Cost structure: classification and calculation

Classify these bakery costs as fixed or variable: premises rent, flour and sugar, the manager's fixed salary, oven electricity (which increases with production), card transaction fees, and depreciation of the bakery equipment.

Classify these costs of a bicycle repair workshop as fixed or variable: premises insurance, the brakes and tyres it fits in each repair, the salary of the full-time mechanic, the fee the payment platform charges for each card payment, the annual social media advertising and the workshop's water and electricity, which barely change whether it produces a lot or a little.

A car park closed for a month due to works and did not have a single car, but its owner kept paying the rent, the insurance and the loan instalment. a) Explain why those costs are called fixed and what other costs disappeared with there being no activity. b) Reason what happened to the car park's profit that month.

A business has monthly fixed costs of $3.000\ \text{€}$ and a variable cost per unit of $2\ \text{€}$. If it produces 1 000 units, calculate: a) total variable cost; b) total cost: $CT = CF + CV_u \cdot q$; c) average or unit cost: $CMe = \frac{CT}{q}$.

A carpentry workshop has fixed costs of $5.000\ \text{€}$ a month and a variable cost per unit of $30\ \text{€}$ per piece of furniture. If it makes 200 pieces of furniture a month, calculate: a) total variable cost; b) total cost: $CT = CF + CV_u \cdot q$; c) the average cost of each piece of furniture: $CMe = \frac{CT}{q}$.

A removals company has these monthly costs: warehouse rent $3.000\ \text{€}$, fixed salaries $9.000\ \text{€}$, fuel $80\ \text{€}$ per removal, hourly loaders $120\ \text{€}$ per removal and advertising $500\ \text{€}$. It carries out 100 removals a month at an average price of $450\ \text{€}$. a) Classify the costs as fixed and variable and calculate the total fixed cost and the variable cost per unit. b) Calculate the total cost and the average cost. c) Calculate the monthly profit.

The figure shows a business's costs against production volume: fixed costs (FC), variable costs (VC) and total costs (TC). Explain what the point marked with "?" represents where the TC line intersects the vertical axis, and why the total cost line starts at that point even when production is zero.

A candle factory produces 500 units a month with a total variable cost of $1.500\ \text{€}$ and fixed costs of $2.000\ \text{€}$. a) Calculate the average variable cost: $CVMe = \frac{CV}{q}$. b) Calculate the total average cost. c) Explain in your own words the difference between the two indicators.

A factory has monthly fixed costs of $12.000\ \text{€}$ and a variable cost per unit of $8\ \text{€}$. For a production of 2 000 units, calculate: a) total variable cost; b) total cost; c) average cost. d) Repeat the average cost calculation for 4 000 units and comment on what happened to it.

Explain with a simple numerical example why average cost decreases as production increases even if fixed costs do not change (they are spread over more units), and how this phenomenon relates to economies of scale.

A shop sells 300 backpacks a month at $40\ \text{€}$ each. Its monthly fixed costs are $4.000\ \text{€}$ and the variable cost per unit is $22\ \text{€}$. a) Calculate the total revenue and the total cost for the month. b) Calculate the profit: $B = IT - CT$.

A ceramics factory has fixed costs of $20.000\ \text{€}$ a month and a variable cost per unit of $6\ \text{€}$. a) Calculate the total cost and the average cost if it produces 5 000 pieces a month. b) Repeat the calculations for 10 000 pieces. c) Explain why the average cost changes even though the fixed costs and the variable cost per unit do not vary.

A business sells its product at $50\ \text{€}$, with fixed costs of $30.000\ \text{€}$ a month and a variable cost per unit of $30\ \text{€}$. a) Calculate the monthly profit if it sells 1 000 units. b) Calculate the profit if it sells 2 000 units. c) Comment on how the profit has changed when sales doubled and explain why it has not exactly doubled.

A patisserie produces 1 000 cakes a month at a total cost of $8.000\ \text{€}$; producing 1 001 cakes would raise the total cost to $8.006\ \text{€}$. a) Calculate the marginal cost of the additional cake. b) Calculate the average cost of the 1 000 cakes. c) Reason which of the two figures the patisserie should look at to decide whether to accept an extra order at $6,5\ \text{€}$ per cake.

A restaurant offers two options on its menu: Daily Menu (selling price $12\ \text{€}$, direct ingredients $3\ \text{€}$) and Tasting Menu (price $32\ \text{€}$, direct ingredients $12\ \text{€}$). Each month, it sells 1.800 daily menus and 200 tasting menus. Its monthly indirect costs (rent, premises energy, and fixed kitchen salaries) amount to $9.000\ \text{€}$. Management decides to allocate these indirect costs equally among the total number of meals served ($4,50\ \text{€}$ per menu) and, observing that the Daily Menu only leaves an apparent net margin of $4,50\ \text{€}$ ($12 - 3 - 4,50$), proposes eliminating it to focus only on the Tasting Menu. a) Numerically demonstrate how the restaurant's overall profit would change if it eliminates the Daily Menu, assuming that sales of the Tasting Menu do not increase. b) Justify why the allocation criterion used by management distorts the real profitability of each product (cross-subsidisation). c) Propose an alternative criterion for allocating indirect costs and explain what effect it would have on decision-making.

An office furniture company produces 500 desks per month and sells them for $150\ \text{€}$ each. Its monthly costs are: factory premises rent ($4.000\ \text{€}$), machinery depreciation ($1.500\ \text{€}$), fixed salaries ($14.000\ \text{€}$), administration ($2.000\ \text{€}$), wood and fittings ($45\ \text{€}$ per desk), and factory energy ($5\ \text{€}$ per desk). The sales director proposes increasing production and sales by $40\ \%$ (up to 700 desks) and claims: "By producing $40\ \%$ more, our total costs will increase by exactly $40\ \%$, so the profit margin per desk will remain the same." a) Classify the costs into fixed and variable and refute the director's statement by calculating the total cost, average cost, and monthly profit for both 500 and 700 desks. b) Explain the economic reason why the average cost changes when changing the scale of production and identify the associated economic concept. c) If, in order to sell the 700 desks on the market, the company had to apply a discount, calculate the minimum unit price at which it could sell them to maintain exactly the same absolute profit it obtained with 500 units.