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What are marginal costs of the three plants

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Reference no: EM132223640

A company produces computers for enterprises.

The company has developed a new model. for production of the computer, the company is considering production at all or some of the following plants.

Plant 1 Plant 2 Plant 3

Average Total Cost ATC1 = 1/2 Q1 ATC2 = 1/4 Q2 ATC3 = 1/4 Q3

How do you allocate production?

i) What are marginal costs (MC) of the three plants 1, 2, and 3?

ii) How would you allocate production of computers? What % of total outputs should be produced at Plant 1, 2, and 3?

iii) Someone in the company argues that either plant 2 or 3 does not need to be used as they have exactly the same cost structure? Do you agree - explain?

iv) Your marketing dept reported that the estimated market price of the new product is P = $2,000. How many units are you going to produce in total?

Reference no: EM132223640

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