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1. Planned Business 1: Upon initial collection ofreliable data, a planned chocolate manufacturing business that will last for20 years will be worth 168 Million pesos
1. Planned Business 1: Upon initial collection ofreliable data, a planned chocolate manufacturing business that will last for20 years will be worth 168 Million pesos to build and with estimated average annual predicted sales of49 million pesos and yearly total operational cost of 12 million pesos. Average annual inflation rate: 4.5 %, Tbill rate: 4.0%. Answerthese questions: a) Would you pursue the said business? b) Why? Note: Please show all calculations. 2. Planned Business 2: Upon initial collection ofreliable data, anotherplanned business, a chain often (10) motorcycle repair shops in NCR is predicted to last for 20 years and would be worth 21 0 Million pesos to build and with estimated an average annual predicted gross revenues of about 60 million pesos and yearly total operational cost of23 million pesos. Average annual inflation rate: 4.5 %, Tbill rate: 4.0%. Answerthese questions: a) Would you pursue the said business? b) Why? Note: Please show all calculations. 3. Assuming, you only have enough resources for one business, which ofthe said businesses would you establish? Why? Please see next item on page 2. SHORT RUN PRODUCTION Short run Production In the short run, firms can for a time increase its output by adding units of labor/workers to its fixed plant. But by how much will output rise when it adds the labor and at what input level (VI) is profit at a maximum or loss at minimum and what would be the optimal output level? Let's find out by completing the table of data collected below. Php 10,000.00 Php 600.00 Variable TR (Total Profit (TR - Fixed Input (L) (in TP (Q) (In Price = revenue) = TC) at Price = Input (K) thousands) thousands) MP AP TFC TVC TC MC AFC AVC ATC Php 30.00 Q x Price PhP 30.00 1 0 0 1.5 20.18 2.2 44.10 3.1 92.03 1 3.6 100.01 3.9 105.70 4.3 106.61 4.7 102.37 TR = Q x Price Profit = TR - TC Instructions/Question: a. What output level should be produced at a price of Php 30.00 per unit ? b. What should be the number of laborers used/employed if the price is Php 30.00 to maximize profit/minimize loss?Definition of Terms: Fixed Input - is aresource which cannot be altered in the short run. Variable Input - is aresourcewhichcan vary in the short run. Total Product (TP) - is the totalquantity or total output of a particular good produced. Marginal Product (MP) -is the extra output or added product associated with a unit of variable resource, in this case labor, to the production process. Average Product (AP) -here, also called labor productivity, is output per unit of variable resource, that is, labor input. Total Fixed Cost (TFC) - arethose costs that in total, do not vary with changes in output. Total Variable Cost (TVC) - are those costs that change with the level of output. Total Cost (TC) - is the sum of total fixed cost and total variable cost at each level of output. Marginal Cost (MC) -is the extra or additional cost of producing one more unit of output. Average Fixed Cost (AFC) - is the fixed cost per unit of output. Average Variable Cost (AVC) - is the variable cost per unit of output. Average Total Cost (ATC) - is the totality of cost incurred per unit of output produced. List of Formulas used MP change in TP/ Change in Variable Inputs AP TP/ VI TC TVC + TFC MC change in TC/change in Q AFC TFC/ Q AVC TVC/ Q ATC AFC + AVC
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