ACC 202 week 5 Assignment 3
For example, let's assume it costs Company Odom&Lovett $1,000,000 to produce 1,000,000 watches per year ($1 per watches). This $1,000,000 cost includes $500,000 of administrative, insurance, and marketing expenses, which are generally fixed. If Company Odom&Lovett decides to produce 2,000,000 watches next year, its total production costs may only rise to $1,500,000 ($0.75 per watches) because it can spread its fixed costs over more units. Although Company Odom&Lovett 's total costs increased from $1,000,000 to $1,500,000, each watches becomes less expensive to produce and therefore more profitable.
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