Now suppose you manage a business that produces high end dog food. Your business produces 3,000...
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Now suppose you manage a business that produces high end dog food. Your business produces 3,000 dog food cans per day, and can sell all cans at $2.00/can regardless of how much is produced. Your firm currently employs twenty workers, cach of whom earns $15/hour and work 8 hours per day. Inputs, like the meat for the food and the metal for the can, cost $1.00/can. Your overhead expenses, including rent, property taxes, insurance, etc., which does not vary with the number of cans produced, equals $250 per day. a. (3) Calculate your company's current daily profit. You're considering whether to produce additional cans of dog food. In order to do so you would need to hire сап more workers, each of whom would be paid $15/hr. Material costs remain constant at $1.00/can. You determine that if you hire a 21" employee, your firm would produce an additional 200 cans per day, and that the number of additional cans from each additional worker would be decreasing by 40 (so a 22nd employce could produce an additional 160 cans per day, a 23rd employee could produce an additional 120 cans per day, ete.). b. (4) Calculate the marginal costs (change to total cost/change to output) associated with producing additional cans for employees 21 through 25. Note each worker works 8 hours/days. c. (4) If you could still sell each can for $2.50, how many employees should you hire, how many additional cans should you produce, and what is your company's new daily profit? d. (3) Suppose your company's fixed costs were $300 per day instead of $250 per day. What is the profit maximizing number of employees and what is your company's daily profit? Now suppose you manage a business that produces high end dog food. Your business produces 3,000 dog food cans per day, and can sell all cans at $2.00/can regardless of how much is produced. Your firm currently employs twenty workers, cach of whom earns $15/hour and work 8 hours per day. Inputs, like the meat for the food and the metal for the can, cost $1.00/can. Your overhead expenses, including rent, property taxes, insurance, etc., which does not vary with the number of cans produced, equals $250 per day. a. (3) Calculate your company's current daily profit. You're considering whether to produce additional cans of dog food. In order to do so you would need to hire сап more workers, each of whom would be paid $15/hr. Material costs remain constant at $1.00/can. You determine that if you hire a 21" employee, your firm would produce an additional 200 cans per day, and that the number of additional cans from each additional worker would be decreasing by 40 (so a 22nd employce could produce an additional 160 cans per day, a 23rd employee could produce an additional 120 cans per day, ete.). b. (4) Calculate the marginal costs (change to total cost/change to output) associated with producing additional cans for employees 21 through 25. Note each worker works 8 hours/days. c. (4) If you could still sell each can for $2.50, how many employees should you hire, how many additional cans should you produce, and what is your company's new daily profit? d. (3) Suppose your company's fixed costs were $300 per day instead of $250 per day. What is the profit maximizing number of employees and what is your company's daily profit?
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Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
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