Lincoln Records Essay

The purpose of this analysis is to better understand the cost, revenue, and profit of the RS-1000 home stereo system and the outcomes these values have for Lincoln Records Inc.’s. The RS-1000 has recently been manufactured and designed to play vinyl record albums along with cassette tapes, compact discs, mp3s, and to interface with digital TVs and a number of portable electronic devices. The high-end RS-1000 home stereo system is currently the only home stereo system on the market with all these unique capabilities. Lincoln Records Inc.’s as a company is interested in better understanding the cost and revenue of the new product, as well as most importantly maximizing RS-1000 profits. For the purposes of this analysis, the total cost function

Analysis of the marginal profit function (see equation 6) showed the weekly profits to reach a local maximum value of $3,709,747 with the demand of 7,342 stereo systems per week. Figure 2 illustrates both the profit function and the marginal profit function overlaid on the same graph. The primary vertical axis on the left applies to the profit function (ranging between $0 and $4,000,000). The secondary axis on the right applies to the marginal profit function (ranging $-1,500 to $1,500). Two different vertical axes were appropriate for this graphic because the two functions are on dramatically different scales and therefore achieve substantially different values over the domain of interest. The marginal profit function depicts a $940 profit from the first stereo system and then profit decreasing linearly from then on. For example, by the 4,500th stereo the profit has decreased to approximately $402. This decreasing profit trend continues until the 7,343th demanded stereo, where there is no profit. Any more stereos demanded after this point result in an operational loss for the RS-1000. For example, the loss taken by Lincoln Records Inc. for the 8,000th stereo system demanded is approximately