A firm manufacture and markets a product that sells for Birr per unit .Fixed cost associated with activity total Birr 40,000 a month ,while variable cost per unit is Birr 10.A maximum of 10,000 units can be produced and sold
6. A firm manufactures and markets a product that sells for Birr 20 per unit. Fixed costs associated with activity total Birr 40,000 a month, while variable cost per unit is Birr 10. A maximum of 10,000 units can be produced and sold.
Required:
a) Drive the TR, TC and Total profit functions.
b) Sketch the TR, TC and Total profit functions in the same coordinate system.
c) What is the Break-even point (in terms of quantity and sales volume)?
d) Drive the new TC, Total profit functions given that FC is increased by Birr 10,000 a month, and calculate the new break-even point.
e) Drive the new TC and Total profit functions given that unit variable costs is decreased by 20% and calculate the new Break-even point.
f) Drive the new TR and Total profit functions given that the unit selling price increases by 20% and calculate the new break-even point.
g) What is the relationship that you may inter from BEP& FC, P& BEP and V& BEP?
h) Assume selling prince increases by 10% and at the same time V increases by 10% what is the effect of these changes on the BEP - calculate the new break-even point. What lesson can we drive from this?
i) Suppose there is no any change in FC, V and P, What is the maximum profit the firm can generate, and at what level of output?
j) Keeping P and FC constant, what is the maximum unit variable cost for the firm to break even (at its maximum out put level)?
k) Keeping all things as they are, what is the quantity level at which the company:
i. Makes a profit of Birr 100,000?
ii. Looses Birr 10,000?
A certain car model cost Birr 20,000 with a gasoline engine and Br 25,000 with a diesel engine. The number of miles per gallon of fuel for cars with these two engines is 25 and 30, respectively. Assume that the price of both types of fuel is Birr 1.50 per gallon.
Required:
a) Drive the equation for the cost of driving a gasoline powered car.
b) Drive the equation for the cost of driving a diesel powered car.
c) Find the break-even point, that is, find the mileage at which the diesel-powered car becomes more economical than the gasoline powered car.
6. A firm manufactures and markets a product that sells for Birr 20 per unit. Fixed costs associated with activity total Birr 40,000 a month, while variable cost per unit is Birr 10. A maximum of 10,000 units can be produced and sold.
Required:
a) Drive the TR, TC and Total profit functions.
b) Sketch the TR, TC and Total profit functions in the same coordinate system.
c) What is the Break-even point (in terms of quantity and sales volume