Ponderosa Development Corporation (PDC) is a small real estate developer that builds only one style house.
- The selling price of the house is $115,000.
- Land foreach housecosts $55,000 and lumber, supplies, and other materials run another $28,000per house.
- Total labor costs are approximately $20,000per house.
- Ponderosa leases office space for $2,000per month.The cost of supplies, utilities, and leased equipment runs another $3,000per month.
- The one salesperson of PDC is paid a commission of $2,000 on the sale ofeach house.PDC has seven permanent office employees whose monthly salaries are given in the table below:
Employee
Monthly Salary
President
$10,000
VP, Development
6,000
VP, Marketing
4,500
Project Manager
5,500
Controller
4,000
Office Manager
3,000
Receptionist
2,000
a) Identify all costs and denote the marginal cost and marginal revenue for each house.
b) Write the monthly cost function c (x), revenue function r (x), and profit function p (x).
c) What is the breakeven point for monthly sales of the houses?
d) What is the monthly profit if 12 houses per month are built and sold?
e) Determine the BEP for monthly sale of houses graphically.