Question

Q.1. On the first day of the New Year to get her business started, Lessis, owner of Photographer Inc. paid $368 for business cards, $1,000 for a listing in Yellow Pages advertisements, and $250 for an annual business license. She also bought a professional portrait camera and studio lighting equipment for $3,000. She rents her office and studio for $1,400 per month that must be paid at the beginning of each month. She does not have a lease on the office/studio, so she can vacate the office/studio at the end of any month should she decide to move to a new location or to go out of business. After she opens the office studio on the first day of each month, her monthly cost of electricity for lighting the office and running her coffee machine is constant at $145 per month. Additional electricity is required for the portrait studio lights, which varies directly with the number of photo sessions where each photo session uses $50 worth of electricity. Output of each photo session has a market value of $ 500 Answer the following questions about the costs for Photographer Inc.: 1. What are monthly fixed costs and variable costs for this company? 2. If the owner wants to close her studio and go out of business at the end of August, identify her sunk costs and avoidable costs. 3. What will be the number of photo sessions owner will have to book to break even in 4 months? Show all calculations (a) For the following data, construct a table for 2 months moving average forecast values: Month Revenues 1 1000 2 1090 3 1093 4 1340 Month 5 6 7 8 Revenues 1397 1409 1411 1647 Additionally, calculate mean average deviation and RMSE or root mean square error. Show all calculations (b) give an application of barometric forecasting' in any Indian state government?

Show detail calculation as applicable

Answer 1

Answer 1

The following explains about various costs of Photographer Inc.

The fixed cost, Semi Variable cost, and variable cost are as follows:

· Fixed costs are the costs that are not dependent on the level of output and are incurred despite output being zero. Here, Rent ($ 1,400) is a fixed cost.

· Semi Variable costs are incurred at a fixed amount when output is not equal to zero. Here Semi variable cost is $ 145 for electricity and coffee.

· Variable costs are the costs that vary with the level of output. Here the variable cost is electricity for the studio that varies according to the number of photo sessions.

Answer 2

If the owner wants to close her studio and go out of business at the end of August, then its

(a) Sunk Costs:   

Costs	Amount ($)
Business Cards	368
Yellow pages advertisements	1,000
Annual business license	250
Portrait camera and studio lighting	3,000
Total	4,618

(b) Avoidable cost is electricity and coffee at $ 145 and Portrait studio lights at $ 50 per photo session.

Answer 3

Calculation of the number of photo sessions owner will have to book to break even in 4 months

                      = Fixed Costs + Fixed portion of Semi Variable Cost

Contribution per photo session

                      = ($ 1,400+ $ 145) x 4 months

                             $ 500 - $ 50

                     = $ 6,180

                          $ 450

                     = 13.73 photo sessions or 14 photo sessions