Calculate the Optimal Level of Output and Maximum Profit
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Question
Precision Engineering department has collected data on its average costs of production for the past 12 months. The monthly fixed cost is $4000 per month. The AVC and associated output data are presented below:
| Month | Q | AVC $ |
| Jan | 70 | 375 |
| Feb | 58 | 540 |
| Mar | 160 | 450 |
| Apr | 120 | 255 |
| May | 130 | 138 |
| Jun | 120 | 150 |
| Jul | 10 | 450 |
| Aug | 35 | 350 |
| Sep | 80 | 60 |
| Oct | 110 | 70 |
| Nov | 100 | 90 |
| Dec | 190 | 153 |
Show what is the optimal level of monthly production for Precision Engineering department if the market price of each component is $400 per piece? What is the maximum profit or minimum loss Precision Engineering department can expect to earn?
Summary
The question belongs to Statistics and it is about calculating the maximum profit and the minimum loss for Precision Engineering department can earn if the market price of each of its components is $400.
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