Khalid has started a small business deals with a certain product, he achieved an amount of sales OMR 10400, at the price of OMR 260 per unit, but when he reduced the price to OMR 200 per unit he achieved sales of OMR 11000. If the variable cost per unit is OMR 60, and the fixed cost is OMR 5100. Required: i. From the above information, formulate the price function, and the cost function of this business. ii. Use the functions to determine the following: a. Profit maximizing quantity. b. Profit-maximizing price. c. Maximum profit value. d. Revenue-maximizing quantity. iii. Suggest a reduction in the fixed cost which gives a maximum profit value between OMR (4000 and 5500), calculate the maximum profit value after the cost reduction.
Q2.
Khalid has started a small business deals with a certain product, he achieved an amount of sales
OMR 10400, at the price of OMR 260 per unit, but when he reduced the price to OMR 200 per
unit he achieved sales of OMR 11000. If the variable cost per unit is OMR 60, and the fixed cost
is OMR 5100.
Required:
i. From the above information, formulate the price function, and the cost function of this
business.
ii. Use the functions to determine the following:
a. Profit maximizing quantity.
b. Profit-maximizing price.
c. Maximum profit value.
d. Revenue-maximizing quantity.
iii. Suggest a reduction in the fixed cost which gives a maximum profit value between OMR
(4000 and 5500), calculate the maximum profit value after the cost reduction.
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