Answer to Question #318595 in Economics for butu

Question

Thomas Private Limited Company is about to start production of new products to

sell to customers. Before the start of the new production, it costs the company $

200,000 to construct the factory’s building. Once the construction is over, the cost

per unit of production is estimated to be birr 20. Upon selling, the company will

incur a 20% commission expense. Moreover, the price per unit of products is

decided to be Birr 50.

Required:

a)

Construct the total cost equation in terms of quantity.

b)

Determine the break-even quantity (Revenue)

Answer 1

a) $TC=TFC+VC*Q=200,000*0.2+20Q=40+20Q$

b)$BEQ={FC \over P-VC}={40 \over 50-20}=1.3333$