Bridget Jackson is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans:

Plan A: Pay 8 cents per minute of long-distance calling.

Plan B: Pay a fixed monthly fee of $17 for up to 320 long-distance minutes, and 6 cents per minute thereafter (if she uses fewer than 320 minutes in any month, she still pays $17 for the month).

Plan C: Pay a fixed monthly fee of $21 for up to 500 long-distance minutes and 4 cents per minute thereafter (if she uses fewer than 500 minutes, she still pays $21 for the month).

Requirements:

a. Draw a graph of the total monthly costs of the three plans for different levels of monthly long-distance calling. Your graph should resemble some combination of those in Panels A and B in Exhibit 2-3.

Exhibit 2-3 Graphs of Variable and Fixed Costs:

b. Which plan should Jackson choose if she expects to make 100 minutes of long-distance calls? 320 minutes? 520 minutes?

Transcribed Image Text:

PANEL A: Variable Cost of Steering Wheels at $600 per BMW X6 Assembled PANEL B: Supervision Costs for the BMW X6 assembly line (in millions) $2,000,000 $3 $1,500,000 $2 $1,000,000 $1 + $500,000 + $0 $0 1,000 2,000 3,000 4,000 20,000 60,000 40,000 Number of X6s Assembled Number of X6s Assembled Total Cost of Steering Wheels Total Supervision Costs