Answer:
c.marginal cost is below average variable cost.
Explanation:
The marginal cost is falling due to the diminishing returns to scale which causes the cost to rise, and followed by the constant returns the increasing returns to the variable factors causes the marginal cost to fall below the average variable cost.
Answer:
11.057 years
Explanation:
For computing the number of years we need to apply the NPER formula i.e to be represented in the attachment below:
Given that,
Present value = $1,000 × 8% ÷ 7.55% = $1,059.60
Assuming Future value = $1,000
Rate of interest = 7.2%
PMT = $1,000 × 8% = $80
The formula is shown below:
= NPER(Rate;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the number of years is 11.057 years
Answer:
Payback is 19 months
Explanation:
It is a capital budgeting problem. Firm has invested in TQM's Channel Support systems of $1,500,000. It will increase demand of product by 1.7%.
$166385985 x1.7071. = $166389948
Last years sales revenue was $163,608,638. A 1.7% increase will mean the saleswill be -
$166385985- $163608638 = 2781347
Thus increase in sales revenue is-
Now consider contribution margin. From total sales direct variable costs are deducted to get total contribution. It is 34.2% . So extral contribution due to 1.7% increase in sales is-
$2781347 x 34/2%= $95122
Thus increase in contribution margin will also increase profit to the same extent as there is no addition in fixed cost due to this project. So firm will be able to recover $951,221of initial investment of $1,500,000 in one year. Pay back is the time required to recover this full initial investment. It ascertained by dividing $1,500,000 amount by the net addition in profit per year. Answer is-
1,500,000+ 951221= 1.6759yrs x12months= 19months
