Instructions

Answer the questions based on the following information.

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 revenu from 50 units is 1000 and the variable cost from 50 units is 700

Question 22

If the fixed cost of production goes up by Rs. 40, then what is the minimum number of units that need to be manufactured to make sure that there is no loss?

Solution

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.
As fixed cost went up by 40 units, the total fixed cost (when number of units is less than 34) is 50+40 = 90
Let the minimum number of units that are needed to be produced to ensure that there is no loss be X.
So, 20X $$\leq$$ 14X + 90
Or X $$\leq$$ 15
So, the least possible number of units to be produced to ensure no loss is 15.

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If the fixed cost of production goes up by Rs. 40, then what is the minimum number of units that need to be manufactured to make sure that there is no loss?

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