As a marketing department team#4 our primary goal is to make best
estimate the price for our new product “DVD player” that will produce the
maximum profit and how many of the DVD players that we can expect to sell,
and how much profit we might hope to realize from the sales.
In order to price DVD player, we need to estimate;
< The demand for a new DVD player on the national market.
< The cost of production of a new DVD player.
< The revenue in relation to quantity sold.
< The price that is likely to maximize profit.
< How profit changes in response to changes in quantity of DVD players.
< The level of production that will maximize our profit.
Here, we have presented our analysis by using mathematical tools to
compute required information.
To produce new DVD player, the first 400,000 units will have production
cost of $41.00 per unit. The next 200,000 units will cost $31.00 per unit
to produce. After the first 600,000 units can be produced for 23.00 further
up to 1,300,000. Also there are fixed overhead costs of $40,800,000 before
producing any players.
Given the information, we set up the cost function which tells us the
total costs at any level or production q units.
First, let q be the number of units be specified by the variable and C(q)
be the total cost function.
The Cost function is set up by formula; C(q)=Variable Costs + Fixed Costs.
Given the data, up to 400,000 units are produced, our first piece of the
cost function is picif q pic400,000. Second part of the function was
set up by plugging the number where pic and variable cost $31.00 to the
equation and found out y-axis of the second piecewise function and then it
came out31q +44,800,000 if 400,000 < q pic 600,000. The last piece of
the function is I basically did same thing as the second one by plugging
the number where picand variable cost $23.00 to get y-axis of the
function and came out 23q+49,600,000 if 600,000