SCENARIO: ACE Manufacturers is a small firm that makes children’s clothing which it sells to a large retail store. Mrs Samuels, who started the business, enjoys managing the operation. The production process involves the designing, cutting, sewing, decorating and finishing of the various items. Currently the factory space is divided into areas allowing for each of the processes to take place efficiently. The factory facility is rented on a three-year contract basis. Mrs Samuels has recently signed a new contract for another three year period. Mrs Samuels is keen to correctly identify the different costs in the business and analyse each of the operations to identify whether she is maximising output. In order to do this she requires assistance with understanding the “economics” of the operation. question Discuss the different types of costs that this operation will face in the short run. Give appropriate examples in each case. [Hint: Use the economic theory you have studied relating to the production costs of firms together with the nature of the operation described in the scenario.]
SCENARIO:
ACE Manufacturers is a small firm that makes children’s clothing which it sells to a large retail store. Mrs Samuels, who started the business, enjoys managing the operation.
The production process involves the designing, cutting, sewing, decorating and finishing of the various items.
Currently the factory space is divided into areas allowing for each of the processes to take place efficiently. The factory facility is rented on a three-year contract basis. Mrs Samuels has recently signed a new contract for another three year period.
Mrs Samuels is keen to correctly identify the different costs in the business and analyse each of the operations to identify whether she is maximising output. In order to do this she requires assistance with understanding the “economics” of the operation.
question
Discuss the different types of costs that this operation will face in the short run. Give appropriate examples in each case.
[Hint: Use the economic theory you have studied relating to the production costs of firms together with the nature of the operation described in the scenario.]
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