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3. A company, Jerry's Jigsaw Puzzles, has fixed costs of $5000 and operating costs of $3 per puzzle. If the price of puzzles is $6 and currently the company makes 1000 puzzles, does Jerry have a problem?

a) Compute Jerry's revenues and costs for every 500 puzzles starting at zero up to the limit of 6000 puzzles and graph both figures against this output.

b) Find an expression of profit as a function of output and determine the breakeven point. (ie: the output level where profit is zero) How many puzzles should Jerry produce?

A.
Costs = 5,000 + 1,000(3)= 8,000
Revenue = 6(1,000) = 6,000

Profit = Revenue - Costs

P= 6,000-8000= -2,000

B. Breakeven = 0 = R-C

0= 6x-(5,000 +3x)

0=6x -5000 -3x
0= 3x -5000
5000=3x
X=1667

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Solution Summary

This solution shows how to compute and graph various pieces of financial information about Jerry's Jigsaw Puzzles.

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