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Savatey [412]
2 years ago
6

1, xyz company cost function for the next four month is cost =500000+5Q A, find the BE dollar volume of sale is the selling pric

e is birr 6/unit B, what would be the company cost is it decides to shutdown operation for the next four month
Business
1 answer:
Temka [501]2 years ago
6 0

Answer:

<u>Break Even point </u>Q = 500000

<u>Shut Down Point </u> P < 5

Explanation:

<u>Break Even point</u> is where Total Revenue = Total Cost.

Total cost = 500000 + 5Q, price = 6 (Given) , Total revenue = Price x quantity  

So, TR = TC implies : 500000 + 5Q = 6Q → 500000 = 6Q - 5Q

Q = 500000

<u>Shut Down Point </u>is where firm's Price is < its Average Variable Cost .  

AVC is the variable cost on per unit output, is found out by average of variable component of cost function. C = 500000 + 5Q implies variable cost = 5Q , so AVC = 5Q / Q = 5

So, the firm would shut down if its price would go below AVC , ie if P < 5

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Answer:

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