A manufacturer has a monthly fixed cost of $25,500 and a production cost of $7 for each unit produced. The product sells for $10/unit(c) What is the profit function? P(x) =

Question

d) Compute the profit (loss) corresponding to production levels of 7,000 and 10,000 units. P(7,000) = P(10,000) =

Answer 1

P(x) = 10x - (25500 + 7x)

= 10x - 7x - 25500

= 3x - 25500

P(7000) = 21000 - 25500 = -4550 <--- LOSS

P(10000) = 30000 - 25500 = 4500

Just FYI the break even point is:

0 = 3x - 25500

25500 = 3x

x = 8500 which is exactly halfway between x=7000 and x=10000