Question

Bright Co. Ltd manufactures electrical repairs components. The company has determined that the total cost of producing the components is:

C = 100 + 50q

Furthermore the company has estimated the price for each component to be

P = 100 - q

Based on this information determine

i). The break-even quantity.

ii). The profit when 25 components are produced and sold.

Answer 1

i). The break-even quantity.

At BEP

Total Revenue = Total Cost

q(100-q) = 100 + 50q

0 = q² – 100q + 50q + 100

0 = q² -50q + 100

Using Quadratic formula to find q

Break even quantity is at 47.913 units or at 2.087 uni

ii). The profit when 25 components are produced and sold. 

Profit = Revenue – Total Cost

Profit = [q(100-q)] – [100+50q]

Profit = [25(100 – 25)] – [100+50(25)]

Profit = 1875 – 1350

Profit = 525

The break-even is the point where total cost and total revenue are equal.