1.) Company A is trying to get an idea of how much it would cost if the company wanted to produce
1,000 units next month.
After having the interns do some research, they found that the total
outputs and total costs for the past few months were as follows:
What would be the total cost for Company A if they were to produce 1,000 units next month?
What would be the total cost for the company if the CEO decided he wanted to produce 2,000
units instead (assuming fixed costs do not rise as a result of the increased production)?
2.) If Company A has a fixed cost per unit of $20 and produced 4,000 units, what would the fixed
costs be if there were 5,000 units produced? What would the fixed cost per unit then be?
3.) Alex decides to open up a bar uptown and become the new new bar, which his accounting
creativity led him to actually name it “New New Bar”.
Alex figures that it would cost him $2,000
to have the building operating. He also figures that each bottle used, assuming he goes for the
cheap stuff since there wouldn’t be a sober person to realize it, would be $12 a bottle. He also
figures that since he could get a deal, that each drink on tap (i.e. not out of the bottle) would only
cost $4 per gallon. In order to maintain a somewhat clean and not too dangerous place for college
students to hang out on the weekends, Alex decides he’ll need to hire 3 bartenders, 2 security
personnel, and 1 manager to help monitor the business. The bartenders and security are paid
hourly at a rate of $10 an hour.
The manager is paid on salary at $2,000.