Lesson 4: Business Math and Linear Functions

Break-Even Point

The production level where total revenue equals total cost and profit is zero.

Fixed Costs

Costs incurred regardless of how many units are produced.

Variable Costs

Costs that change when the production level changes.

Total Cost Formula

Total Cost = Variable Costs + Fixed Costs.

Marginal Cost (MC)

The additional cost incurred to produce one more item.

Marginal Revenue (MR)

The additional revenue gained from selling one more item.

Marginal Profit (MP)

The additional profit gained from selling one more item.

Slope-Intercept Form

The equation y = mx + b, where m is slope and b is the y-intercept.

Slope (m)

The rise over run, or change in y divided by change in x.

y-Intercept

The value of y when x = 0, representing the starting point or fixed cost.

x-Intercept

The value of x when y = 0.

Cost Function Breakdown

In C(x) = 10x + 200,000, 10 is the variable cost and 200,000 is the fixed cost.

Extreme Protection Inc. Cost Function

For $6,600 fixed costs and $35 variable cost: C(x) = 35x + 6600.

Extreme Protection Inc. Revenue Function

For helmets selling at $60 each: R(x) = 60x.

Extreme Protection Inc. Profit Function

Profit function P(x) equals Revenue minus Cost: P(x) = 25x - 6600.