Question

Cox Electric makes electronic components and has estimated the following for a new design of one of its products:

Answer 1

Answer:

a) attached below

b) P( profit ) = TR(q) - TC(q)

c) attached below

d) -$5000 ( loss )

Explanation:

Given data:

Fixed Cost = $10,000

Material cost per unit = $0.15

Labor cost per unit = $0.10

Revenue per unit = $0.65

a) Influence diagram to calculate profit

attached below

b) derive a mathematical model for calculating profit.

VC = variable cost per unit , LC = per unit labor cost , MC = per unit marginal cost, TC = Total cost of manufacturing , FC = Fixed cost, q = quantity, TR = Total revenue, R = revenue per unit

VC = LC + MC

TC (q) = FC + ( VC * q )

TR (q) = R * q

P( profit ) = TR(q) - TC(q) ------------ ( 1 )

c)  attached below

d) If Cox Electrics makes 12,000 units of the new product

The resulting profit = -$5000

q = 12

P = TR ( q ) - TC ( q )

  = ( R * q ) - ( Fc + ( Vc * q ) )

  = ( 0.65 * 12000 ) - ( 10,000 + ( 0.25 * 12000 )

  = -$5200