Babsies is a boutique that makes beaded jewelry which is colorful. Babsies monthly costs are listed below:
Category Amount
Advertising (Yearly Contract for Billboard) $550
Beads $900
Clasps (for Necklaces and Bracelets) $400
Business Cards $25
Hourly Employee Wages $3,750
Internet Connection (Yearly Contract) $120
Manager's Salary $5,000
Rent $1500
Wire (for Necklaces and Bracelets) $200
a. Carefully defined the fixed and variable costs for the firm.
b. Calculate the total cost, total variable cost and total fixed cost. .
c. Calculate the Average Total Cost, Average Variable Cost and the Average Fixed Cost assuming that the company is making 350 pieces of jewelry per month.
d. Babsies charges $15 per piece. Calculate their monthly profit.
e. The Great Recession hit Babsies rather had. Their jewelry is now selling for only $8. Should they continue producing, shut down, or exit the industry?
f. Let's assume that their price falls even more to $4 per unit. Should they increase production, shut down or exit the industry.