Geoffrey’s Glassworks makes glass flanges for scientific use. Materials cost $ 3 per flange, and the glass blowers are paid a wage rate of $ 25 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $ 23,000 per period. Period (non-manufacturing) costs of flanges are $ 17,000 per period, and are fixed.

1. Graph the fixed, variable, and total manufacturing cost for flanges, using units (number of flanges) on the x- axis (the horizontal axis).
2. Assume Geoffrey’s Glassworks manufactures and sells 4,000 flanges this period. Its competitor, Flora’s Flasks, sells flanges for $ 10.50 each. Can Geoffrey sell below Flora’s price and still make a profit on the flanges?
3. How would your answer to requirement 2 differ if Geoffrey’s Glassworks made and sold 10,000 flanges this period? Why? What does this indicate about the use of unit cost in decision making?

  • CreatedJanuary 15, 2015
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