Cost Revenue and Profit Maximization Pgs 127 131

� Fixed Cost �Cost that exist even if you’re not making anything �Sometimes called

Production Schedule Stage III Costs # of workers Total Product Marginal Product Tot. Fixed

� Self-Service Gas Stations �High fixed casts vs. low variable costs �Why is Meijer

� Total Revenue �Amount � Marginal sold multiplied by price Revenue �Revenue for the

Production Schedule Stage III Costs Revenues # of workers Total Product Marginal Product Tot.

� Marginal Analysis �Cost-benefit � Break Even Point �When � Profit �Any for business

Production Schedule Stage III Costs Revenues Profit # of workers Total Product Marginal Product

Slides: 8

Download presentation

Cost, Revenue, and Profit Maximization Pgs. 127 – 131

� Fixed Cost �Cost that exist even if you’re not making anything �Sometimes called overhead � Variable Cost �Costs that change based on output �Labor and raw materials � Total Costs �Fixed and variable costs together � Marginal �Cost for the next unit made

Production Schedule Stage III Costs # of workers Total Product Marginal Product Tot. Fixed Costs Tot. Variable Costs Total Costs Marginal Costs 0 0 0 $50 $0 $50 ------- 1 7 7 $50 $90 $140 $13 2 20 13 $50 $180 $230 $6. 92 3 38 18 $50 $270 $320 $5. 00 4 62 24 $50 $360 $410 $375 5 90 28 $50 $450 $500 $3. 21 6 110 20 $540 $590 $4. 50 7 129 19 $50 $630 $680 $4. 74 8 138 9 $50 $720 $770 $10. 00 9 144 6 $50 $810 $860 $15. 00 10 148 4 $50 $900 $950 $22. 50 11 145 -3 $50 $990 $1040 ------- 12 135 -10 $50 $1080 $1130 -------

� Self-Service Gas Stations �High fixed casts vs. low variable costs �Why is Meijer open 24 -7? � Internet �Low Stores fixed costs

� Total Revenue �Amount � Marginal sold multiplied by price Revenue �Revenue for the next unit sold �Wait… How is this different from the “price”? It isn’t!

Production Schedule Stage III Costs Revenues # of workers Total Product Marginal Product Tot. Fixed Costs Tot. Variable Costs Total Costs Marginal Costs Total Revenue Marginal Revenue 0 0 0 $50 $0 $50 ------ $0 ------ 1 7 7 $50 $90 $140 $13 $105 $15 2 20 13 $50 $180 $230 $6. 92 $300 $15 3 38 18 $50 $270 $320 $5. 00 $570 $15 4 62 24 $50 $360 $410 $375 $930 $15 5 90 28 $50 $450 $500 $3. 21 $1, 350 $15 6 110 20 $540 $590 $4. 50 $1, 650 $15 7 129 19 $50 $630 $680 $4. 74 $1, 935 $15 8 138 9 $50 $720 $770 $10. 00 $2, 070 $15 9 144 6 $50 $810 $860 $15. 00 $2, 160 $15 10 148 4 $50 $900 $950 $22. 50 $2, 220 $15 11 145 -3 $50 $990 $1, 040 ------ $2, 175 $15 12 135 -10 $50 $1, 080 $1, 130 ------ $2, 025 $15

� Marginal Analysis �Cost-benefit � Break Even Point �When � Profit �Any for business you’re no longer losing money! Maximizing Quantity of Output thoughts? �How might we find it?

Production Schedule Stage III Costs Revenues Profit # of workers Total Product Marginal Product Tot. Fixed Costs Tot. Variable Costs Total Costs Marginal Costs Total Revenue Marginal Revenue Total Profits 0 0 0 $50 $0 $50 ----- $0 ----- -$50 1 7 7 $50 $90 $140 $13 $105 $15 -$35 2 20 13 $50 $180 $230 $6. 92 $300 $15 $70 3 38 18 $50 $270 $320 $5. 00 $570 $15 $250 4 62 24 $50 $360 $410 $375 $930 $15 $520 5 90 28 $50 $450 $500 $3. 21 $1, 350 $15 $850 6 110 20 $540 $590 $4. 50 $1, 650 $15 $1, 060 7 129 19 $50 $630 $680 $4. 74 $1, 935 $1, 210 8 138 9 $50 $720 $770 $10. 00 $2, 070 $15 $1, 300 9 144 6 $50 $810 $860 $15. 00 $2, 160 $15 $1, 300 10 148 4 $50 $900 $950 $22. 50 $2, 220 $15 $1, 270 11 145 -3 $50 $990 $1, 040 ----- $2, 175 $1, 135 12 135 -10 $50 $1, 080 $1, 130 ----- $2, 025 $15 $895