Wk6_EYB_JTORRES_REVISIONS.docx

Wk6_EYB_JTORRES_REVISIONS.docx - Week Number_6 Problem...

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Week Number__6 __ Problem Number _ 3 ___ W6.3 Group Members who worked on this problem: A company that manufactures a special brand of road bicycle has $200,000 in fixed expenses to produce a new brand of bicycle. Each bicycle produced can be sold for $1350 and costs $650 to make. Let x represent the number of bicycles made in the first year. For this business venture: a. Write the cost function, C(x). b. Write the revenue function, R(x). c. Determine the break-even point. Describe what this means. Calculations Explanations of Calculations a.) C ( x )= 200,000 + 650 x Cost function is C(x) = Total fixed costs + Variable Cost × Number of units sold/made or (x). b.) R ( x )= 1,350 x Revenue Function R(x) = Price of the unit × Number of units sold or made (x). (In this case we use x, we weren’t given a number) c.) B. E.P = ¿ Cost Sales Price per unit varible price per uni B. E.P = 200,000 1,350 650 B. E.P = 200,000 700 B. E.P≈ 285.71 B.EP = 286 Bicycles (Answer) The break-even point analysis is a way to calculate margin of safety by comparing the amount of units that must be
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