Total Length: 447 words ( 1 double-spaced pages)
Total Sources: 2
Managerial Accounting
Total variable costs = # of workers * daily wage + other variable costs
TVC = (50,000*80) + 400,000
TVC = $4,400,000
Average variable cost = TVC / units of output
AVC = $4,400,000 / 200,000
AVC = $
Average Total cost = (TVC + TFC) / units of output
ATC = ($4,400,000 + $1,000,000) / 200,000
ATC = $
Worker Productivity = units of output / number of workers
WP = 200,000 / 50,000
WP = 4
The total and average variable costs do not change if there is a change in the fixed costs so, nor does worker productivity:
TVC = $4,400,000
AVC = $
WP = 4
The average total cost does change.The new figure for average total cost is:
ATC = ($4,400,000 + 3,000,000) / 200,000
ATC = $
Under the first scenario the profit is calculated as follows:
Profit = Revenue -- VC -- FC
P = (200,000 * 25) -- (4,400,000) -- (1,000,000)
P = 5,000,000 -- (5,400,000)
P = (400,000)
For the second scenario, the loss is even larger:
P = (5,000,000) -- (7,400,000)
P = (2,400,000)
Under neither of these scenarios should the firm.....