used to determine the short-run cost equations of total cost, average cost, average variable cost and marginal cost. Calculations using these equations gave rise to Cranston Coils cost structure, which predicts cash flow within the company. Cranston Coils’ cost function was also used to determine if a contract between Sleep Easy and Cranston Coils should be accepted. After determining marginal cost and revenue (see Appendix 5: Sleep Easy Contract Costs at Connecticut Plant), the contract should
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EGT1: Task 1. When owning or managing a business it’s important to keep track of the marginal revenue. The most important factors in showing you if your business is a success are cost, revenue and profit. Revenue can high for a company, but if the costs are high as well a profit won’t show and they will most likely not be able to make it. It’s important for businesses to keep track of their profits and cost’s. The way businesses figure their profit maximization is by determining the price and
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5 and 6) After taking fixed costs, advertisements costs, cost of acquiring new customers, cost of maintaining existing customers, I carefully evaluated the values I got. After calculation of break even and return of investment using marginal revenue and marginal cost. We can come to a conclusion that: 1. By targeting only the Affluent customers first, we can break even with half the number of customers.
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CHAPTER 10 DETERMINING HOW COSTS BEHAVE 10-16 (10 min.) Estimating a cost function. 1. Slope coefficient = = [pic] = [pic]= $0.35 per machine-hour Constant = Total cost – (Slope coefficient ( Quantity of cost driver) = $5,400 – ($0.35 ( 10,000) = $1,900 = $4,000 – ($0.35 ( 6,000) = $1,900 The cost function based on the two observations is Maintenance costs = $1,900 + $0.35 ( Machine-hours 2. The cost function in requirement 1 is an estimate of how
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1. What is the estimate of the marginal cost of the Phase 4 hospital services assuming, as given in the case, that 60 percent of the designated costs are fixed and the remaining costs are variable? INPUT DATA: | | | | | | | | | Phase 4 Hospital Costs: | | | | | | | | | | Average | | | Category | | Cost | | | | | | | | Nursing | | $ 13,314 | | | Ancillary | | 53,245 | | | OR | | 5,906 | | | Laboratory | |
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production cannot be changed. As time goes by, the firm has the opportunity to change the levels of all inputs. In the long-run production function, all inputs are variable. 2. Why is the marginal product of labor likely to increase initially in the short run as more of the variable input is hired? The marginal product of labor is likely to increase initially because when there are more workers, each is able to specialize on an aspect of the production process in which he or she is particularly
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consumers would be willing to switch quickly among carriers, and existing carriers had to be prevented from responding to new entrants' lower prices. 3. Define and discuss Cost of Service Pricing. ANS: Cost of service pricing takes a marginal-cost approach to pricing. Cost of service pricing can also be analyzed as a total cost or fully allocated cost approach to price setting, where the price charged by a carrier for a movement of a commodity represents the recovery of the related costs
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CHECKLIST OF KEY FIGURES Volume II For Exercises and Problems in Kimmel, Weygandt, and Kieso Accounting, Tools for Business Decision Making, Third Edition Chapter 14 Exercises 14-2 (a) DM 5, 10. (b) DL 1, 6. 14-4 (a) $166,350; (c) $72,140. 14-5 (a) 3, 7; (c) 1, 2, 4, 9, 10. 14-7 (a) $35,100. 14-8 (a) CGM $303,500. 14-9 Total manfg. costs $381,000. 14-10 (a) $82,150; (c) $36,225; (e) $242,500. (g) $21,700; (i) $267,000. 14-11 (b) $17,000; (d) $60,000; (f) $225,000;
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of the marginal investment in accounts receivable, and the cost of marginal bad debts. Additional Profit Contribution from Sales Sales are expected to increase by 10%, or 1,000 units. The profit contribution per unit will equal the difference between the sale price per unit ($40) and the variable cost per unit ($31). The profit contribution per unit therefore will be $9. The total additional profit contribution from sales will be $9,000 (1,000 units x $9 per unit). Cost of the Marginal Investment
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QUESTIONS FOR REVIEW 8. Assume the marginal cost of production is greater than the average variable cost. Can you determine whether the average variable cost is increasing or decreasing? Explain. If the average variable cost is increasing (decreasing), then the last unit produced is adding more (less) to total variable cost than the previous units did, on average. Therefore, marginal cost is above (below) average variable cost. In fact, the point where marginal cost exceeds average variable cost
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