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Homework 9
Homework 9
per hour the cost of operation is $300 per mile. The cost of the passengers time CC
in
dollars is equal to $300,000 times the number of hours of travel. The airline company
wants to minimize the total cost of a trip which is equal to the cost of operating plus the
cost of the passengers time.
At what velocity should the trip be planned to minimize the total cost?
Hint: If you are finding this difficult to solve, arbitrarily choose a number of miles for the
trip length, but as you solve it, you should be able to see that the optimal velocity does
not depend on the value of n .
2) a) The selling price for an item is 50% greater than the variable cost per item. Fixed costs
are $50,000. What is the break-even sales?
b) Assume the variable and fixed costs remain the same from part a but the selling price
decreases by 10%. What is the new break-even sales?