XYZ Company has variable costs including raw materials, production worker wages, and packaging materials. The relationship between costs and output can be analyzed using a table. The zero-profit and shutdown points can be determined by comparing revenue with costs. Analysis of cost and revenue can help determine the profitability or loss of the company.
Example: XYZ Company
1. Variable costs of XYZ Company include:
- Cost of raw materials for manufacturing its products
- Wages of production workers
- Packaging materials
2. Output (Q), Total Cost (TC), Marginal Cost (MC), Average Cost (AC), Variable Cost (VC), and Average Variable Cost (AVC) can be recorded in a table to analyze the relationship between costs and output.
3. The zero-profit point is when total revenue equals total cost, while the shutdown point is when the company is unable to cover its variable costs.
4. If XYZ Company sells computers for $500, whether it makes a profit or a loss can be determined by comparing the price with the average cost per unit. If the average cost is higher than $500, the company is making a loss, and vice versa. A graph with the AC, MC, and AVC curves can visualize the profitability or loss.