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 were fixed at $18.60, what would you do in the SHORT RUN? Fill in the chart and state what level of production you would use.(1 mark)

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