A smaller 2-year old emerging venture is set to enter a new segment of its original target market, with a modified version of very popular product already being sold by about a half dozen suppliers in that space. Marketing research produced the revenue model: 3464.5Q -0.07874Q2.
Her targeted price seems to be around $3,200 +/- (she hopes, subject to many factors). We've helped her develop an overhead/operations budget for next year at $965,000. Her labor + materials + related direct cost of production are modeled as: $2,566.59Q + .0811Q2.
TIP: Unlike the example in the session, this cost production function only has two terms (Q and Q2). So please only use the information given (adjust the Excel file in class to only two terms).
Get some analysis completed in time for our meeting with her and her advisory team before Session 12. We examined a range of possible annual production runs between 400 and 4,000 units manufactured and sold. We need some basic answers to these:
1. Demand function and graph
2. Sales function and graph
3. Total cost function and graph
4. Profit function and graph
5. Marginal revenue function
6. Marginal cost function (graph 5+6)
7. Marginal profit and graph
8. Gross profit, gross margin at your recommended output, Price, and VC/unit
9. Maximum revenue and quantity for such
10. Maximum profit and quantity on that, with MR, MC
11. Breakeven point for this production configuration