-Refer to Table 7-9. 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 8000 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.
Definitions:
Self-Actualization
The act of fulfilling or realizing personal skills and potential, regarded as a fundamental need or urge within every individual.
Physiological Needs
Basic, essential life requirements such as food, water, shelter, and warmth, fundamental for survival.
Needs For Safety
The requirement for physical and emotional security and protection from harm.
Esteem
A regard or respect for oneself or others; often refers to holding someone in high regard or valuing their abilities and qualities.
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