Your University magazine, The Indus Magazine, has fixed production costs of Rs.1.5 million per edition, and printing and distribution costs of Rs.80/copy. The Indus Magazine sells for
Rs.150/copy.
a. Write down the associated cost, revenue, and profit functions.
b. What profit (or loss) results from the sale of 1000 copies of The Indus Magazine?
c. How many copies should be sold in order to break even?
d. Sketch the cost, revenue, and profit functions.
Answers
Given : Your University magazine, The Indus Magazine, has fixed production costs of Rs.1.5 million per edition, and printing and distribution costs of Rs.80/copy. The Indus Magazine sells for
Rs.150/copy.
To Find : a. Write down the associated cost, revenue, and profit functions.
b. What profit (or loss) results from the sale of 1000 copies of The Indus Magazine?
c. How many copies should be sold in order to break even?
d. Sketch the cost, revenue, and profit functions.
Solution:
Fixed cost = 1.5 million = 1500000 Rs
Variable cost per copy = Rs 80
Revenue per copy = Rs 150
Let say Copies printed and sold = x
then Variable cost = 80x Rs
Revenue = 150x Rs
Revenue function R(x) = 150x
Total cost = 1500000 + 80x
Cost function C(x) = 1500000 + 80x
Profit function P(x) = 150x - (1500000 + 80x )
P(x) =70x - 1500000
sale of 1000 copies
=> P(x) = 70*1000 - 1500000 = 70000 - 1500000
=- 1430000 Rs
Loss of 1430000 Rs
Break even : 70x - 1500000 = 0
=> x = 21,428.6 ≈ 21,429 copies.
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Answer:
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