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 each type of plant is as follows: constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for Plant C Plant A Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor 0.90 Materials 1.20 1.80 Other 0.50 2.40 2.00 $2.50 $6.00 $7.50 Total $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 C. (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? a. $8.00 $4.25 $2.375 $1.4375 b. $8.00 $8.00 $8.00 $8.00 C. $8.00 $15.50 $23.00 $30.50 d. $8.00 $7.75 $7.667 $7.625
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 each type of plant is as follows: constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for Plant C Plant A Plant B Average Variable Costs $1.10 $2.40 $3.70 Labor 0.90 Materials 1.20 1.80 Other 0.50 2.40 2.00 $2.50 $6.00 $7.50 Total $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 C. (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? a. $8.00 $4.25 $2.375 $1.4375 b. $8.00 $8.00 $8.00 $8.00 C. $8.00 $15.50 $23.00 $30.50 d. $8.00 $7.75 $7.667 $7.625
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question

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
each type of plant is as follows:
constant so long as output is less than capacity, which is the maximum output of the plant. The cost structure for
Plant C
Plant A
Plant B
Average Variable Costs
$1.10
$2.40
$3.70
Labor
0.90
Materials
1.20
1.80
Other
0.50
2.40
2.00
$2.50
$6.00
$7.50
Total
$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 C. (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?
a. $8.00 $4.25 $2.375 $1.4375
b.
$8.00 $8.00 $8.00 $8.00
C.
$8.00 $15.50 $23.00 $30.50
d.
$8.00 $7.75 $7.667 $7.625
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