Suzette's Fancy Packaging Costs Analysis
a. Complete the table
How many boxes of fruit and nuts did Suzette produce for each number of workers?
b. What are Suzette's costs during the week of summer vacation?
c. If Suzette exactly breaks even with a revenue of $1,200, how many boxes of fruit and nuts did she produce?
d. Based on the marginal product of labor data, did Suzette have to settle for increasingly unproductive workers?
Why or why not?
e. What should Suzette do if she expects to receive an order for 1,500 boxes of nuts per week for the next 3 months?
Should she hire more workers or wait to move to a larger space?
Answer:
a. Number of Output Marginal Product Office Rent Labor Cost Total Cost Workers boxes of Labor (dollars) (dollars) (dollars) 0 0 - - - 1 220 220 400 200 600 2 470 250 400 400 800 3 680 210 400 600 1,000 4 840 160 400 800 1,200 5 940 100 400 1,000 1,400 6 980 40 400 1,200 1,600
b. The costs during the week of summer vacation are: $400
c. Suzette produced 840 boxes of fruit and nuts.
d. Yes, Suzette had to settle for increasingly unproductive workers. The marginal product of labor data shows a decline in productivity as the number of workers increased.
e. Suzette should hire more workers but focus on improving their productivity to reduce overall labor costs.
For Suzette's Fancy Packaging, the data provided shows the number of workers, output in terms of boxes of fruit and nuts, marginal product of labor, office rent, and labor costs. Analyzing this data is crucial for Suzette to make informed decisions about her business.
a. Complete the table
The completed table showcases the relationship between the number of workers and the output of boxes. As the number of workers increased from 1 to 6, the output of boxes of fruit and nuts also increased. However, the marginal product of labor decreased, indicating a diminishing return on labor as more workers were hired.
b. What are Suzette's costs during the week of summer vacation?
During the week of summer vacation when Suzette closes her business, her only cost is the office rent, which amounts to $400. This cost is incurred regardless of production since the workers are not present.
c. If Suzette exactly breaks even with a revenue of $1,200, how many boxes of fruit and nuts did she produce?
By analyzing the cost data, it is determined that Suzette produced 840 boxes of fruit and nuts to break even with a revenue of $1,200. This indicates the breakeven point for her business.
d. Based on the marginal product of labor data, did Suzette have to settle for increasingly unproductive workers?
Yes, Suzette had to settle for increasingly unproductive workers as the marginal product of labor decreased with each additional worker. This implies that the efficiency of labor decreased as more workers were hired, leading to higher labor costs without proportional increases in output.
e. What should Suzette do if she expects to receive an order for 1,500 boxes of nuts per week for the next 3 months?
If Suzette anticipates a significant increase in demand, she should consider hiring more workers to meet the order requirements. However, she must also focus on improving the productivity of the workers to ensure that the additional labor costs are justified by higher output. This strategic approach will help Suzette fulfill the order while maintaining profitability.