Question

Best Plastics produces a line of cell phone covers. Its best-selling cover is the Cobra model, a slim but very durable black plastic cover. The annual fixed cost for the Cobra model is $234,000. This fixed cost includes management time, advertising, and other costs. In addition, the variable cost, including labor and material costs, is $2 for each unit produced Best Plastics sells the Cobra for $3.50 per unit. The exact demand for next year is not known. Best Plastics wants to analyze the possible profit against different quantities. Define "q" as the quantity (number of units) required next year. Define TMC(9) as the total cost to manufacture q units. Define TR(q) as the total revenue from selling q units. a. Write the algebraic equations for TMC(q) and TR(q). b. Define TP(q) as the total profit from selling q units, that is, TR(q) - TMC(q). Write the algebraic equation for TP(q). C. Below is a screenshot of an Excel Template: A B C D E Quantity Profit Best Plastic 3 Cost Input 4 Fixed Cost 5 Variable Cost 234000 7 Selling price per unit Variable (a) 10 Quantity 25000 50000 75000 100000 125000 150000 175000 200000 225000 250000 275000 300000 12 Model 13 Total Revenue 14 Total Manufacturing Cost 15 Total Profit Answer all the following: i) What is the exact cell entry in B13? Give the entry in terms of cell references not variable names (e.g., =A12+B20) What is the exact cell entry in B14? What is the exact cell entry in B15?

_{Please answer at least iv, v, and vi}

Answer 1

Answer :

(a). Algebraic equation for TMC(q) and TR(q) are

TMC(Q) = Annual fixed cost + Variable cost *q

= 234000+2q

= 3.5q

(b). TP(q) - TMC(q)

= 3.5q - (234000 + 2q)

= 1.5q - 234000

(c). Cell entries are following

i)

B13 =B7*B10

ii)

B14 =B4+B5*B10

iii)

B15 =B13-B14

iv)

Keep E2 blank , because it's a one-way data table

v)

Entry in "Row input cell" is nothing. keep it blank

vi)

Entry in "Column input cell" is $B$10

it refers to the quantity

d)

Break-even quantity = Annual fixed cost / (selling price - variable cost)

= 234000 / (3.5-2)

= 156,000 units

e)

i)

entry in "Set cell" is C15

ii)

entry in "To value" is 0

iii)

entry in "By changing cell" is D4

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