The capital catering company specializes in making hors d’oeuvres for receptions
ID: 1109438 • Letter: T
Question
The capital catering company specializes in making hors d’oeuvres for receptions. Its goal is to maximize profit. A small business operated out of a rented test kitchen, it has fixed costs (FC) of $2,000 per week for space rental plus variable costs (VC) for labor and ingredients. Six weekly output levels (Q) and associated VC appear below. To lay the foundation for management decision, please complete the table with total cost, average variable cost, average total cost, incremental change in variable cost (VC), incremental change in quantity (Q), and marginal cost (calculate from the incremental change numbers). Round AVC, ATC and MC values to two decimal places (cents).
Q
VC
TC
AVC
ATC
VC
Q
MC
0
0
--------------
--------------
--------------
--------------
--------------
248
800
784
1,600
1,416
2,400
1,952
3,200
2,200
4,000
Q
VC
TC
AVC
ATC
VC
Q
MC
0
0
--------------
--------------
--------------
--------------
--------------
248
800
784
1,600
1,416
2,400
1,952
3,200
2,200
4,000
Explanation / Answer
Q VC TC AVC=vC/Q ATC=TC/q VC=VCn-VCn-1 Q=Qn-Qn-1 MC=Tcn-TCn-1 0 0 2000 -------------- -------------- -------------- -------------- -------------- 248 800 2800 3.22580645 11.2903 800 248 800 784 1,600 3600 2.04081633 4.59184 800 536 800 1,416 2,400 4400 1.69491525 3.10734 800 632 800 1,952 3,200 5200 1.63934426 2.66393 800 536 800 2,200 4,000 6000 1.81818182 2.72727 800 248 800
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