Opportunity cost is defined to as the value of the best alternative that is forgone when a choice has to be made from two alternatives. The opportunity cost is comprised of implicit and explicit costs. Explicit costs are…
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Average fixed cost: This cost is computed by dividing the total fixed cost by the quantity of goods produced by a firm. The formula for calculating Average Fixed cost is AFC=TFC/Q where Q is the quantity and TFC is Total Fixed Cost.
Average Variable Cost: This is calculated by dividing the total variable cost by the quantity of goods produced by a firm. The formula for calculating Average Variable Cost is AVC=TVC/Q where Q is the quantity and TVC is Total Variable Cost.
Average Total cost: This is calculated by dividing the total cost by the quantity of goods produced. The formula for calculating Average Total cost is ATC=TC/Q where TC is Total cost and Q is quantity.
If, in a business firm, the prices levels are equal or greater than the average cost, the business will continue operating in the short run even if the fixed and variable cost are not entirely paid out. In brief, the firm continues to operate even though it is running at an economic loss. The reason behind this is that the fixed cost is paid out whether the firm produces goods or does not produce. The rationale is that it is better to have enough returns in order to cover a portion of the fixed cost than to get nothing at all (Sexton, 2011).
This law states that the marginal cost decreases at some point as additional units of a fixed variable factor are added to the fixed factor. The law of diminishing returns is a principle that operates on short run as opposed to the long run. This law is applicable to agricultural and non-agricultural products.
The relationship between the changes in the labor and the total output is referred to marginal cost. Marginal cost is any increase in the total output, which is produced by adding one unit of variable input to a fixed input. The figure below represents a short- run production for Eaglecrest Vineyard. The number of workers per day is the variable input. The factors of
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Economists usually consider the implicit costs and explicit costs of operating, often called as opportunity cost, while accounting cost do not count the explicit costs of the owner. Ralph Bryns, 2011 argues that a business becomes profitable in the overall perspective when a firm’s revenue exceeds the explicit and implicit costs.
The profits of a firm in essence are the total revenue net of total costs. Both these variables, total revenues and total costs depend upon the level of output produced. Additionally, the price charged per unit of the product influences the total revenue.
Firstly, the manager should consider the costs of additional capital as compared to cost of employing new workers. Moreover, he should also consider whether adding new workers will help increase the output or it will result in falling output. In the short run, the capital is fixed and as more workers are added to the fixed capital, initially with each additional worker the marginal revenue product of the labor will increase as the restaurant will experience increasing returns to scale.
The magnitude of economic cost is dependent on the value of the foregone benefits of the best alternative and the cost of the alternative selected. The main difference between accounting cost and economic cost is that the later factors in the concept of opportunity cost (Boyes & Melvin, 2011).
Second, the supply chain management covers the whole process of product development and delivery to the end user - starting with the introduction of the raw materials to the point when consumers buy the finished product. In addition, the statistics shows that the companies that have implemented the supply chain management have a greater cost effective advantage over the competitors because they are able to accomplish short-term and long-term goals, gain greater market share and increase the customers' satisfaction.
Basically, failure of a company to satisfy the market demand as scheduled means that the company will lose a lot of business opportunity caused by production inefficiency or internal miscommunication. For this study, the student will
Basically, a company can realize two types of economies of scale according to Alfred Marshall namely internal and external economies of scale. Internal economies of the scale are realized when a firm increases its production and reduces its cost. External economies of
nging drastically due to increase in production costs among other factors such as rise in competition of talent, risk of intellectual property and diminishing incentives from the governments.
There are costs which are related production costs which have led to increase in
The overview of the idea, the profit and profitability, milestones and then the possible effects of demand and supply forces form the discussion.
The business will operate in the fashion sector with a variety of products. The products include