Anita Tjahyadi Blog 3 (C. Hoppin' Hairbands)

-Part 1- 

Company: Hoppin' Hairbands LLC.
About Us: Founded 2001, Hoppin' Hairbands is a company that prides itself in making damage-free hairbands. Our elastics are gentle and flexible enough that it won't snag your hair or make unsightly creases. This hairband won't damage the natural state of healthy hair.
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-Part 2-

Total Fixed Costs:
          - Rent             : $ 3,500.00
          - Utilities        : $ 800.00
          - Internet       : $ 150.00
          - Salary          : $ 11,000.00
          - Marketing    : $ 350.00
                                  ---------------------
                                  Total : $15,800      

Variable Costs:
          - Raw Materials Per Unit (Elastics) : $ .35
          - Labor per unit                             : $ .10     
                                                              ---------------------
                                                                Total: $ .45 

Selling Price (5 elastics per package):
          - 1 Package of 5 Elastics                    : $ 6.95 

Cost Function:
          - C(q) = FC + VC(q)
                    =  15,800 + .45q

Revenue Function:
          - R(q)= 6.95q 

Profit Function:
          - P(q)= R(q)-C(q)
                  = 6.95q - (15,800 + .45q)
                  = 6.95q - 15,800 - .45q
            P(q)= 6.50q - 15,800
  
Break-even Point:
          -   R(q) = C(q)

            6.95q = 15800 + .45q

            6.95q - .45q = 15800

            q = 15800/6.50

            q = 2431 units to break even

Cost & Revenue Function Graph

        -  

Profit Function Graph

Marginal Cost
          - Daily Units = 45 packages
          - C(q) = 15,800 + .45q
                 = .45
         - The marginal cost will remain the same for every additional unit produced. 
            For the 45th unit produced, the marginal cost will remain $.45 per unit.

Average Cost
           -     A(q) = C(q) / q 

                 A(q) =15,800 + .45*45 /45 = $351.56

Marginal Revenue

             - Marginal Revenue with be at $6.95 per unit

             -The marginal revenue will be higher at q = n because both marginal revenue and marginal cost are                     constant.

             

            - The number of units sold on a daily basis will be below the break even point, because the break even point takes into account all of the costs associated with the production of the hairbands. These costs are typically measured on yearly or quarterly basis, with this being said, the value the break even point does not matter on a daily basis. 

Increase in units

An increase of one unit more unit per day will lead to an increase in profits for the company.

                                 R(46)=6.95*46= $319.70

                                 C(46)=15,800 + .45*46= $15820.70

Increase in Production at q = n

If average costs are more than marginal costs, increasing production will drive down average costs and since that is the dynamic of this company, increasing production will decrease average cost. Less average cost is beneficial because the less a company pays per unit, the more likely they will produce more units, in turn making it cheaper to produce those units.

Future Analysis

I feel that the company would thrive within the next five years because of the low costs into making the product. Although it would not exceed large amounts of gain due to the low man power, it would not lose in profit. The company will be able to gain a profit in the long run.

 

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Part 3