ACTIVITY 1:

DIRECTIONS: Solve each problem completely.

1. A furniture company produces tables. The fixed monthly cost of production is P400,000 and the
variable cost per table is P3,250. The tables sell for P9,000 a piece.
a. Determine the total cost, total revenue, and profit function.

TC = 400,000 + (3250) (x)

TR = 9000x

Z = 9000x – [400000 + 3250x]

Z = 5750x - 400000

b. For a monthly volume of 300 tables, find the total cost, total revenue, and profit.

TC = 400,000 + (3,250) (300)

TC = 1,375,000

TR = 2,700,000

TP = 2,700,000 - 1,375,000

TP = 1,325,000

c. Solve for the monthly break-even volume for the Furniture Company.

Z= P(X) – [F(c) + Vcx]

Z= 9000x – [400000 + 3250x]

= 5750x - 400000

−5750 x 400000
=
−5750 −5750

x=69.57 0r 70
 d. Graph the cost and revenue functions and determine the break-even point.

2. The Yokohama Tire Company recaps tires. The fixed annual cost of the recapping operation is
P600,000. The variable cost of recapping a tire is P90. The company charges P250 to recap a tire.

a. Determine the total cost, total revenue, and profit function.

TC = 600,000 + (90) (x)

TR = 250x

Z = 250x – [600000 + 90x]

Z = 340x - 600000

b. For an annual volume of 12,000 tires, determine the total cost, total revenue, and profit.

TC = 600,000 + (90) (12,000)

TC = 1,680,000

TR = (250) (12,000)

TR = 3,000,000

Profit Function = 3,000,000 – 1,680,000

Profit Function = 1,320,000

c. Determine the annual break-even volume for the Yokohama Tire Company.

Z = 250x – (600000 + 90x)

Z = 160x – 600000

Z = 3,750

d. Graph the cost and revenue functions and label the break-even point.
3. A company that produces fertilizer has a fixed monthly cost of P250,000 and its variable cost per
pound of fertilizer is P15. The company sells the fertilizer for P40 per pound.
a. Find the total cost, total revenue, and profit function.
TC = 250,000 + 15(x)
TR = 40x
P = 40x – [250,000+15x]
b. Determine the monthly break-even volume for the company.
Z = 40x – [250,000 + 15x]
Z = 25x-250000
Z = 10,000
c. Graph the total cost and total revenue and determine the break-even point.
d. If the company changes the price of its fertilizer from P40 to P60 per pound, what effect will
the change have on the break-even volume?
Z = 60x – [250,000 + 15x]
Z = 45x-250000
Z = 5,555.56

e. If the company changes its production process to add a weed killer to the fertilizer to increase
sales, the variable cost per pound will increase from P15 to P22. What effect will this change
have on the break-even volume?
Break-Even Point = 60x – [250,000 + 22x]
0 = 38x-250000

Z = 6,578.95

4. A company manufactures and sells shoes. Production costs consist of a fixed cost of P650,000
and a variable cost of P50 per pair of shoes. Each pair of shoes is sold for P900.
a. Determine the total cost, total revenue, and profit functions.
TC = 650,000 + 50(x)
TR = 900x

b. How many pairs of shoes must be produced and sold for the company to make a profit?
c. Graph the cost and revenue functions.
d. If the company increases the price per pair of shoes by P100, what effect will this change
have on the break-even volume?
Break-Even Point = 900x – [650,000 + 50x]
O = 850x-650000
−85 0 x −6 50 , 000
=
−850 −850
Z = 764.71
5. A company producing jigsaw puzzles has a fixed cost of P6,000 and a variable cost of P30 per
puzzle. The company sells puzzles for P60 each.
a. Find formulas for the total cost function, total revenue function, and profit function.
TC = 6,000 + 30(x)
TR = 60x
Z = 60x – [6,000 + 30x]
Z = 30x – 6,000

b. Sketch the graph of the cost and revenue function. What is the break-even point for the
company? Determine the profit and loss area.

Break-Even Point = 30x – [6,000 + 60x]

0 = -30x-6000
30 x −6 , 000
=
30 30
x = -200

c. If the company increases the fixed cost to P10,000, what effect will this change have on the
break-even volume?
Break-Even Point = 30x – [10,000 + 60x]
0 = -30x-10,000
30 x −10,000
=
30 30
x = -333.33