You are a newspaper publisher. You are in the middle of a one-year 1,000,000 per

Question

You are a newspaper publisher. You are in the middle of a one-year 1,000,000 per month that you can't get out of. You also have a marginal printing cost of $0.25 per paper as well as a marginal delivery cost of $0.10 per paper Instructions: Round your answers to 2 decimal places a If sales fall by 20 percent from 1,000,000 papers per month to 800,000 papers per month, what happens to the AFC per paper? rental contract for your factory that requires you to pay $500,000 per month, and you have contractual labor obligations of Cick to select)from $ per paper to$ per pape b.What happens to the MC per pape? MC does not change c. What happens to the minimum amount that you must charge to break even on these costs? Cick to select) from per paper to $ per paper 8

Explanation / Answer

Ans:

Fixed cost = $500,000 + $1000,000

   = $1,500,000

Variable cost = $0.25 + $0.10

= $0.35 per paper

a) Increases, from $1.5 per paper to $1.875 per paper

Average fixed cost = Fixed cost / Quantity

Average fixed cost(1,000,000 papers) = $1,500,000 / 1,000,000 papers

   = $1.5 per paper

  Average fixed cost(800,000 papers) = $1,500,000 / 800,000 papers

= $1.875 per paper

b) Marginal cost(MC) does not change.

c) Increases from $1.85 per paper to $2.225 per paper.

Break-even price = Average fixed cost per unit + Variable cost per unit

Break-even price(1,000,000 papers) = $1.5 per paper + $0.35 per paper

= $1.85 per paper

Break-even price(800,000 papers) = $1.875 per paper + $0.35 per paper

= $2.225 per paper

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.