Knitting Machine Table
Posted in Sewing on 04/14/2004 07:32 am by admin
Fixed cost vs. variable cost?
Frank's clothing company produces hooded sweaters. His fixed cost is the cost of his knitting machines, and his variable cost comes from maintenance for the machines and his workers. Use the table to answer the following questions.
1 $2,000 $2,200 $3,800 $10,800
2 $3,000 $1,800 $2,400 $10,500
3 $4,000 $1,400 $1,700 $8,150
See table from hosted on image shack
http://img135.imageshack.us/my.php?image=37941626dr8.png
How many machines will Frank choose to use in the long run if he plans to produce 60 sweaters?
possible answers
1
2
3
Total cost (TC) is the sum of fixed cost (FC) and variable cost (VC). That is, TC=FC+VC. The problem here is to find the number of machines that can produce 60 sweates at least total cost. Since the total cost of using one machine to produce 60 sweaters is 2,000+3,800=$5,800, the total cost of using two machines is 3,000+2,400=$5,400, and the total cost of using three machines is 4,000+1,700=$5,700 , Frank will use two machines.
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