Popper 2: Suppose you buy a piece of office equipment for $8000.00. After 5 years you sell it for scrap value of $5000.00. The equipment is depreciated linearly over 5 years. The rate of depreciation of the piece of equipment is a.$3000/yr b.$1600/yr c.$1000/yr d.$600/yr Linear Cost, Revenue and Profit Functions: If x is the number of units of a product manufactured or sold at a firm then, The cost function, C(x), is the total cost of manufacturing x units of the product. Fixed costs are the costs that remain regardless of the company’s activity. Examples: building fees (rent or mortgage), executive salaries Variable costs are costs that vary with the production or sales. Examples; wages of production staff, raw materials The revenue function, R(x), is the total revenue realized from the sale of x units of the product. The profit function, P(x), is the total profit realized from the manufacturing and sale of the x units of product.
Formulas: Suppose a firm has fixed cost of F dollars, production cost of c dollars per unit and selling price of s dollars per unit then C(x) = R(x) = P(x) = Where x is the number of units of the commodity produced and sold. Example 3: A manufacturer has a monthly fixed cost of $150,000 and a production cost of $18 for each unit produced. The product sells for $24 per unit. a. What is the cost function? b. What is the revenue function? c. What is the profit function?