Answer:
Both increases
Explanation:
Suppose a person initially produces and sell some amount of milkshakes with the available resources.
But, if he will be able to produce and sell more quantity of milkshakes with the same level of resources then this will indicates that there is a rise in the productivity of this person and if the number of milkshakes sold increases then as a result profits increases at a same price level.
For Example:
Case 1:
Initially,
Person producing and selling = 20 units of milkshakes at a selling price of $10 each and cost of inputs used in the production = $50
Therefore, Profits = Total revenue - Total cost
= (20 units × $10 each) - $50
= $200 - $50
= $150
Case 2:
Now, we assumed that there is an increase in the productivity of this person. Cost of production and selling price of each milkshake remains the same.
Person producing and selling = 40 units of milkshakes at a selling price of $10 each and cost of inputs used in the production = $50
Therefore, Profits = Total revenue - Total cost
= (40 units × $10 each) - $50
= $400 - $50
= $350
Hence, there is an increase in the profits from $150 to $350.
Shipping costs on merchandise sold s an example of a variable cost
<h3>What is
variable cost?</h3>
Variable costs are costs that change as the quantity of a good or service produced by a business changes. Variable costs are the total of marginal costs across all units manufactured. They can also be considered standard expenses. The two components of total cost are fixed costs and variable costs.
Variable costs are costs that change with volume. Raw materials, piece-rate labour, production supplies, commissions, delivery costs, packaging supplies, and credit card fees are examples of variable costs.
Formula for Variable Cost. To calculate variable costs, multiply the cost of producing one unit of your product by the total number of products produced. This formula is as follows: Total Variable Costs = Cost Per Unit x Unit Count
To know more about variable cost follow the link:
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Answer:
$38.375
Explanation:
In this question, we apply the Gordon model which is shown below:
Maximum price = Next year dividend ÷ (Required rate of return - growth rate)
= $6.14 ÷ 0.16
= $38.375
We simply divide the dividend rate by the required rate of return so that the accurate and maximum price can come. The growth rate is not given so we do not consider it.
