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Thread Subject:
total cost and revenue

Subject: total cost and revenue

From: john

Date: 13 Mar, 2006 19:24:24

Message: 1 of 2

Breakeven analysis determines the production volume at which the
total production cost is equal to the total revenue. At the
breakeven point, there is neither profit nor loss. In general,
production costs consist of fixed costs and variable costs. Fixed
costs include salaries of those not directly invoved with production,
factory maintenance costs, insurance costs, and so on. Variable costs
depend on production volume and include material costs, labor costs,
and energy costs. In the following analysis, assume that we produce
only what we can sell; thus the production quantity equals the sales.
 Let the production quantity be Q, in gallons per year.
Fixed cost: $3 million per year.
Variable cost: 2.5 cents per gallon of product
The selling price is 5.5 cents per gallon.
Use this data to plot the total cost and the revenue versus Q, and
graphically determine the breakeven point. Fully label the plot and
mark the breakeven point. For what range of Q is production
profitable? For what value of Q is the profit a maximum.

im having troouble graphing this problem; im confused. Could anyone
tell me the commands i must enter to get the right graph?

if ur wondering wat the answer is
 
Production is profitable for Q>10^8 gallons per year. The profit
increases linearly with Q, so there is no upper limit on the profit

Subject: total cost and revenue

From: helper

Date: 13 Mar, 2006 21:57:52

Message: 2 of 2

john wrote:
>
>
> Breakeven analysis determines the production volume at which the
> total production cost is equal to the total revenue. At the
> breakeven point, there is neither profit nor loss. In general,
> production costs consist of fixed costs and variable costs. Fixed
> costs include salaries of those not directly invoved with
> production,
> factory maintenance costs, insurance costs, and so on. Variable
> costs
> depend on production volume and include material costs, labor
> costs,
> and energy costs. In the following analysis, assume that we produce
> only what we can sell; thus the production quantity equals the
> sales.
> Let the production quantity be Q, in gallons per year.
> Fixed cost: $3 million per year.
> Variable cost: 2.5 cents per gallon of product
> The selling price is 5.5 cents per gallon.
> Use this data to plot the total cost and the revenue versus Q, and
> graphically determine the breakeven point. Fully label the plot
> and
> mark the breakeven point. For what range of Q is production
> profitable? For what value of Q is the profit a maximum.
>
> im having troouble graphing this problem; im confused. Could anyone
> tell me the commands i must enter to get the right graph?
>
> if ur wondering wat the answer is
>
> Production is profitable for Q>10^8 gallons per year. The
> profit
> increases linearly with Q, so there is no upper limit on the profit

Well it looks like you have a 2-D plot. The x-axis represents "Q"
(gallons), and the y-axis represents "Cost/profit". There will be 2
different lines on this plot.

Since this is homework, I don't want to give you the exact answer.
However, let's assume the function you want to plot looks like this
(it doesn't for your problem):

Cost = 3*Q.^2 - 2*Q + 3

And let's assume you want to plot this function over the range
0<=Q<=10 using 100 linearly spaced points. You can perform
this using:

Q = linspace(0,10,100);
Cost = 3*Q.^2 - 2*Q + 3;
plot(Q, Cost)

If you want to also plot another function on the same plot, be sure
to use the command HOLD ON before plotting again, or else the first
plot will be erased.

The only thing I've left for you to do is to take your professor's
problem and develop a mathematical model of what is occurring. This
is often the hardest part for many students. One tip is to try to
isolate the important parts. Lets see if I can help:

1. Production costs consist of fixed costs and variable costs.
1a. Fixed cost: $3 million per year.
1b. Variable cost: 2.5 cents per gallon (Q) of product

2. The selling price is 5.5 cents per gallon (Q).

1 and 2 represent two different functions to be plotted versus Q.

My advice for the next time, have the confidence to realize you ARE
smart enough to figure this out IF you spend enough time on it, then
GO SPEND THE TIME ON IT. If you get used to always asking for help,
you will never realize that you CAN figure it out yourself.

ok. preaching done.

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