Consider a firm with total costs represented by TC=16+Q^2 and a corresponding marginal cost of 2Q (MC=2Q)

1. Graph the ATC and MC, be certain to label the lowest point of the ATC.

Consider that the firm faces a price of $12.

2. Find the optimal quantity

3. Graph and find the total cost, total revenue and any profit or loss at the optimal quantity

In the short run, why does the Average Total Cost have a U-Shape? please use "bullet points".

Consider a perfectly competitive market where each firm’s total cost function is TC = q^3 – 10q^2 + 50q.

a) What is the long run equilibrium price and quantity for each firm?

b) The industry demand function is Qd=2000-10p. How many firms are there in the industry in the long run?

c) The demand has changed to Qd=4000-18p. Describe the industry’s response to the demand shock and calculate the change in the number of firms in the long run equilibrium.

Nova Company’s total overhead cost at various levels of activity are presented below:

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:

Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.)

2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a + bX.

3. Express the company’s total overhead cost in the form Y = a + bX.

4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours

During 2017, Barden Building Company constructed own equipment at a total cost of $16,650,000.

The company had the following debt outstanding at December 31, 2017:

1.   10%, 5-year note to finance construction of various assets,

      dated April 1, 2017, with interest payable annually on January 1                                    $6,300,000

2.   13.5%, ten-year bonds issued at par on December 31, 2011, with interest

      payable annually on December 31                                                                                  7,000,000

3.   9%, 3-year note payable, dated January 1, 2016, with interest payable

      annually on January 1                                                                                                    3,500,000

Compute the amounts of each of the following (show computations). Extra 1 point for being the first group, which provided correct answers

1. What is Actual Interest in 2017?_________________

2. What is Weighted average accumulated expenditures on assets?________________

3. What is Avoidable interest in 2017?______________________

4. Total interest to be capitalized during 2017____________

5. Record journal entries for asset capitalization in 2017

Extra 0.5 points: You are the first year auditor, who is doing company’s PPE analysis. You found out that the company did not capitalize interest in 2017 and therefore equipment depreciation expense was misstated in 2018. Please, write down ADJUSTMENT journal entry, that you will submit to your senior associate, to CORRECT depreciation expense in 2018, assuming that you agree with company’s estimates for salvage value: 1,000,000 and period of usage 10 years. Company applies straight-line depreciation method

XM Radio was depreciating its satellites over 20 years (total cost of $20 million), for each of five satellites, useful life is only seven years due to the intensity of the sun rays.

As the accountant what would you recommend to management and why? Be sure to address the accounting implications, explaining your rationale.

Nova Company’s total overhead cost at various levels of activity are presented below:

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 36,000 machine-hour level of activity is:

Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the $251,200 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $251,200 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.)

2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a + bX.

3. Express the company’s total overhead cost in the form Y = a + bX.

4. What total overhead cost would you expect to be incurred at an activity level of 41,000 machine-hours?

Total Manufacturing Costs, Income Statement, Unit Cost, and Selling Price. You are consulted by Investors, Inc., a group of investors planning a new product. They have estimates of the costs of materials, labor, overhead, and other expenses for 2016 but need to know how much to charge for each unit to earn a profit in 2016 equal to 10% of their estimated investment of $500,000 (ignore income taxes).

Their plans indicate that each unit of the new product requires the following:

Direct Material

4 lb. of a material costing $6 per lb.

Direct Labor

3 hrs. of a die cutter’s time at $9 per hr.

2 hrs. of an assembler’s time at $8 per hr.

Major items of production overhead would be annual rent of $40,000 on the factory building and $25,000 on machinery as well as indirect material of $21,000. Other production overhead is an estimated 60% of total direct labor costs. Selling expenses are an estimated 20% of total sales, and non-factory administrative expenses are 10% of total sales.

The consensus at Investors is that during 2016 4,000 units of product should be produced for selling and another 1,000 units should be produced for the next year’s beginning inventory. Also, an extra 6,000 pounds of material will be purchased as beginning inventory for the next year. Because of the nature of the manufacturing process, all units started must be completed, so work in process inventories are negligible.

Required

a) Incorporate the above data into a schedule of estimated total manufacturing costs and compute the unit production cost for 2016.

b) Prepare an estimated income statement that would provide the target amount of profit for 2016.

c) What unit sales price should Investors charge for the new product?

1. Product X is manufactured by Y Co. Direct materials cost £6.10 and prime costs total £9.60 per unit of product. Production overheads are absorbed at a rate of £13.40 per machine hour. Two units of Product X are manufactured per machine hour.

Using absorption costing, what is the total production cost per unit of Product X?

1. £22.40
2. £16.30
3. £23.00
4. £29.10

Nova Company’s total overhead cost at various levels of activity are presented below:

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 38,000 machine-hour level of activity is:

Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the $210,460 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $210,460 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.)

2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a + bX.

3. Express the company’s total overhead cost in the form Y = a + bX.

4. What total overhead cost would you expect to be incurred at an activity level of 43,000 machine-hours?