Bead-U-Tiful Designs is a boutique that makes beaded jewelry. Bead-U-Tiful's monthly costs are listed below:
Category Amount
Advertising (Yearly Contract for Billboard) $250
Beads $700
Clasps (for Necklaces and Bracelets) $300
Business Cards $50
Hourly Employee Wages $2,500
Internet Connection (Yearly Contract) $80
Manager's Salary $2,000
Rent $500
Wire (for Necklaces and Bracelets) $100
a. Separate the costs into fixed and variable. Calculate the total cost, total variable cost and total fixed cost. Be sure to show your work.
b. Calculate the Average Total Cost, Average Variable Cost and the Average Fixed Cost assuming that the company is making 450 pieces of jewelry per month.
c. Bead-U-Tiful typically sells their product for $20. Calculate their monthly profit.
d. The recession hit Bead-U-Tiful especially hard. Their jewelry is now selling for only $12. Should they continue producing, shut down, or exit the industry?
e. Let's assume that their price falls even more to $7 per unit. Should they increase production, shut down or exit the industry.