Linear Equations and Business Situations
1. Understanding Revenue and Cost
Question:
A company sells a product for $20 per unit. The cost to produce each unit is
$8, and the company has a fixed cost of $500 for equipment and rent.
• Write a linear equation that represents the total cost, C, of producing x
units.
• Write a linear equation that represents the total revenue, R, generated
from selling x units.
• If the company sells 50 units, what will its total revenue and total cost
be?
2. Finding Break-Even Point
Question:
Using the cost and revenue equations from the previous question:
• Write an equation to find the break-even point (when total revenue
equals total cost).
• Solve for x, the number of units the company needs to sell to break
even.
3. Profit Equation
Question:
Based on the previous questions, let profit, P, be the difference between
revenue and cost.
• Write a linear equation for profit in terms of x, where x is the number of
units sold.
• If the company sells 100 units, what is the profit?
4. Pricing Strategy
Question:
Suppose a company is considering a new pricing strategy. They want to
make at least $1,500 in profit by selling their product. Using the profit equation
from the previous question:
• Set up an inequality to represent the minimum number of units needed
to achieve $1,500 in profit.
• Solve the inequality to find the minimum number of units they must sell.
5. Cost-Volume-Profit (CVP) Analysis
Question:
A company has a fixed cost of $2,000 and variable costs of $15 per unit. They
plan to sell each unit at $50.
• Write a linear equation for the company’s total costs, total revenue,
and profit.
• Calculate the break-even point and interpret its meaning in terms of
units sold.
6. Linear Demand Function
Question:
A company estimates that it will sell 200 units if the price is $40 per unit, and
400 units if the price is $30 per unit.
• Write a linear equation for the demand function, with quantity Q as a
function of price p.
• Use this demand function to predict the quantity sold if the price is set
at $35.
7. Depreciation of Equipment
Question:
A company purchases a machine for $5,000. They expect the machine’s
value to decrease by $400 each year.
• Write a linear equation that models the value V of the machine over
time t, where t represents the number of years.
• What will the value of the machine be after 3 years?
