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Incremental profit

Categories: Economics

Distinguish between the following:
a) Industry demand and Firm (Company) demand, b) Short-run demand and Long run demand, and c) Durable goods’ demand and Non-durable goods demand.

2 . What are the problems faced in determining the demand for a durable good? Illustrate with example of demand for households refrigerator or television set.

3 . Analyze the method by which a firm can allocate the given advertising budget between different media of advertisement.

4 . What kind of relationship would you postulate between short-run and long-run average cost curves when these are not U-shaped as suggested by the modern theories?

5 . How do demand forecasting methods for new products vary from those for established products?

6 . What are the different methods of measuring national income? Which methods have been followed in India?

7 . What do you understand by the investment multiplier? In what way does it defend the policy of public works on the part of the state during business depression?

8 . Discuss the various phases of business cycle:
a. Are cyclical fluctuations necessary for economic growth? b.

Suggest appropriate fiscal and monetary policies for depression

Assignment B: all
Case Study
Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sensitive test equipment. The yearly volume of output is 15,000 units. The selling price and cost per unit are shown below: Selling price
Direct material
Direct labor
Variable overhead
Variable selling expenses
Fixed selling expenses
Unit profit before tax
$ 50
Management is evaluating the alternative of performing the necessary customizing to allow Electron Control to sell its output directly to Q/A labs for 5 per unit.

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Although no added investment is required in productive facilities, additional processing costs are estimated as:

Direct labor
$25 per unit
Variable overhead
$15 per unit
Variable selling expenses
$10 per unit
Fixed selling expenses
$100,000 per year

Calculate the incremental profit Electron Control would earn by customizing its instruments and marketing directly to end users.

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