part 1 project - Jerod Lane Business Calc February 20th,...

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Jerod Lane Business Calc February 20 th , 2011 In this problem a CEO of an online bookstore has setup an online bookstore and the growth has been tremendous over the past six years. Because of this growth they now generate revenue through an online publisher that allows prospective readers to pay and download the whole book online. The cost the company incurs a monthly variable cost of four dollars per novel and a fixed cost of nine hundred dollars per month to maintain and operate and the business. The company charges five dollars and fifty cents per novel. We need to find out how many novels must be sold in order for the company to breakeven. From this information we can quickly gather 2 equations that will help us arrive at our answer. (1) The cost function is represented by the function C(x)=mx+b a. In this original equation C(x) stands for the total cost of “x” standing for the number of units. When we combine the “x” with “m” this gives us our variable cost. “b” in this equation stands for our fixed costs. Now that we understand what these mean we can now come up with our cost equation by simply substituting in the numbers we are given in the problem above. (2) C(x)= 4x+900 a. The variables in this equation all stand for something. “C” stands for the “Total Cost” of “x” amount of novels. Letting “x” stand for one individual online novel. We arrive at “4x” because the company incurs a four dollar charge per novel due to copyright fees. The “900” part of this equation is representing the monthly fixed cost of maintaining and operating the service. All together this says that the total cost “C(x)” is equal to the variable cost of four dollars per novel “4x” and also a fixed cost of 900 dollars (+900) to continue operating their business. (3) The Revenue Function is R(x)=5.50x a. The variables used in this equation also stand for valuable information. The “R” in this equation is representing the total “Revenue” of “x” amount of novels, being one single novel like stated in our first equation. The “5.50” in this equation is representing the credit we get for each individual novel sold. This is the money we are receiving back for the hard work we put in to running this online business. So now that we have a cost and revenue function what does this mean? In order to find out how many
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This note was uploaded on 04/28/2011 for the course SPORTS ADM 101 taught by Professor Debbie during the Spring '10 term at Capital University.

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part 1 project - Jerod Lane Business Calc February 20th,...

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