Williams Company Is an East Coast Producer of Electronic Furnace

question 51

Essay

Williams Company is an East Coast producer of electronic furnace air filters. A significant jump in new housing starts in the region has triggered a 25 percent increase in orders for the filter units, especially the quality model that Williams sells for $270. Six weeks after increasing production to supply the increased orders, the assistant controller notices some unusual unit cost data in the monthly report she is preparing. Prior and current month unit values are given below:
$\begin{array}{lccc}\text { Filter } & \text { This Month } & \text { Last Month } & \text { Change } \\\text { Average total cost } & \$ 167.20 & \$ 171.14 & -\$ 3.94 \\\text { Cost of last unit produced } & 104.90 & 101.22 & +3.68\end{array}$ Required:
(1) Suggest some possible causes for the decline in average total cost.
(2) Assume now the opposite change has occurred, namely, average total cost has risen $3.94 per unit, while unit variable cost has fallen by $3.68 per unit. Suggest a possible situation to explain these changes.

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Definitions:

Venn Diagram

A diagram that uses circles to represent the relationships among various sets, highlighting where they overlap and do not overlap.

Proposition

An idea or plan put forward for consideration, especially in the context of a debate or discussion.

Venn Diagram

A graphical representation used in set theory and logic to depict the relationship among various sets, showing all possible logical relations through overlapping circles.

Proposition

A statement or assertion that expresses a judgment or opinion; in logic, it refers to a declarative sentence that is either true or false.