Market Demand an Supply Individual Firm Demand DEFINITION OF SHORT RUN(SR) Some input cannot be changed within a time period There 2 type of inputs: I. Fixed inputs II. Variable inputs There 2 type of production of costs: I. Fixed costs • Fixed costs are those that do not vary with output and typically include rents‚ insurance‚ depreciation‚ set-up costs‚ and normal profit. II. Variables costs • Variable costs are costs that do vary with output‚ and
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SHORT-RUN TACTICAL DECISIONS The organizations strive to earn short-run profits. In making short-run decisions‚ not all cost and revenue data is relevant. The cost data relevant for decision-making is referred to as relevant costs and that which is not useful for decision-making is non-relevant costs. On the revenue side‚ the only relevant revenue is the incremental & differential revenue. Relevant and Non-Relevant Costs: 1. Future Costs and Sunk Costs (IR): A future cost is that cost yet
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associated with managing in a business with high fixed costs like airlines? To understand the challenges firms face with regard to high fixed costs we must first have a basic understanding. A fixed cost is a routine cost the company incurs despite production‚ and changes in volume. It is a cost that must be paid routinely‚ but the amount of the expense may vary. Firms with high fixed costs must have complete understanding of what fixed costs exist that will be incurred‚ and how much revenue they
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Short-Run Decision Making Short-run decision consists of choosing among alternatives with an immediate or limited end in view. Accepting a special order for less than the normal selling price to utilize idle capacity and to increase this year’s profits is an example. Thus‚ some decisions tend to be short run in nature and sometimes are referred to as tactical decisions; however‚ it should be emphasized that short-run decisions often have long-run consequences. Consider a second example. Suppose
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many people struggle with fears associated with vulnerability. In the short story “ Raymond’s Run” by Toni Cade Bambara the protagonist Squeaky is very protective in the beginning of the story‚ but has a change at the end. Squeaky learns that being vulnerable to others helps you become a better more mature person. Squeaky learned that she should be more open to people and to not try and block them out. At the start of “Raymond’s Run” we all notice just how protective Squeaky is. Part of that is because
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businesses are transforming labor into a more flexible (and variable) cost. Among such companies are Hewlett-Packard‚ General Electric‚ DuPont‚ Sun Microsystems‚ and British Airways. Discuss whether direct labor is a fixed or a variable cost. What are the pros and cons of management treating direct labor as a variable cost? Are there ethical issues to be considered here? Direct labor can be classified as a fixed cost or a variable cost‚ depending on how flexible the employer needs to be/can be with
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To: Patrick Oray Company: Plastic Composites Inc. From: Jane Doe Date: March 1‚ 2012 RE: Allocation Options for Fixed Manufacturing Overhead Costs Dear Mr. Oray‚ After researching the different methods allowed for you to use in allocating the fixed manufacturing costs to the work in process and finished goods I have come to the conclusion that normal capacity is the best method for your business. First I will define theoretical‚ practical and normal capacity and then I will explain to
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http://www.articlesbase.com/finance-articles/fixed-versus-floating-exchange-rate-229803.html Floating Exchange Rate The floating exchange rate is a market-driven price for currency‚ whereby the exchange rate is determined entirely by the free market forces of demand and supply of currencies with no government intervention whatsoever. Broadly‚ the floating exchange rate regime consists of the independent floating system and the managed floating system. The former is where exchange rate is
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Quiz: If Boeing produces 9 jets per month‚ its long-run total cost is $9.0 million per month. If it produces 10 jet pre month‚ it long-run total cost $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale? * The long-run average total cost of producing 9 planes is $9 million /9 = $1 million. The long-run average total cost of producing10 planes is $9.5 million / 10 =$0.95 million. Since the long-run average total cost declines as the number of planes increases‚ Boeing exhibits
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Assignment: Fixed and Variable Costs‚ Break-Even Point Exercise 10.1 Recompute fixed costs‚ variable costs‚ and the BEP. What are the variable costs? What are the fixed costs? How many meals will the WHDM program need to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45‚000-meal contract with the City of Westchester? The variable cost of service is $3.93 during the fiscal year the WHDM should provide 1‚011 meals to reach their
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