john owns a golf shop. He manufactures his own clubs. He owns some of the equipment and rents others using an annual contract. This year he estimates he will produce 12 sets of clubs. The materials (metal, ruber, etc…) for each set costs $200. John pays $400 per year for his mortgage on the golf shop, and $200 per year for rental machines. He will sell each set of clubs for $1000. He spends 5 hours making each set of clubs. He could otherwise be golfing, which he values at $20 per hour.
What is john's fixed cost?
What is his total variable cost? (accounting)
What is his total variable cost? (economics) ?
do not know how to do this at all. help?
What is john's fixed cost?
What is his total variable cost? (accounting)
What is his total variable cost? (economics) ?
do not know how to do this at all. help?
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fixed costs are costs that happen even if you do nothing
therefore fixed costs are: $400 for mortgage and $200 for rental so fixed cost is $600 / year
variable costs are what is consumed or what is attributed to consumption
therefore variable costs are: $200 / set of clubs for materials rubber...
total variable cost economic should include his time which is 5 hours @ $20 / hr or $100 / set of clubs
So if he is going to make 12 sets of clubs profit is
P = variable costs * number of units - fixed costs
P = (200 + 100) * 12 - 600 = 3600 - 600 = $3,000
(looks like a good business)
therefore fixed costs are: $400 for mortgage and $200 for rental so fixed cost is $600 / year
variable costs are what is consumed or what is attributed to consumption
therefore variable costs are: $200 / set of clubs for materials rubber...
total variable cost economic should include his time which is 5 hours @ $20 / hr or $100 / set of clubs
So if he is going to make 12 sets of clubs profit is
P = variable costs * number of units - fixed costs
P = (200 + 100) * 12 - 600 = 3600 - 600 = $3,000
(looks like a good business)