Calculating Average Revenue and Average Cost per Employee
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Average revenue, average cost, marginal revenue, marginal cost, economies of scale, diseconomies of scale, break-even points, cost structure, single-product activities, multi-product activities
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Abstract
This document provides a detailed analysis of the average revenue and average cost per employee for a cleaning services company, including the calculation of marginal revenue and marginal cost per employee. It also explores the concepts of economies and diseconomies of scale, break-even points, and the importance of cost structure in single-product and multi-product activities.
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[...] Calculate the average revenue and average cost per employee. RM = RT/Q = 240,000 / 10 = 24,000 CM = CT/Q = 140,000 / 10 = 14,000 In 2011, the company hires a new employee. The total revenue is now 250,000 euros and the total cost is 160,000 euros. Calculate the average revenue and average cost per employee. RM = 250,000/11 = 22,727 CM = 160,000/11 = 14,545 Calculate the marginal revenue and marginal cost per employee. RM = RT11-RT10/11-10 = 250,000-240,000/1 = 10,000 CM = CT11-CT10 / 11-10 = 160,000-140,000/1 = 20,000 What advice can you give to the company? [...]
[...] It has already been incurred and cannot be recovered or reimbursed in case of business cessation. The recoverable fixed cost can be recovered in case of business cessation. For sunk fixed costs, we can cite the example of salaries, and rents. For recoverable fixed costs, we can cite for example products that can be resold such as jewelry, and clothing. 4. points) Why does the cost structure distinguish the case of single-product activities from the case of multi-product activities? This distinction is made because we should take into account different costs for a single-product activity and for a multi-product activity. [...]
[...] It is with the marginal cost that the firm will be able to know the profitability of the production of an additional unit. 2. points) What is the difference you make between marginal cost and variable cost? Variable costs are expenses related to activity and proportional variations to the increase or decrease of this activity. The marginal cost is the variation of the total cost that occurs when the quantity of goods produced increases by one unit. It is a measure of the production cost of an additional unit. 3. [...]
[...] What are the areas of economies and diseconomies of scale? At what level of production is the technical optimum located? The areas of economies of scale are: 5 The areas of diseconomies of scale are: Q=9 The technical optimum is located at Q=4 with a marginal cost of Cm = 60 (What are the break-even points? At what level of production is the economic optimum located? What is the level of production chosen by the firm? The break-even points are from Q=4 with a profit = 35 The economic optimum is at Q=7 with the highest profit = 205 In our case, an additional unit produced leads to an increase in the total profit. [...]
