Question

Question 1 Impact of changing price upon revenue and profit

A suburban factory makes three types of motorcycles. Each type of motor is made of engine parts and two wheels. The factory uses three brands of engine parts – Chrome Catalyst, Platinum Power and Silver Streak.   Motorcycles are built and sold as follows;


Type 1 -Chrome Catalyst engine parts
Type 2 Platinum Power engine parts
Type 3 Silver Streak engine parts Cost of engine parts $876 $1228 $1024 Cost of wheels (each) $65 $65 $65 Sale price range $1000 - $1200 $1400 - $1600 $1200 - $1400


Regardless of the type of engine parts used to make a motorcycle, there are fixed production costs of $4000.

Your task is to investigate the cost, revenue and profit associated with each type of motorcycle.


Steps to complete to undertake the investigation

1. Find the total cost and total revenue functions for each type of motorcycle and plot these functions using Excel. You will produce 3 graphs (one for each motorcycle type), each with two lines on it. For the revenue function, select a price for each motorcycle type within the price ranges in the table above.


2. Confirm any points of intersection between the cost and revenue function lines using algebra, round your final answer up to the next whole number.

3. Profit will also differ for each motorcycle type. Find the profit functions and the break-even points for each type of motorcycle.

4. Summarise your findings in 200 words. In your conclusion:

a. Explain the meaning and significance of any points of intersection noted from steps 1 and 2 and any similarities noted from you results in step 3. b. Discuss any differences in profitability between each type of motorcycle (for example, which motorcycle type would be easiest to make a profit from?) c. Note any assumptions you have made and any limitations of your findings.

Answer 1