Question

11. You work at an accessory company, and you calculate the cost of producing 1,000 units is $45,000. The cost of producing 1,500 units is $65,000. Each unit produced can be sold for $50. What is the profit function in the simplest form?

A. y = 40x - 5000
B. y = 40x+ 5000
C. y = 10x + 5000
D. y = 10x - 5000

ANSWER: B  y = 40x+ 5000

From the previous question #12, what’s the break-even point?

A.300 units

B.400 units

C. 500 units

D. 600 units

*I HAVE THE ANSWER FOR 11 BUT NEED FOR QUESTION 12*

Answer 1

Given that,

cost of producing 1,000 units is $45,000 and cost of producing 1,500 units is $65,000

So, variable cost per unit = (higher price - lower price)/(higher units - lower units) = (65000-45000)/(1500-1000) = $40

So, VC = $40

Fixed cost FC is 45000 - 1000*VC = 45000 - 1000*40 = $5000

Price per unit P = $50

11). Contribution margin CM = P - VC = 50-40 = $10

So, profit function = CM*Q - FC = 10*x - 5000

=> y = 10x - 5000

Option D is correct.

12). for break even unit,

Break-even units = FC/CM = 5000/10 = 500 units

Option C is correct.

Your answer for question 11 is not correct. You have calculated revenue function, but question asked for profit function.