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 0 2 4 5 7 Workers No. Of 10,000 21,000 35,000 50,000 65,000 73.000 70.000 Picture Frames that can be 1 3 6 0 made 2. What is the lowest price you would be willing to start producing this new product? Be precise. Don't round up to the nearest dollar. (1 mark) 3. If you were already committed to the fixed costs, how low could the price per picture frame fall before you would consider shutting down production? Remember, in the SHORT RUN, you have to keep paying your fixed costs whether you produce any picture frames or not. If you can cover your variable costs, then anything over that will reduce your fixed costs. You may be losing money in the short run but you are losing less money. (1 mark) For Questions 4 to 7, you need to fill in the table for each question. You need to STATE how many workers, the level of production and the profit you will make. Your costs, quantities and # of workers will be the same as you calculated in Question 1. 4. If the price per picture frame was fixed at $35, what would you do? Remember, in the short run you can't alter fixed costs, you can just decide where to set the level of production. You need to calculate total revenue and profit or loss for each level as you are given the average revenue. Remember to state both what level of production you would choose and what dollar profit you would make. (1 mark) # of Workers PXQ price FC + VC Profit or Loss TR AR TC TP 0 12 3 4 5 6 7