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Ghosh Babu has a manufacturing unit. The following graph gives the cost for the various number of units. Given: Profit = Revenue - Variable cost - Fixed cost. The fixed cost remains constant up to 34 units after which additional investment is to be done in fixed assets. In any case, production cannot exceed 50 units.
Note: The fixed cost for upto 34 units is 50 and the the fixed cost for more is 100.
The revenue from 50 units is 1000 and the variable cost from 50 units is 700
What is the least number of units that should be manufactured such that the profit was at least Rs. 50?
The revenue of 50 units is 1000. So, the revenue per unit is 20.
The variable cost of 50 units is 700. So, the variable cost per unit is 14.
Let the minimum number of units that are needed to be produced to ensure that there is a profit of at least 50.
So, total revenue is 20X and total cost is 14X+50.
So, Profit is 20X - (14X+50) = 6X-50 > 50
Hence, 6X > 100
Or X > 16
So, the least possible number of units to be produced is 17.
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