The Elite Nibbles Company specializes in making hors doeuvres for receptions. Its goal is to maximize profit. A small business operated out of a rented test kitchen, it has fixed costs (FC) of $3,600 per week for space rental plus variable costs (VC) for labor and ingredients. Six weekly output levels (Q) and associated VC appear below.

1. (30) To lay the foundation for management decisions, please complete the table below by filling in unshaded cells with total cost (TC), average variable cost (AVC), and average total cost (ATC), as well as values calculated between output levels: incremental change in variable cost (VC), incremental change in quantity (Q), and marginal cost (MC) per hors doeuvre serving (calculated from the incremental change numbers). Round AVC, ATC and MC values to two decimal places (cents).

Q	VC	TC	AVC	ATC	VC	Q	MC
		(FC+ VC)
0	0	3,600	--	--	0	0	--
173	600	3,600+ 600	600/173	4,200/173	600 - 0	173 - 0	VC/Q =600/173
		=4,200	=3.47	=24.28	=600	=173	=3.47
722	1,200
1,408	1,800
1,947	2,400
2,120	3,000

2. (18) Elite Nibbles has a major client willing to contract to pay $3.08 per serving (per Q).
   1. Should it accept a contract at this price in the long run if the space rental cost remains the same? If so, what output levels couldbe profitable in the long run?

2. Should it accept a contract at this price in the short run? If so, what output levels couldbe profitable in the short run?

3. What is the most profitable output level?

3. (12) For the coming week, Elite Nibbles has no sales contracted. However, its manager just got a call offering $1.23 per item for 1,558 servings.
   1. Should it accept this offer in the short run (just next week)? If so, why? If not, why not?

2. What is the most profitable output level?