Question

In: Economics

Julio Fernandez runs a small business specializing in delivering organic fruit and vegetables to the local...

Julio Fernandez runs a small business specializing in delivering organic fruit and vegetables to the local area. He buys from local farms and packages these together in boxes and delivers them locally. Each box is sold for $12. He has the following costs:  Direct wages are $9 per hour (30 minutes per box on average) Fruit and vegetables are $4 per box  Other fixed costs incurred each year for this business are as follows: o Rent of Delivery Van: $4500 o Rent of Premises: $10500 o Advertising: $2000

i. Calculate the marginal cost of producing one box of vegetables. (5 points)

ii. Calculate the break-even point in boxes (unit) (5 points)

Solutions

Expert Solution

a.

Marginal cost of producing 1 box = 4 + 9/2 = 4 + 4.5 = 8.5

b.

Let breakeven volume be n boxes, then

TC = 2000+ 4500 + 10500 + 8.5*n = 17000 + 8.5*n

TR = 12*n

For breakeven, TR = TC

17000 + 8.5*n = 12*n

n = 17000 / 3.5 = 4857.14 ~ 4858


Related Solutions

PHP A local client needs to take his static web page for ordering organic vegetables and...
PHP A local client needs to take his static web page for ordering organic vegetables and build a dynamic page. He doesn't have much money to spend, so we are going to write orders to a flat file. He is also going to need a page that he can go to that will display his orders. He has already met with Sharron, so we've got a specification already assembled. Here are the details: The customer will go to a form...
Great Oaks Farm grows organic vegetables and sells them to local restaurants after processing. The farm’s...
Great Oaks Farm grows organic vegetables and sells them to local restaurants after processing. The farm’s leading product is Salad-in-a-Bag, which is a mixture of organic green salad ingredients prepared and ready to serve. The company sells a large bag to restaurants for $25. It calculates the variable cost per bag at $19 (including $1 for local delivery), and the average total cost per bag is $22. Because the vegetables are perishable and Great Oaks Farm is experiencing a large...
Wally runs a fruit & vege stall Wally’s VegeRama -at the local Sunday market. He can...
Wally runs a fruit & vege stall Wally’s VegeRama -at the local Sunday market. He can buy watermelons from his supplier for $5 each. He can sell watermelons for $10 Each. On any particular Sunday, demand for watermelons follows a Poisson distribution with mean 5. Any watermelons that are not sold on Sunday go bad before the next weekend. Wally’s current policy is to stock 6 watermelons. What is Wally’s expected and variance of the profit?
Special Order Great Oaks Farm grows organic vegetables and sells them to local restaurants after processing....
Special Order Great Oaks Farm grows organic vegetables and sells them to local restaurants after processing. The farm’s leading product is Salad-in-a-Bag, which is a mixture of organic green salad ingredients prepared and ready to serve. The company sells a large bag to restaurants for $25. It calculates the variable cost per bag at $19 (including $1 for local delivery), and the average total cost per bag is $22. Because the vegetables are perishable and Great Oaks Farm is experiencing...
Punita Nagarajan, a business studies graduate recognized that a door-to-door fresh fruit and vegetables delivery service...
Punita Nagarajan, a business studies graduate recognized that a door-to-door fresh fruit and vegetables delivery service may be a potential business opportunity. She believed that households would be willing to pay a small delivery fee to get fresh fruits and vegetables directly from farms delivered at their home. Before she developed a detailed business plan, she needed to check that her ideas are on the right track. To do this, she decided to conduct some research into attitudes towards fruit...
Max Tennyson is a small business owner, specializing in renting vacation cottages in Europe and Africa....
Max Tennyson is a small business owner, specializing in renting vacation cottages in Europe and Africa. Up to now, his business, Tennyson’s Travel, has been manageable with spreadsheets and manual records. All business has been conducted in the travel office or on the phone. TT has been experiencing phenomenal growth, at a rate of 25% a year. Max has only 3 employees currently but is now looking to expand the operations, up to 10 employees. He knows that he needs...
Ashley runs a small business in Boulder, Colorado, that makes snow skis. She expects the business...
Ashley runs a small business in Boulder, Colorado, that makes snow skis. She expects the business to grow substantially over the next three years. Because she is concerned about product liability and is planning to take the company public in year 2, she currently is considering incorporating the business. Pertinent financial data are as follows: Year 1 Year 2 Year 3 Sales revenue $150,000 $320,000 $600,000 Tax-free interest income 5,000 8,000 15,000 Deductible cash expenses 30,000 58,000 95,000 Tax depreciation...
Simone runs a small business and receives an invoice for $1000 payable in 30 days. The...
Simone runs a small business and receives an invoice for $1000 payable in 30 days. The invoice offers a discount of 2% for immediate payment. If Simone doesn’t pay immediately and instead pays in 30 days, what effective annual interest rate is she paying?
Simone runs a small business and receives an invoice for $1000 payable in 30 days. The...
Simone runs a small business and receives an invoice for $1000 payable in 30 days. The invoice offers a discount of 2% for immediate payment. If Simone doesn’t pay immediately and instead pays in 30 days, what effective annual interest rate is she paying?
a. Ahmed runs a small business. In the first year he charged $45 and sold 1200...
a. Ahmed runs a small business. In the first year he charged $45 and sold 1200 units and in the second year he charged $30 and sold 1800 units. Calculate the price elasticity of demand (Use the midpoint method). If Ahmed plans to raise the price by 10%, indicate what would be a reasonable estimate of what will happen to the quantity demanded and to the total revenue? b. The table below shows the change of the demand for good...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT