Suppose a firm must employ 20 workers in order to produce 2,000 units of output that the firm has contracted to supply to the government for $1.4 million. The firm must choose how much to invest in safety. The firm can choose any level of safety, S, from 0 to 100. The cost of safety is C( S) = 50S2. Given the firm’s choice of safety, the annual salary paid to workers is determined byAnnual salary = 60,000 - 300SThus, a firm that chooses S = 30 pays $45,000 for this level of safety and pays each worker $51,000. What level of safety will the firm choose, and how much does this cost? How much will each worker earn? How much profit will the firm earn?
Suppose a firm must employ 20 workers in order to produce 2,000 units of output that the firm has contracted to supply to the government for $1.4 million. The firm must choose how much to invest in safety. The firm can choose any level of safety, S, from 0 to 100. The cost of safety is C( S) = 50S2. Given the firm’s choice of safety, the annual salary paid to workers is determined byAnnual salary = 60,000 - 300SThus, a firm that chooses S = 30 pays $45,000 for this level of safety and pays each worker $51,000. What level of safety will the firm choose, and how much does this cost? How much will each worker earn? How much profit will the firm earn?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter5: Activity-based Costing And Management
Section: Chapter Questions
Problem 16MCQ: Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000...
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Suppose a firm must employ 20 workers in order to produce 2,000 units of output that the firm has contracted to supply to the government for $1.4 million. The firm must choose how much to invest in safety. The firm can choose any level of safety, S, from 0 to 100. The cost of safety is C( S) = 50S2. Given the firm’s choice of safety, the annual salary paid to workers is determined by
Annual salary = 60,000 - 300S
Thus, a firm that chooses S = 30 pays $45,000 for this level of safety and pays each worker $51,000. What level of safety will the firm choose, and how much does this cost? How much will each worker earn? How much profit will the firm earn?
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