Question and Answer Essay

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

In our analysis we determined the equations for total cost and marginal cost using the average cost obtained from the regression model provided, and the fixed costs estimates in the collected data calculated by a previous resource endorsed by the company. Once we have determined the marginal cost equation, we calculated the output for perfect competition profit maximizing criteria P

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

c) Explain how the location of each curve graphed in question 7b would be altered if (1) total fixed cost had been $100 rather than $60 and (2) total variable cost had been $10

2.) For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour.

An alternative method for determining the profit-maximizing quantity is to determine where marginal costs equal marginal revenue. Instead of calculating profits for each level of sales, total variable costs and total revenue are calculated. Marginal costs and marginal revenues are calculated in the same manner as marginal profit, thereby determining the amount of change for each level of sales (Huter, 2012, p.2).

The second and final option is to analyze marginal revenue and marginal cost. This process is done by comparing the amount each additional unit of output is costing and adding it to the total revenue and total cost. Unfortunately, this information was not made available for this

12. Take a look at the exhibit above. If the firm maximizes profit, what will be the firm 's total profit?

1. Tutti’s Sandwich Shop has the following information regarding costs at various levels of monthly sales. Help Tutti separate her costs into fixed costs and variable costs so that she can predict and evaluate costs at varying levels of guests served.

Adding both fixed and variable costs into the equation made it possible to see, not only where the firms maximum revenue lies, but where its maximum profit is. Finding the unitary price point of the elasticity functions confirmed the optimization of the revenue functions, providing a greater level of insight in the way in which consumers react to a change markets. Finally, analysis confirmed that while the company generates revenue in the summer, it does not entirely offset its costs of production. If they are able to maintain their brand and production facilities throughout the summer, they would be better served financially if they halted summer production

Profit is maximized when Marginal Revenue equals Marginal Cost, to use it, a business needs to know how much it costs to produce one more unit of a service. A business can also use total revenue - total cost method (McConnell, Brue & Flynn, 2011). Profit is maximized when the total revenue and total cost curves are farthest apart.

Cost of goods sold | (9,000) | 0.900 | (8,100) | Gross profit | 6,000 | |

It can also be seen that when the marginal cost is lower than the marginal revenue, profit is increased. When marginal cost is equal to the marginal revenue profit is maximized. After this point, when marginal cost is above the marginal revenue, profit starts to fall. Therefore, profit is maximized when MR=MC.

a) Draw Brennan's average total, marginal revenue and marginal cost curves. (Hints: calculate total revenue (P* times Q) first, and then calculate MR)