Coffin Shoppe

Juan Junior Junior’s Coffin Shoppe

After Grandpa Juan’s timely (as determined in blog post two) death, and Juan Junior Junior’s subsequent coffin research, Juan Jr. Jr. decided to open a coffin shop. When doing his research, Juan Jr. Jr. realized that everyone dies eventually, and therefore it would be very wise to capitalize in this market.

Fixed costs:

                Heating/cooling systemà $1,700

                Rent------------------------à $7,000

                Supplies-----------------à  $100,000

                Internet-----------------à $1,000

                Other--------------------à $5,300

 

TOTAL FIXED COST: 115,000

Variable costs--à1,000

Price-------------à  7,000

Revenue Function:

                R(q)=7,000q

Cost Function

                C(q) =1000q+ 115,000    

Profit Function

                P(q)= R(q)-C(q)

                P(q)=(7,000q)-(1000q+115,000)

Break Even Point

                7,000q=1000q+115,000

                6,000q=115,000

                q= 19.166

The break even point, or equilibrium, is the point at which revenue and cost are equal. In this case, after this point is where revenue begins to exceed cost and therefor is where the company begins to make a profit.

        Where P(q) crosses the x-axis is where the company begins to make a profit. A this graph shows, when the company sells 19.166 units is where the company begins to even out, and anything sold above that is where the company is making a profit.

(Part three)

N=q=5 units

5 units produced daily

Marginal cost—1000

The average cost of producing 5 units is C(q)/q= 24,000

1.)    Marginal revenue is greater than marginal cost due to the fact that marginal revenue is $7,000 and marginal cost is $1,000

2.)    The number of units sold daily is after the break even point because the break even point is on a monthly scale. If you were to multiply the number of units sold daily (5), by 30 to put it on the correct scale, you would be selling approximately 150 units a month, which is after the break even point.

3.)    If production is increased by one extra quantity per day, the company will continue to make money. When you subtract the formula C (q+1) –C (q) from the formula R (q+1) –R (q), you can determine whether or not the company will continue to make money. If your answer is negative then your company will begin to lose money; however, in this case, the answer was positive and therefore the company is still making money.

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

5.)    Decreasing average costs would benefit the company because it would become cheaper to produce their product, and therefore, increase the profit margin.

Part 4

        Over the next five years, the coffin industry is going to grow at a steady rate. Everyone dies eventually, and so Juan Junior Junior’s Coffin Shoppe is expected to thrive.