The firm currently uses 50,000 workers to produce 200,000 units of output per day. The daily wage per worker is $80, and the price of the firm’s output is $25. The cost of other variable inputs is $400,000 per day.

Assume that total fixed cost equals $1,000,000. Calculate the values for the following four formulas:
Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs
Average Variable Cost = Total Variable Cost / Units of Output per Day
Average Total Cost = (Total Variable Cost +Total Fixed Cost) / Units of Output per Day
Worker Productivity = Units of Output per Day / Number of Workers
Then, assume that total fixed cost equals $3,000,000, and recalculate the values of the four variables listed above.
For both cases, calculate the firm’s profit or loss.

For both sets of calculations, compare the firm’s output price and the calculated average variable cost and average total cost. Should the firm shutdown immediately when the total fixed cost equals $1,000,000? Should the firm shut down immediately when the total fixed cost equals $3,000,000?

For one of the cases, if the firm can operate at a loss in the short-run, how many employees need to be laid off in order for the company to break even? To calculate the number of workers to be laid off, divide the loss for the two situations by the daily wage per worker. Given a lower number of employees now working at the company, what is the change in worker productivity? Is the change in worker too large, and the firm should shut down immediately? Or in your opinion, can the workers increase their productivity, assuming that the units of output per day remain fixed at 200,000 units, so that the firm operates at a breakeven state?

Provide a two to four page report to management of the firm that discusses what should be done.
Be sure to show your work to support the decision you outline in your report.

A firm uses 50,000 workers to produce 200,000 units of output per day.the daily wage per worker is $80, and the price of the firms output is $25. The cost of other vairable input is $4000,000 per day. Assume that total fixed cost equals $1,000,000. Calclate the following four formulas total variable cost=(number of workers x workers daily wage)+ other variable cost

To calculate the values for the given formulas, we need to follow the steps provided in the question. Let's start by calculating the four formulas for the first scenario.

1. Total Variable Cost = (Number of Workers * Worker's Daily Wage) + Other Variable Costs
Total Variable Cost = (50,000 * $80) + $400,000
Total Variable Cost = $4,000,000 + $400,000
Total Variable Cost = $4,400,000

2. Average Variable Cost = Total Variable Cost / Units of Output per Day
Average Variable Cost = $4,400,000 / 200,000
Average Variable Cost = $22

3. Average Total Cost = (Total Variable Cost + Total Fixed Cost) / Units of Output per Day
Average Total Cost = ($4,400,000 + $1,000,000) / 200,000
Average Total Cost = $5,400,000 / 200,000
Average Total Cost = $27

4. Worker Productivity = Units of Output per Day / Number of Workers
Worker Productivity = 200,000 / 50,000
Worker Productivity = 4

Now let's calculate the profit or loss for the first scenario.

Profit = (Price per Unit * Units of Output per Day) - Total Variable Cost - Total Fixed Cost
Profit = ($25 * 200,000) - $4,400,000 - $1,000,000
Profit = $5,000,000 - $4,400,000 - $1,000,000
Profit = $600,000 - $1,000,000
Profit = -$400,000 (Loss)

Comparing the firm's output price and the calculated average variable cost and average total cost:
Output Price = $25
Average Variable Cost = $22
Average Total Cost = $27

In this case, the firm should not shut down immediately because the output price ($25) is greater than both the average variable cost ($22) and average total cost ($27).

Now let's calculate the values of the four variables for the second scenario where the total fixed cost equals $3,000,000.

1. Total Variable Cost = (Number of Workers * Worker's Daily Wage) + Other Variable Costs
Total Variable Cost = (50,000 * $80) + $400,000
Total Variable Cost = $4,000,000 + $400,000
Total Variable Cost = $4,400,000

2. Average Variable Cost = Total Variable Cost / Units of Output per Day
Average Variable Cost = $4,400,000 / 200,000
Average Variable Cost = $22

3. Average Total Cost = (Total Variable Cost + Total Fixed Cost) / Units of Output per Day
Average Total Cost = ($4,400,000 + $3,000,000) / 200,000
Average Total Cost = $7,400,000 / 200,000
Average Total Cost = $37

4. Worker Productivity = Units of Output per Day / Number of Workers
Worker Productivity = 200,000 / 50,000
Worker Productivity = 4

Now let's calculate the profit or loss for the second scenario.

Profit = (Price per Unit * Units of Output per Day) - Total Variable Cost - Total Fixed Cost
Profit = ($25 * 200,000) - $4,400,000 - $3,000,000
Profit = $5,000,000 - $4,400,000 - $3,000,000
Profit = $600,000 - $7,400,000
Profit = -$6,800,000 (Loss)

Comparing the firm's output price and the calculated average variable cost and average total cost:
Output Price = $25
Average Variable Cost = $22
Average Total Cost = $37

In this case, the firm should shut down immediately because the output price ($25) is less than the average variable cost ($22) and average total cost ($37).

Now, let's analyze the situation where the firm can operate at a loss in the short-run. We need to calculate the number of workers to be laid off to reach the breakeven point.

Loss = Total Fixed Cost (TF) - Profit
Loss = $3,000,000 - (-$6,800,000)
Loss = $9,800,000

Number of Workers to be Laid Off = Loss / Daily Wage per Worker
Number of Workers to be Laid Off = $9,800,000 / $80
Number of Workers to be Laid Off = 122,500

The firm needs to lay off 122,500 workers in order to break even.

With a lower number of employees, the new worker productivity can be calculated as follows:

New Worker Productivity = Units of Output per Day / (Number of Workers - Number of Workers Laid Off)
New Worker Productivity = 200,000 / (50,000 - 122,500)
New Worker Productivity = 200,000 / (-72,500)

However, the change in the number of workers is too large, and the firm should shut down immediately because a negative worker productivity is not feasible.

In conclusion, based on the calculations and analysis, the firm should shut down immediately when the total fixed cost equals $3,000,000. The loss incurred in this scenario is too large, and laying off a significant number of workers would result in a negative worker productivity. Therefore, it is in the firm's best interest to cease operations.