ACCOUNTING

Revenue 1.50 36,000.00 54,000.00

Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 16,000.00
Total Cost 26,800.00
Profit 27,200.00

ECONOMIC
Considering the Opportunity Cost
Revenue 1.50 36,000.00 54,000.00
Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 16,000.00
Opportunity Cost (Fixed) 30,000.00
Total Cost 56,800.00
Profit/Loss - 2,800.00

Disregarding the Sunk Cost

Revenue 1.50 36,000.00 54,000.00
Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 10,000.00 *Sunk cost of $6,000 for the non-
Opportunity Cost (Fixed) 30,000.00
Total Cost 50,800.00
Profit/Loss 3,200.00
*Sunk cost of $6,000 for the non-refundable deposit is subtracted/excluded from the total fixed cost
 TABLE 2.1
Revenue, Cost and Profit for Selected Sales Volume of Ice Cream Bars
UNITS REVENUE COST PROFIT AC
0.00 $ - 40,000.00 - 40,000.00 -
10,000.00 $ 15,000.00 43,000.00 - 28,000.00 4.30
20,000.00 $ 30,000.00 46,000.00 - 16,000.00 2.30
30,000.00 $ 45,000.00 49,000.00 - 4,000.00 1.63
40,000.00 $ 60,000.00 52,000.00 8,000.00 1.30
50,000.00 $ 75,000.00 55,000.00 20,000.00 1.10
60,000.00 $ 90,000.00 58,000.00 32,000.00 0.97

Given:
Price per ice cream bar = $1.5
Variable cost per ice vream bar = $0.3
Fixed cost = $40,000
Formula/Function
R = $1.5Q
C = $40,000 + $0.3 Q
π=R−C
AC = C/Q = ($40,000 + $0.3 Q)/Q = $0.3 + $40,000/Q
 π P R π C
- 40,000.00 3.3 - - 40,000.00 40,000.00
- 28,000.00 2.8 28,000.00000 - 15,000.00 43,000.00
- 16,000.00 2.3 46,000.00000 - 46,000.00
- 4,000.00 1.8 54,000.00000 5,000.00 49,000.00
8,000.00 1.3 52,000.00000 - 52,000.00
20,000.00 0.8 40,000.00000 - 15,000.00 55,000.00
32,000.00 0.3 18,000.00000 - 40,000.00 58,000.00

Profit function Using Differential Calculus

π=1.2Q-40000 P= 3.3-0.00005Q Mπ= 3-0.0001Q
R= 3.3Q-0.00005Q^2 Mπ=0 0=3-0.0001Q
π= -0.00005Q^2+3Q-40000 0.0001Q=3
Q= 30,000.00
Using R=3.3Q-0.00005Q^2
Q at 36,001 53,999.70 Q at 35,999 54,000.30
Q at 36,000 54,000.00 Q at 36,000 54,000.00
MR= - 0.30 0.30

Using π=-0.00005Q^2+3Q-40000
Q at 36,000 3200
Q at 36,0001 3199.39995
Mπ= -0.60
MC= 0.30
ential Calculus

0=3-0.0001Q *marginal profit at

the quantity with
the highest profit
has a value of zero
P1 P2 P= 3.3-0.00005Q
1.50 2.00 b= rise/run
Q1 Q2 b= P2-P1/Q2-Q1
36,000.00 26,000.00 b= 2-1.5/26000-36000
b= - 0.00005
Inverse Demand Equation
P=a+b(Q) 1.5=a-0.00005(36000)
1.5=a-1.8
P=3.3-0.00005Q 1.5+1.8=a
3.30 a