Short-run economic decisions, Microeconomics

Assignment Help:

Weston Industrial Manufacturing Products ("WIMP") has the capability to produce a variety of industrial products, including a number of types of widgets. In the past, WIMP has manufactured 2 different types of widget (Type A and Type B). Each of these is sold in a market that approximates a perfectly competitive market. Production is limited to standard shifts operating Monday through Friday due to a contract with the relevant labor union.

The average labor rate is $10 per hour and the company currently employs 10 laborers who work a single 8-hour shift each day. The company employs several salaried marketing and administrative employees. The following table provides price and cost data collected from the accounting department:

WIMP: Per-Unit Price and Cost Data by Widget Type

 

Type A

Type B

Gizmo Widget

Price

100

90

See marketing estimates

 

 

 

 

Labor

40

20

20

Materials

20

40

50

SGA

8

4

4

Depreciation

20

18

40

 

 

 

 

WIMP has recently developed a new widget, the "Gizmo Widget." The Gizmo Widget is designed to serve a niche demand segment in the manufacturing industry. Labor costs are relatively low but this is partially offset by higher materials costs.

The company recently upgraded machinery to enable the Gizmo Widget to be produced and this is reflected in higher depreciation charges. WIMP's marketing staff produced the following sales projections regarding the Gizmo Widget:

Price

Projected Weekly Sales (# units)

180

50

160

90

140

120

120

140

100

160

80

170

In the short run, WIMP cannot add to its labor force of ten employees and consequently there are only 80 labor hours available per day to allocate toward widgets.

1.      Which costs in the table of accounting information are relevant for making short-run economic decisions regarding the production mix of widgets? Explain and show.

2.      Ignore the Gizmo Widget for the moment. How should WIMP be allocating production between the Type A and Type B widgets?
Be sure to briefly explain your approach/reasoning.

3.      What is the profit maximizing number of Gizmo Widgets that should be introduced? Be sure to account for the fact that Gizmo Widgets displace other types of widgets. Again, be sure you provide a brief explanation of your approach/reasoning.


Related Discussions:- Short-run economic decisions

Estimating Industry Demand for Fresh Market Carrots, this is a project I ne...

this is a project I need help answering the questions

Role of managerial economist, Explain the role of managerial ecnomist in ki...

Explain the role of managerial ecnomist in kissan &dipsy fro ub group

Resilience in addition to strength, Resilience in Addition to Strength: ...

Resilience in Addition to Strength: The BOP has been in overall surplus since 1996-97 with forex reserves rising, on an average, by $8.50 billion per annum during 1996-97 to 2

Social welfare function, 2 i) Explain what are the key assumptions by the w...

2 i) Explain what are the key assumptions by the welfarist approach. ii) Define and discuss the properties of a Generalized Utilitarian social welfare function and represent it

Marginal utility, If the MU of the 1st unit consumed = 75 utils, and the TU...

If the MU of the 1st unit consumed = 75 utils, and the TU of consuming 2 units is 130 utils, what is the marginal utility of the second unit?

Project work, PLEASE GIVE ANY ONE TOPIC OF ECONOMIC WITH ANSWERS

PLEASE GIVE ANY ONE TOPIC OF ECONOMIC WITH ANSWERS

Oligopoly, what makes it differ from other market structures

what makes it differ from other market structures

Micro economics, If the Bank of England wanted to discourage investment spe...

If the Bank of England wanted to discourage investment spending and reduce aggregate demand, it could? A. reduce the required reserve ratio B. sells securities on the open m

Production , Suppose that a firm’s production function is given by Q=30L-3L...

Suppose that a firm’s production function is given by Q=30L-3L2, where L is labor input and Q is the output. a) Derive and draw the firm’s demand for labor while the firm’s produ

Market structures, #question.contrast the long run equilibrium position of ...

#question.contrast the long run equilibrium position of monopolistic competition firm and oligopoly.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd