Question

A gas station sells unleaded regular and unleaded premium gasoline. The price per gallon charged by the station is$1.299 for unleaded regular and $1.379 for unleaded premium. The cost per gallon from supplier is$1.219 for unleaded regular and $1.289 for unleaded premium. If equals the number of gallons sold of regular and equals the number of gallons sold of premium:(a) Formulate the revenue function from selling and gallons of the two grades of gasoline respectively?(b) Formulate total cost for purchasing and gallons?(c) Formulate the total profit? d) what is the total profit expected to equal if the station sells 100,000 gallons of unleaded and regular and 40000 of unleaded premuim?

Answer 1

Answer:

a) Revenue function = 1.299r + 1.379p

where: r = gallon of unleaded regular gasoline and p = gallon of regular unleaded premium gasoline

b) cost function = 1.219f + 1.289p

c) profit function = (1.299r + 1.379p) - (1.219f + 1.289p) = 1.299r - 1.219r + 1.379p - 1.289p = 0.08p + 0.09p

d) total profit = (0.08 x 100,000) + (0.09 x 40,000) = $8,000 + $3,600 = $11,600