Hi, could someone check over my work?
Beta inc. produces parts for Alpha inc. In an average year Beta inc. produces a maximum of 50 units at a cost of $1.50 with a mortgage of $100 and Alpha inc. pays unit price of $10 for the parts. However, due to pressure form end users, Alpha inc. may only agree $5 for the upcoming year. If this is the case, then Beta inc. could sell the parts to Gamma corp for $3.
i) what is Beta's profits if Alpha pays $10?
profit=price*quanity- costs
= 10(50)-(50*1.50)-100
=325
ii) what is the profit if Alpha pays $5?
=(5*50)-(50*1.50)-100
= 75
or
(3*50)-(50*1.50)-100
= -25
so they would rather take the $75 profit
Thanks
Beta inc. produces parts for Alpha inc. In an average year Beta inc. produces a maximum of 50 units at a cost of $1.50 with a mortgage of $100 and Alpha inc. pays unit price of $10 for the parts. However, due to pressure form end users, Alpha inc. may only agree $5 for the upcoming year. If this is the case, then Beta inc. could sell the parts to Gamma corp for $3.
i) what is Beta's profits if Alpha pays $10?
profit=price*quanity- costs
= 10(50)-(50*1.50)-100
=325
ii) what is the profit if Alpha pays $5?
=(5*50)-(50*1.50)-100
= 75
or
(3*50)-(50*1.50)-100
= -25
so they would rather take the $75 profit
Thanks
