So, I’m sitting in my marketing class this morning and our teacher tells us that we’re covering pricing. Basic math skills of addition, subtraction, multiplication, and division required. She hands out a practice worksheet with five problems that I literally finished within two minutes.

Then I had to sit there for the rest of class having my brain cells slowly murdered while she went through them step by step by agonizing step because, “Some of you don’t get math.”

If we’re so bad that we can do basic math, there’s a failing in the elementary school system. Seriously, fourth graders do harder math than this AND they do it in their heads. We get a calculator. What has happened that we can’t add?

Anybody want to test their brain, here you go:

Formula Required: Profit = Revenue – Total Cost

And since some of you may not have taken accounting or the like;

Revenue = Price x Quantity

Total Cost = Fixed Costs + Variable Costs

So the entire formula is Profit = (Price x Quantity) – (Fixed Costs + Variable Costs)

Futon Factory Inc. makes and sells Futons. The fixed costs (as in these costs will always be the same) for this firm in $25,000 while the unit variable cost (as in this cost will be applied per unit) is $30. If the company is able to sell only 10 futons in the first year, at what price should they have sold each futon to break-even (as in profits = 0)? Assume each futon is sold at the same price.

I’ll post the answer in the comments if you’d like to check it.

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K.D. Storm

2010/04/03 at 01:02

I amm going to tell you staright out and you might be a bit disappointed in me. I am one of those who majorly lack in the math department. I am actually looking into taking basic math classes so that I can keep up with my son as he progresses in school.

Candice Beever

2010/04/03 at 01:08

You’re not alone.

Candice Beever

2010/04/03 at 01:08

Profits = (Price x Quantity) – (Fixed Costs + Variable Costs)

We’re looking for Price, so P is our unknown variable.

First find the Variable Costs.

$30 x 10 = 300

0 = (P x 10) – (25,000 + 300)

0 = (P x 10) – (25300) [add 25300 to both sides so it cancels on the right]

25300 = P x 10 [divide by 10 on both sides so it cancels on the right]

2530 = P

Well done, you just learned the biggest fundamental in accounting in about five minutes, if that.

kendrawatkins

2010/04/03 at 08:58

Okay, I was going to say $2503, but that is close right? I see your point, but honestly I blame the public school system. I remember way back when I was little and I started asking questions about math, like in elementary school. Finally the teacher got so fed up she said just do it this way. So I never got a basic understanding of what these letters and numbers stand for and why it matters etc. It is hard to do well in math if you don’t have that basic understanding that should have been taught to you in elementary school. But in a way I agree with you, it’s sad when college students can’t spell five-letter words and the like.

Candice Beever

2010/04/03 at 11:15

Exactly! I was fortunate to have really good math teachers in elementary school and junior high. I didn’t start getting bad math teachers until high school and college, but by then I had a good foundation. I was a lucky one.