Applied Appliances - Jackson Yellen

Applied Appliances

Part 1:

Applied Appliances was founded in 1978 by George Edward.  He created the company to sell quality appliances at a lower cost for hardworking middle class families.  Applied Appliances currently sells all different kinds of kitchen appliances from other manufacturers.  They currently manufacture their own refrigerator.  Still today their current demographic is primarily middle-aged middle class adults.

Part 2:

Fixed Cost  500,000

Expense – 100,000

Materials – 300,000

Warehouse rent – 100,000

The fixed cost for applied appliances is 500,000 dollars

Each unit refrigerator is 800 dollars.

The materials per each unit cost 600 dollars.

The selling price is 800 per unit.

The variable cost to build a refrigerator is 600 dollars.

Q-> the number of refrigerators produced.

Cost Function: 500,000 + 600q

Revenue Function: 800q

Profit Function: (800q) – (500,000 +600q)

Part 3

1.     The marginal revenue is less than the marginal cost at q. When the unit per cost is calculated it is less than.

2.     The number of units sold daily is before the break even point so there is no profit.

3.     Q= (80 + 1) so no the company will not make money. 

R(q) = 800 (80) = 64,000

R(q + 1) = 800 ( 80 + 1) = 64800

C(q) =500,000 + 600 (80) =548,000

            R(q) = 500,000 + 600 (80 + 1) = 548,600

            548,600 – 548,000 = 600 to  produce another unit.

4. Average Cost = 800/unit  ÷ 80 = $109

            5. Decreasing average cost would be better for the company

Part 4

The company over the next five years will continue to grow as they try to lower their average costs.  The Company will struggle, but with innovation will come profit.