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midterm 1 solutions

# midterm 1 solutions - IE 343 Fall 2009 Name Student ID IE...

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Name: _______________________ Student ID: ___________________ 2 1. A company produces a memory chip that is used in manufacturing cell phones. The fixed cost is \$16,000 per month, and the variable cost is \$40 per chip. The selling price per unit is P=\$200 – 0.025D, where D is monthly demand. Maximum output of the plant is 3,600 units per month. a) Determine the demand quantity that maximizes profit. 8 points TR = 200D – 0.025D 2 TC = 16000 + 40D = TR – TC = 160D – 0.025D 2 – 16000 D * = 3200 b) What is the breakeven level of the firm? 5 points We have 0.025D 2 – 160D + 16000 = 0. Solving quadratically, D = 102 or 6298. Since maximum output is 3,600, breakeven can only occur at D = 102. c) What is the range of profitable demand?
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midterm 1 solutions - IE 343 Fall 2009 Name Student ID IE...

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