Jacks Flapjack Shop

Part 1:
      In 2014 I decided to open up my own company that solely makes pancakes. The sole purpose of the this business to create the most delicious, scrumptious pancakes that DC has ever seen. The pancakes will come with a wide variety of fillings and toppings and will be served from breakfast to dinner. We target our market for people who have a love for pancakes at any time of the day.

Part 2:

Fixed Cost

ITEM	Monthly Cost
Rent	$2500
Utilities	$720
Payroll	$4000
Business License/Government Fees	$50
	$7,270

   Variable Pancake Cost:

$5 per pancake

Price For One Unit:

$10

Cost Function:

C(q) = 7,270 + 5q

Revenue Function:

R(q) = 10q

Profit Function:

P(q) = 10q - 7,270 + 5q

Break Even Point:

10q = 7,270 + 5q

5q = 7270

q= 1,454 pancakes

Interpretation: This graph shows the “break even” point. This point represents the amount of pancakes that need to be sold in order to make a profit. If less than 1,454 pancakes are sold there will be a deficit because the cost function will be greater than the revenue function.

The slope of the revenue function represents the amount of money needed to produce a set of pancakes, while the slope of the revenue function represents the amount of money made from selling a set of pancakes.

 The Profit Function:

            The break-even point on the profit function is the negative break-even point of the cost/revenue function (-7,270). This graph represents the total profit of the company.

Part 3

            Q=100

The Marginal cost of producing n=100 pancakes is C’(q)= $5

The average cost of producing n=100 would be 17770/30 (days in a month) then 592.3/100 which is $5.92 per pancake unit.

1.     The marginal revenue of $10 is greater than the average cost per unit of $5.92, which means that this business is making a profit.

2.     100 * 30 = 3000 pancakes per month. This is greater than the breaking point of 1,454 pancakes.

3.     Yes the business will still be making a profit R(101)-R(100) = 10 and C(101)-C(100) = 5 so they will still make a profit of $5 if adding a additional unit.

4.     The average cost will decrease if more additional units were added because it will become more spread out.

5.     If you decrease the average cost, then the business will benefit from it because they have a greater profit.

Part 4:

                       

At the rate that the company is going, Jack’s Flapjack shop should continue to make a profit over the next 5 years. Although there can be a fluctuation either for the better or the worse in the cost, revenue, and profit functions, the profit made by selling the pancakes should continue to remain positive.