Question

Cellphone Prices:

Analyzing Cost and Revenue

INTRODUCTION

Cost, revenue and profit functions may take parabolic forms. In many business and economics applications, our most important goal is to maximize revenue, profit or minimize cost. We may be able to find the price or the quantity of goods and services that maximizes profit, revenue and minimizes cost by using the quadratic formula and vertex formula.

The goal of this project is to enhance the understanding quadratic functions and how to find the maximum/minimum.

Question 1: If you have the chance to start a business, what business would you choose? Why?

Question 2: Starting and running a business requires time, effort, hard work and in particular money. What kind of costs do you expect to have to pay in order to start and run your business? Please list them and explain why you need them.

Question 3: Some costs are fixed, which are called fixed costs, such as equipments and buildings. Some cost are variable, which are called variable costs, such as labor and material. Please explain what costs in the Question 2 are fixed costs, and what are variable costs.

In general, the total cost consists of variable costs and fixed costs.

Question 4: In order to keep your business running, you need to make revenue. Revenue is the money that comes into the business from customers. Suppose you know the number of products your business sold and the price you sold them at, how can you calculate the revenue? What strategies could you use in order to increase your business’ revenue?

The revenue of a business may go up and down depending on many factors. For example a business that sells ice cream will likely make more money during hot summer months. The profit of your business is the difference of the revenue and the cost. That is,

Profit = Revenue - Cost.

If the profit is the positive, your business makes money. If the profit is negative, your business unfortunately makes a loss. If the profit is zero, that is the revenue is equal to the cost, it is called the break-even point.  

Suppose that you were the CEO of a giant high technology corporation, Strawberry, Inc, manufacturer of the Strawberry Phone.

Question 5:

This month, you have estimated the demand for the Strawberry Phone to be:

Q = 220 - 4P

  

where Q is the quantity demanded, and P is the price of a Strawberry Phone.

The cost of producing a phone is constant at $12, which is called marginal cost. The fixed cost that includes the cost spent on the factory, the equipment, among others is $1525. As a result, you have a linear cost function,

C = FC + (MC Q),

Where C is the total cost, FC is the fixed cost, and the MC is the marginal cost, and Q is the quantity as before.

Answer the following questions.

1. What is the price that maximizes the corporation’s profit? (Hint: Profit = Revenue - Cost)

2. At what price does the corporation break even?

Question 6: From the two questions above, create a strategy to lower your cost and maximize your profit for the business you chose in question 1.

Essay: Write an essay that discusses the answers to the questions above include a detailed description of your business ideas and how it is possible to use maximization of quadratic functions to find the maximum profit.

Answer 1

only first 4 question are answered.

Answer 1
if I have a chance to start a business then I will start a restaurant chain as it is quite promising and people want to eat health and good quality of food for what they are ready to pay anything and if they find my restaurant food hygienic, they will provide me repeat business and might increase the demand for packed food.

Answer 2 & 3
Yes it is true that to start any business we have to incur fixed and variable cost,

fixed cost are those which incur irrespective of production. They are constant in nature..

it have to incur variable cost which vary with the production process, as the produciton of goods increase cost also increase and vice versa.

Fixed cost Variable cost
cost of plant and machinery vegetables, food
rent of premise or space floor, pulses

insurance cost water bottles. Etc
wages for guard and supervisor (permanent) and no of waiters as per demand
License cost. electricity, water, internet, cable, and phone

Table and chairs Advertising cost

Answer 4

revenue is the amount that the firm charges from the customer for their goods and services and it is product of price and no of quantity demanded by customers so

revenue = price * Quantity of food order.

profit = total revenue - total cost ( fixed cost + variable cost )

loss = Total revenue < Total cost

break even = Total revenue= total cost

in order to increase our business as we are in food industry we can provide quantity discount, birthday and annivesary discount, flat discount, kind of offer that attract customer to value their money.