1-2-3 Ninja blog post 3

1-2-3 Ninja is a company that produces hand crafted ninja stars.  The Company began in 2005 to help teach self-defense techniques. This product is marketed to children 12+ but adult supervision is advised. Each sale comes with a manual with tips and techniques on using this age old weapon with a modern twist!

                Fixed Cost: $10,050

                Variable Costs: $20 for 800 units

                Selling Price:  $40/ unit

Revenue Function: R(q)=40q= 40(800)= 32,000

Cost Function: C(q)= 10,050 + (20*800) = 26050

Profit Function: R(q)- C(q)= 32,000-26,050= 5,950

Break-even Point: 10,050/ 40-20= 503 units = $40(503) = $20,120

The break-even point on the graph shows where the cost and revenue for the ninja stars is equal. The costs of producing are not exceeding the revenue and vice versa.

The profit function only indicates the amount of profit made when producing 800 ninja stars. The price function shows that 1-2-3 Ninja made a total profit of $5,950 if they sell 800 stars.

Unites produced daily= q=n n=50 q=50 ninja stars

Marginal cost: MC= c(q+1)-c(q)= [10,050+(20*51)]- [10,050+(20*50)]= 11070-11.050=20

The average cost of producing the 50^th unit= $20

1.       The marginal revenue is less than the marginal cost at q=n because the fixed costs of starting the company are not paid off in a day’s worth of production and sales.

2.       The number of units sold therefor is under the break-even point on a per day scale. This is because the cost of producing the ninja stars is more expensive than the sales.

3.       Yes, 1-2-3 Ninja will be able to make more of a profit, although at the rate they are producing they are paying more in costs than they are receiving in profit. The way to fix this would be to increase production or price.

4.       If they increased sales by an exponential amount there profit would eventually increase above their costs.

5.       If possible it would be best for the company to decrease their average cost so they could make more profit while selling their good at the same price.

Part IV

1.       I believe the company will do well in business over the next five years if they are able to sell at the same rate that they started with. They need to sell over 503 units to break-even. Following their production rate they should sell this amount in about a month. After a month of business they will be making a profit so in five years their company should be doing well.

2.       The only foreseeable problem is that if their sale decrease below the amount they are producing per day then there business could have trouble, but as long as they sell enough units at the current prices 1-2-3 Ninja should thrive in the market.