Total cost

Question

A firm is considering a new product. The accounting department estimates that the total cost, C(x), of producing x units will be C(x) = 70x + 6410. The sales department estimates that the revenue, R(x), from selling x units will be R(x) = 80x, but that no more than 898 units can be sold at that price.

(a) Find (R – C)(898).
(b) What does (R – C)(898) tell this firm?

Answer 1

R(x) = 80x

C(x) = 70x + 6410

 

Find (R-C)(898)

 

(R-C)(898) = 80x - (70x + 6410)

(R-C)(898) = 80(898) - (70(898) +6410)  Please note: x is 898

(R-C)(898) = 71,840 - (62,860 +6410)

(R-C)(898) = 71,840 - 69,270

(R-C)(898) = $2,570

 

2.  This tells us the profit of producing 898 units for this firm will be $2,570  (Revenue - Cost = Profit)