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Assignment 2 |
"Operations Decision" |
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Anita Monique Barnes |
8/11/2013 |
Dr. George A. Uhimchuk
ECO 550
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The mission of Computer Unlimited is to “Provide customers with a quality product and service that will keep them coming back for all their computing needs.” Computer Unlimited is a computer company founded November 2005 by Charlotte Windley. The Main headquarter is located in Greenville, North Carolina. This location is used for developing, manufacturing, repair, and support for a wide range of products and services related to computing. Computer Unlimited is the leading PC manufacturer in Greenville, North Carolina. The Company was created due to Charlotte’s love for computers. Computer Unlimited is a company currently uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm's output is $32. The cost of other variable inputs is $2,000 per day.
I have recently been hired as a managing consultant by Computer Unlimited to offer advice that will help with making decisions on whether it should shut down completely or continue its operations. I have been told that the firm's fixed cost is “high enough” so that the firm's total costs exceed its total revenue.
As stated before Computer Unlimited is currently using 100 workers, so worker productivity (WP) = units of output per day / number of workers: WP = 300 / 100 = 3 units per worker-day.
Total Variable Cost = (number of workers * salary per worker-day) + other variable costs
TVC = TVC = (100 x 70 x20) + 2,000 x 20 = 140,000 + 40,000 = $180,000
Average Variable Cost = Total variable cost / Units of output per day
VC per unit = $180,000/6000 = $30 per unit
Selling price per unit = $32
Price per unit is greater than VC per unit.
TR = 6,000 x 32 = $192,000
AVC = $180,000 / 6000 Units per day = $30 equals to marginal cost (MC). Superposes the AVC and MC curves, the point where...