Smith Manufacturing is a major player in the lawn sprinkler business. Their high-end sprinkler is used commercially, and is quite popular with golf course greens keepers. In producing these sprinklers Smith's fixed cost (CF) is $50,000 per month with a variable cost (c,) of $10 per unit. The selling price for these high-end sprinklers is described by the equation p=$90 – 0.2(D). a) What is the optimal volume of sprinklers? b) Does Smith make a profit at that volume?

Smith Manufacturing is a major player in the lawn sprinkler business. Their high-end sprinkler is used commercially, and is quite popular with golf course greens keepers. In producing these sprinklers Smith's fixed cost (CF) is $50,000 per month with a variable cost (c,) of $10 per unit. The selling price for these high-end sprinklers is described by the equation p=$90 – 0.2(D). a) What is the optimal volume of sprinklers? b) Does Smith make a profit at that volume?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Smith Manufacturing is a major player in
the lawn sprinkler business. Their high-end sprinkler
is used commercially, and is quite popular with golf
course greens keepers. In producing these sprinklers
Smith's fixed cost (CF) is $50,000 per month with a
variable cost (c,) of $10 per unit. The selling price
for these high-end sprinklers is described by the
equation p=$90 – 0.2(D).
a) What is the optimal volume of sprinklers?
b) Does Smith make a profit at that volume?

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