Table 11-9 -Refer to Table 11-9. Clock It to Me Manufactures Clock

question 19

Essay

Table 11-9

-Refer to Table 11-9. Clock It To Me manufactures clock radios. The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes.
a. You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes. Record your calculations in the table below.
Average Cost of Production
b. For each of the three output levels, which plant size will generate the lowest average total cost of production?
c. Suppose the firm currently sells 8,000 clock radios per period (using the optimal plant size for this output level). Now, however, it has just secured a long-term contract to supply 20,000 clock radios per period. In the short run, what is the average total cost of producing 20,000 clock radios? Provide a numerical value based on your answer in part a.
d. What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.

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Definitions:

Funded Through Taxes

Financed by revenues obtained from taxing individuals and businesses.

Employment-Based Insurance

A form of health insurance coverage that is provided to employees by the employer as part of a benefit package.

Adverse Selection

A situation in market transactions where asymmetric information results in high-risk parties being more likely to engage in the transaction, often discussed in the context of insurance.

Poverty

Poverty is the condition where an individual or community lacks the financial resources and essentials for a minimum standard of living.