If the elasticity for computers at the current price is at 6.4, what would happen to total revenues if a computer manufacturer d
2 answers:
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Answer: Increase of $20,000
Explanation:
The cost of making a unit is:
= Direct material + Direct labor + Variable overhead + Fixed overhead
= 10 + 14 + 5 + 3
= $32
For 4,000 units that would be:
= 4,000 * 32
= $128,000
Cost of buying 4,000 units :
= Cost of buying + Fixed cost
= (4,000 * 30) + (3 / 2 * 4,000)
= $126,000
This cost is further reduced by the renting of the unused space:
= 126,000 - 18,000
= $108,000
Impact on profit:
= Cost of making - Cost of buying
= 128,000 - 108,000
= $20,000
Increase of $20,000
