microeconomics p18

Microeconomics

Anna Blajer-Gołębiewska M. Sc.

Exercise 9. On the base of profit and loss statement determine variable costs, fixed costs, total costs, average cost per unit of production, average fixed cost and average variable cost. Additional information: the price of product equals 15 monetary units; the cost of energy consists of two elements: the company has to pay 50 monetary units every month, and the rest depends on the energy consumption.

A	Revenues form sales	15 000
B	Cost of operations	10 000
I.	Consumption of materiał and energy	4 700
1	Cost of energy	200
2	Raw materials	4 500
II.	Wages and salaries	3 800
1.	Direct labour wages	2 500
2.	Accountancy salaries	500
3.	Administrative employees’ salaries	800
III.	Depreciation	1 000
IV	Other operating costs	500
1	Office rental expense	150
2	Workshop rental expense	250
3	Advertising	100
c	Profit/Loss on Sales

ff - profit

L - loss ACCOUNTING COSTS ■=> TR vs. explicit costs (and depreciation)	implicit costs		FC
ECONOMIC COSTSO TR vs. TC	explicit		VC
NORMAL PROFIT TR=TC (the economic profit eąuals zero)	costs

Exercise 10. Kate has been running her own account and consulting Office for 2 years. She has to work late hours, so she hired a baby sitter for her little daughter. She pays her PLN 1 000 monthly. Previously she worked as an accountant in insurance company. Her salary was PLN 4 000 per month. Then she set up her own business. Now, her total revenue in April eąuals PLN 20 000. The operating costs in April are:

•    property rental expense: PLN 3 000,

•    advertising cost: PLN 1 000,

•    cost of energy: PLN 500,

•    clerical and accounting staff salaries: PLN 10 500.

a)    Calculate economic costs of running the office.

b)    Calculate accounting costs of running the office.

Exercise 11. Peter runs his own company. Previously he worked as an administrative assistant. His salary was PLN 3 000 per month. Presently the total revenue of his company (in October) eąuals PLN 40 000. The operating costs of the company in October are:

•    cost of lease: PLN 4 500,

•    raw materials cost: PLN 10 000,

•    cost of energy: PLN 500,

•    vehicles fuel cost: PLN 1 000,

•    clerical and accounting staff salaries: PLN 4 000,

•    direct production wages: PLN 11 000.

a)    Calculate economic costs of running the office.

b)    Calculate accounting costs of running the office.

Exercise 12. Which of the following can be classified as a fixed cost?

a)    Costs of raw materials and components paid by a manufacturer.

b)    The taxes paid by a company on its profits.

c)    Royalties paid by a radio station to a recording company every time it plays one of its records.

d)    Interest charges paid by an air charter company on a bank loan to buy an aircraft.

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