Question

Wilma bonds sells handcrafted yard decorations at county fair. the variable cost to make there is $20 each and she sells them for $50 The cost to rent a both at the fair is $270

A) provide the revenue cost profit equations?

B) if wilma sells 25 decorations, what will her total revenue be? What her his total cost be?

C) How many decorations must wilma sell to break even? What is the total revenue break even?

Answer 1

The total fixed cost is the cost of renting which equals $270 and the total variable cost is $20 which is constant for each additional unit of output produced.

A. Total Revenue (TR) = 50q ; where, q is the quantity sold and price is $50 which is given

Total Cost (TC) = TFC + TVC = 270 + 20q ; where, q is the quantity sold.

B. If q is 25 then:

Total Revenue = 50q = (50) (25) = $1,250

Total Cost = 270 + 20q = 270 + (20) (25) = 270 + 500 = $770

C. The point where total revenue equals total cost is called the break-even point.
Putting TR = TC

50q = 270 + 20q

30q = 270

q = 9

So, Wilma will sell 9 decorations at break-even point.

Total Revenue (TR) at break even point is equal to (50) (9) = $450