Anja offers gift-wrapping services at the local mall. Anja wraps each package, regardless of size, in the
Question:
Anja offers gift-wrapping services at the local mall. Anja wraps each package, regardless of size, in the customer's choice of wrapping paper and bow for a price of $3. Anja's variable costs total $1 per package wrapped, and her fixed costs amount to $600 per month. Due to the anticipated increase in demand over the holiday season, Anja is considering hiring a helper, at a cost of $8.50 per hour, to help her wrap packages. With the helper, Anja estimates that she can wrap 110 packages in a 10-hour day. Without the helper, Anja estimates that she can wrap 60 packages in a 10-hour day. Anja plans on operating her business for thirty 10-hour days during the holiday season.
Required:
a. Does Anja's decision deal with excess supply or excess demand?
b. Determine the amount by which Anja's profit would change if she hired the helper.
Step by Step Answer:
Managerial Accounting
ISBN: 978-1118385388
2nd edition
Authors: Ramji Balakrishnan, Konduru Sivaramakrishnan, Geoff B. Sprinkle