Mayfair Office Chairs, Inc. is a small firm in the office furniture industry. They have asked...

Mayfair Office Chairs, Inc. is a small firm in the office furniture industry. They have asked you to help them complete the limited data they have gathered in an effort to enable effective decision-making. Some work can be done using MS Excel but it must be copied to an MS Word file for the final submission of this assignment. To assist Mayfair Office Chairs, Inc., respond to the following: Using MS Excel or a table in MS Word, complete Table-1 (Mayfair Office Fairs, Inc., Cost and Revenue Data). Create Demand and Supply Curve Assume that the price is $165. Assume the fixed costs are $125, at an output level of 1. Assume that the data represents a firm in pure competition. Show your calculations. Explain the MC=MR Rule. Describe the market structures to which this rule applies. Create a chart to illustrate the data in Columns 9 and 10. Describe the profit maximizing (or loss minimizing) output for this firm. Explain why or why not there an accounting profit? Explain why a firm in pure competition is considered to be a “price taker.”

Expert Solution

OUTPUTPRICE		TFC	TVC	TC	AFC	Avc	ATC	TR	MC	MR	profit -125
0	165	125	0	125	nil	nil	nil	0	)	0	profit -125
1	165	125	113	238	125	113	238	165	113	165	-73
2	165	125	213	338	63.	107.	169	330	100	165	-8
;	165	125	300	425	46.66670000	100	142.		37	165	70
	165	125	375	500	31.	94.	125	660	75	165	160
	165	125	463	588	25	93.	118.	825	88	165	237
6	165	125	563	588		20.8333393.83333114.6667990			100	165	302
	165	125	675	800		17.8571496.42857114.28571155			112	165	355
8	165	125	813	938	16.	102.	117.	1320	138	165	382
9	165	125	975	1100		13.88889108.3333122.22221485			162	165	385
10	165	125	1163	1288	13.	116.	129.	1650	188	165	362

Total cost is the summation of total fixed cost and total variable costs.

AFC = TFC/output

AVC =1VC/output

ATC = TC/output

Total revenue = price times output.

Marginal cost = change in TR/change in output.

Marginal revenue = change in TR/change in output.

MC=MR rule says that this determines the profit maximizing level of output. That is, when an additional revenue earned by selling one more unit of output equals the additional cost incurred by selling the same another unit of output. This rule applies to market structures where there is some degree of price making.

Profit maximizing level of output is determined at a point where the marginal cost equals the price (as it is pure competition). The nearest value where MC=P is at 9 units.

The firm is earning an economic profit, as it is = total revenue - total cost.

Profit = 385. It is earning a profit because its revenue exceeds its costs.

Affirm under pure competition is considered as a price taker because there are infinite number of buyers and sellers present in the market, selling same homogenous goods. they cannot increase/decrease the prices. Being a highly competitive market, they are forced to sell their product at marginal cost. And hence are price takers.

Rahul Sunny answered 1 year ago

A furniture supplier, Acme Chairs, Inc., manufactures a Basic office chair and a Deluxe office chair....

A furniture supplier, Acme Chairs, Inc., manufactures a Basic office chair and a Deluxe office chair. Each Basic chair costs $25.00 to manufacture, and each Deluxe office chair costs $40.00 to manufacture. Acme Chairs wishes to determine the optimal production quantities per day for each chair model in order to minimize overall total cost. The production of each chair requires three types of materials: Wood, Primer, and Paint. The amount of material available per day to manufacture the chairs is...

Office Furniture Inc. sells modular desk units and office chairs in the ratio of 3:2. That...

Office Furniture Inc. sells modular desk units and office chairs in the ratio of 3:2. That is 3 desk units for every 2 chairs sold. The selling prices are $1,280 per desk unit and $540 per chair. The variable costs are $760 per desk unit and $270 per chair. Shared fixed costs total $160,000. a) Prepare a schedule to compute the selling price and variable cost per composite unit. b) Compute the break-even point in composite units. c) Compute the...

Office Furniture Systems, Inc. sells chairs for $150. The unit variable cost per unit is $65....

Office Furniture Systems, Inc. sells chairs for $150. The unit variable cost per unit is $65. Fixed costs total $18,700. Required: a. What is the contribution margin per unit? b. What is the breakeven point in units? c. How many units must be sold to earn a pretax income of $45,000? d. What is the margin of safety, assuming 700 units are sold?

Norwegian Furniture Manufacturing makes two models of office chairs: regular and deluxe. Summary data for the...

Norwegian Furniture Manufacturing makes two models of office chairs: regular and deluxe. Summary data for the two products showed the following: Unit Costs Regular Deluxe Direct materials $65.00 $105.00 Direct labour ($20 per hour) 10.00 20.00 Manufacturing overhead* 4.80 9.60 * Under the company's current costing, manufacturing overhead is allocated on the basis of direct labour-hours. The overhead for the year follows: Materials handling $ 300,000 Setups 400,000 ...

Lee Furniture Company manufactures office chairs. The 2020 operating budget is based on sales of 50,000...

Lee Furniture Company manufactures office chairs. The 2020 operating budget is based on sales of 50,000 units at $65 per chair. Budgeted variable costs are $40 per unit, fixed costs are $800,000, and operating income is projected to be $450,000. Regarding actual results, 54,000 units were sold at $70 each, actual variable costs were $38 per unit and fixed costs were $750,000. Resulting in 2020 actual income of $978,000. Required: Prepare a variance analysis report with both flexible-budget and sales-volume...

Lee’s Furniture manufactures two types of chairs---recliner and office chair. The following activity and cost information...

Lee’s Furniture manufactures two types of chairs---recliner and office chair. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Recliner 5 40 300 Office chair 8 45 175 Overhead costs $80,000 $180,000 Assume a traditional costing system applies the $260,000 of overhead costs based on direct labor hours. a. What is the total amount of overhead costs assigned to the recliner? b. What is the total amount...

also well known in the housing estate industry. Its products include household furniture, office furniture and...

also well known in the housing estate industry. Its products include household furniture, office furniture and industrial furniture. In the housing estate industry, it has partnership agreements with contractors to roof houses, fix doors and windows and provide all the furniture in the estate houses and office accommodation units that are being constructed by the latter. Its unique finishings are enhanced by the modern equipment, well-trained and flexible workforce including carpenters, joiners and other staff that are in its workshops...

As an Operations Manager (OM) of a million dollar furniture manufacturing firm, you have been asked...

As an Operations Manager (OM) of a million dollar furniture manufacturing firm, you have been asked by your General Manager to work with your colleagues in Marketing and Finance to determine who is able to provide the greatest gain in increasing the bottom line contribution to the company’s profit. Complete the table below and determine the net contribution to profit of each functional area. Note that your GM has provided the required targets for each functional area as compared to...

A small business purchases some office furniture for $43000 and will sell it for an estimated...

A small business purchases some office furniture for $43000 and will sell it for an estimated $6000 in 5 years. (Replace them with new furniture) 7. If the firm used the DDB depreciation, NPW =

You have been asked, as a member of a small Accounting firm, to review the 31...

You have been asked, as a member of a small Accounting firm, to review the 31 December year-end financial statements of a small (R2 million revenues) companyin East London. The company has applied for a long-term loan from the bank. You are interesed to note as you beign your review of the company's records that a principal stockholder is your former college roommate. You are preparing your report and wonder about the following items: - The company decided during the...

Question