There is a fixed cost of 50000 to start a production process

There is a fixed cost of $50,000 to start a production process. Once the process has begun, the variable cost per unit is $25. The revenue per unit is projected to be $45. a. Write an expression for total cost. b. Write an expression for total revenue. c. Write an expression for total profit. d. Find the break-even point.

Solution

Let the number of products manufactured be x units

a) Total Cost = Fixed Cost + Variable Cost = 50000 + 25x

b) Total Revenue = 45x

c) Profit = Total Revenue - Total Cost = 45x - (50000 + 25x) = 20x - 50000

d) Break even point is the point when the profit goes to zero

20x - 50000 = 0

x = 2500