A product may be made using machine I or machine II. The manufacturer estimates that the monthly fixed costs of using machine I are $18,000, whereas the monthly fixed costs of using machine II are $15,000. The variable costs of manufacturing 1 unit of the product using machine I and machine II are $10 and $20, respectively. The products sell for $50 each. What is the maximum profit if the projected sales are 650 units

maximum profit is $8000 if sales from machine 1

Explanation:

given data

monthly fixed costs machine 1 = $18000

monthly fixed costs machine 2 = $15000

variable costs by machine 1 = $10

variable costs by machine 2 = $20

products sell = $50 each

to find out

What is the maximum profit if the projected sales are 650 units

solution

we consider here no of machine sold = x

and we know total Cost = Fixed Cost + Variable Cost

so for machine 1 cost = 18000 + 10x

for machine 2 cost = 15000 + 20x

here x we have given 650 machine sold so

for machine 1 cost = 18000 + 10 (650) = $24500

for machine 2 cost = 15000 + 20 (650) = $28000

we know products sell for $50 each

so earn for 650 = $32500

so profit from machine 1 = $32500 - $24500 = $8000

so profit from machine 2 = $32500 - $28000 = $4500

so maximum profit is $8000 if sales from machine 1