Question
As your Division's Chief economist, you perform a periodic review of the current total Cost C , Revenue R and Profit
As your Division's Chief economist, you perform a periodic review of the current total Cost "C", Revenue "R" and Profit "P" models associated with one of the Division's newest, but possibly underperforming, product lines.Among other important questions, you would like answers to the ones provided below.[thedependentvariables are "C", "R" or "P"; theindependentvariable is "x", the number of units (produced and) sold].The "best fit"linearorquadratic"C", "R" or "P" models, derived from the data referenced above, follow:
C= 100(x)1+ 250,000 with [(R^2)] = 1.0.
R= -0.25(x)2+ 500(x)1with [(R^2)] = 1.0.
P= -0.25(x)2+ 400(x)1- 250,000 with [(R^2)] = 1.0.
1.Calculate how many product units "x" should be sold per sales period tomaximizethis product's total Profit "P"...then...calculate "Pmax" at this "x" value.Assume market constraints suggest that1,400is themaximumnumber of product units that actually can be sold per sales period (i.e. 0<x< 1,400 units).
2.If internal production or external market constraints are not an issue, determine, if possible, the minimum number of product units "x" that must be produced and sold in order to "break even" (i.e. generate a Profit of $0.0
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