Profit = (Cost Per Item × Number of Items) – Constant Charges
In this equation, constant charges may be rent, salaries, or other fixed costs. This includes anything that you have to pay for periodically as a business owner. This value is negative because this cost must be paid each period and must be paid whether you make a sale or not.
Your company may wish to release a new e-reader device. Based on data collected from various sources, your company has come up with the following regression equation for the profit of the new e-reader:
Profit = $0.15 × number of e-readers sold – $28
Or, assuming x = the number of e-readers sold, this would be the same regression equation:
Profit = 0.15x – 28
In this case, the values are given in thousands (i.e., the cost of making an individual e-reader will be $150 [0.15 × 1,000], with $28,000 [28 * 1,000] in constant charges).
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