Engineering Economy: Tricky fixed cost problem

[jdawg]

Homework Statement

John pays $500 to a tailor for a regular supply of new shirts. The tailor delivers 5 black shirts. He next wants to purchase 10 red shirts at the contract rate of $11 per shirt. For the black and the red shirts together, what are the fixed and variable cost of the shirts? John's discount rate is 12%.

Homework Equations

The Attempt at a Solution

Hi! So I'm having a lot of trouble with this problem. The first time I attempted this problem I assumed that the fixed cost was $500 and tried applying the discount rate to the $11 per red shirt and multiplying by 10. This was completely wrong. I think the discount rate is thrown in there to confuse me.
What I'm supposed to do is find two data points and then use y=mx+b to find the fixed and variable cost. But how do I find the data points?

Can I just do this?:

($500,5) ($110,10) (I multiplied 10*$11)

But I think this gives me a negative marginal cost... Which means this is wrong also.

 

[paisiello2]

I agree that the discount rate is not applicable here.

I think you have the right idea assuming a linear variable cost relationship. Just need to plug in the right numbers.

At the end of the day, what is the total money spent by John?

 

[jdawg]

Is $610 the total amount spent?

 

[paisiello2]

At the end of the day it is, right?

 

[jdawg]

I think so! So my data points are ($500,5) and ($610, 15)?

 

[paisiello2]

You got it!

 

[jdawg]

Awesome! Thanks so much!