# Refer to Exercise 12-18. 1. Calculate the amount and cost of unused administrative capacity at the beginning

## Question:

Refer to Exercise 12-18.

1. Calculate the amount and cost of unused administrative capacity at the beginning of 2013, based on the actual number of customers Ramiro served in 2013.
2. Suppose Ramiro can only add or reduce administrative capacity in increments of 250 customers. What is the maximum amount of costs that Ramiro can save in 2013 by downsizing administrative capacity?
3. What factors, other than cost, should Ramiro consider before it downsizes administrative capacity?

Data From Exercise 12-18:
Ramiro & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Ramiro wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Ramiro T-shirt. Ramiro presents the following data for its first two years of operations, 2012 and 2013.

Administrative costs depend on the number of customers Ramiro has created capacity to support, not on the actual number of customers served. Ramiro had 4,300 customers in 2012 and 4,200 customers in 2013.

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