Question
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
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 |
- 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 |
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