Reference no: EM132647751

Camera GmBH produces digital camera. The company incurs the cost of renting the factory and the leasing machines are $40 and $60 per month, respectively. The labour cost and the raw material cost are shown in the table below:

a) Calculate the company's average fixed cost, average variable cost, average total cost and marginal cost at each level of production.

b) The Chief financial officer (CFO) tells the CEO that it is better to produce 3 units of digital camera because the marginal cost is at its minimum. Was this the best decision if the price of digital camera is $70 and why? At that level, the company experiences profit or less and how much? If that level (3 units) is not the best decision, what is the best optimal level of production and why?

c) Due to the introduction of the smart phone, the demand for digital camera declines dramatically causing the price of digital camera to decline to $35. At that price, as a CFO, do you advise the company to continue producing the camera or shut down. If you advise the company to produce, how many outputs should the company produce and why? If you advise the company to shut down, please give the reason why.