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COST OF PRODUCTION IN THE SHORT RUN

ABD-GME COMPANY SALAD PRODUCTION


Requirements:
a.) Compute for TFC, TVC and TC per month
A.1) Total Fixed cost
Telephone bill (Land line)
Building Monthly rental
Freezer (30,000 x 20% Dep allowance)
Ladle (5pcs @ 40 = 200 x 20% Dep
allowance)

450.00
6,000.00
6,000.00
40.00

Mixing bowl (Big)(300 @ pcs = 1,200 x 20%


Dep allowance
Electricity bill
Water bill
Cellphone unit ( 600 x 20% Dep allowance)
Cellphone load
worker (2 @ 250/day x 24 days)
Total Fixed cost
A.2) Total variable cost

240.00
6,000.00
700.00
120.00
500.00
12,000.00

32,050.00
Price
QTY/unit

Total cost

Can of fruit cocktail (1kg)

130.00

20

2,600.00

I kilo o fyoung coconut (buko), Shredded


1 bottled sugar palm fruit (Kaong),
drained

200.00

50

10,000.0
0

80.00

10

1 pack of cups (50 pcs)

100.00

3500

800.00
350,000.
00

Bottled coconut gel (nata de coco), drained

90.00

10

900.00

Can of pineapple chunks, drained

60.00

10

600.00

1 can sweetened condensed milk

35.00

20

700.00

Cream

45.00

20

900.00

Sweet corn

50.00

10

500.00
367,000.
00

Total Variable cost


3.) Total cost
Total Variable cost
Total Fixed cost

367,000.
00

32,050.0
0
399,050.
00

Total cost
B.) Compute for TR and profit if the price per cups of fruit
salad is PHP 10.00
B.1) Total fixed cost ( please see item A.1)

32,050.0
0

B.2) Total Variable cost (please item A.2)

367,000.
00

B.3) Total cost


B.4) Average fixed cost
Total fixed cost
Divided by Output
Average fixed cost

399,050.
00
32,050.00
175,000.00
0.18

B.5) Average variable cost


Total Variable cost
Divided by Output
Average variable cost

367,000.
00
175,000.
00
2.10

B.6) Average total cost


Average variable cost
Average fixed cost

2.10
0.18

Average total cost

2.28

B.7) Total revenue


175,000 cups (output)

175,000.
00

SRP

10.00

Total Revenue

1,750,00
0.00

B.8) Profit
Total revenue

1,750,000.

00

399,050.0
0

Total cost

1,350,95
0.00

Profit

C.) if the output increase by 20%. It requires additional cost for all variable 10% .
Compute
for the MC, TC, TR, Profit and Total Capital investment (TCI). Refer your answer in
problems a and b for your MC.
C.1 ) Marginal cost
Change Total cost or change in TVC
(367,000 x 10%)
Divide by Change in output (175,000 x
20%)

36,700.0
0
35,000.0
0

Marginal cost

1.05

C.2) Total cost


32,050.0
0
403,700.
00
435,750.
00

Total fixed cost


Total Variable cost ( 367,000 x 110%)
Total Cost
C.3) Total Revenue
Output (175,000 x 120% )
Selling price (SP)

210,000.00
10.00

Total Revenue

2,100,000.
00

C. 4 Profit
2,100,000.
00

Total Revenue

435,750.0
0
1,664,250
.00

Less: Total cost


Profit
C.5 Total capital Investment
Initial Investment for one month operation
1.) Capital Expenditures

Price

QTY

Amount

15,000.0
0
40.00
300.00
600.00

Freezer
Ladle
Mixing bowl (Big)
Cellphone unit

2
5
4
1

Total Capital Expenditures

30,000.00
200.00
1,200.00
600.00
32,000.00

2.) Operating expenses (one Month)


Can of fruit cocktail (1kg)
I kilo of young coconut (buko), Shredded
Telephone bill (Land line)
1 bottled sugar palm fruit (Kaong),
drained
Building Monthly rental
1 pack of cups (50 pcs)
Bottled coconut gel (nata de coco), drained
Can of pineapple chunks, drained
1 can sweetened condensed milk
Cream
Sweet corn
Electricity bill
Water bill
Cellphone load
1 worker

130.00
200.00
450.00

20
50
1

2,600.00
10,000.00
450.00

80.00
6,000.00
100.00
90.00
60.00
35.00
45.00
50.00
6,000.00
700.00
500.00
250.00

10
1
3,500
10
10
20
20
10
1
1
1
2

800.00
6,000.00
350,000.00
900.00
600.00
700.00
900.00
500.00
6,000.00
700.00
500.00
12,000.00

Total Operating expenses

392,650.00

Total Capital Investment

424,650.0
0

D. What is the maximum profit earned by ABH-GME company? If you are the
president will you be happy for getting this profit? If yes/no, why?
Answer: The maximum profit is 1,664,250 and yes much happy simply because
return of investment will be recovered in less than one month.

****END*******

Philippine Christian University


1648 Taft Ave, Malate, Manila, 1000 Metro Manila
(02) 526 2261

Managerial Economics

Problems

Cost of Production in the Short run


(ABH-GME a Fruit Salad Company)

Submitted by:
Levi L. Eugenio

Submitted to:
Prof. Neil C. Bermudez
March 09, 2016