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COSTS OF PRODUCTION FORMULAS Total cost (TC) = total fixed cost (TFC) + total variable cost (TVC) Total Product (TP) - Average fixed cost (AFC) = TFC ÷ output or total product or quantity Average variable cost = TVC + output or total product or quantity - Marginal cost (MC)= change in total Cost (TC) ÷ change in TP or output - Average total cost (ATC) = AFC + AVC or - Average Total Cost = TC ÷ TP - Total Revenue (TR) = price x TP %3D - Total Profit/Loss = TR – TC - Break even : TR – TC = 0 | Hypothetical problem A corn farmer produces 300 sacks of corn at 50 kgs./sack. Prevailing price of corn/sack is P1,200. He incurred the following annual expenses (P): Fixed costs: land rent @5,000; irrigation fee@3,000; warehouse @2,500; insurance @3,000; interest on loan @4,200; entrepreneuship@7,000; salaries/wages@10,000; taxes@4,600; depreciation@2,600 Variable costs: seeds@5,000; fertilizer@10,500: labor@18,000; pesticides@8,000; tractor@3,000; transportation,@3,500. Compute for: 1. Total Cost, Total Fixed Cost, Total Variable Cost 2. Average total cost, average fixed cost, average variable cost 3. Total Revenue, average revenue 4. Total profit or Loss

COSTS OF PRODUCTION FORMULAS Total cost (TC) = total fixed cost (TFC) + total variable cost (TVC) Total Product (TP) - Average fixed cost (AFC) = TFC ÷ output or total product or quantity Average variable cost = TVC + output or total product or quantity - Marginal cost (MC)= change in total Cost (TC) ÷ change in TP or output - Average total cost (ATC) = AFC + AVC or - Average Total Cost = TC ÷ TP - Total Revenue (TR) = price x TP %3D - Total Profit/Loss = TR – TC - Break even : TR – TC = 0 | Hypothetical problem A corn farmer produces 300 sacks of corn at 50 kgs./sack. Prevailing price of corn/sack is P1,200. He incurred the following annual expenses (P): Fixed costs: land rent @5,000; irrigation fee@3,000; warehouse @2,500; insurance @3,000; interest on loan @4,200; entrepreneuship@7,000; salaries/wages@10,000; taxes@4,600; depreciation@2,600 Variable costs: seeds@5,000; fertilizer@10,500: labor@18,000; pesticides@8,000; tractor@3,000; transportation,@3,500. Compute for: 1. Total Cost, Total Fixed Cost, Total Variable Cost 2. Average total cost, average fixed cost, average variable cost 3. Total Revenue, average revenue 4. Total profit or Loss

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
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Given are the formulas for computing. Read the instructions below and do as indicated. Answer the questions below and provide a solution for each. Then make graphs.

COSTS OF PRODUCTION FORMULAS Total cost (TC) = total fixed cost (TFC) + total variable cost (TVC) Total Product (TP) - Average fixed cost (AFC) = TFC ÷ output or total product or quantity Average variable cost = TVC ÷ output or total product or quantity | - Marginal cost (MC)= change in total Cost (TC) ÷ change in TP or output | - Average total cost (ATC) = AFC + AVC or - Average Total Cost = TC ÷ TP - Total Revenue (TR) = price x TP Total Profit/Loss = TR – TC - Break even : TR – TC = 0 | | Hypothetical problem A corn farmer produces 300 sacks of corn at 50 kgs./sack. Prevailing price of corn/sack is P1,200. • He incurred the following annual expenses (P): • Fixed costs: land rent @5,000; irrigation fee@3,000; warehouse @2,500; insurance @3,000; interest on loan @4,200; entrepreneuship@7,000; salaries/wages@10,000; taxes@4,600; depreciation@2,600 Variable costs: seeds@5,000; fertilizer@10,500: labor@18,000; pesticides@8,000; tractor@3,000; transportation,@3,500. Compute for: 1. Total Cost, Total Fixed Cost, Total Variable Cost 2. Average total cost, average fixed cost, average variable cost 3. Total Revenue, average revenue 4. Total profit or Loss
Transcribed Image Text:COSTS OF PRODUCTION FORMULAS Total cost (TC) = total fixed cost (TFC) + total variable cost (TVC) Total Product (TP) - Average fixed cost (AFC) = TFC ÷ output or total product or quantity Average variable cost = TVC ÷ output or total product or quantity | - Marginal cost (MC)= change in total Cost (TC) ÷ change in TP or output | - Average total cost (ATC) = AFC + AVC or - Average Total Cost = TC ÷ TP - Total Revenue (TR) = price x TP Total Profit/Loss = TR – TC - Break even : TR – TC = 0 | | Hypothetical problem A corn farmer produces 300 sacks of corn at 50 kgs./sack. Prevailing price of corn/sack is P1,200. • He incurred the following annual expenses (P): • Fixed costs: land rent @5,000; irrigation fee@3,000; warehouse @2,500; insurance @3,000; interest on loan @4,200; entrepreneuship@7,000; salaries/wages@10,000; taxes@4,600; depreciation@2,600 Variable costs: seeds@5,000; fertilizer@10,500: labor@18,000; pesticides@8,000; tractor@3,000; transportation,@3,500. Compute for: 1. Total Cost, Total Fixed Cost, Total Variable Cost 2. Average total cost, average fixed cost, average variable cost 3. Total Revenue, average revenue 4. Total profit or Loss
There are 2 blankgraphing papers that you may use to draw the curves required. The scales were already done for you. • For graphing paper #1 Y axis = total fixed cost (TFC), total variable cost (TVC), and total cost (TC) %3D X axis = output For graphing paper #2 Y axis = average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), and marginal cost X axis = output
Transcribed Image Text:There are 2 blankgraphing papers that you may use to draw the curves required. The scales were already done for you. • For graphing paper #1 Y axis = total fixed cost (TFC), total variable cost (TVC), and total cost (TC) %3D X axis = output For graphing paper #2 Y axis = average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), and marginal cost X axis = output
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