Assume that the unit price is Rs. 150 and profit is defined as the excess of sales revenue over total costs. What is the monthly production level of ABC Ltd. at which the profit is highest?
Explanation:
Profit = Sales Revenue – Total cost
Profit at 30 units = (150 × 30) – (800 + 2500)
= 4500 – 3300
= Rs. 1200
∵ Second shift charges will be incurred as the cost when the number of widgets are more than 30.
Profit at 40 units = (150 × 40) – (800 + 1200 + 3700)
= 6000 – 5700
= Rs. 300
Profit at 50 units = (150 × 50) – (800 + 1200 + 5000)
= 7500 – 7000
= Rs. 500
Profit at 60 units = (150 × 60) – (800 + 1200 + 6700)
= 9000 – 8700
∴ Profit at 30 units will be maximum.
Hence, option (a).
» Your doubt will be displayed only after approval.
Help us build a Free and Comprehensive Preparation portal for various competitive exams by providing us your valuable feedback about Apti4All and how it can be improved.