Scribd
Upload
31 views

Unit 7 TechProdCost

This document contains two problems related to costs for businesses. Problem 2.7 lists the costs for Jill Johnson's Pizza restaurant and classifies each cost as either fixed or variable. Problem 5.3 provides total cost, fixed cost, and quantity produced information for a company and calculates average variable cost, average fixed cost, and average total cost. It then plots a cost curve graph with AVC, ATC, and AFC lines.

Uploaded by

MrDiaz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
31 views

Unit 7 TechProdCost

This document contains two problems related to costs for businesses. Problem 2.7 lists the costs for Jill Johnson's Pizza restaurant and classifies each cost as either fixed or variable. Problem 5.3 provides total cost, fixed cost, and quantity produced information for a company and calculates average variable cost, average fixed cost, and average total cost. It then plots a cost curve graph with AVC, ATC, and AFC lines.

Uploaded by

MrDiaz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

TomasE.Sanchez,Jr.

GE273Microeconomics
Unit7:Technology,Production,andCost
Problems:2.7,Page377;5.3,Page379
2/20/2014

Problem 2.7

JillJohnsonsPizzarestaurant
Cost

Amount

Fixed or Variable

InsurancePolicyPayment

$25,000

Fixed

PizzaDoughPurchase

20,000

Variable

Salaries

48,000

Variable

BuildingLease

75,000

Fixed

300

Fixed

AdvertisementCost

Insurance Policy Payments are a fixed cost. Payments like these are based on a total value
of the policy divided by the term of the policy which results in a fixed payment.
Pizza Dough is a variable cost due to the fact that the cost of the ingredients and delivery
cost will vary.
Salaries is a variable cost. This cost is governed by the amount of employees working each
week and based on who is working and what their salary is will depend on what Jills
overhead cost will be from week to week.
The building lease is a fixed cost. The owner of the building has set a fixed dollar amount
that he/she has determined would cover any of their expenses occurred by the property.
And last but not least advertisement cost, most advertising companies set a price for the
amount of space and location of that space for you to get the word out. For aired
advertisement the price is set for the amount of time your commercial will air.
One should keep in mind though that any of the fixed costs can increase but for the short
term these cost remain the same.

TomasE.Sanchez,Jr.
GE273Microeconomics
Unit7:Technology,Production,andCost
Problems:2.7,Page377;5.3,Page379
2/20/2014

Problem 5.3

Quantity of Balls Produced = 10,000


Total Cost = $30,000
Fixed Cost = $10,000
a. AVC = TC-FC

VC = $30,000 - $10,000
VC = $20,000
b. AVC = VC/Q

AVC = $20,000/10,000
AVC = $2.00 per ball
AFC = FC/Q
AFC = $10,000/10,000
AFC = $1.00

CostCurves
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$
0

2,000

4,000

6,000

8,000

AVC

ATC

AFC

10,000

12,000

You might also like