2. In its first year, “Abol Buna Co” had the following experience
Sales = 25,000 units Selling price = br. 100
TVC = br. 1,500,000 TFC = br. 350,000
Required:
1. Develop Revenue, cost & profit functions for the co. in terms of quantity.
2. Find the Breakeven point in terms of quantity
3. Convert the cost equation in terms of quantity in to a cost equation in terms of revenue
4. Find the Breakeven revenue
5. If profit had been br. 500,000 what would have been the sales volume (revenue) & the quantity of sales
6. What would have been the profit if sales are br. 2,000,000
#1. as always, revenue = price * quantity
profit = revenue - cost
#2. solve revenue = cost
see what you can do from there.
All answer
I need to get all answe
Answer in
It's a first year Abol bun col
To answer these questions, we need to understand the following concepts:
1. Revenue: It is the total income generated from sales of a product or service. It is calculated by multiplying the quantity sold by the selling price.
2. Total Variable Cost (TVC): It is the cost that varies with the level of production or sales. In this case, the given TVC is br. 1,500,000.
3. Total Fixed Cost (TFC): It is the cost that remains constant regardless of the level of production or sales. In this case, the given TFC is br. 350,000.
4. Profit: It is the difference between revenue and total cost. In this case, profit can be calculated as revenue minus the sum of TVC and TFC.
Now let's answer the given questions step by step:
1. Developing Revenue, Cost, and Profit Functions for the company in terms of quantity:
The revenue function can be calculated as: Revenue = Quantity * Selling Price. In this case, Revenue = 25,000 units * br. 100 = br. 2,500,000.
The cost function can be calculated as: Cost = TVC + TFC. In this case, Cost = br. 1,500,000 + br. 350,000 = br. 1,850,000.
The profit function can be calculated as: Profit = Revenue - Cost. In this case, Profit = br. 2,500,000 - br. 1,850,000 = br. 650,000.
2. Finding the Breakeven point in terms of quantity:
The Breakeven point is the point where total revenue equals total cost, resulting in zero profit. To calculate the Breakeven point in terms of quantity, we need to set the Profit function to zero and solve for Quantity:
0 = Quantity * Selling Price - (TVC + TFC)
0 = Quantity * br. 100 - (br. 1,500,000 + br. 350,000)
0 = Quantity * br. 100 - br 1,850,000
Solving for Quantity: Quantity = br. 1,850,000 / br. 100 = 18,500 units
So the Breakeven point in terms of quantity is 18,500 units.
3. Converting the cost equation in terms of quantity into a cost equation in terms of revenue:
To convert the cost equation in terms of quantity into a cost equation in terms of revenue, we need to express the Quantity in terms of Revenue using the Revenue function and substitute it into the cost equation.
Quantity = Revenue / Selling Price
Substituting Quantity in the cost equation:
Cost = TVC + TFC
Cost = (Revenue / Selling Price) * br. 100 + br. 1,500,000 + br. 350,000
Simplifying, we get: Cost = (Revenue * 100 / Selling Price) + br. 1,850,000
So the cost equation in terms of revenue is: Cost = (Revenue * 100 / Selling Price) + br. 1,850,000.
4. Finding the Breakeven revenue:
To find the Breakeven revenue, we need to substitute the Breakeven point in terms of quantity (18,500 units) into the revenue function:
Breakeven Revenue = Quantity * Selling Price
Breakeven Revenue = 18,500 units * br. 100 = br. 1,850,000.
So the Breakeven revenue is br. 1,850,000.
5. If profit had been br. 500,000, what would have been the sales volume (revenue) and the quantity of sales:
To find the sales volume (revenue) and quantity of sales when profit is br. 500,000, we need to set the profit function to br. 500,000 and solve for Quantity:
br. 500,000 = Quantity * Selling Price - (TVC + TFC)
br. 500,000 = Quantity * br. 100 - (br. 1,500,000 + br. 350,000)
br. 500,000 = Quantity * br. 100 - br. 1,850,000
Solving for Quantity: Quantity = (br. 500,000 + br. 1,850,000) / br. 100 = 23,500 units
Substituting Quantity in the revenue function:
Sales Volume = Quantity * Selling Price
Sales Volume = 23,500 units * br. 100 = br. 2,350,000.
So the sales volume (revenue) would be br. 2,350,000, and the quantity of sales would be 23,500 units.
6. To find the profit when sales are br. 2,000,000:
We need to substitute the given sales value of br. 2,000,000 into the profit function and solve for Profit:
Profit = Revenue - Cost
Profit = br. 2,000,000 - (TVC + TFC)
Profit = br. 2,000,000 - (br. 1,500,000 + br. 350,000)
Profit = br. 2,000,000 - br. 1,850,000 = br. 150,000
So the profit when sales are br. 2,000,000 would be br. 150,000.