CSA 273
Solutions to Homework Set #1
Problem #1
(a)
Let Q = daily sales volume in airline tickets ($)
R(Q) = .20Q
= Revenues per day
TC(Q)=47,500/250 + .05Q = 190 + .05Q = Total cost per day.
To break even, find Q such that R(Q)=TC(Q)
.20Q = $190 + .05Q
Q = $1266.67
(b)
Let P=new commission rate
Q=$1000
R(Q)=1000P
TC(Q)=(47,500 + 250)/250 + .05(1000)=191+50=241
R(Q)=TC(Q) at the break even point.
1000P=241 => P=.241=24.1%
Problem #2
Let Q = Number of units produced and sold during each time period.
P = Selling price per unit.
F = Fixed cost per period
V = Variable cost per unit per period
(a) Q=F/(PV)
Q=50,000, F=$19,000, v=$.12 per unit, Solve for P
P=V+F/Q=.12/unit +$19,000/50,000 units = $.50 per unit.
(b)
Using the same selling price computed in (a), the profit from the first 50,000 units would be zero.
The profit from the next 20,000 = 20,000(PV.03) = 20,000(.50.12.03)= $7,000
Problem #3
The following spreadsheet covers the calculations required in (a),(d), and (e)
Production
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 Spring '08
 Patton
 $1,400, production quantity, $1,245

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