Analysis Of Piggy Bank

717 Words3 Pages
The business I choose to start is a piggy bank designing company. My company makes over 100 different styles and textures of piggy banks. To produce our most popular, style the matte black stainless steel piggy bank, it cost $5 to acquire all the material it will take to make it. The market value set for a single piggy bank is set at $11. My total fixed cost including rent and utilities for my business is $4,000 per month. My cost function is C(x)= 4,000+11x. In order to get the linear cost function, I take the equation C =mx+b. There is an option to buy a piggy bank deluxe box which includes 100 piggy banks for $650. This would place the marginal cost at $5, C is equal to the total cost and x is the number of items. The slope m is the marginal cost and b is the fixed cost, ending with the equation C(x)= 5x+150.

Next, with the price-demand, x=f(p)=12000-75p, to determine the feasible range
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My revenue would be 33,000 per month if I am producing 3,000 units of piggy banks. Lastly My profit would be around 360,000 a month if I continued to produce 3,000 units of piggy banks on a continuous basis. My marginal cost and revenue at 3,000 if I took the derivative of both equations. Would be the marginal cost function C’(x)=11, meaning it would cost me an extra $11 to produce another piggy bank. The derivative of the marginal revenue function is if I plugged in 3,000 to the original function of R’(x)=160- 1/75x would equal $120. Which would mean that when 3,000 units are produced the change in revenue would be $120. Using the price -demand function at my product would sell for $120 every month. The price elasticity of demand function is (q(p)/p)*(dP/dQ) which would covert to my function as E(p)= -p(120p)/4000-120p. This would cause my company to be elastic because if I change my quantity my price will fluctuate. When profit is maximized, marginal revenue is
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