Carol’s Flowers, a profit-seeking enterprise, is considering whether or not to p
ID: 422528 • Letter: C
Question
Carol’s Flowers, a profit-seeking enterprise, is considering whether or not to produce and sell a new product line of flowers in brown bags. Carol has has estimated a one-time cost of $3,000 to start a new production line for this product. Her marketing research projects first-year demand to range from 800 to 1,000 bags. Once the product is introduced, the first-year variable cost per flower bag will be $3.11, and each bag will be priced at $5.99. Carol needs to develop simple mathematical models to help make a decision whether or not she should move ahead with new product offering. Carol does not tolerate introduction of unprofitable product lines. What is the correct model expression for first-year total profit?
TP = 5.99x - (3,000 +3.11x)
TP = 5.99x - 3,000 + 3.11x
TP = 5.99x
TP = 5.99x - 3,000 - 3.11(1,000)
Explanation / Answer
given
Price =$5.99
Variable cost VC=$3.11
Fixed cost FC=$ 3000
to calculate the total profit
the formula is TP= revenue - total cost
TP=P*x-(FC+VC*x)
TP=5.99*x -(3000+3.11*x)
so the answer us option 1