Week 1 homework chapter 1
1. we have: Cf= 55000, cv= 8, p= 21; v= 10 000
a. Total cost TC = cf + v*cv TC= 55000+ 10000*8 TC= $135000
Total revenue TR= v*p TR= 10000*21 TR=$ 21000
Profit Profit= TR-TC Profit= TR-TC P= 21000-135000 P= $ -114 000 b.Break even volume, V= cf/ (p- cv) V= 55000/ (21- 8) V= 4230.77 recap tires, 2. monthly break even volume V= cf/ (p- cv) We have Cf= 30000, cv= 0.16, p= 0.40 V= 30000/ (0.4- 0.16) V= 125000 units
3. If the new price is p= 0.60,
Then the break even volume will decrease. We don’t need to sell as much units as before to break even.
Proof: V= 30000/ (0.6- 0.16) V= 68181.81 units
4. If we increase advertising, that means CF increases, then the Break even volume will increase, because the cost of the production increased.
Proof; V= 30000+ 14000/ (0.6- 0.16) V= 100000 units 5.we have Cf= 5600, cv= 0.35, p= ?; v= 2000 (note: Cf= 2500+3100; Cf= $5600)
a.What price should be charged to break even?
Break even means Profit = 0, then TR=TC Meaning V*P= cf+ V*cv, then P= (cf+ V*cv)/ V
P= (5600+ 2000*0.35)/ 2000 P= $3.15
b. If during the season, there are less guest than expected, to break even, she needs to increase the prices. 6. we have Cf= 360000, cv= 12000, p= 17000;
a. determine V , V= cf/ (p- cv) , V= 360000/ (17000- 12000) V= 72 units.
b. if we have V= 75, Profit = ? , Profit= V*P- ( cf+ V*cv),
Profit= 75*17000- ( 360000+ 75*12000)
Profit = 1275000-1260000
Profit = $ 15000 c. If the tuition increase, to p= 22000; the volume become v= 35, should the college consider doing this? let's check the amount of profit to decide.
Profit= 35*22000-