Christine Mazzocchi Blog Post 3

Part 1:

JT’s Chia Pet Store

Part 2: 

JT’s Chia Pet Store is based in Sydney, Australia that produces one item: koala chia pets. Koala chia pets are in high demand because the Aussie population loves their furry little friends. The store is named after JT the koala, who was named after the very talented singer, Justin Timberlake. The company has been going strong over the past couple of years because of the popular demand. JT’s Chia Pet Store targets their items towards the whole population of Australia, especially for parents and their children. 

Fixed Costs:

Rent: $3,500

Heating: $1,000

Supplies: $4,000

Internet: $50.00

Payroll: $10,750

Business & Government Fees: $300

Total Cost: $19,600

Variable Costs: $2.00

Cost for one Chia Pet: $15.00

Cost Function: C(q)=2q+19,600

Revenue Function: R(q)=15q

Profit Function: P(q)=15q-2q-19,600

Break-even Point Value: 15q=19,600+2q

  -2q           -2q

  13q= 19,600

    q=1,507.69

Interpretation for cost and revenue function graph: The break even point on my graph represents how many koala chia pets JT’s Chia Pet Store needs to sell each month in order equal how much money they put in. A number greater than 1508 chia pets will result in a profit for the company. A number less than 1508 chia pets will result in a loss for the company. The revenue function has greater slope than the cost function, therefore after the break even point, the company will profit. 

Interpretation for profit function graph: The break even point shows how many koala chia pets this company must sell in order to equal the money the company spent. For a profit to occur, the company must sell a number greater than 1508 koala chia pets. 

Part 3:

Quantity Produced Each Day

q=100

The marginal cost of producing n=100 units would be $2.00. 

The average cost of producing n=100 units is $198. 

C(q)= 2q+19,600

      =2(100)+19,600

      =19,800

19,800/100= $198.00

1) The marginal revenue is greater than the marginal cost at q=n. This is because the marginal revenue=R’(q), which equals 15. The marginal cost=C’(q), which equals 2. (15>2)

2) The number of units sold daily is 100 chia pets. If you multiply 100 by 30, to get the monthly rate, you get 3,000. This number is above the break even point, which is 1,508. Since the number falls above the break even point, the company will be making a profit. 

3) R(101)-R(100)=

     1,515-1,500=15

C(101)-C(100)=

 19,802- 19,800=2

If production is increased by one extra quantity per day, the company will continue to make money because revenue is 15, and cost is 2. As seen in the above equations, the company will make more money than what they are selling them for. 

4)At q=n, an increase of production decreases the average cost. 

5)Decreasing average costs would be better for the company because they would be able to produce their product cheaper and allows for more profit. 

Part 4:

It looks like JT’s Chia Pet Store will do well over the next five years. The company is making a profit because 3,000 falls above the break even point of 1,508. Also, this company will be thriving because the social implications are high. Koalas are in danger of becoming extinct, so people want to save koala chia pets as a memory of their beloved animal.