A firm believes the sales volume (S) of its product depends on its unit selling price (P)

Question:

A firm believes the sales volume (S) of its product depends on its unit selling price (P) and can be determined from the equation P = $100 - S. The cost (C) of producing the product is $1000 + lOS.

(a) Drawa graph with the sales volume(S) from 0 to 100 on the x axis, and total cost and total income from 0 to 2500 on the y axis. On the graph –draw the line C = $1000 + lOS. Then plot the curve of total income [which is sales volume (S) x unit selling price ($100 - S)]. Mark the breakeven points on the graph.

(b) Determine the breakeven point (lowest sales volume where total sales income just equals total production cost).