Agroscience Company, Cypress, TX manufactures a certain product with estimated variable costs, per unit, V =0.10Q – 40 and aggregated fixed costs of $40,000. The price-quantity demand relationship for this product is P = −0.5Q + 900, where P is the unit sales price of the product and Q is the annual quantity demand. ● Total cost = Fixed cost + Variable cost ● Revenue = Quantity Demand × Price ●Profit = Revenue − Total cost a) Develop the equations for total cost and total revenue. b) Find the breakeven quantity. c) What profit is earned if i) total cost is minimized and ii) total revenue is maximized?
E1
Agroscience Company, Cypress, TX manufactures a certain product with estimated variable costs, per unit, V =0.10Q – 40 and aggregated fixed costs of $40,000. The price-quantity demand relationship for this product is P = −0.5Q + 900, where P is the unit sales price of the product and Q is the annual quantity demand.
● Total cost = Fixed cost + Variable cost
● Revenue = Quantity Demand × Price
●Profit = Revenue − Total cost
a) Develop the equations for total cost and total revenue.
b) Find the breakeven quantity.
c) What profit is earned if i) total cost is minimized and ii) total revenue is maximized?
d) Which of the strategy will be better for the company to adopt to optimize their profit, is it to minimize total cost or maximize total revenue? Give reason for your choice.
e) What is the company’s maximum possible profit?
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