ECO 605 Assignment 2.1 Maximizing Productivity FRANK
ECO 605 Assignment 2.1 Maximizing Productivity FRANK
Many entrepreneurs know that one important aspect of running a business is determining how much it costs to produce certain products. This can be difficult without knowing what your exact output will look like or if there is any chance you might increase production levels over time and reduce losses from decreased sales due to low demand for their product line-up. Businesses can ensure they are making enough money off each unit by calculating the cost as closely matched against revenue generated by selling a said item at the retail price point (Fathi et al., 2020). Startup founders often find themselves in the unenviable position of having to make difficult spending decisions. For example, you might be spending more money on fixed expenses like rent or salaries than your startup’s variable costs, such as coffee drinks for employees every day at work, but less when they are not working out so well because it can take time before these things become an issue. The assignment mainly involves different computing costs for the clinic and identifying factors that may lead to a decrease or increase in the cost.
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During start-ups, there may always seem like plenty leftover from one week/month, etc., until eventually, all those little pieces add up together into something significant enough. Total, fixed, and variable costs are essential parts of running a successful business (Lin & Chen, 2020). In other words, the parts of running a business that is most crucial to focus on are fixed costs (which don’t change with the size/growth rate) and variable ones. Businesses need both kinds because without having an investment put into certain aspects like marketing, they would not be able to make their product available at all markets – but if they invest heavily in them, then revenue could grow exponentially as well.
Definition of Terms
Total fixed costs refer to the sum of all non-variable expenses that an organization or a company ought to pay, such as rent for their building space and salaries. These are items that continue to be paid for even when there is no production going on (De Loecker et al., 2020). A great way for companies in our modern economy, where they must face increased competition from across borders due largely because globalization has made it easier than ever before, not just legally but also logistically speaking – if one is trying out something new, then there is less chance there startup may fail without first understanding its market potential inside out. This explains why understanding the total fixed cost is important.
The total variable cost for a company’s production is equivalent to how much it takes to produce one unit. This can be split up into different categories such as raw materials, labor costs, and rent on space where they do their manufacturing work – but there are many more factors involved in determining exactly what these amounts will look like at any given time. (Sabogal-De La Pava et al., 2020). The final cost of your products is determined by multiplying how much each individual product costs and then adding them all together, without including any fixed or indirect expenses such as rent space where these items/products are made.
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The total cost of a product is the sum, by quantity or value, for each unit produced. This can include fixed parts and variable ones such as labor, rent, or space where products are being made, but it does not include taxes since these vary depending upon what the company is making (Yang, 2020).
Formulas for AFC, AVC, ATC, and MC
Average Fixed Cost (AFC) = (Ran et al., 2020)
Average Variable Cost (AVC) =
Average Total Cost (ATC) =
Marginal Cost (MC) =
Fill in the values of the following table 1
|Patient Visits||Total Variable Costs||Total Costs
|Total Fixed Costs||Average Fixed Cost||Average Variable Cost||Average Total Cost||Marginal Cost|
Factors That Would Cause Cost For the Clinic to Increase or Decrease
One of the factors that could have caused this increase in cost is fluctuation within pharmaceutical products. The prices for medical supplies and equipment vary depending on a variety of different things, such as market demand or even how close they are to the expiration date. Health care expenses can vary depending on changes in economic policies and health insurance. When it comes to how much you should be paying for your healthcare, there’s a lot that can change from year-to-year. The operational costs will also vary depending on what type of economic policies or health insurance policy someone has in place at any given point in time (Dai et al., 2020). With the government providing more subsidies in healthcare, including an increase of patients insured and a possible cause for this rise or fall with clinics costs. One incentive that employers have over other organizations is their ability to purchase expensive plans, which can lead them down less costly paths when it comes time employee cost-effective measures such as maintaining high turnover rates among staff members due to lack of resources otherwise. A large number one reason why businesses fail nowadays is that they cannot take advantage of opportunities presented before competitors do.
Graphical Representation of AFC, AVC, ATC, and MC curves
Graph1: Total Fixed Costs
From graph I, the total cost of a project is always constant, where it can be seen that there is only one line representing the total fixed cost. In other words, in the graph I, a constant fixed cost remains at 50 for all the outputs under consideration. Fixed costs still exist even when production is at zero, as shown in the graph.
Graph II: Total Variable Costs
Graph II changes in total variable costs against the output. The higher your output, the more you will spend on costs. An increase in production leads to an increase of spending for everything else – with a seven being associated with high variable expenses while 1 represents minimal risk-taking and lower fixed operational expense items such as rent or payroll; these low numbers can help keep overall margins stable even during times when sales are not what they used to be.
“Graph III: Total Costs
Graph III shows an increase in total cost with the increase in output. Similar to variable costs, Total costs are determined by the balance between production and consumption. High output means more spending, while low outputs mean fewer expenses for a particular good or service in question.
Many entrepreneurs know that one important aspect of running a business is determining how much it costs to produce certain products. Total fixed costs refer to the sum of all non-variable expenses that an organization or a company ought to pay, such as rent for their building space and salaries. The total variable cost for a company’s production is equivalent to how much it takes to produce one unit. The total cost of a product is the sum, by quantity or value, for each unit produced. Total costs, fixed costs, and variable costs are essential parts of running a successful business.
Lin, R., & Chen, Z. (2020). A DEA‐based method of allocating the fixed cost as a complement to the original input. International Transactions in Operational Research, 27(4), 2230-2250. https://onlinelibrary.wiley.com/doi/abs/10.1111/itor.12495
Ran, Z., Lun, R., Jinlin, L., & Tao, D. (2020). A Step-by-step Fixed Cost Allocation Method Based on Leader-follower DEA Model. Management Review, 32(3), 279. http://journal05.magtech.org.cn/jweb_glpl/EN/abstract/abstract1632.shtml
De Loecker, J., Eeckhout, J., & Unger, G. (2020). The rise of market power and the macroeconomic implications. The Quarterly Journal of Economics, 135(2), 561-644. https://doi.org/10.1093/qje/qjz041
Yang, J. (2020). Learning the Best Price and Ordering Policy under Fixed Costs and Ambiguous Demand. Available at SSRN 3554042. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3554042
Sabogal-De La Pava, M. L., Vidal-Holguín, C. J., Manotas-Duque, D. F., & Bravo-Bastidas, J. J. (2020). Supply Chain Design by Minimizing Equivalent Present Cost Considering Weighted Variable Costs. In Techniques, Tools and Methodologies Applied to Global Supply Chain Ecosystems (pp. 285-305). Springer, Cham. https://link.springer.com/chapter/10.1007/978-3-030-26488-8_13
Fathi, M., Markazi Moghaddam, N., Meshkani, Z., & Kazemi Karyani, A. (2020). Variable Costs of the Intensive Care Units and its Determinants in Iranian Hospitals. Evidence Based Health Policy, Management, and Economics, 4(1), 1-9.
Dai, Z., Gao, K., & Giri, B. C. (2020). A hybrid heuristic algorithm for a cyclic inventory-routing problem with perishable products in VMI supply chain. Expert Systems with Applications, 153, 113322. https://www.sciencedirect.com/science/article/abs/pii/S0957417420301470
Stennikov, V., & Penkovskii, A. (2020). The pricing methods on the monopoly district heating market. Energy Reports, 6, 187-193. https://doi.org/10.1016/j.egyr.2019.11.061
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ECO 605 Assignment 2.2 Production Costs FRANK
Week 2: Healthcare Production and Costs
This week, the focus is on the healthcare provider. Healthcare providers need resources to deliver a treatment or procedure. The purchase of these resources represents costs for healthcare providers. We will examine the relationship between the output of healthcare providers and the costs incurred to produce these services.
Review a list of all items due this week in your course’s syllabus.
Lesson 1: The Production Function
This lesson will describe the production function for a good or service and will describe how a production function gives the relationship between inputs and outputs.
By the end of this lesson, you will be able to:
â€¢ Define the terms fixed input, variable input, and production function.
â€¢ Identify fixed and variable inputs in the medical field.
â€¢ Identify factors that shift a production function.
â€¢ Determine how a production function shows the relationship between inputs and outputs.
Before attempting to complete your learning activities for this week, review the following learning materials:
Read the following in your Economics of Health and Medical Care textbook:
Chapter 5, â€œHealth Care Production and Costsâ€ (pp. 71â€“77)
These pages provide additional references to the production function and other issues related to it.
The Production Function Media Presentation
Complete The Production Function (Links to an external site.) media presentation. Select Begin to start. Select CC for Closed Captioning.
The Production Function Transcript
Assignment 2.2: Production Costs
In this assignment, you will calculate various costs of a clinic and identify factors likely to increase or decrease those costs. You will calculate the clinicâ€™s marginal cost (MC). To better understand how these costs for the clinic behave, you will translate the different average costs and marginal cost into graphical form.
Use the Assignment 2.2 Document (Word) (Links to an external site.) to
1. Define total fixed costs, total variable costs and total costs.
2. State the formulas for AFC, AVC, ATC, and MC.
3. Complete the table by calculating AFC, AVC, ATC, and MC.
4. List examples of the factors that would cause costs for the clinic to increase or decrease.
5. Present a graph of curves for TFC, TVC, and TC.
6. Present a graph of the curves for AFC, AVC, ATC, and MC.
Submit your file using the following naming convention: Last name_First name_Assignment_2.2.
Submit your assignment and review full grading criteria on the Assignment 2.2: Production Costs page.
In the first lesson this week, we described the production function for a good or service. We explained how a production function gives the relationship between inputs and outputs.
In the second lesson, we described the relationship between production and cost in the short run. We also analyzed cost concepts such as total cost, marginal cost, and average cost.
â€¢ Course Essentials
â€¢ Week 1: Demand for Healthcare
â€¢ Week 3: Behavior of Supply
â€¢ Week 4: Competitive Markets and Monopoly Power
â€¢ Week 5: Economic Evaluation and Quality Initiatives of Health Services
â€¢ Week 6: Financial Statements and Ratios