Lite and Brite produce lamps which they sell for 40. Lite has fixed costs of 8,000...

  

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Lite and Brite produce lamps which they sell for £40. Lite has fixed costs of £8,000 less than Brite and average variable costs of £33, which is 10 per cent more than Brite. Lite has a break-even output which is 15 per cent less than Brite, and produces 25 per cent less revenue than Brite. Lite also makes £12,000 less profit than Brite. a. Calculate the cost functions of both firms. b. Calculate the outputs of both firms. c. Calculate the profits of both firms. Last month Susie Q sold 24,000 litres of ice-cream. The variable costs were £2.70 per litre and each litre contributed 25 per cent of its revenue to fixed costs and profits. It has just discovered a new supplier which will enable it both to reduce its cost by £0.40 per litre and to improve its quality. However, it estimates that it will have to spend another £3,000 on advertising per month to inform customers of the improvement. Profits last month were £10,000. a. What is the previous month's cost function? b. What is the new cost function with the new supplier? c. How many litres will Susie Q have to sell to increase profit by 20 per cent, assuming it keeps its price the same? d. If Susie Q can raise its price by 10 per cent, what difference will this make to the sales in (c) above? Lite and Brite produce lamps which they sell for £40. Lite has fixed costs of £8,000 less than Brite and average variable costs of £33, which is 10 per cent more than Brite. Lite has a break-even output which is 15 per cent less than Brite, and produces 25 per cent less revenue than Brite. Lite also makes £12,000 less profit than Brite. a. Calculate the cost functions of both firms. b. Calculate the outputs of both firms. c. Calculate the profits of both firms. Last month Susie Q sold 24,000 litres of ice-cream. The variable costs were £2.70 per litre and each litre contributed 25 per cent of its revenue to fixed costs and profits. It has just discovered a new supplier which will enable it both to reduce its cost by £0.40 per litre and to improve its quality. However, it estimates that it will have to spend another £3,000 on advertising per month to inform customers of the improvement. Profits last month were £10,000. a. What is the previous month's cost function? b. What is the new cost function with the new supplier? c. How many litres will Susie Q have to sell to increase profit by 20 per cent, assuming it keeps its price the same? d. If Susie Q can raise its price by 10 per cent, what difference will this make to the sales in (c) above?

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