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Using Excel to predict output decisions: Definitive example

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A firm's cost curves are given in the following table.

q TC TFC
0 100 100
1 130 100
2 150 100
3 160 100
4 172 100
5 185 100
6 210 100
7 240 100
8 280 100
9 330 100
10 390 100

a. Use Microsoft Excel to calculate the firm's Total Variable Cost (TVC), Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC).

b. Suppose market price is $30. How much will the firm produce in the short run? How much are total profits?

c. Suppose market price is $50. How much will the firm produce in the short run? What are total profits?

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Solution Preview

a. See the attached Excel file. The formulas in the cells show how to calculate each variable.
b. ...

Solution Summary

This solution shows how to use Microsoft Excel to easily calculate a firm's cost, revenue and profit curves. It is then very easy to predict a firm's short-run and long-run output decisions simply by looking at the spreadsheet.

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See Also This Related BrainMass Solution

BUS599 - MBA Integrative Project Case: Outputs

Focus on the Outputs aspect of Deckers Outdoor Corporation

BACKGROUND

Outputs are not complicated to understand. At the Organization level, they are the products and services that are provided to customers. (It can also be the value provided to owners, but we are not going to consider this here.) The primary way that a company measures its performance is financially: Sales, Profit, Return on Sales (ROS), Return on Assets; and also via market share.

The organization is made up of various groups. One way to look at groups is by functional area: marketing, operations, purchasing, etc. Another way, if the company is large, is by its various divisions or by its product groupings. Here it becomes a little more complicated to measure performance, but it is possible by defining the goals and objectives of each group.

The bottom level of the organization is the individual. Each person has a job description and is responsible for specific outputs for that job. The main method of performance measurement here is individual productivity: Outputs / Inputs. e.g. widgets / hour, or reports / day. This is more difficult to quantify and for a specific company is difficult to obtain, since this data is not generally reported. Sometimes you can infer some individual measures, for example, by dividing Profit by the number of total employees, to get a measure of overall profitability per person.

Research your company and find the relevant data for this assignment in terms of its outputs. One good source of information here is the Annual Report or the annual 10k report. But you may have to take some time to sift through these.

CASE 3 ASSIGNMENT:

Make a Case for one of the following possible statements about your organization: The interaction of the outputs at Deckers Outdoor Corporation from the three different levels of the organization, interact to generate [high, medium, or low] performance of the overall organization [choose one of the three possible performances.]

Using the Nadler-Tushman Congruence Model, conduct an analysis of the Deckers Outdoor Corporation outputs. Remember that outputs exist at the individual, group and organizational levels and that there are often differences between the output goals an organization specifies in its strategic plans and those that are actually achieved.

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