Question

A camera company has enough capacity to produce 20,000 cameras per year for mobile phones. This...

A camera company has enough capacity to produce 20,000 cameras per year for mobile phones. This year it is producing 10,000 cameras and is planning to produce 15,000 next year. How would the unit and total manufacturing costs change if this plan is implemented, other things being equal?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

(I) Unit costs

Unit variable cost is assumed to remain unchanged, so AVC will be the same.

Since higher production remains within capacity, total fixed costs (TFC) will be unchanged, so average fixed cost (AFC) will decrease.

Lower AFC and unchanged AVC will mean average total cost (ATC) will decrease.

(II) Total costs

TFC will stay the same.

As AVC is unchanged, higher production will incraese total variable cost (TVC).

Since TVC will rise and TFC is the same, total cost (TC) will increase.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A camera company has enough capacity to produce 20,000 cameras per year for mobile phones. This...
A camera company has enough capacity to produce 20,000 cameras per year for mobile phones. This year it is producing 10,000 cameras and is planning to produce 15,000 next year. How would the unit and total manufacturing costs change if this plan is implemented, other things being equal?
A company has the capacity to produce 20,000 units of its product per year. It is...
A company has the capacity to produce 20,000 units of its product per year. It is currently only producing 13,000 units per year, with a sell price of $70 per unit. A customer has placed a special order for 6,500 units at $62 per unit. The incremental cost of accepting the special order is $382,000. Should the company accept the special order?
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $14.00 per unit in the open market. The cost of the product is $11.30 (variable manufacturing of $5.00, plus fixed manufacturing of $6.30). Total fixed manufacturing costs are $441,000 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $11.30. The Disposables Division...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $14.00 per unit in the open market. The cost of the product is $11.30 (variable manufacturing of $5.00, plus fixed manufacturing of $6.30). Total fixed manufacturing costs are $441,000 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $11.30. The Disposables Division...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $15.00 per unit in the open market. The cost of the product is $13.10 (variable manufacturing of $5.00, plus fixed manufacturing of $8.10). Total fixed manufacturing costs are $567,000 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $13.10. The Disposables Division...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables...
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $15.00 per unit in the open market. The cost of the product is $13.10 (variable manufacturing of $5.00, plus fixed manufacturing of $8.10). Total fixed manufacturing costs are $567,000 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $13.10. The Disposables Division...
Widget Inc. manufactures widgets. The company has the capacity to produce? 100,000 widgets per? year, but...
Widget Inc. manufactures widgets. The company has the capacity to produce? 100,000 widgets per? year, but it currently produces and sells? 75,000 widgets per year. The following information relates to current? production: Sales price per unit $ $45 Variable costs per? unit: Manufacturing $25 Marketing and administrative $5 Total fixed? costs: Manufacturing $79,000 Marketing and administrative $20,000 If a special sales order is accepted for 7,000 widgets at a price of $37 per? unit, and fixed costs remain? unchanged, how...
The Belik Company has the capacity to produce 5,000 units per year. Its predicted operations for...
The Belik Company has the capacity to produce 5,000 units per year. Its predicted operations for the year are as follows: Sales (4,000 units @ $20 each) $80,000 Manufacturing costs: Variable $5 per unit Fixed $10,000 Marketing and administrative costs: Variable $1 per unit. Fixed $8,000 The accounting department has prepared the following projected income statement for the coming year for your use in making decisions. Sales $80,000 Variable costs: Manufacturing ($5 x 4,000) $20,000 Marketing ($1 x 4,000) 4,000...
Alpine Luggage has a capacity to produce 450,000 suitcases per year. The company is currently producing...
Alpine Luggage has a capacity to produce 450,000 suitcases per year. The company is currently producing and selling 370,000 units per year at a selling price of $402 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 158 Fixed manufacturing costs 42 Variable selling and administrative costs 80 Fixed selling and administrative costs 20 Total costs $ 300 The company has received a special order for 40,000 suitcases at a price of $251 per...
The Indigo Girls Company has the capacity to produce 90,000 units per year. Normal production and...
The Indigo Girls Company has the capacity to produce 90,000 units per year. Normal production and sales are 75,000 units per year. The normal selling price is $15 per unit. At the 75,000 unit level of activity, unit costs are as follows: Direct material $2.25 per unit Variable Overhead $1.50 per unit Fixed Overhead $2.00 per unit ($150,000 total) Direct Labor $1.75 per unit Variable Selling $1.00 per unit Fixed Selling $1.20 per unit ($80,000 total) A special one-time customer...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT