Cost of Quality Report A quality control activity analysis indicated the following four activity costs of a hotel: Inspecting cl
1 answer:
Answer: Check attachment
Explanation:
Quality cost:
Prevention $265000
Appraisal $175000
Internal failure $20000
External failure $40000
Total $500000
Percent of total quality was calculated as:
Quality cost classification/Total
e.g. Prevention = 265000/500000 × 100 = 53.00%
Check attachment for further information.
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Answer:
Increase quantity to where AC = MC = D=AR=MR
Explanation:
A perfectly competitive market is where there are many firms in the industry producing homogeneous products. There is ease of entry and exit into and out of the market. They are price takers and earn normal profits in the long-run. In order to maximize profits, a firm in a perfectly competitive industry should produce an the quantity where its average cost is equal to marginal cost when AR = MR = D. In other words, when the AC and MC curves intersect with AR = MR = D curve.
<em><u>Please refer diagram</u></em>
The firm is currently producing at a point where AC > MC at quantity 1000. In order to reach AC = MC, the firm has to increase its quantity to Qe. As it increases quantity, although marginal cost increases, average cost falls because now fixed costs are spread over a larger quantity of output.
At Qe, the three curves intersect and is the point where this firm can maximize its revenue (Price = Pe). At a price higher than this, it would lose customers since there are many others producing the same product and customers can easily shift to another.
