A company produces gold picture frames. The cost per picture frame is:

Materials $9

Packaging $1

Decorations on the frame $5

Shipping and handling $1.5

Each worker earns $30,000 annually in salary and benefits. The number of workers changes based on the level of production. This means this is a variable cost.

The artist who creates the designs on the picture frames is paid $25,000 annually. Senior management are paid a total of $200,000 annually. Other annual costs are:

Taxes and Insurance $17,000

Utilities $50,000

Rent $300,000

Miscellaneous Overhead Expenses $24,000

The following production is possible:

No. Of Workers	0	1	2	3	4	5	6	7
No. Of Picture Frames that can be made	0	12,000	21,000	35,000	50,000	65,000	73,000	71,000

1. If the price per picture frame was fixed at $26.50, what would you do in the SHORT RUN? Again, remember that you have to keep paying your fixed costs in the short run. Fill in the table completely and state what level of production you would use. State what is your profit at this level? (1 mark)

# of Workers	PxQ	price		FC + VC	Profit or Loss
	TR	AR	Q	TC	TP
0
1
2
3
4
5
6
7