Consider two different cost structures for the same firm. The first bas higher variable costs per unit (V-63) but lower fixed cost (F=2,109). If the firm invests in a labor saving machine the cost structure will tip towards fixed costs with variable cost per unit V-30 and fixed costs F=D3,661. The selling price is the same for both scenarios (P-100) and the current level of production is 80. Calculate the profit under each scenario and how that changes as unit sales increase to 100; also, as they decrease to 60. What is the percent change in profits from 80 units to 100 units under the scenario with higher variable costs?
Consider two different cost structures for the same firm. The first bas higher variable costs per unit (V-63) but lower fixed cost (F=2,109). If the firm invests in a labor saving machine the cost structure will tip towards fixed costs with variable cost per unit V-30 and fixed costs F=D3,661. The selling price is the same for both scenarios (P-100) and the current level of production is 80. Calculate the profit under each scenario and how that changes as unit sales increase to 100; also, as they decrease to 60. What is the percent change in profits from 80 units to 100 units under the scenario with higher variable costs?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider two different cost structures for the same firm. The first bas higher variable costs per unit (V=63) but lower
fixed cost (F=2,109). If the firm invests in a labor saving machine the cost structure will tip towards fixed costs with
variable cost per unit V-30 and fixed costs F=3,661. The selling price is the same for both scenarios (P3100) and the
current level of production is 80. Calculate the profit under each scenario and how that changes as unit sales increase
to 100; also, as they decrease to 60. What is the percent change in profits from 80 units to 100 units under the
scenario with higher variable costs?
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