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Use the following data for answering Questions 3-6: The Haverford Company is considering three types of plants to make a particular electronic device. Plant A is much more highly automated than plant B, which in turn is more highly automated than plant C. For each type of plant, average variable cost is constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for each type of plant is as follows: Plant A Plant C Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor Materials 1.20 0.90 1.80 Other 0.50 2.40 2.00 Total $2.50 $6.00 $7.50 $300,000 $75,000 $25,000 Total fixed costs Annual capacity $50,000 200,000 100,000 Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with Plant B. (NOTE: for output exceeding the capacity of a single plant, assume that more than one plant of this type is built, i.e., all inputs are duplicated in each additional plant. What are the average costs per unit for the four market output levels? . $0.75 $0.375 $0.50 $0.375 b. $6.75 $6.375 $6.25 $6.1875 C. $6.75 $6.75 $6.75 $6.75 d. $6.75$12.75 $18.75 $24.75

Use the following data for answering Questions 3-6: The Haverford Company is considering three types of plants to make a particular electronic device. Plant A is much more highly automated than plant B, which in turn is more highly automated than plant C. For each type of plant, average variable cost is constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for each type of plant is as follows: Plant A Plant C Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor Materials 1.20 0.90 1.80 Other 0.50 2.40 2.00 Total $2.50 $6.00 $7.50 $300,000 $75,000 $25,000 Total fixed costs Annual capacity $50,000 200,000 100,000 Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with Plant B. (NOTE: for output exceeding the capacity of a single plant, assume that more than one plant of this type is built, i.e., all inputs are duplicated in each additional plant. What are the average costs per unit for the four market output levels? . $0.75 $0.375 $0.50 $0.375 b. $6.75 $6.375 $6.25 $6.1875 C. $6.75 $6.75 $6.75 $6.75 d. $6.75$12.75 $18.75 $24.75

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 3E
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Use the following data for answering Questions 3-6: The Haverford Company is considering three types of plants to make a particular electronic device. Plant A is much more highly automated than plant B, which in turn is more highly automated than plant C. For each type of plant, average variable cost is constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for each type of plant is as follows: Plant A Plant C Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor Materials 1.20 0.90 1.80 Other 0.50 2.40 2.00 Total $2.50 $6.00 $7.50 $300,000 $75,000 $25,000 Total fixed costs Annual capacity $50,000 200,000 100,000 Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with Plant B. (NOTE: for output exceeding the capacity of a single plant, assume that more than one plant of this type is built, i.e., all inputs are duplicated in each additional plant. What are the average costs per unit for the four market output levels? . $0.75 $0.375 $0.50 $0.375 b. $6.75 $6.375 $6.25 $6.1875 C. $6.75 $6.75 $6.75 $6.75 d. $6.75$12.75 $18.75 $24.75
Transcribed Image Text:Use the following data for answering Questions 3-6: The Haverford Company is considering three types of plants to make a particular electronic device. Plant A is much more highly automated than plant B, which in turn is more highly automated than plant C. For each type of plant, average variable cost is constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for each type of plant is as follows: Plant A Plant C Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor Materials 1.20 0.90 1.80 Other 0.50 2.40 2.00 Total $2.50 $6.00 $7.50 $300,000 $75,000 $25,000 Total fixed costs Annual capacity $50,000 200,000 100,000 Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with Plant B. (NOTE: for output exceeding the capacity of a single plant, assume that more than one plant of this type is built, i.e., all inputs are duplicated in each additional plant. What are the average costs per unit for the four market output levels? . $0.75 $0.375 $0.50 $0.375 b. $6.75 $6.375 $6.25 $6.1875 C. $6.75 $6.75 $6.75 $6.75 d. $6.75$12.75 $18.75 $24.75
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