QUESTIONS 3 TO 6 .A car manufacturer must decide on purchasing or making specifi
ID: 1122888 • Letter: Q
Question
QUESTIONS 3 TO 6 .A car manufacturer must decide on purchasing or making specific car parts o The total cost (S) of making the car parts is $50,000 + 5x. The cost of buying the car parts from a manufacturer is C-25x · where "x" represents the annual quantity of car parts 3. What is the variable production cost of making 10,000 car parts? a) $50,000 b) 100,000 c) 150,000 d) None of these answers 4. What is the fixed production cost of making 10,000 car parts? a) 50,000 5x b) 50,000 c) 25x d) None of these answers What is the breakeven point between buying and making car parts? a) 25 b) 2,500 c) Cannot be determined from the information given. d) None of these answers 6. Over what range is it cheaper (less costly) to make car parts? a) Less than the breakeven point b) More than the breakeven point c) At the breakeven point d) None of these answersExplanation / Answer
Q3
Answer
Variable cost function is cost function except for constant term
VC=5x
x=10000
VC=5*10000=$50000
option a
Q4
Answer
the fixed cost is the constant term of the total cost function and it is same at all level of production
FC=$50000
Q3
the breakeven point is where
cost and revenue is same
TR=25x and TC=50000+5x
25x=50000+5x
x=2500
Option b
Q4
Option b
Producing above breakeven will decrease cost per unit or the ATC so the production is cheap at above equilibrium