Question

number 6 and 7

6. It costs KD4500 to create an advertisement for a new product. Each successful sale will have a profit of KD55 less KD5 for administration. How many units must be sold to break even? A product has two major components P1 and P2. It costs the manufacturer KD135 to buy each P1 and KD750 to buy each P2. If there is a budget of KD12,500 for the purchase of these two components. Write down the budget constraint equation (represents the number of P1 units purchased and represents the number of P2 units purchased). 7.

Answer 1

6)

Given Fixed Cost KD4500

Variable cost per unit KD5

Profit per unit 55 less Administration fee KD5

Break Even units =Fixed cost/(Inflow per unit -Variable cost per unit)

=4500/(55-5)

=90

If 90 Units are sold then company would attain break even point

7)

Given

Budget KD12500

Cost of P1 KD135

Cost of P2 KD750

Let

Number of Product P1 product be x

Number of P2 product be y

Equation would be :

12500=P1*x+P2*y

12500=135x+750y