Chapter 5 Linear Functions Application

Chapter 5
Linear functions;
Applications
Today’s Topics
 Linear functions
Cost Function
Revenue Function
Profit Function.
Variables
In mathematics, the "x" and "y" values in an

equation or a graph are referred to as "variables."
If an equation shows a relationship between x and y
in which the value of y is dependent upon the value
of x, y is known as the dependent variable and is
sometimes referred to as ‘function(x)’ or f(x).
The final solution of the equation, y, depends on the
value of x, the independent variable which can be
changed.
Variables
Example
y = 5x + 2
For x = 0; y = 2
x = 1; y = 7
Here y is depending on x
Or we can say that y is a function of x
y = f(x)
Function
A function is a special relationship between values Each
of its input values gives back exactly one output value.
Consider the example
y = 2x + 1
For x = 0; y = 1 x = 1; y = 3
x = 2; y = 5 x = 3; y = 7
Here y is depending on x.
y is a dependent variable and x is independent variable
y is a function of x i.e y = f(x)
Function
or f(x) = 2x + 1
A function is a relation for which each
value from the set the first components
of the ordered pairs is associated with
exactly one value from the set of
second components of the ordered pair.
Linear Function
A linear function f involving one

independent variable x and a
dependent variable y has the general
form
y = ax + b
where a and b are constants

Example of a Linear Function
Weekly salary function

Suppose a sales person is paid $25 per week and a
commission of $3 per unit sold.
We can define the function based on the given

data as:
y = 3x + 25
where y is defined as the weekly salary and x is the
no. of units sold per week.
Clearly, this is a weekly function in one
independent variable x.
Weekly salary function
25 represents the base salary, i.e. when no units are sold
per week and 3 is the commission of each unit sold.
The change in weekly salary is directly proportional to the

change in the no. of units sold.
Slope of 3 indicates the

increase in weekly salary
associated with each
additional unit sold.
The graph is in the first
quadrant, allowing x and y
to be positive values only.
Linear function involving two
independent variables
A linear function f involving two
independent variables, x1 and x2 and a
dependent variable y has the general
form
y = f(x1 , x2 ) = a1 x1 + a2 x 2 + a0
where a1 and a2 are non-zero
constants and a0 is a constant.
Example
Weekly Salary Function
Assume that a salesperson salary depends on
the no. of units sold of each of two products,
i.e. the salary function is given as
y = 5 x1 + 3 x2 + 25
Where y= weekly salary,
x1 = no. of units sold of product 1
x2 = no. of units sold of product 2
This salary function gives a base salary of 25
and commission 5 on each unit sold of product
1 and 3 on each unit sold of product 2.
For n independent variables
Definition: A linear function f involving n

independent variables x1, x2, …, xn and a
dependent variable y has the general form
y = f(x1 , x2 ..... x n) = a1 x1 + a2 x 2 + ...... +
an x n + a0
where a1 , a2 ...an are non-zero constants and

a0 is a constant.
Application of Linear Function
Linear Cost function
Consider the following case:
A firm which produces a single product is

interested in determining the functions that
expresses annual total cost y as a function of the
no. of units produced x.
Accountants indicate that the fixed expenditure
each year are 50,000. They also have estimated
that raw material costs for each unit produced are
5.50 and labour costs per unit are 1.50 in the
assembly department, 0.75 in the finishing room,
and 1.25 in the packaging and shipping
department.
Solution:
Data:
Fixed expenditure = 50,000
Raw material cost = 5.50/unit
Labour Cost = 1.50/unit (assembly
department)
= 0.75/unit (finishing room)
=1.25/unit (packaging and
shipping department).
The total cost function will be in the form:
y = C(x)
(where x is the no of units sold/produced)
Total Cost = total variable cost + total
fixed cost
Total fixed cost = 50,000

Total variable cost = total raw material cost + total
labour cost
= 5.50x + 1.50x + 0.75x + 1.25x
= 9x
Total Cost = 9x + 50,000
The 9 represents the combined variable cost per unit of 9
(dollars). That is, for each additional unit produced, total
cost will increase by 9 (dollars).
Linear Revenue function
The money which flows into an organization

from either selling products or providing is
often referred to as revenue.
The most fundamental way of computing total
revenue from selling a product (or service) is
Total revenue = (price)(quantity sold)
We assume that selling price is the same for
all units sold.
Suppose a firm sells n products. If x1,
x2, …, xn equals the no. of units sold of
n products and p1, p2, …, pn equals the
price of individual product. Then, the
function of revenue from the sale of the
n products is
R = P1 x1 + P2 x 2 + ...... + Pn x n
Linear Profit Functions
Profit for an organization is the

difference between total revenue and
total cost.
Profit = total revenue - total cost.

P(x) = R(x) - C(x)
Example 1
A firm sells a single product for 65
dollars per unit. Variable costs per unit
are 20 dollars for materials and 27.50
dollars for labour. Annual fixed costs
are 100,000 dollars. Construct the profit
function stated in terms of x, the no. of
units produced and sold. What profit is
earned if annual sales are 20,000 units.
Solution
Data:
Selling Price = $65/unit
Variable cost = $20 (materials)
= $27.50 (labour)
Fixed cost = $100,000
Let x be the number of units sold
Profit = total revenue - total cost.
Total revenue R(x) = 65x
Total Cost = total variable cost + total fixed cost
= 20x + 27.5x + 100,000
= 47.5x + 100,000
P(x) = 65x – (47.5x + 100,000)
= 17.5x – 100,000
For x = 20,000
P(20,000) = 17.5(20,000) – 100,000
= 250,000
Note that P(x) is a linear function. The
slope of 17.50 shows that for each
additional unit produced and sold, total
profit increases by 17.50 dollars. In
business and economics, this is called
as marginal profit.
Example 2
Agriculture Planning
A corporate agricultural organization has three separate

farms which are to be used during the coming year. Each
farm has unique characteristics which make it most
suitable for raising one crop only. Table given indicates
the crops selected for each farm, the annual cost of
planting 1acre of the crop, the expected revenue to be
derived from each acre, and the fixed cost associated with
operating each farm. In addition to the fixed cost
associated to with operating each farm, there are annual
fixed cost of $75,000 for the cooperation as a whole.
Determine the profit function for the three farm operation.
Agriculture Planning
Farm Cost/Acre Cost/Acre Revenue/ F.Cost
Acre
1 Soybeans 900 1300 150,000
2 Corn 1100 1650 175,000
3 Potatoes 750 1200 125,000

Solution
Let x1 = no of acres soybeans planted
x2 = no of acres corns planted
x3 = no of acres potatoes planted
Revenue = Price(quantity)
= 1300x1 + 1650x2 + 1200x3
Fixed cost = 150,000 + 175,000 + 125,000 +
75,000
= 525,000
Solution
Variable cost = 900x1 + 1100x2 + 750x3
Total cost = F.C + V.C
= 525,000 + 900x1 + 1100x2 + 750x3
Profit = Revenue – cost
P(x1, x2, x3)
= (1300x1 + 1650x2 + 1200x3) – (525,000 +
900x1 + 1100x2 + 750x3)
= 400x1 + 550x2 + 450x3 - 525000

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Chapter 5 Linear Functions Application

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Chapter 5

In mathematics, the "x" and "y" values in an

A linear function f involving one

where a and b are constants

Weekly salary function

We can define the function based on the given

The change in weekly salary is directly proportional to the

Slope of 3 indicates the

Definition: A linear function f involving n

where a1 , a2 ...an are non-zero constants and

A firm which produces a single product is

Total fixed cost = 50,000

The money which flows into an organization

Profit for an organization is the

Profit = total revenue - total cost.

A corporate agricultural organization has three separate

1 Soybeans 900 1300 150,000

2 Corn 1100 1650 175,000

3 Potatoes 750 1200 125,000

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