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kaheart [24]
4 years ago
10

Chloe’s Café sells gourmet cinnamon rolls. In the long run, the café incurs a total cost of $500 to produce 1,000 cinnamon rolls

. If Chloe’s Café exhibits economies of scale between 1,000 and 2,000 cinnamon rolls, the long-run average total cost for 1,500 cinnamon rolls isa. lower than $0.50.b. ​higher than 500.c. ​higher than $0.50.d. ​equal to $0.50.
Business
1 answer:
Irina-Kira [14]4 years ago
3 0

Answer:

a. lower than $0.50

Explanation:

As more and more units of output are produced, labor efficiency increases, machine capacity is better utilized, raw materials can be purchased in bulk which reduce the total cost of production.

The above factors give rise to the concept of Economies of scale which leads to a decrease in cost of production as a result of which the average total cost reduces.

Economies of scale refers to savings in cost in the long run owing to efficient use of resources.

Average cost is defined as total cost incurred per unit of output produced.  Current average cost = $500/1000 = $0.5. In case of economies of scale, the long run average cost would be lower than $0.5.

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At the end of the fiscal year, the balance in Factory Overhead is small. The balance will be a.transferred to Work in Process b.
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Given that

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Lindon company is the exclusive distributor for an automotive product that sells for $40 per unit and has a cm ratio of 30%. the
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1)The cm ratio<span> is the difference between a company's sales and variable expenses (expenses proportional to units produced), expressed as a <span>percentage. Hence, we have that the costs of the product per unit are 70%= 100%-30% of the unit income, thus they are 40*70%=28$. Thus, the variable expenses per unit are 28$.
2) In order to break even, they have to make profit of 180000$ from sales. Each unit gives a profit of 12$=40$-28$ (unit profit). Hence, in order to make a profit of 180000$, the have to sell 180000/12=15000 units. Those units will bring in sales of 40*15000=600000$. We also have that if the company wants to make a net profit of 60000$, the profit from the unit sales needs to be 240000$ in total. Hence, they will need 240000/12=20000 units and the sales will be 40*20000=800000$ at that point.
3) Let us calculate the new cost. It is obviously 28-4=24$. The new profit margin per unit is 40-24=16$. Hence, to break even this time they will need only 180000/16=11250 units. They will be sold for 40*11250=450000$ in total. To make that additional profit of 60000$, they will need to sell 60000/16 more units, hence 3750 more units. This means that they need to do an additional 150000 dollars in sales. With the new variable cost, to achieve profit of 60000 they need to sell 11250+3750=15000 units and they will cost 600000$


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