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Production Cost Analysis and Estimation Applied Problems

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Production Cost Analysis and Estimation Applied Problems
Vada Taborn
BUS 640: Managerial Economics
Instructor: Isabel Wan
Date August 10, 2015

Production Cost Analysis and Estimation Applied Problems
Problem 1:
William is the owner of a small pizza shop and is thinking of increasing products and lowering costs. William’s pizza shop owns four ovens and the cost of the four ovens is $1,000. Each worker is paid $500 per week. Workers Employed | Quality of pizzas produced per week 0 0 1 75 2 180 3 360 4 600 5 900 6 1140 7 1260 8 1360
Show all of your calculations and processes. Describe your answer for each question in complete sentences, whenever it is necessary.

Workers
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However, when fixed costs and production do not increase proportionately, diseconomies of scales occur. As you can see in the chart above, when the 7th worker was added, the average cost increased, the number of pizzas per worker decreased, and productivity decreased.
Problem 2
The Paradise Shoes Company has estimated its weekly TVC function from data collected over the past several months, as TVC = 3450 + 20Q + 0.008Q2 where TVC
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