Maranan, Jere Mae G.

A2A

PROBLEM 3
A business firm produces and sells a particular product. Variable cost is ₱30 per unit. Selling
Price is ₱40 per unit. Fixed cost is ₱60, 000. Determine the following:

A. Profit when sales are 10,000 units.

Profit = TR – TC)
= (SP x Number of units sold) – (FC + (VC x Number of units sold))
= (₱40 x 10,000) – (₱60,000 + (₱30 x 10,000)
= ₱400,000 – ₱360,000
Profit = ₱40,000

B. The break-even quantity and revenue.

TR = TC
P40Q = ₱60,000 + ₱30Q

Break-even Quantity = Total FC / (SP – VC)

= ₱60,000 / (₱40 – ₱30)
= ₱60,000 / ₱10
Break-even Quantity = 6,000 units

Break-even Revenue = SP x Q = FC + (VC x Q)

= ₱40 x 6,000 = ₱60,000 + (₱30 x 6,000)
Break-even Revenue = ₱240,000

C. Sales volume when profit is ₱9,000

Sales Volume = (Profit / (SP – VC)) + Q
= (₱9,000 / (₱40 – ₱30)) + 6,000
= 900 + 6,000
Sales Volume = 6,900

There should be a total of 6,900 units for the sales volume when the profit is ₱9,000.

D. The amount by which the fixed cost has to be decreased or increased for the firm to
break even at 500 units. Assume that the selling price and the variable cost remain
constant.
Fixed Cost = TR – TVC
= (SP x Q) – (VC x Q)
= (₱40 x 500) – (₱30 x 500)
= ₱20,000 – ₱15,000
 Fixed Cost = ₱5,000

= Previous Fixed Cost – New Fixed Cost

= ₱60,000 – ₱5,000
= ₱55,000
Fixed cost has to be decreased by ₱55,000 in order to have break-even at 500 units.

F. Number of units to sell to cover the fixed cost.

Number of Units = (FC) / SP
= ₱60,000 / ₱40
Number of Units = 1,500
The number of units to be sold is 1,500 in order to cover the fixed cost.

G. Suppose the firm wants to break even at a lower number of units, assuming that FC
and VC remain constant, how is the selling price affected?

The selling price will increase.

PROBLEM 4
A factory sells a particular product at ₱0.80 per unit. The variable cost is ₱0.60 per unit. The
total fixed cost is ₱12,000. Determine the following:
A. The break-even point in units of sales
TR = TC
0.8 x = 0.6 x + 12000
0.2 x = 12000
x = 12000/0.2 = 60,000
Break-even point in units of sales = 60,000

B. Profit when sales are 10,000 units.

Profit = TR – TC
= (SP x Number of Units Sold) – (FC + (VC x Number of Units Sold))
= (₱0.80 x 10,000) – (₱ 12,000 + (P0.60 x 10,000)
= ₱8,000 – ₱18,000
Profit = - ₱10,000

C. TC when sales are 5,000 units.

TC = (FC+ (VC x Number of Units Sold)
= (₱ 12,000 + (P0.60 x 5,000)
TC = ₱15,000

The total cost is ₱15,000 when sales are 5,000 units

 D. The amount by which the fixed cost will have to decrease in order to break even at a
sales volume of 4,000 units. Assume that the selling price and the variable cost
remain constant.
Fixed Cost = TR – TVC
= (SP x Q) – (VC x Q)
= (₱0.80 x 4,000) – (₱0.60 x 4,000)
= ₱3,200 – ₱2,400
Fixed Cost = ₱800

= Previous Fixed Cost – New Fixed Cost

= ₱12,000 – ₱800
= ₱11,200
Fixed cost has to be decreased by ₱11,200 in order to have break-even at 4,000 units.

E. The amount by which the selling price will have to increase or decrease for the firm
to break even at a sales volume of 4,000 units. Assume selling price and variable
cost remain the same.
TR = TC
SP x 4000 = (₱0.60 x 4000) + ₱12000
SP = ₱0.60 + 3
SP= ₱3.6
Initial price = ₱0.80
₱3.60 - ₱0.80 = ₱2.80
Selling price should be increased by ₱2.80

PROBLEM 5
A manufacturer sells his products at P10 per unit.
A. Find the total revenue if the volume of sales is 1,800.
Total Revenue = SP x units of sales
= ₱10 x 1,800
Total Revenue = ₱18,000
There is a total revenue of ₱18,000 if the volume of sales is 1,800.

B. If fixed cost is ₱3,000, represent the total cost when the variable cost per unit is P5.
Q = Total FC / (SP – VC)
= ₱3,000 / (₱10 – ₱5)
Q = 600

Total Cost = (FC + (VC x Q)

= (₱ 3,000 + (P5 x 600)
Total Cost = ₱6,000

The total cost is ₱6,000 if the fixed cost is ₱3,000 and the variable cost per unit is ₱5.
 C. Suppose that the variable cost per unit is 70% of the selling price. Represent the
total cost when the fixed cost is ₱5,000.
Q = Total FC / (SP – VC)
= ₱5,000 / (₱10 – (₱10 x 0.70))
Q = 1,667

Total Cost = FC + (VC x Q)

= ₱5,000 + (P7 x 1,667)
Total Cost = ₱16,669
The total cost is ₱16,669 if variable cost per unit is 70% of the selling price and the fixed cost is
₱5,000.

D. If the variable cost is 20% of the selling price and the fixed cost is ₱1,000, find the
break-even point.
Break-even Point = FC / (SP – VC)
= ₱1,000 / (₱10 – (₱10 x 0.20))
Break-even Point = 500
The break-even point is 500 units

NON LINEAR FUNCTION

PROBLEM 1
A. Represent the new selling price per unit.
New SP = (12 – 0.1x) per unit

B. Write the TC, TR and profit functions.

TR = (12 – 0.1x) x = 0
TR = 12x – 0.1x2
TC = 7x + 40

P = (12x – 0.1x2) – (7x + 40)

P = 12x – 0.1x2 – 7x – 40
P = 5x – 0.1x2 – 40

C. Find the break-even point quantity and revenue.

0 = 5x – 0.1x2 – 40
x2 – 50x + 400 = 0
(x – 10) (x – 40)
x = 10 x = 40
 If x = 10
TR = 12x – 0.1x2
= 12(10) – 0.1(10) 2
= 120 – 10
= 110

If x = 40
TR = 12x – 0.1x2
=12(40) – 0.1(40) 2
=480 – 160
= 320

D. Find the profit at a sale of 50 units.

P = 5x – 0.1x2 – 40
= 5(50) – 0.1(50) 2 – 40
= 250 – 250 – 40
P = -40

Find the break-even quantities.

1. P = - .09x2 + 2.4x – 6
P’ = -.18x + 2.4
.18x = 2.4
x = 13.33

P = -.09(13.33) 2 + 2.4(13.33) – 6
= -15.99 + 31.99 – 6
P = 10
2. P = -1x2 + 4x -10
P’ = -2x +4
2x = 4
x =2

P = -1(2)2 + 4(2) - 10
= -4 + 8 -10
P = -6

3. P = -.5x2 + 40x -740

P’ = -x + 40
x = 40

P = -.5(40)2 + 40(40) - 740

 = -800 + 1,600 – 740
P = 60

4. P = -.01x2 +2x – 60
P’ = -.02x + 2
.02x = 2
x = 100

P = -.01(100)2 + 2(100) – 60
= -100 + 200 – 60
P = 40

5. P = -.3x2 + 36x -1040

P’ = -.6x + 36
.6x = 36
x = 60

P = -.3(60)2 + 36(60) -1040

= -1,080 +2,160 – 1,040
P = 40