# A small company manufactures a certain product. Variable costs are $20 per unit and fixed costs are

## Question:

A small company manufactures a certain product. Variable costs are $20 per unit and fixed costs are $10,875. The price-demand relationship for this product is P = -0.25D + 250, where P is the unit sales price of the product and D is the annual demand. Use the data (and helpful hints) that follow to work out answers to parts (a)-(e).

Set up your graph with dollars on the y axis, (between o and $70,000) and, on the x axis, demand D: (units produced or sold), between 0 and 1000 units.

(a) Develop the equations for total cost and total revenue.

(b) Find the breakeven quantity (in terms of profit and loss) for the product.

(c) What profit would the company obtain by maximizing its total revenue?

(d) What is the company's maximum possible profit?

(e) Neatly graph the solutions from parts (a), (b), (c) and (d)

## Step by Step Answer:

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