The total cost C for a manufacturer during a months time period is a function of the number N of items produced during that period. To determine a formula for the total cost, we need to know two things. The first is the manufacturer's fixed costs. This amount covers expenses such as plant maintenance and insurance, and it is the same no matter how many items are produced. The second thing we need to know is the cost for each unit produced, which is called the variable cost.
The total revenue R for a manufacturer during a given time period is a function of the number N of items produced during that period. In this exercise, we assume that the selling price per unit of the item is a constant, so it does not depend on the number of items produced. The profit P for a manufacturer is the total revenue minus the total cost. If the profit is zero, then the manufacturer is at a break-even point.
Consider a manufacturer of widgets with fixed costs of $1500 per month and a variable cost of $22 per widget. Suppose the manufacturer sells 100 widgets for $2500 total.
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