MGMT 3121

MATHEMATICS FOR MANAGEMENT

CHAPTER ONE LINEAR EQUATIONS AND THEIR APPLICATION
1. Suppose the set up (fixed) cost for establishing an automobile
manufacturing company is birr 4,000,000. After the company is
established it costs Birr 5000 to produce a single automobile. If the
total cost is represented by the letter Y:
A. Write the equation of this relationship in slope intercept form.
B. State the slope and interpret this number.
C. State the Y – intercept of the line and interpret the number.
2. Wt Lewam wants to buy a mini bus for a taxi service. The bus costs Birr
175,000 to buy. In addition she will incur Birr 150 per day when
operation is started. If total cost for the mini bus represented by letter
Y.
A. Write the equation of this relationship in slope intercept form.
B. State the slope and interpret this number.
C. State the Y – intercept of the line and interpret the number.
3. If a line have a slope of -2 and X-intercept of 10.
A. Write the equation of a line.
B. State the Y-intercept of the line.
4. Suppose you have birr 40 to spend on item A and B. if you buy item A
at Birr 2 and B at Birr 4, what will be your expenditure equation?
5. If the relationship between total cost and number of units made is
linear , and if cost increases by Birr 5 for each additional unit made,
and if the total cost of 10 units is Birr 60 , find the equation of the
relationship between total cost (Y) and the number of units made(X).
6. If the relationship of total cost and number of units made is linear, and
if cost changes from Birr 25 to Birr 100 when the number of units
made changes from 5 to 30 units , find the equation of the relationship
between total cost (Y) and number of units made (X).
7. A manufacturer buys Birr 20,000 worth of machinery that depreciates
linearly so that its trade-in value after 10 years will be Birr 1,000.
A. Express the value of the machinery as a function of its age and
draw the graph.
B. Compute the value of the machinery after 4 years.
8. A manufacturer sells a product for Birr 10 per unit. The manufacturer’s
fixed costs are 12,000 Birr per month, and the variable costs are Birr
2.50 per unit. How many must be produced to break even? Interpret
the result.
9. Barka milk manufacturing company has started producing and selling a
product. In its first year it has the following operations:
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Unit selling price--------Birr 2.00

Unit variable cost--------Birr 1.25
Total revenue------------Birr 550,000
Total cost ----------------75% of total revenue
Assuming linearity, answer the following
A. What is the amount of fixed cost?
B. Develop total revenue, total cost and total profit functions in terms of
quantity.
C. Develop total cost equation in terms of revenue.
D. Determine:
I. The break even quantity
II. The break even revenue
E. Determine the quantity level that leads to a total loss of Birr 20,000.
F. Determine the total revenue that leads to a total profit of Birr 45,000.
10. A record company sold 80,000 units of album earning a profit of Birr
100,000. Total variable costs of the company are Birr 400,000.
Moreover, the company incurred a commission expense (additional
cost) of Birr 40,000 at a 5% rate.
A. Develop the total cost equation expressed in terms of
I. Quantity
II. Revenue
B. Find the break even revenue.
C. Find the break even quantity
11. The prospective graduates of MBA students are planning to arrange a
fare well party at the EVA hotel. The hotel charges a fee of Birr 60,000
plus 40% of the ticket price. If the graduates expect to charge Birr 250
per ticket for entrants:
A. Develop the revenue, cost and profit functions in terms of the number
of tickets.
B. How many tickets must be sold I order to breakeven?
C. How many tickets must be sold to obtain a profit of Birr 20,000?
12. A manufacturer has a fixed cost of Birr 125,000 and variable cost of
Birr 25 per unit made and sold, selling price is Birr 75 per unit:
A. Write the revenue, cost and profit equations.
B. Compute profit if 10,000 units are made and sold.
C. Compute profit if 1,000 units are made and sold.
D. Find the break even quantity
E. Find the break even volume of sales.
F. Construct the break even chart. Label the cost, revenue, profit
and fixed cost lines and the break even profit

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13. A firm sells a product for Birr 80 per unit. Raw material costs are Birr
13 per unit, labor costs are Birr 27 per unit and annual fixed costs are
Birr 360,000.
A. Determine the profit function.
B. How many units would have to be sold to earn an annual profit of
Birr 250,000?
C. Determine the amount of contribution to the fixed cost and profit
if the firm sells 10,000 units
14. Suppose that a company uses a margin of 25% on all items it
purchases. The company sold X Birr worth of merchandise. It is known
that the firm uses 10% commission as selling expense. Fixed costs for
the given year are Birr 10,000.
A. Express the cost of goods sold in terms of sales volume (X).
B. Develop the total cost function(Y) in terms of sales volume (X).
C. What will be the cost at the sales volume of Birr 50,000?
D. What is the profit before tax value for sales volume of Birr 50,000?

15. A company plans to work on a margin of 46% of retail price and to

incur other variable costs of Birr 0.06 per a sale. Fixed costs for the
given year are Birr 10,000.
A. Find the equation relating total cost to sales.
B. Find the break-even revenue.
C. What will net profit before taxes be if sales are Birr 100,000?
D. If we want to make a profit before taxes of Birr 20,000, what should be
the revenue level?
16. A merchandiser expects a margin level of 52% of retail, and variable
costs other than the cost of goods sold are estimated to be Birr 0.06
per birr of sales. If fixed costs amount Birr 162,000:
A. Write the equation relating total costs to sales.
B. Find the break-even revenue.
C. If the merchandiser intends to make profit of Birr 25,000, what is
the total cost to be incurred?
D. At a sales volume of Birr 400,000, what amount of profit can the
merchandiser realized?
17. A company expects fixed cost of Birr 50,000. It plan to work on a
margin of 45% of retail, and to incur other variable cost of Birr 0.05 per
Birr of sales.
A. Find the equation relating total costs to sales.

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B. Find the breakeven point.

C. Make the break even chart.
D. What will be net profit before taxes be if sales are Birr 100,000?

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