Question

Use the following information to complete the table in the worksheet named "Data" When completing the table, you must enter the appropiate formulas instead of typing the numeric answer. Do not change the cell formatting in the table. ABC Designs offers printing services to publishers. The table in the worksheet "Data" provides production information in terms of number of books that can be printed per hour of work. Assume that monthly fix cost, which include the cost of capital and services that are independent of the level of production, are $20,000 per month. The information in the table is provided per hour, hence use the following convertion measures 1 year = 12 months 1 year = 365 days 1 day = 24 hours Assume as well that the only variable cost is labor and that the hourly wage rate is $15 Once you finish completing the table, create four graphs were you are going to graph the following on each: Graph 1. graph the Total Product function Graph 2 - graph the Marginal Product and the Average Product functions together. Graph 3 - graph the Total Fixed Cost, Total Variable Cost and Total Cost functions together, Graph 4-graph the Marginal Cost, Average Variable Cost and Average Total Cost functions together NOTE: Use the Scatter (X,Y) option instead of the line graph since you will need to specify in Excel what you are graphing on each axis Label your graphs appropiately and give then a title. IMPORTANT: Do not leave the charts as object on the worsheet "Data", right click them and select the option "Move Chart" and create a new sheet. Name the new sheets Graph 1, Graph 2, Graph 3, and Graph 4. Click on the "Questions worksheet and answer the questions in the sapce provided. Save your file and upload the Excel file into Canvas.

Answer 1

Given,

Fixed cost = $20,000 per month

=> Fixed cost per hour = $20,000*12/(24*365) = $27.40

Variable cost per hour = Hourly wage rate = $15

L	TP	MP	AP	TFC	TVC	TC	MC	AFC	AVC	ATC
Number	books/hour	per hour	per hour	per hour	per hour	per hour	per hour	per hour	per hour	per hour
0	0			27.397	0	27.397
1	29	29	29	27.40	15.00	42.40	0.52	0.94	0.52	1.46
2	112	83	56	27.40	30.00	57.40	0.18	0.24	0.27	0.51
3	243	131	81	27.40	45.00	72.40	0.11	0.11	0.19	0.30
4	416	173	104	27.40	60.00	87.40	0.09	0.07	0.14	0.21
5	625	209	125	27.40	75.00	102.40	0.07	0.04	0.12	0.16
6	864	239	144	27.40	90.00	117.40	0.06	0.03	0.10	0.14
7	1127	263	161	27.40	105.00	132.40	0.06	0.02	0.09	0.12
8	1408	281	176	27.40	120.00	147.40	0.05	0.02	0.09	0.10
9	1701	293	189	27.40	135.00	162.40	0.05	0.02	0.08	0.10
10	2000	299	200	27.40	150.00	177.40	0.05	0.01	0.08	0.09
11	2299	299	209	27.40	165.00	192.40	0.05	0.01	0.07	0.08
12	2592	293	216	27.40	180.00	207.40	0.05	0.01	0.07	0.08
13	2873	281	221	27.40	195.00	222.40	0.05	0.01	0.07	0.08
14	3136	263	224	27.40	210.00	237.40	0.06	0.01	0.07	0.08
15	3375	239	225	27.40	225.00	252.40	0.06	0.01	0.07	0.07
16	3584	209	224	27.40	240.00	267.40	0.07	0.01	0.07	0.07
17	3757	173	221	27.40	255.00	282.40	0.09	0.01	0.07	0.08
18	3888	131	216	27.40	270.00	297.40	0.11	0.01	0.07	0.08
19	3971	83	209	27.40	285.00	312.40	0.18	0.01	0.07	0.08
20	4000	29	200	27.40	300.00	327.40	0.52	0.01	0.08	0.08

Formulae used in the excel sheet:

MP of Nth worker = TP of N workers - TP of (N-1) workers

AP = TP/L

TFC = (20,000*12)/(24*365)

TVC = 15*L

TC = Sum(TFC:TVC)

MC at Nth worker = (TC of N workers - TC of (N-1) workers)/MP of Nth worker

AFC = TFC/TP

AVC = TVC/TP

ATC = TC/TP or Sum(TFC:TVC)

Total Product graph:

Total Product 4500 4000 3500 Total Product 0 1 2 3 4 5 6 7 8 19 20 21 9 10 11 12 13 14 15 16 17 18 Labor

MP and AP graphs:

MP, AP AP 0 1 2 3 4 5 6 7 8 9 13 14 15 16 17 18 19 20 21 10 11 12 Labor

Graphs of TC, TFC, TVC:

350.000 300.000 250.000 200.000 TEC, TVC, TC 150.000 100.000 50.000 0.000 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 Output or TP TFC TVC ---TC

Graphs of MC, ATC and AVC:

MC, AVC, ATC 0 500 1000 1500 3000 3500 4000 4500 2000 2500 Output or TP AVC ATC ---MC

1) Pedro's ATC is minimum at an output = 3584 units

2) Pedro's AVC is minimum at an output = 3375 units

3) AVC reaches its minimum point at a lower output level. AVC is brought down by the effect of lower marginal cost. As the marginal cost rises and meets both AVC and ATC at their minimum points, and due to the fact that AVC lies below the ATC, the positive sloped MC curve meets AVC at a lower output level before meeting ATC and a higher output level.

4) When AVC is at its minimum, the MP of an additional worker(16th worker) = 209 units

5) The worker in question 4 is not the most productive worker as the AVC starts increasing from the 16th worker