Reference no: EM132472341
4 plants A, B, C and D are identical. The same production technology, raw materials, prices, wage rates.
We know that as volume increases, average fixed cost per unit falls, so D needs to be more profitable than other plants, but numbers say completely opposite:
A B C D
Output 50000 55000 60000 65000
Revenue 500 550 600 650
Variable cost 195 220 290 355
Fixed cost 300 300 300 300
Profit 5 30 10 -5
Question 1) Provide the cost structure.
Question 2) How to explain this situation - why A, B, C are profitable, and D is having minus profit.
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