Gunny Sacks is a small business in Toronto that manufactures and sells bags –backpacks, briefcases, luggage, handbags, duffel bags, etc. They have lately beenexpanding their operations, hiring more...

Gunny Sacks is a small business in Toronto that manufactures and sells bags –backpacks, briefcases, luggage, handbags, duffel bags, etc. They have lately beenexpanding their operations, hiring more workers in their factories. But profits duringthe expansion have been slipping, and parent company A.T. & Love Holdings isconcerned that the current business plan needs adjustment.Each of the following problems asks you to analyze some important aspects of GunnySacks as a business. Each question suggests the best length of your answer in numbersof words, and notes what chapters you should refer to in your responses.Due 24 JulyAnalysis Questions1) Diminishing Returns (refer to Chapter 4). Interpret the chart below in answering eachof the following questions. A.T. & Love Chief Financial Officer Kevin MacDonaldproduced the chart based on Gunny Sacks’ performance since it expanded itsfactory. Gunny Sacks currently employs 54 workers: 38 in its factory and 16 inadministration.A. Does CFO MacDonald have reason to think Gunny Sacks is in a period ofdiminishing returns? Explain why. (200 words)B. Is there another way to avoid the problem of diminishing returns while GunnySacks continues to expand its operations? (300-400 words)Units Made Per Day (in hundreds)022.54567.590Total Workers20 30 40 50 60 70Total Workers by Daily Output (in hundreds)2) Marginal Cost (refer to chapters 4 & 5). For the following information, calculate theMarginal Cost (MC) for the year for Gunny Sacks. Show all calculations.• Gunny Sacks Average Wage per Hour = $27 (for all workers, factory &administration)• Gunny Sacks Work Week = 35 hours / week; 52 weeks / year• Number of workers = 54 people. Product produced / day = 86A. Calculate Variable Costs (VC): the total amount Gunny Sacks would spend eachyear on worker salaries for the following points on the chart.i. 30 workersii. 70 workersiii. 54 workersB. Fixed Costs (FC) for Gunny Sacks is $1.2-million / year. Calculate the AverageFixed Costs and Average Variable Costs for the following data points from thechart.i. 61 units / day (at 30 workers)ii. 83 units / day (at 70 workers)iii. 87 units / day (at 54 workers)C. Calculate Marginal Cost (MC) for the following arc on CFO MacDonald’sDiminishing Returns Graph:- Old Total Costs = FC + VC (at 30 workers)- New Total Costs = FC + VC (at 54 workers)- All worker salary data is the same as in the introduction to Part 2 above- Use the yearly figure for Fixed Costs- Multiply daily production numbers by 365 for annual figures