Blogg #3: Golden Wheat

Blog 3

Golden Wheat

Part 1:

c. Golden Wheat is a star up company in Tampa, Florida that produces bread: hot dog bread, hamburger bread, loaf bread, and baguettes. The star-up cost for getting the fabrication lab ready to produce units is $62,000 and the cost for producing one unit is $1.00/unit. Additionally they sell  in their store for a minimum of $5.00 each, where bigger companies like Whole Foods, Walmart, Publix, go to buy bread.   

From the above information, we found that C(q)= 62,000 + 1q and that R(q)= 5q.

Part 2:

a.The start up cost will be

-The bakery rent will be $4,000 monthly.

-Buying the machines $50,000.

-The store rent $2,800 monthly.

-With a bundle the internet, cable and telephone will have a cost of $200 for both buildings.

-Supplies will have $5,000 monthly.

b. Vc= $1.00

c. R(q)=5q

d. C(q)= 62,000 + 1q

e. R(q)= 5q

f.  P(q)= 5q  - (62,000 + 1q) 

g. Break Even Point:

0= 5q  - (62,000 + 1q)

q=15500

h.

i.The break even point is where the cost and revenue are equal. Every point after this point is gonna be profit for Golden Wheat. Also the marginal revenue point will always be bigger than the marginal cost, as the marginal revenue function is gonna be more steeper than the marginal cost.

j.

k. The profits function shows that profits will be negative until 15500 units are produce. This is because the start up cost will take all of the profit as is a beginning company.

Part 3:

a.There will be produce 16,000 units per month so every day will be like 533.33 units. So q=533.33.

b.  

Cost 

Function:

Revenue Function:

c. Marginal Cost=C’(q)

      C(q)= 62,000 + 1q

      C’(q)=1

The Marginal Cost of producing 533.33 units per day is 1 dollar.

d. Average Cost: A(q)=C(q)/q

The average cost of producing the 16000 bread monthly will be:

A(q)=(62,000+1q)/ q

A(q)=(62,000+1(16000))/16000

A(q)= 4.87

e.

Questions:

1.The marginal revenue is greater than the marginal cost at q=n=16,000, is greater because in order to make positive profits the marginal revenue must be greater than the marginal cost.

2.The number of units sold daily is 533.33, traduced to units by month will be 16,000 units. So first, the company  will start recovering money lost at the initial cost, but after the company surpasses the break even point it will start making profit.

3. If the number of breads increases by 1 the daily produce of units will be 534.33, so monthly will be increased by 16030. The process will be:

R(q+1)-R(q) and C(q+1)-C(q) using both of this formulas I realize that the marginal revenue  equals $5, and the marginal cost is $1. So there is gonna be profit, as the more units the company produces will make more money as the revenue is still higher than the cost.

4. At q=16030 the average cost will decrease from 4.87 to 4.86. 

5. This is optimal because if the average cost decrease the revenue will increase as cost of production will be less.

Part 4:

1. I think in five years the cost function will increase because of the factory, supplies, more stores and machinery provoked by the  expansion over Florida. But as the cost increases the revenues will increase as well as sells will also expand to all Florida. Also, with this expected growth, hopefully, Golden Wheat will expand all over the United States, as well as other countries.

2.  I think the company will strive to success in the next five years. I think as it will have a every year increasing revenue, and will expand year after year all over Tampa, and take markest of other bread companies.