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 + l0S.
(a) Draw a graph with the sales volume(S) from 0 to 100on 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 + l0S. 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).
(c) Determine the sales volume (8) at which the firm's profit is a maximum.