Finance

Part-A1

a Cost is dependent variable, sales independent variable.

b Variable cost = (1500-750)/(4000-1000)=25%

Fixed cost = 1500-4000*25%=$500

Equation

y = 0.25x+$500

c [pic]

d When volume goes beyond a limit, the fixed costs would change and that would change the relationship.

e C(2000) = 2000*.25+500 = $1000

This means when sales are 2000, cost is $1000.

f Profit = sales – cost =$ 2000 – $1000 = $1000.

g For profit = 2500

Sales = (2500+500)/(1-25%) =$4000.

A-2

a Variable drink cons.= (1720-1480)/(320-260) = 4

Fixed drink cons. = 1720-320*4 = 440

Equation

y = 4x+440

b Number of canned drinks for Residence C

Equation, y = 4x+ 440

= 4*600+440

= 2840 canned drinks

A-3

a Sale price = 500000/10000 = $50

Variable cost = (1050000-600000)/(25000-10000) = $30 p. u.

Fixed cost = 600000-30*10000 = $3000000

Revenue function

R(x) = 50x

Cost function

C(x) = 30x+$300000

Profit function

P(x) = 50x-30x-$300000

b Break even point = 300000/(50-30) = 15000 units

A-4

a Purchasing cost = 0.50*70000 = $35000

Internally produced cost = 0.40*70000 + 10000 = $38000

They should purchase from outside as it would save $3000(38000-35000).

b Break even point = 10000/(0.50-0.40) = 100000 units

After 3years it will be benificial producing internally.

A-5

a Fixed cost = 1000

Contribution ratio = (145-100 – 0.12*145)/145 = 19.03%

Break even sales = 1000/19.03% = 5253.62

b Profit on 80000 = (80000*0.1903) – 1000 = $14227.59

A-6

a 0.52q is the variable portion of total cost and q is the quantity.

$30000 is the fixed portion of total cost that is fixed cost.

b sale price per unit = $0.80

Revenue function

R(q) = 0.80q

P(q) = R(q) – C(q)

= 0.80q-0.52q-$30000

= 0.28q-$30000

c $250000 = 0.28q-$30000

q = 1000000 units

Part-B

B-1

a Variable cost function = 0.001X2 +0.5X

b Average cost function = (0.001X2...