The table below shows the firm's income statement. The business is obviouslygenerating a loss. How would the firm's decision to increase production and sales atgiven prices impact the loss:INCOME STATEMENT185REVENUESsales revenuesfinancial revenuesextraordinary revenues185228COSTSmaterial costs - Vccosts of services - VC9635labour costs - VC35depreciation costs - FCother operating costs - FCinterest expenses - FCextraordinary costs - FC30221210PROFIT-43 material costs - VC96costs of services - VC35labour costs - VC35depreciation costs - FCother operating costs - FC3022interest expenses - FC12extraordinary costs - FC10PROFIT-43The loss would become smaller because of P > AVC.Fixed costs need to be lowered so that price P becomes larger than AVC.The loss would become larger because of P < AC.The loss would become larger because of P < AVC.

Given the income statement, the firm is having a fixed cost of $30+22+12+10 ie $74 is the fixed…

material costs - VC 96 costs of services - VC labour costs - VC depreciation costs - FC other operating costs - FC 35 35 30 22 interest expenses - FC 12 extraordinary costs - FC 10 PROFIT -43 The loss would become smaller because of P > AVC. O Fixed costs need to be lowered so that price P becomes larger than AVC. The loss would become larger because of P < AC. The loss would become larger because of P < AVC.

material costs - VC 96 costs of services - VC labour costs - VC depreciation costs - FC other operating costs - FC 35 35 30 22 interest expenses - FC 12 extraordinary costs - FC 10 PROFIT -43 The loss would become smaller because of P > AVC. O Fixed costs need to be lowered so that price P becomes larger than AVC. The loss would become larger because of P < AC. The loss would become larger because of P < AVC.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The table below shows the firm's income statement. The business is obviously
generating a loss. How would the firm's decision to increase production and sales at
given prices impact the loss:
INCOME STATEMENT
185
REVENUES
sales revenues
financial revenues
extraordinary revenues
185
228
COSTS
material costs - Vc
costs of services - VC
96
35
labour costs - VC
35
depreciation costs - FC
other operating costs - FC
interest expenses - FC
extraordinary costs - FC
30
22
12
10
PROFIT
-43

material costs - VC
96
costs of services - VC
35
labour costs - VC
35
depreciation costs - FC
other operating costs - FC
30
22
interest expenses - FC
12
extraordinary costs - FC
10
PROFIT
-43
The loss would become smaller because of P > AVC.
Fixed costs need to be lowered so that price P becomes larger than AVC.
The loss would become larger because of P < AC.
The loss would become larger because of P < AVC.

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