Watch the Cost
Vallow Electronics have been making
electronic watches for the fitness market for
15 years – specialising in wrist watches that
show heart rates and have basic pedometer
functionality.
They have now moved in to the
‘SmartWatch’ market. Their latest watches
connect via Bluetooth to phones that use
Android and IOS operating systems. The
watch can alert the user when there have
incoming calls, text messages, email notifications and social network interactions.
The table below is a predicted calculation of possible costs and pricing that may occur for Vallow’s
new watches (all figures shown in 000’s):
Output
Fixed
Cost
Variable
Cost
Total
Cost
Average
Total
Cost
Marginal
Cost
Price
per unit
Total
Revenue
Average
Revenue
Marginal
Revenue
0
150
0
--
--
--
0
0
-
1
150
20
76
2
150
35
75
3
150
45
74
4
150
62
73
5
150
90
72
6
150
136
71
7
150
200
70
8
150
290
69
9
150
408
68
10
150
560
67
Tasks
1. Complete the table above.
2. Complete a chart to show Average Total Costs, Marginal Costs, Average Revenue and
Marginal Revenue for outputs from 0 to 10 (000’s of units).
3. At what output would profit be maximised for Vallow?
4. Use your graph to estimate the approximate output and sales that Vallow would need ot
achieve to maximise sales without making a loss.
Watch the Cost
Answers:
Output
Fixed
cost
Variable
cost
Total
cost
Average
Total
cost
Marginal
cost
Price per
unit
Total
Revenue
Average
Revenue
Marginal
Revenue
0
150
0
150
--
--
--
0
0
-
1
150
20
170
170
20
76
76
76
76
2
150
35
185
92.5
15
75
150
75
74
3
150
45
195
65
10
74
222
74
72
4
150
62
212
53
17
73
292
73
70
5
150
90
240
48
28
72
360
72
68
6
150
136
286
47.66
46
71
426
71
66
7
150
200
350
50
64
70
490
70
64
8
150
290
440
55
90
69
552
69
62
9
150
408
558
62
118
68
612
68
60
10
150
560
710
71
152
67
670
67
58
3. Profit maximisation at output 7,000 units
4. Sales maximisation at approximately 9,600 units of sales.