Part 1: I will be making up my own business with one
product.
Part2:
The company I have started is called: The Sabella Khnouf
Deli. The company is based in Washington
DC and we are one of the most popular Deli’s in DC although we only recently opened. We have one deli in the DC area and we are
expected to open 2 more stores in coming 3 years. We offer many types of Middle Eastern meals
and dishes but our most popular and best selling is our falafel sandwich. Our
target market is mostly working men and women looking for a quick bite to eat
in their lunch breaks since the food we make is mostly healthy and does not need a lot of time to
make.
The Below figures are Per/Month
Total Fixed Costs:
Rent: $300
Wages: $500
Supplies for making food: $500
Heating, AC, Water: $300
Variable Costs: $5
Price for One Falafel Sandwich: 5$
Cost Function: C(q)=1600+5q
Revenue Function: R(q)= 7q
Profit function: P(q)= 7q-(1600+5q)
Break Even Point:
Total Revenue = Total Costs
7q= 1600+5q
q= 800
Break Even Graph:
In order for the company to cover all its costs for
producing the goods, 800 hundred units must be sold. Anything sold afterwards will be considered
profit for the company.
The marginal cost for the production of an extra unit is $5
The marginal revenue to produce an extra unit is $7
Profit Function:
The slope for the profit function is an increasing
slope. This means that the company will
have a positive profit return on the goods they produce and sell after the 800th
unit. The profit function shows the rate
at which the company will make money out of their sales.
Part 3:
Units produced per day: 100 Sandwiches.
Marginal costs from producing the nth unit: 5$
Average cost of producing the nth unit:
Average costs= C(q)/q
= C(100)/100
= 2100/100
= 21 $
1-the marginal revenue (7) is greater than the marginal cost
(5). This means that the production of
an extra unit will benefit the business since the marginal revenue is greater
than the marginal cost to produce an extra unit.
2- before. This means that the company will need extra 7
days in order to break even and thus cover their costs. For the first 7 days we will be operating a
loss but after the 8th day we will start generating profit and for
the remainder bigger portion of the month we will be operating in profit
3- yes. Because for every extra unit produced the marginal revenue
is 7 dollars whereas the marginal cost is 5 dollars. Therefore, for every extra unit produced the
business will be making money.
4- Marginal cost = 5, Average Cost= 21
The average cost is greater than the marginal cost. Therefore an increase in production will lead
to a decrease in average costs.
5- Decreasing. Because increasing average costs means that
for every extra unit that is going to be produced the overall costs are going
to increase on a company. However, a
decreasing average cost is good for a company because that means that for every
extra unit they produce overall costs will decrease. This will provide an opportunity for a
business to increase production and therefore increase their number of sales
and thus greater profit will be made.
(Part 4):
I believe that over the next 5 years the company will strive
due to various economic and social factors.
From an economic standpoint, according to the mathematical calculations
I did throughout this experiment it is evident that the company will
strive. The marginal revenue is greater
than the marginal costs this means that for every extra unit produced the
business will make an extra 2 dollars.
Other than that, since the average costs are greater than the marginal
costs for the company therefore over time as the company expands and production
increases this will lead to a decrease in average costs. Other than that, since the business can break
even after only 8 days to cover their costs for the entire month this is an
indication that the business is efficient and productive. From a social standpoint, DC is a very
diverse area with different people from all around the world. It is very well
known for having the most diversity in terms of restaurants and cuisines. Therefore, people are becoming more familiar
with the Middle Eastern cuisine and it is getting more popular so there is a
growing market for it, which can be an opportunity for the deli to continue to
grow.
Super clear introduction, loved the company's idea!
ReplyDeletegeorge,
ReplyDeletevery creative name for your company! i like your intro and the detailed background you give about your company. your post is well organized and easy to follow. your formulas look good as do your calculations. a few things to note is that you left off units in a couple of areas, and also, since the cost function is linear the line is the same as the marginal cost function. so the graphs of the slopes of mc and ac should just be straight lines with slopes of 5 and 21 respectively. so, there should only be two lines not four on that graph.
all in all good job and nice detail on your prospectus section.
professor little