Acompany manufactures and sells novelty mugs. the manufacturing costs consists of a fixed cost of r8000 and a variable cost of r15.00 per mug. the mugs are sold at r35 each. assume a linear profit function.
1. determine the profit function.
2. what is the break-even level.
3. draw a graph depicting a profit function.

Given:
Manufacturing cost : fixed cost = 8,000 ; variable cost = 15 per mug
Selling Price: 35 per mug

Let x be the number of mugs.

Sales Revenue = 35x
Manufacturing Cost = 8,000 + 15x

Profit = Sales Revenue - Manufacturing Cost
P = 35x - 8,000 - 15x
P = 20x - 8,000

Break even level: Profit is 0
Sales Revenue = Manufacturing cost
35x = 8,000 + 15x
35x - 15x = 8000
20x = 8000
x = 8000/20
x = 400

Company must produce at least 400 mugs to break even or have 0 profit. Quantity greater than 400 will result to a profit while quantity lesser than 400 will result to a loss.