Question

For Hosmer Company, the cost to produce Component Part A was $10

per unit in the previous year. During the current year, the cost to
produce Component Part A has increased to $11 per unit. In the

Answer 1

The student's question pertains to a computer company's production costs and illustrates the concept of economies of scale in a business setting, with fixed costs and variable marginal costs that increase with each additional unit produced, in comparison to similar scenarios with production plants for toaster ovens.

Step-by-step explanation:

The question involves a business scenario where a computer company is looking at production costs and economies of scale. The company has fixed costs of $250, and varying marginal costs for producing additional units. The company's marginal costs for producing computers are $700 for the first computer, $250 for the second, and so on, increasing incrementally with each additional unit up to $500 for the seventh computer. Additionally, there's a comparison with a toaster oven production scenario where economies of scale play a role in the average cost of production, with the average cost decreasing as production increases up to a point, after which economies of scale no longer apply, as indicated in Figures 33.5, 20.5, and 19.5. These scenarios are used to illustrate the concept of economies of scale within a business context.