If Boeing produces 9 jets per month‚ its long-run total cost is $9.0 million per month. If it produces 10 jet pre month‚ it long-run total cost $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale? * The long-run average total cost of producing 9 planes is $9 million /9 = $1 million. The long-run average total cost of producing10 planes is $9.5 million / 10 =$0.95 million. Since the long-run average total cost declines as the number of planes increases‚ Boeing exhibits
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But economic growth also has opportunity costs! (Let TA handle in recitation) An important factor responsible for economic growth is an increase in capital Capital goods long-lasting tools used to produce final/consumption goods (goods that are used up) But capital itself has to be produced by the use of other resources (e.g. tractors‚ R & D) More capital a society produces today higher will be future output of final goods growth in the output of final goods => PPF will push out
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Plant overhead $122‚000 D/L rate/hour $30 Youngstown has a traditional cost system. It calculates a plant-wide overhead rate by dividing total overhead costs by total direct labor hours. Assume‚ for the calculations below‚ that plant overhead is a committed (fixed) cost during the year‚ but that direct labor is a variable cost. 1. Calculate the plant-wide overhead rate. Use this rate to assign overhead costs to products and calculate the profitability of the four products. The assignment
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process of choosing one option‚ item‚ good‚ or service over another‚ opportunity cost is the value of what is foregone in order to have the alternative option. More simply‚ the opportunity cost of an item is the benefits you could have received by taking an alternative action. Every decision that involves a choice between two or more options has an opportunity cost. Opportunity costs are not limited to fiscal or monetary costs‚ the value or opportunity not chosen can take many forms including lost time
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Cost reduction Generally defined as the act of cutting costs to improve profitability. Cost reduction‚ should therefore‚ not be confused with cost saving and cost control. Cost saving could be a temporary affair and may be at the cost of quality. Cost reduction implies the retention of essential characteristics and quality of the product and thus it must be confined to permanent and genuine savings in the costs of manufacture‚ administration‚ distribution and selling‚ brought about by elimination
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Benedictine University Managerial Economics Individual Work-1 Unit Tutor: Char Lee Racine Student name：Gu Haizhen (Vivian) Date of issue: September 6‚ 2010 Date of submission: September 13‚ 2010 Contents I. 3 II. 4 III. 7 VI. 9 Technical problems I. During a year of operation‚ a firm collects $175‚000 in revenue and spends $80‚000 on raw materials‚ labor expense‚ utilities‚ and rent. The owners of the
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CHAPTER 6 PRODUCTION EXERCISES 4. A political campaign manager must decide whether to emphasize television advertisements or letters to potential voters in a reelection campaign. Describe the production function for campaign votes. How might information about this function (such as the shape of the isoquants) help the campaign manager to plan strategy? The output of concern to the campaign manager is the number of votes. The production function has two inputs‚ television advertising and
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have done above is a “full-cost” analysis. This is in contrast to a “direct-cost” analysis that ignores overhead costs. Is full cost the right metric for job profitability and customer profitability? What assumptions are we making about the variability of overhead costs when we do a “full-cost” analysis? By allocating the overhead costs to jobs and customers there is an implicit assumption that these are variable with the cost driver. In reality‚ some of the overhead costs are fixed‚ at least in the
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Cost Accounting – Classification of costs Cost accounting refers to a process of accumulating‚ recording‚ classifying and analyzing all costs incurred at various levels of production. The purpose of cost accounting is manifold. It provides a final selling price‚ suggests the best possible course of action where maximum savings are possible and a strategy for future. Cost accounting is also constructive in comparing the input and output results that ultimately aids the management to arrive at a financial
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WHAT ARE COSTS AND PROFITS? HUNGRY HELEN’S COOKIE FACTORY • Helen‚ the owner of the cookie factory‚ buys flour‚ sugar‚ flavorings‚ and other cookie ingredients. • She also buys the mixers and the ovens and hires workers to run the equipment. • She then sells the resulting cookies to consumers. 2 TOTAL REVENUE‚ TOTAL COST‚ AND PROFIT • The amount that Helen receives for the sale of its output (cookies) is its total revenue. • The amount that the firm pays to buy inputs (flour‚ sugar‚ workers
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