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Eco251 Microeconomics

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ECON251: Microeconomics Dr. Audil Rashid Khaki Prepared by: - Sultan Zwayyed - Waleed Alhasan - Ebrahem Alorf - Hussain Alqallaf The Final Project Deliverable The company's changeable inputs are resources or elements of production function whose quantity can be changed or diversified in the short run by the company, while it intends to adjust the quantity of output manufactured. Labor, energy, and materials are the most familiar examples of variable inputs. Variable inputs present the methods used by the company to manage the functional process of short-run production. As a larger quantity of variable inputs, like labor, are joined to fixed inputs, e.g. capital, variable inputs become fixed and less effective resulting in a downfall in …show more content…

Costs are the expenditures that the company bears in creating a particular service or product to the market. The costs express the definite value for unit price purchased in a retailing system. In deciding profitability, the cost value is utilized as a main factor. The market price is the economic value paid for that service or product in the market. The correlation between the price that is paid and the cost that is borne is the profit the company earns when a particular service or product is being sold out. If a buyer pays KWD 200 for a particular service or product that costs the company KWD 100 to sell and fabricate, the company makes a KWD 100 …show more content…

Without doubt, the situation that marginal revenue equals marginal cost is utilized to decide the profit maximizing level of output. As a result, the company will select to produce 70 units of output quantity because the marginal revenue that it obtains from producing 70 units is KWD 200, which is similar to the marginal cost of producing the same quantity of output, KWD 200. If the company aims to maximize profit to KWD 5600, it will incur KWD 8400 as its total cost. If the overall cost is KWD 8400 and the profit is KWD 5600, then the total revenue during a month will be the aggregate of both total costs and profits. Accordingly, the total monthly revenue of the company shall be KWD

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However, A1 is currently under pressure to increase its operating revenue by 10% in 2003. Therefore, a loss in operating revenue for their steak sauce will be harmful to their new profit goal when factoring in the loss from A1’s marinate line. In order for their marinate line to continue their steak sauce must yield a profit of $62 million in operating profits, offsetting the $7 million in losses. The potential loss of 5% in market dollars will lead to an overall loss of about $7.6 million for the steak sauce line. Due to these factors, A1 should definitely take any potential losses to their steak sauce line from the new entry of Lawry’s

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Cost is the allotted budget required to complete the project. Cost includes material, resources, labor and any item within the project which has a cost associated with it. The three constraints are interdependent and a change to one can affect the one or both of the other constraints. If more requirements are added to the scope of the project, then it is likely for the amount of time and cost to increase as well.

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The profit margin percentage

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What is the cost volume profit is an administrative method that focuses on the effect of sales volume and product costs on operating profit of businesses. The cost volume profit analyzes the sales volume; the unit sells prices, the variable cost unit, and the total fixed cost. The formula that is used for cost volume analysis is px = vx + fc + profit were p stand for price per unit, v stands for variable cost per unit, x stands for the total number of units produced and sold, and fc stands for the total fixed cost. To understand better of the formula is necessary to understand each of its components.

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Many factors play a role in determining these prices, including cost of production and distribution of commodities. These factors are unique to companies hence packaging and pricing of goods differs. The guiding principles in pricing process therefore must follow ethical and legal considerations to

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Variable costs are those that vary with the amount of production. For example, at General Motors, variable costs go up with each car produced. If a Transmission costs $7,000, for each car produced by GM variable cost goes up $7,000. If five cars were assembled the variable cost for the engines would be $49,000. Fixed costs do not fluctuate in reference with the quantity of production.

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As the activity level gets further away from the limits of the reference range. Management accountants often use a behavioral pattern of semi-variable costs to approximate a curvilinear cost. It is important to know the limit of the approximation range of an activity in which the accuracy is acceptable. In the process of budgeting costs, it is often useful for management to make a distinction between engineering, committed to discretionary costs.

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Therefore, their anticipated budget will be $120000 million dollars. This in turn will affects the raw materials budget because they need to buy components which is sufficient to manufacture 3 million bikes and obviously a little more to be in safer position. Based on their sales budget, they would be allocating resources and making sure that there is no wastage of resources. In the same way, Sales budget will affect the other budget too. If the level of sales is high, Raw material Requirement will also be high which in turn will require more labor to process and manufacture this product.

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Also, various methods of controlling costs such as standard costing system and flexible budgets have close relation with the variable costing system, in turn making it easy to use those methods. 3. Companies using variable costing system are able to prepare income statement in contribution margin format that provides necessary information for cost volume profit (CVP) analysis. On the flip side, this data cannot be directly obtained from a traditional income statement prepared under absorption costing

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6.1.2 Price Price is the value or amount that customer pays to buy a product. For instance, for our Star Lab ice cream shop, we need to consider the cost of production of our ice cream, price of our main competitor and our potential customers demographics in order to succeed this competitive market. (C. Breidert, 2007, p.9) 6.1.2.1 Pricing Strategy Pricing strategy that can be used by our company such as penetration pricing, cost-plus pricing, value based pricing and more. But we think that market penetration pricing is the best pricing strategy to be used by our business.

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