# Assignment V Part 1 Part 2 And 3

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User Generated
Subject
Accounting
School
Columbia Southern University
Type
Homework
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1
Introduction
Ruby Red Movie Theatre depends on the revenues generated from the concession stand sales to
pay labor costs and fixed costs of running the business. Labour presents the single highest cost for Ruby
Red. Therefore, determining the optimum output is crucial to determine the number of workers required
to run the business and maximize profits. Thus, calculating average costs, marginal costs, and marginal
revenue is required to determine the maximum level of output and profit to keep the business afloat. This
paper will use the data available for Ruby Red Movie theatre to determine the maximum level of profits
and output and labor for the business.
Key Indicators
Total cost
The total cost for Ruby Red Movie Theatre is calculated by summing the fixed cost and variable
costs of production. While the data did not show the components of the fixed costs, the variable cost was
majorly composed of the cost of labour. The cost of labour is determined by multiplying the number of
workers per day by the wages per day. When this is added to the fixed cost, the total cost of production is
achieved.
Total cost=  
󰇛

󰇜
Variable cost=  
Total Revenues and Profits
Total revenue represents the number of sales generated by the sale of concession tickets. It is
found by multiplying the sales of concession tickets by the price per ticket. Revenues generated by the
sale of tickets present the amount available to pay for fixed and labor costs. Thus, profit is determined by
subtracting the total cost from the total revenue generated by the sales of concession items.

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Total Revenues=  
Profits=  
Average Variable Cost
Variable cost represents the production costs that change with the level of output. In the case of Ruby
Red, as output changes, the number of workers required changes. Thus, average cost increases with the
increase in the number of workers.
Average Variable cost=  
Total cost=  
󰇛

󰇜
Average Fixed Cost
Unlike variable costs, fixed costs remain constant for all output levels. The fixed costs for Ruby Red are
\$2,000 and remain constant for all concession items sold. Average fixed cost represents the fraction of
fixed cost attributed to each concession item sold. Thus, it's calculated by dividing the fixed costs by the
number of concession items sold.
Average Fixed cost=  
Average Total Cost
It represents the fraction of total costs attributed to each unit of concession item sold. Average total cost,
average variable cost, and average fixed cost are crucial when determining the optimum level of output
for which profit is maximized. The average total cost can be calculated in two ways:
Average total cost=  
Or

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1 Introduction Ruby Red Movie Theatre depends on the revenues generated from the concession stand sales to pay labor costs and fixed costs of running the business. Labour presents the single highest cost for Ruby Red. Therefore, determining the optimum output is crucial to determine the number of workers required to run the business and maximize profits. Thus, calculating average costs, marginal costs, and marginal revenue is required to determine the maximum level of output and profit to keep the business afloat. This paper will use the data available for Ruby Red Movie theatre to determine the maximum level of profits and output and labor for the business. Key Indicators Total cost The total cost for Ruby Red Movie Theatre is calculated by summing the fixed cost and variable costs of production. While the data did not show the components of the fixed costs, the variable cost was majorly composed of the cost of labour. The cost of labour is determined by multiplying the number of workers per day by the wages per day. When this is added to the fixed cost, the total cost of production is achieved. Total cost= 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 + 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡(𝑐𝑜𝑠𝑡 𝑜𝑓 𝑙𝑎𝑏𝑜𝑢𝑟) Variable cost= 𝑊𝑜𝑟𝑘𝑒𝑟𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦 × 𝑊𝑎𝑔𝑒𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦 Total Revenues and Profits Total revenue represents the number of sales generated by the sale of concession tick ...
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