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Calculate the Optimal Level of Output and Maximum Profit

Question

Precision Engineering department has collected data on its average costs of production for the past 12 months. The monthly fixed cost is $4000 per month. The AVC and associated output data are presented below:

Month Q     AVC $
Jan 70 375  
Feb     58     540       
Mar      160     450       
Apr      120     255       
May      130     138       
Jun      120     150       
Jul      10     450       
Aug      35     350       
Sep      80     60       
Oct      110     70       
Nov      100     90       
Dec      190     153    

Show what is the optimal level of monthly production for Precision Engineering department if the market price of each component is $400 per piece? What is the maximum profit or minimum loss Precision Engineering department can expect to earn?


Summary

The question belongs to Statistics and it is about calculating the maximum profit and the minimum loss for Precision Engineering department can earn if the market price of each of its components is $400.

 

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