) = $175

Selling price (p)= $500 per unit

To find:

a. Find the cost function

b. Find revenue function

c. Find profit function

d. Find break-even level of output

Solution:

​a. Find the cost function

Cost function (C(x))

C(x) = F + Vx

C(x) = 150 + 175x

b. Find revenue function

Revenue function (R(x))

R(x) = px

R(x) = 500x

c. Find profit function

Profit function (P(x))

P(x) = R(x) - C(x)

P(x) = 500x - (150 + 175x)

P(x) = 325x - 150

d. Find break-even level of output

Contribution per unit = Selling price per unit - Variable cost per unit

Contribution per unit = p - V

Contribution per unit = 500 - 175

Contribution per unit = 325

Break-even output = Fixed costs / Contribution per unit

Break-even output = 150 / 325

Break-even output = 0.462 units

Answer 2

Answer:

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