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Engineering Economics

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Published in: Economics | Financial Management
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Cost Analysis Solutions and Formulae

Rohit K / Kolkata

3 years of teaching experience

Qualification: B.Tech/B.E. (WEST BENGAL UNIVERSITY OF TECHNOLOGY - 2017)

Teaches: Chemistry, Computer Science, IT & Computer Subjects, Mathematics, All Subjects, Physics

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  1. FORMULAE FOR COST ANALYSIS & ELASTICITY COSTS ATC => ATC => Profit (X) MC = MC = BES Ctb => Ctb/unit BES MOS MOS MOS=> (as % of Sales) PV Ratio BEP MOS VC + FC TVC + TFC TVC + TFC AVC + AFC or TVC + TFC S/Unit TC = > Total Cost S => Sales or selling price Q => Quantity of production VC => Variable Cost FC Fixed Cost ATC => Average Total Cost AVC => Average Variable Cost AFC => Average Fixed Cost => Profit MC => Marginal Cost TC (n) - TC(n-1) AVC (n) - AVC(n-1) Loss = Profit (X) S/unit -VC/unit s- vc S/unit - VC/unit X S/unit Ctb Act S - BES X BEP BES Ctb MOS Act S Break Even Point Break Even Sales Contribution Margin of safety Actual Sales Ctb MOS s Ctb s PV Ratio PV Ratio Ctb - FC x 100 s- vc s
  2. ELASTICITY Price Elasticity of Demand (Ep ) => Proportionate change in quantity demanded change in quantity demanded / quantity demanded Change in quantity demanded (Aq) Quantity demanded (q) Ap Proportionate change in price change in price Price Price (p) x Change in price ( AP) Income Elasticity of Demand (ED => X Aq (d) Cross Elasticity of Demand (EC) => X AQ(x) Q(x) Elasticity of Supply E(s) => Elasticity of Supply E(s) => AP(y) p Proportionate change in quantity demanded Proportionate change in income Percentage change in quantity of good X Percentage change in price of good Y Proportionate change in quantity supplied Proportionate change in price Change in quantity supplied Original quantity supplied / Change in price Original price X
  3. Aq (d)=> Ap Al q(s) Aq Change in quantity demanded (Aq) Quantity demanded(q) Price Change in price Income Change in Income Price of Y Price of X Change in price of Y Change in price of X Quantity Supplied Change in quantity supplied
  4. PROBLEMS ON COSTS AND ELASTICITY Question 1 Given = information for coloumns for Units, TC, TFC, TVC. Find AFC,AVC, ATC and MC? Units 1 2 3 4 5 6 7 8 Question 2 Total cost (TC) 60 90 100 105 115 135 180 200 220 Total Fixed Cost (TFC) Total variable Cost (TVC) From following table calculate MC? Quantity 1 2 3 4 5 6 7 Question 3 AVC 60 40 30 25 22 20 35 60 60 60 60 60 60 60 60 60 - AVC *Quantity TVC - TVC 60 80 90 100 110 120 245 0 30 40 45 55 75 120 140 160 MC: TVC(n) - TVC (n-l) 60 20 10 10 10 10 125 The following data refer to a firm's production department during a certain week. Estimate TVC, A Details # of workers employed # units of production Weekly wages of each worker Weekly Rent of shed Raw Materials used Power Units 50 100 200 400 1000 300 Details Total Variable cost (TVC) Average Varable Cost (AVC) Total Cost (TC) Average Total Cost (ATC)
  5. Question 4 From the following units of Output 0 3 Question 5 Find the elasticity of Price 6 5 4 3 2 Question 6 Calculate the price Price/unit 10 12 table find TFC, TC 51 96 supply when price Quantity Supplied 6,000 5,500 4,500 3,000 0 AFC,VC and AVC? TFC 51 51 decreases from Rs 5 elasticity of Demand? Quantity demanded 200 140 AFC 0 17 to Rs 3 per unit? Supply Elasticity QI = 5,500 kg AQ = Q2-Q1 = -2,500 kg PI = Rs5/kg AP = Rs(3-5) = -Rs2 Supply Elasticity Hence Supply elasticity < 1 Demand Elasticity qi = 200 Aq = 200-140 = 60 pi = 10 Ap = 12-10 = 2 Demand Elasticity Demand Elasticity >1
  6. AFC = TFC/Units Average Fixed Cost (AFC) 0 60 30 20 15 12 10 8.571428571 7.5 VC, ATC? Amount (Rs) 11,300.00 113.00 11,700.00 117.00 AVC = TVC/units Average Variable Cost (AVC) 0 30 20 15 13.75 15 20 20 20 ATC = AFC + AVC Average Total Cost (ATC) 0 90 50 35 28.75 27 30 28.57142857 27.5
  7. vc 45 AQ /AP X P/Q Q2 = 3,000 kg P2 = Rs3/kg 1.136363636 Aq /Ap )( p/q q2 = 140 p2 = 12 1.5 AVC 0 15
  8. MC = TC(n) - TC(n-1) Marginal Cost (MC) 30 10 10 20 45 20 20

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