Cost & Revenue Relationships

Cost & Revenue Relationships
You are the new owner of Drespie Corn Products and Refineries. You are interested in your company’s cost and revenue relationships as well as its future pricing strategies. Accordingly, you have developed the following relationships, which you believe to be accurate on the basis of historical data:
Cost & Revenue Relationships

P = $50 – $0.005Q

TC = $73,500 + $6Q + $0.0006Q2

MR = $50 – $0.01Q

MC = $6 – $0.0012Q

where P is the price, Q the quantity, TC the total cost, MC the marginal cost, and MR the marginal revenue.
Cost & Revenue Relationships
Tasks:
1.Using the Microsoft Excel Template given below, complete all the data in the template.
2.Use the following formula to calculate the profit-maximizing point: MR – MC = 0. Explain your answer.
3.Using the equation for MR (given below), calculate the revenue-maximizing level of output. Explain your answer.
Cost & Revenue Relationships
MR = $50 – $0.01Q = 0
4.What is the difference between the output level where the total profit is maximized and the output level where the total revenue (TR) is maximized? What is the significance of these two values in the decision-making process?
5.Using Microsoft Excel, graph the data in the completed Template given below. Using the graph, identify the point where the total profit is maximized and the point where the TR is maximized. Explain your answers.
Cost & Revenue Relationships
Click here to download the Microsoft Excel Template for this week.
Cost & Revenue Relationships
Submission Details:
•Compile your calculations and graph in a Microsoft Excel spreadsheet named as SU_MBA5004_W2_A2_LastName_FirstInitial.xls and your analysis in a Microsoft Word document named as SU_MBA5004_W2_A2_LastName_FirstInitial.doc.
•By Tuesday, January 10, 2017, submit these documents to the W2 Assignment 2 Dropbox.

Assignment 2 Grading Criteria
Maximum Points

Performed all necessary calculations by accurately applying theoretical concepts.
20
Cost & Revenue Relationships
Accurately completed the template and presented data in a correctly designed graph.
10

Interpreted results of calculations by applying theoretical concepts.
10
Cost & Revenue Relationships
Used correct spelling, grammar, and professional vocabulary. Formatted the paper and cited all sources using APA format.
10

Total:
50

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