Scenario: You plan to open your own donut shop. After doing some research and planning, you have created the table below to help you estimate how much to charge for your donuts to make a profit. You already identified various amounts of donuts you could potentially produce as well as the related variable and fixed costs. # of Donuts Variable Costs Fixed Costs Total Costs Average Total Cost Average Variable Cost Marginal Cost 2,000 $2,000 $10,000 $12,000 3,000 $2,500 $10,000 $12,500 5,000 $3,500 $10,000 $13,500 10,000 $4,000 $10,000 $14,000 15,000 $7,000 $10,000 $17,000 25,000 $20,000 $10,000 $30,000 50,000 $80,000 $10,000 $90,000 Step Two Graph the Average Total Costs, Average Variable Costs, and Marginal Costs on the same graph. Step Three Answer the following questions in your Word document and submit your completed assignment. What is the lowest price you could charge for a donut and still make a profit? How many donuts would you need to produce? How much will your group sell your donuts for?
Scenario: You plan to open your own donut shop. After doing some research and planning, you have created the table below to help you estimate how much to charge for your donuts to make a profit. You already identified various amounts of donuts you could potentially produce as well as the related variable and fixed costs.
|
# of Donuts |
Variable Costs |
Fixed Costs |
Total Costs |
Average Total Cost |
Average Variable Cost |
Marginal Cost |
|
2,000 |
$2,000 |
$10,000 |
$12,000 |
|
|
|
|
3,000 |
$2,500 |
$10,000 |
$12,500 |
|
|
|
|
5,000 |
$3,500 |
$10,000 |
$13,500 |
|
|
|
|
10,000 |
$4,000 |
$10,000 |
$14,000 |
|
|
|
|
15,000 |
$7,000 |
$10,000 |
$17,000 |
|
|
|
|
25,000 |
$20,000 |
$10,000 |
$30,000 |
|
|
|
|
50,000 |
$80,000 |
$10,000 |
$90,000 |
|
|
|
Step Two
Graph the Average Total Costs, Average Variable Costs, and Marginal Costs on the same graph.
Step Three
Answer the following questions in your Word document and submit your completed assignment.
- What is the lowest price you could charge for a donut and still make a profit?
- How many donuts would you need to produce?
- How much will your group sell your donuts for?
- Now, look up a couple of local donut shops. Compare their prices with the prices that you decided on as a group. How do your prices compare with theirs? Would you be able to compete with them? Why or why not? Explain your reasoning.
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