costs associated with production. When a company is deciding how much to produce, there are both short-run and long-run production periods. A short run is the current time span during which at least one fixed input must be paid whether or not any output is produced. A long run is a time period far enough into the future that all fixed inputs can be variable. Planning for the future involves looking at all possible situations which will maximize profit and minimize cost. A production function shows the
Price elasticity of supply measures the sellers’ responsiveness to price changes. One determinant of price elasticity of supply is the time period that it takes to adjust production depends on the degree of flexibility, different in different industries. Another determinant of price elasticity of supply is the ease of shifting resources between alternative uses. 2. What information is in a budget line? What information is
A more efficient manufacturing equipment has been installed. The variance is adverse in part a which may be caused by 1). Using poor quantity raw material which is not easy to work with 2). The new labor of labor with low skill cause inefficient production 3). The manufacturing equipment is old or there are some technical problems cause a decline in the manufacturing equipment productivity. ( Collier, P.M, (Collier, P.M.,2006) The advantages of ABC is; 1. Extend the concept of cost behavior. ABC use
calculated by multiplying the price of a product times the quantity sold. For instance, if 160 baseball caps are sold and each baseball cap was priced at $5 each, the total revenue would be (160*5) $180. Total cost is all of the expenses incurred in the production of a product, to include fixed and variable costs. Fixed costs, are expenses that are constant and do not change from month to month regardless of the amount of products sold. For instance, the rent of the factory is considered a fixed cost, for
understanding of the terms used when discussing our budget. The terms of importance include, but are not limited to: fixed, variable, direct, indirect, sunk, marginal and total cost. Fixed Cost Fixed cost is a cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense (Investorwords, 2008). Fixed costs remain constant regardless of the company’s activities. An example of one of our organization’s fixed cost is the building lease. If we
Therefore, steam engines could have not only effected the production of goods, but also the capital that was collected by the industrial sector. The effects that Craft (2004a) finds for the impact of steam engines on growth during the Industrial Revolution are similar. Craft (2004a) argues that the steam engine had
Firms have many costs associated with their production output levels. These include fixed, variable costs and total costs, which is a summation of the former two. As the names suggest, a fixed cost does not alter with the output level, whereas the variable cost does. The equation linking these three are; Costs can be given either in the long run or the short run. The short run is a period of time where at least one of a firm’s inputs is fixed. On the other hand, the long run is a period of time where
continue to eliminate the waste in order to achieve near-optimal level as a performance standard. ABC compares to the traditional method is more suitable to these companies that have a large percent of indirect overhead, various products, and complex production and operation activities. There is affection in part a while using ABC method. As ABC classified the cost as different activities and it is more accurate than using traditional method. This leading to the calculated product cost more
Maximization Production is very essential in the growth and development of the economy. For the economy to grow and have a wide development, the production sectors need to work with the aim of getting the maximum. The location and site at which the production is carried out determines much on whether the firm will earn more profits or not. However, for the case of China, some of her production industries had to shift to the United States of America due to conducive working and production environment
marginal costs denotes to the decrease or increase in that results from distributing or producing an extra unit of output and, increment cost means to the variance in the overall output that rises from change in the ways and means of distribution and production, e.g. addition of a territory or product, technological improvement or addition of a sales channel. 3a) Fixed cost=$3000 Ticket cost =$200 Operating cost =$11,000 Overnight charge=$1,200 Total cost = $11,000+$3,000+$1,200=$15,200 I. evening flight
the soft drink industry. In South Africa alone, SABMiller owns 90% of the shares of the total beer market and 72% of the shares of the total alcohol market. The following essay, related to the attached article, explains the economic theory behind the firm’s short-run production and costs resulting a decrease in the quantity of labour employed. Since SABMiller operate in the beer industry they face monopolistic competition, which according to Parkin et al. (2013:305) is a barrier-free market structure
Economies of Scale Economics Test 1. Define and explain all Internal Economies of Scale: · Internal Economies of Scale:Are reductions in long-run average cost as the size and output of a firm increases. In other words, they are advantages that large firms have because they are large. As they grow larger in the long-run they manage to raise their output faster than the rise in their total costs. The result is lower long-run average cost. - Marketing economies- Both in buying materials
and convenience stores (C-Space), there were synergistic gains for Homeplus. The synergistic gains imply advantages such as shared production and product development, and expansion of market presence. Since the acquired firms (Homever and C-Space) share their product categories with Homeplus, there is a gain of larger economies of scale that can lower the production cost for Homeplus. Thus, it can be seen that the integration strategy of Homeplus generates a clear synergy. 2. Sustainability According
Economies of scale The concept of economies of scale refers to the advantages gained when long-run average cost decrease with an increase in the quantity being produced. Economies of scale are common in highly capital intense industries with very high FC such as the airline industry. In general the average total cost curve at least in the short run is U-shaped, which indicates that the average total costs decline over a certain range of increasing output and then increase again until they reached
Ford has to adapt to different competitive strategies in order to overcome their strong competition such as Toyota, Daimler Chrysler, KIA, and Hyundai. Without implementing competitive strategies in the company, Ford is unable to overpower their competitors in the market who are growing stronger by the day. Therefore, there are four competitive strategies that Ford can implement into their management system which can improve Ford in various perspectives. Firstly, Ford can implement a differentiation
Xerox Case Study Analysis Xerox's "Book In Time" is a revolutionary product, presenting some new opportunities for the company. It is simply a matter of costs. The Book-in-Time equipment allows for a publishing company to produce a 300-page book for $6.90, something which could have been previously reached only for lots larger than 1,000 copies. A significant decrease in publishing costs, given the fact that these cover up to 20 % (including the paper and binding the book), would create the
Exhibit 4: Similarly, For Apex: As it has a capacity utilization of 71% now, Suppose a sale is $100. Then contribution is $39.15 Therefore variable cost is $60.85. Now if we increase the capacity utilization to 100%, Sales becomes $ 141 since production increases by [(100-71)/71] * 100 = 41% Variable Cost = 141% of 60.85 = $85.8 Fixed Cost = 69.38% * 12.3 = $8.53 Total Cost = 85.8+8.53 = $94.33 EBIT = Sales – Variable cost – Fixed Cost = $46.67 % of EBIT = [(46.67/141) * 100] = 33.09% Suppose
The impact of economies and diseconomies of scale Tesco face As businesses grow and their output increases, they commonly benefit from a reduction in average costs of production. Total costs will increase with increases in output, but the cost of producing each unit falls as output increases. This reduction in average costs is what gives larger firms a competitive advantage over smaller firms. This fall in average costs as output increases is known as Economies of Scale. Tesco benefit
factor of production are employed in production by fixing some other production factor, after some level, the resulting increases in output of product become lower and lower. That is, first the marginal returns to consecutive little will increase within the variable issue of production turn down, then eventually the general average returns per unit of the variable input begin decreasing. The law of diminishing returns doesn't imply that adding a lot of an element can decrease the whole production, a condition
Mario was thinking of going into the bakery business. Mario knows that the bakery business holds a lot of uncertainty, his decision about prices, cost and production are critical for business survival, at the same time; he has to determine the pulse of the market. However, if he decides to work in another business, his choice will involve an opportunity cost. If Mario decides to push for the bakery business, he needs some money to start up his business. Total fixed Cost Mario first decision is