Question

In: Economics

Suppose the fixed costs at a widget factory are $500.00 and variable costs per widget are...

Suppose the fixed costs at a widget factory are $500.00 and variable costs per widget are as indicated. Compute the total average costs for each of the following: 1. Producing 10 widgets when the variable cost is $10 per widget Total Cost = $ _________ Average Cost = $ _________ 2. Producing 20 widgets when the variable cost is $15 per widget Total Cost = $ _________ Average Cost = $ _________ 3. Producing 100 widgets when the variable cost is $20 per widget Total Cost = $ _________ Average Cost = $ _________ b. Suppose that widgets sell for a price of $50. Compute total revenue (TR) and profit (P) for each of the above cases. 1. TR = $ _______ P = $ _______ 2. TR = $ _______ P = $ _______ 3. TR = $ _______ P = $ _______

Solutions

Expert Solution

The Fixed cost of production, FC = $500.00

Variable cost, VC is different for each cases.

Ans 1.

No. of widgets produced, Q = 10

Variable cost, VC = $10 per widget

Total Variable Cost, TVC = Q * VC = $10*10 = $100

Total Cost, TC = FC + TVC = $500 + $100 = $600

Average Cost, AVC = TC/ Q = $600/10 = $60

Ans 2.

No. of widgets produced, Q = 20

Variable cost, VC = $15 per widget

Total Variable Cost, TVC = Q * VC = $20*15 = $300

Total Cost, TC = FC + TVC = $500 + $300 = $800

Average Cost, AVC = TC/ Q = $800/20 = $40

Ans 3.

No. of widgets produced, Q = 100

Variable cost, VC = $20 per widget

Total Variable Cost, TVC = Q * VC = $100*20 = $2000

Total Cost, TC = FC + TVC = $500 + $2000 = $2500

Average Cost, AVC = TC/ Q = $2500/100 = $25

b. Widget sell for a price of $50

Total Revenue,TR = Price * Quantity

Profit, P = TR - TC

case 1.

No. of widgets produced, Q = 10

Price = $50

TR = $50*10 = $500

TC = $600

Profit, P = $500 - $600 = -$100

Hence, the company makes a loss of $100

Case 2.

No. of widgets produced, Q = 20

Price = $50

TR = $50*20 = $1000

TC = $800

Profit, P = $1000 - $800 = $200

Case 3.

No. of widgets produced, Q = 100

Price = $50

TR = $50*100 = $5000

TC = $2500

Profit, P = $5000 - $2500 = $2500

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Joe’s Widget Factory operates in a perfectly competitive industry. Joe’s fixed and variable costs are given...
Joe’s Widget Factory operates in a perfectly competitive industry. Joe’s fixed and variable costs are given in the table below. He is a price taker and can sell as many widgets as he produces for $10 each. Complete the table using the provided link and respond to the following questions. Besides referring to your table to support your answers, include references from the course materials on profit-maximizing rules for competitive firms. Your response should be at least 75–150 words (1–2...
1) Suppose that a company has fixed costs of $15 per unit and variable costs $11...
1) Suppose that a company has fixed costs of $15 per unit and variable costs $11 per unit when 15,500 units are produced. What are the fixed costs per unit when 11,000 units are produced? 2)Total costs for ABC Distributing are $240,000 when the activity level is 9,000 units. If variable costs are $3.0 per unit, what are their fixed costs? 3)Park and West, LLC, provides consulting services to retail merchandisers in the Midwest. In 2019, they generated $750,000 in...
Suppose a company has fixed costs of $5,500 and variable costs per unit of  7/8x + 1,040...
Suppose a company has fixed costs of $5,500 and variable costs per unit of  7/8x + 1,040 dollars, where x is the total number of units produced. Suppose further that the selling price of its product is 1,200 − 1/8 x dollars per unit. (a) Form the cost function and revenue function (in dollars). C(x) = R(x) = Find the break-even points. x = 50,110 (b) Find the vertex of the revenue function. (x, y) =    Identify the maximum revenue....
Suppose a company has fixed costs of $47,600 and variable cost per unit of 4/9x +...
Suppose a company has fixed costs of $47,600 and variable cost per unit of 4/9x + 333 dollars, where x is the total number of units produced. Suppose further that the selling price of its product is 1767 −5/9x dollars per unit. (a) Find the break-even points. (Enter your answers as a comma-separated list.) x =      (b) Find the maximum revenue. (Round your answer to the nearest cent.) $   (c) Form the profit function P(x) from the cost and...
Suppose a company has fixed costs of $48,000 and variable cost per unit of 4 9...
Suppose a company has fixed costs of $48,000 and variable cost per unit of 4 9 x + 333 dollars, where x is the total number of units produced. Suppose further that the selling price of its product is 2357 − 5 9 x dollars per unit. (a) Find the break-even points. (Enter your answers as a comma-separated list.) x = (b) Find the maximum revenue. (Round your answer to the nearest cent.) $ (c) Form the profit function P(x)...
Fixed costs are P10 per unit and variable costs are P25 per unit. Production was 13,000...
Fixed costs are P10 per unit and variable costs are P25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine (a) whether variable cost income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.
A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs....
A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 104,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?
Your company has fixed costs of $150,000 per year. The variable costs per unit in 2018...
Your company has fixed costs of $150,000 per year. The variable costs per unit in 2018 were $3 per unit, and 30,000 units were produced that year. Your company uses cost-based pricing and has a profit margin of $3 per unit. In 2019, production increased and your team had more experience—variable costs went down to $2 per unit because of your team’s higher skill and 65,000 units were produced that year. What is the change in selling price from 2018...
Variable Costing—Production Exceeds Sales Fixed manufacturing costs are $37 per unit, and variable manufacturing costs are...
Variable Costing—Production Exceeds Sales Fixed manufacturing costs are $37 per unit, and variable manufacturing costs are $111 per unit. Production was 91,000 units, while sales were 86,450 units. a. Determine whether variable costing income from operations is less than or greater than absorption costing income from operations. b. Determine the difference in variable costing and absorption costing income from operations. $
Alternative A has fixed initial costs of $ X per year and variable costs of $45...
Alternative A has fixed initial costs of $ X per year and variable costs of $45 per unit. Alternative B has fixed costs $20,000 per year and variable costs of $30 per unit. Determine the value of X, if the breakeven quantity is 900. Assume there is no any other cost.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT