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# how the company will respond to future changes in the keyboard market

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The goal is to support your conclusions with data, and explain the difference between the long run and the short run and how this distinction is important for X keyboard division, the conditions under which the company should exit the keyboard market and why,the conditions that determine the length of the short run for X's keyboard division and the conditions under which the company should shut down production and why. Any help on this subject, or some guidance to a solution would be helpful. Based on my notes, and my income statements, a solution is obtainable.

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IN THE KEY BOARD DIVISION
SHORT RUN
In the short run the total fixed cost is \$470 and this cannot this cannot be easily be wished away because there is the lease contract for the space and the equipment for a period of 18 months.
The reaction of the company X with regards to the keyboard division will be very different in the short run. In the short run any price that is above the average variable cost is acceptable because at this price the division contributes to the fixed costs of the company. However, if the price reaches a level where the price goes below the average variable cost, then it would be better for the company to shut down production.
In the case given to us, in the keyboard division the at 45 quantity level the average variable cost is 285.00 and if the price is 300 then per unit the production is contributing 305 - 285 = 20 to the total fixed cost and the company should continue with the production.
This implies that even if the price falls to 290, in the ensuing 18 months the company should continue its production at the quantity level ...

#### Solution Summary

This posting explains the difference between the long run and the short run and how this distinction is important for X keyboard division, the conditions under which the company should exit the keyboard market and why,the conditions that determine the length of the short run for X's keyboard division and the conditions under which the company should shut down production and why.

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