Question
Thecommodity that your company produces is pricesensitive, i.e., the number of units that you can sell depends upon the price. Suppose that a roughexamination of
Thecommodity that your company produces is pricesensitive, i.e., the number of units that you can sell depends upon the price. Suppose that a roughexamination of past data and experience suggests that the functional relationship between theselling price charged ($/unit) and the number of units actually sold (Q) is given as follows: Q =(BaseSales)-(PriceElasticity)*(SellingPrice)Adetailedstatisticalanalysisofpastdata showsthat Base Sales is best approximated by 100,000, and the Price Elasticity is approximately25,000 units per dollar. Further, suppose that the technology used to produce these parts is suchthat its cost structure consists of a fixed component and a variable component. In fact, for anyproduction run, there is a fixed cost of $5,000 and a variable cost of $2 per unit produced. It isyourjobtodetermine thebest pricingand production strategyforyourcompany.
What is the break-even point for the selling price of the part? Profit = Revenue - Cost = 0 P = (-25,000P^2 + 100,000P) - (5000 + 2(-25,000P + 100,000)) =0 P = 100,000P - 25000P^2 - 205,000 + 50,000P P = 150,00P-25,000P^2 - 205,000 = 0 (150P - 25P^2 - 205)/5 = 0/5
I am stuck here, and Not able to get the formula for the break even point. Could you help me get to the next step of finding the break even price?
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