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”.
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