   Chapter 13, Problem 5PA

Chapter
Section
Textbook Problem

You are the chief financial officer for a firm that sells digital music players. Your firm has the following average-total-cost schedule: Quantity Average Total Cost 600 players $300 601 301 Your current level of production is 600 devices, all of which have been sold. Someone calls, desperate to buy one of your music players. The caller offers you$550 for it. Should you accept the offer? Why or why not?

To determine
Whether the offer should be accepted or not.

Explanation

When the current level of production is 600 devices, then the total cost can be calculated as follows:

Total cost=Average total cost×Quantity=300×600=180,000

Thus, the total cost for producing 600 devices is $180,000. When the current level of production is 601 devices, then the total cost can be calculated as follows: Total cost=Average total cost×Quantity=301×601=180,901 Thus, the total cost for producing 601 devices is$180,901

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started 