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Week 1 Extra Problems Solution

CHAPTER 1

INTRODUCTION

Problems

1.1

If Q units are produced per month, then

Monthly Profit = $0 {if Q = 0} and –$20,000 + ($20 – $10)Q {if Q > 0}.

Break-even point = $20,000 / ($20 – $10) = 2000, so it will be profitable

to produce if Q > 2000.

1.3

a) Let Q be the number of units produced and sold. Then Monthly Profit

= $0 {if Q = 0} and –$500,000 + ($35 – $15)Q {if Q > 0}.Break-even

point = $500,000 / ($35 – $15) = 25,000.

b) Let Q be the number produced and s the number that can be sold.

Then

Profit = [0 if Q = 0] and [-$500,000 + $35 * MIN(Q, s) – $15Q if Q > 0].

c)

d) Q ≤ s.

1.4

a) $30,000,000

b) $1,666.67

c) $1,333.33

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