Quiz # 3 Answers and Solution: Outputs (In Units) Fixed Cost Variable Cost Total Cost Total Revenue Profit
Quiz # 3 Answers and Solution: Outputs (In Units) Fixed Cost Variable Cost Total Cost Total Revenue Profit
Quiz # 3 Answers and Solution: Outputs (In Units) Fixed Cost Variable Cost Total Cost Total Revenue Profit
1. Determine TR, TC, and the Profit Function. 2. How many units to breakeven? Find the breakeven cost and
Sol’n: revenue . How much is the breakeven price?
Since the sp is not given compute for it first. 𝑇𝑉𝐶 2𝑄
𝐴𝑉𝐶 = 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 𝑄
=2
𝑇𝑅 = 𝑠𝑝 𝑥 𝑄
𝑇𝑅 350,000
OR look for the coefficient of Q in the TVC function
𝑠𝑝 = 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 50,000
=7
𝑇𝐹𝐶
𝐵𝐸𝑃𝑈 = 𝑠𝑝−𝐴𝑉𝐶
𝑇𝑅𝑓𝑥 = 7𝑄
450,000
𝐵𝐸𝑃𝑈 = 7−2
= 90,000 𝑢𝑛𝑖𝑡𝑠
In order to find for TC use the two- point method where in TC is y.
𝑦 − 𝑦1 𝑦2 − 𝑦1
= 𝐵𝐸𝑃𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 7𝑄𝑒 = 7 (90,000) = 630,000
𝑥 − 𝑥1 𝑥2 − 𝑥1
𝐵𝐸𝑃𝐶𝑜𝑠𝑡 = 2𝑄𝑒 + 450,000 = 2(90,000) + 450,000 = 630,000
𝑦−550,000 626,000−550,000
= simplify the right-side of the equation
𝑥− 50,000 88,000−50,000
𝑦−550,000
𝑥− 50,000
= 2 cross-multiply
3. How much is the total variable cost (TVC) if Q= 75,000 units? 5. Complete the table.
90 000 450 000 180 000 630 000 630 000 0 breakeven
100 000 450 000 200 000 650 000 700 000 50 000 Net income
4. How many units to cover the fixed cost?
125 000 450 000 250 000 700 000 875 000 175 000 Net income
𝑇𝑅 = 𝑇𝐹𝐶
7𝑄 = 450,000
Use the ff:
7𝑄 = 450,000
7 TFC = 450,000
Conclusion:
BREAKEVEN = 0 PROFIT