Formulating a Cost Function for Production Optimization

00:00 3 marks

  • Build Confidence
  • SL
  • Tier 2
  • Real-world applications
  • Optimization
  • Cost function
  • Cost function formulation
  • Single variable modeling

A company produces widgets with a fixed daily cost of $500 and a variable cost of $20 per widget. Given that the revenue per widget is $50, formulate the cost function C(x) in terms of the number of widgets x produced. Explain how this cost function can be utilized to determine the optimal production level for minimizing costs while considering production efficiency.

Hint Hint

Hint

Consider both the fixed and variable costs when expressing C(x).

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Complete Answer

C(x) = 500 + 20x

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