Q.A company manufactures cassettes. Its cost and revenue functions are and , respectively, where is the number of cassettes produced and sold in a week. How many cassettes must be sold by the company to realise some profit?
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Start your 14-day free trial to unlock the full solution →Profit occurs when revenue exceeds cost; solving gives , so the company must sell at least 2,001 cassettes to realise profit.
Profit is what remains after subtracting all costs from revenue. A company breaks even when , loses money when , and makes profit when . The question asks for the minimum production level at which profit becomes positive.
The cost function has two parts: a fixed cost of ₹26,000 (overhead, rent, equipment—expenses that don't depend on production volume) and a variable cost of ₹30 per cassette. The revenue function means each cassette sells for ₹43. The company earns ₹13 per cassette sold (the difference ), but must first recover that ₹26,000 fixed cost.
Finding the break-even point
- Set revenue equal to cost to find where profit is exactly zero:
- Collect like terms by subtracting from both sides:
- Solve for :
At exactly 2,000 cassettes, the company breaks even: revenue and cost are both ₹86,000.
Moving into profit
- For profit to be positive, we need :
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