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ein4354-hw1

# ein4354-hw1 - 2-8 Consider the accompanying breakeven graph...

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2-8. Consider the accompanying breakeven graph for an investment, and answer the following questions as they pertain to the graph. Dollars (x 10 4 ) Total Revenue Total cost Output (units/year) 0 250 500 750 1000 1250 1500 1750 (a) Give the equation to describe total revenue for x units per year Pick two points (250, 50000) & (1000, 100000) Slope = 200 Total revenue for x units/ year = 200x (b) Give the equation to describe total costs for x units per year Pick two points (0, 100000) & (1000, 100000) Slope = 100 *Y axis starts at 100000. Total Cost for x units/year = 100000 + 100x (c) What is the “breakeven” level of x in terms of costs and revenues? TR- TC = 0 200x - (100000 +100x) =0 1000x – 100000 = 0 x = 1000 (d) If you sell 1500 units this year, will you have a profit or loss? How much? You will have a profit. Total Profit = Total Revenue – Total Cost 200x - (100,000 +100x) = 100x -100,000 100(1500) – 100000 = 50,000 2-10. Three alternative designs have been created by Snakisco engineers for a new machine that spreads cheese between the crackers in Snakisco snack. Each machine design has unique total costs (fixed and variable)

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