1. Assume that if a firm uses one more unit of one input it will have diminishing marginal returns. If the firm uses one more unit of that one input its total output will decrease. (True or False)
2. When a firm produces 200 units of output its average fixed cost is $200. if its average total cost at this output is $500, what is the firm’s average variable cost at this output?
$700
$300
$3.00
None of the answers shown is correct.
More information is needed to answer this question.
3. identify the correct observations of cost curves in the following list. There is more than one answer to this question. You must mark all of the correct answers to receive full credit.
The marginal cost curve passes through the minimum points of the average variable cost and average total cost curves.
Average total cost continually decreases as output increases.
When marginal cost is below average total cost, average total cost decreases.
The average variable cost curve lies below the average total cost curve.
Total variable cost continually increases as output increases.
4. Oil is used in the production of gasoline. Recently, Russia and Saudi Arabia have substantially increased oil production causing the cost of oil to decrease substantially. Simultaneously, due to the Covid-19 pandemic many people are working from home. Based on this information, what would you expect to happen to the price of gasoline?
It will remain the same.
It will increase.
It will decrease.
More information is needed to answer this question.
5. Suppose that the cost to hire a worker for one more hour is $15. The addition to output from hiring the worker for one more hour would be 5 units. The output produced can be sold for $4/unit. Which of the following statements is correct?
The firm should hire the worker for one more hour because MRP > wage rate.
The firm should hire the worker for one more hour because the total output would increase.
The firm should hire the worker for one more hour because the marginal product is positive.
The firm should not hire the worker for one more hour because MRP < wage rate.
The firm should hire the worker for one more hour because it has increasing marginal returns.
In: Economics
[The following information applies to the questions displayed below.]
The following partially completed process cost summary describes
the July production activities of Ashad Company. Its production
output is sent to its warehouse for shipping. All direct materials
are added to products when processing begins. Beginning work in
process inventory is 20% complete with respect to
conversion.
| Equivalent Units of Production | Direct Materials | Conversion | ||||
| Units transferred out | 44,000 | EUP | 44,000 | EUP | ||
| Units of ending work in process | 4,000 | EUP | 2,400 | EUP | ||
| Equivalent units of production | 48,000 | EUP | 46,400 | EUP | ||
| Costs per EUP | Direct Materials | Conversion | ||||||
| Costs of beginning work in process | $ | 40,350 | $ | 5,250 | ||||
| Costs incurred this period | 574,050 | 342,750 | ||||||
| Total costs | $ | 614,400 | $ | 348,000 | ||||
| Units in beginning work in process (all completed during July) | 3,500 |
| Units started this period | 44,500 |
| Units completed and transferred out | 44,000 |
| Units in ending work in process | 4,000 |
Prepare its process cost summary using the weighted-average method. (Round "Cost per EUP" to 2 decimal places.)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In: Accounting
Please provide accurate answers to the followings with appropriate graphs:
Please write your responses clearly and elaborate your answers with graphs and equations to get full credit.
PART A
Q.1 The following table gives the short-run and long-run total costs for various levels of output of Consolidated National Acme, Inc.
|
Q 0 1 2 3 4 5 6 7 |
TC 1 0 300 400 465 495 540 600 700 |
TC 2 350 400 435 465 505 560 635 735 |
|
Q 0 1 2 3 4 5 6 7 |
TFC |
TVC |
AFC |
AVC |
MC |
In: Economics
A. Kleenway supermarket is comparing the two approaches to inventory management: Continuous review and periodic review: Use both approaches to evaluate the cost and recommend a method for Kleenway. Data given below.
|
Distribution of weekly demand |
Normal |
|
Mean |
1000 units per week |
|
Standard Deviation of weekly demand |
250 units |
|
Holding cost |
0.20 per unit per week |
|
Ordering cost |
2500 |
|
Lead time |
4 week |
|
Service level Desired |
90% |
|
Review period (when using periodic review) |
5 weeks |
|
Number of weeks per year |
50 |
|
Cost per unit |
100 |
|
Continuous review system |
Formula used (with numbers substituted for variables) |
Value obtained |
|
EOQ |
||
|
Mean lead time demand |
||
|
s.d. Lead time demand |
||
|
Z value for a service level of 90% |
||
|
Safety stock |
||
|
Reorder Level |
||
|
Total expected ordering cost per year |
||
|
Total expected holding cost per year |
||
|
Total expected cost per year |
||
|
Service level if SS is reduced by 300 units |
|
Periodic review system |
Formula used (with numbers substituted for variables) |
Value obtained |
|
Mean demand during (lead time + review period ) |
||
|
s.d. of demand during (lead time + review period ) |
||
|
Z value for a service level of 90% |
||
|
Safety stock |
||
|
Order up to Level |
||
|
Total holding cost per year |
||
|
Total ordering cost per year |
||
|
Total cost per year |
If there was no additional cost for continuous review, will that always be better than periodic review? Yes or No explain
In: Operations Management
Luthan Company uses a plantwide predetermined overhead rate of $23.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $286,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours.
The company incurred actual total manufacturing overhead cost of $268,000 and 11,800 total direct labor-hours during the period.
Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.
In: Accounting
Exercise 9-44 (Algo) Activity-Based Costing versus Traditional Costing (LO 9-4, 5, 6)
Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company’s two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters.
Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $296,000. During that time, the company produced 12,000 units of the M-008 and 2,600 units of the M-123. The direct costs of production were as follows:
| M-008 | M-123 | Total | ||||
| Direct materials | $ | 96,000 | $ | 104,000 | $ | 200,000 |
| Direct labor | 96,000 | 52,000 | 148,000 | |||
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows:
| Activity Level | |||||||||
| Cost Driver | Costs | M-008 | M-123 | Total | |||||
| Number of machine-hours | $ | 116,000 | 8,000 | 2,000 | 10,000 | ||||
| Number of production runs | 80,000 | 10 | 30 | 40 | |||||
| Number of inspections | 100,000 | 10 | 40 | 50 | |||||
| Total overhead | $ | 296,000 | |||||||
Required:
a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round your intermediate calculations and final answers to 2 decimal places.)
m-008 m-123
total over head
total unit cost
b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total unit cost" to 2 decimal places.)
m-008 m-123
total over head
total unit cost
In: Accounting
Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:
| Units in beginning inventory | 420 |
| Units started into production | 4,320 |
| Units in ending inventory | 320 |
| Units transferred to the next department | 4,420 |
| Materials | Conversion | |||
| Percentage completion of beginning inventory | 70 | % | 30 | % |
| Percentage completion of ending inventory | 70 | % | 50 | % |
The cost of beginning inventory according to the company’s costing system was $7,875 of which $4,849 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $180,742. The costs per equivalent unit for the month were:
| Materials | Conversion | |
| Cost per equivalent unit | $18.00 | $23.00 |
Required:
1. Compute the total cost per equivalent unit for the month.
2. Compute the equivalent units of material and conversion in the ending inventory.
3. Compute the equivalent units of material and conversion that were required to complete the beginning inventory.
4. Compute the number of units started and completed during the month.
5. Compute the cost of ending work in process inventory for materials, conversion, and in total for the month.
6. Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month.
1)
Compute the total cost per equivalent unit for the month. (Round your answer to 2 decimal places.)
|
2)
Compute the equivalent units of material and conversion in the ending inventory.
|
3)
Compute the equivalent units of material and conversion that were required to complete the beginning inventory.
|
4)
Compute the number of units started and completed during the month.
|
5)
Compute the cost of ending work in process inventory for materials, conversion, and in total for the month. (Round your intermediate calculations to 2 decimal places.)
|
6)
Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month. (Round your intermediate calculations to 2 decimal places.)
|
In: Accounting
Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 52,000 to 92,000 units is given below: Required: 1. Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below. 2. Assume that the company produces and sells 82,000 units during the year at a selling price of $9.55 per unit. Prepare a contribution format income statement for the year.
Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below. (Round the per unit variable cost and fixed cost to 2 decimal places.)
|
|||||||||||||||||||||||||||||||||||||||||
Assume that the company produces and sells 82,000 units during the year at a selling price of $9.55 per unit. Prepare a contribution format income statement for the year.
|
||||||||||||||
In: Accounting
Equivalent Units and Product Cost Report—FIFO Method
In its first month's operations (January 2016), Allred Company's Department 1 incurred charges of $165,000 for direct materials (10,000 units), $70,000 for direct labor, and $84,700 for manufacturing overhead. At month-end, 8,800 units had been finished and transferred out. The remaining units were finished with respect to material but only 25% complete with respect to conversion costs.
Assuming Allred uses the FIFO method and that materials are added at the beginning of the process and conversion costs occur evenly, compute the following:
b. The cost per equivalent unit for material and conversion.
c. The total cost assigned to the units transferred out.
d. The total cost assigned to the ending inventory.
e. Prove that your solutions to requirements (c) and (d) sum to the total costs to be accounted for.
| Product Cost Report | ||||||
|---|---|---|---|---|---|---|
| Direct Materials |
Conversion Costs |
|||||
| Beginning Inventory | $ | $ | $ | |||
| Current | ||||||
| Total Costs to Account For | $ | $ | $ | |||
| ÷ Total Equivalent Units | ||||||
| Average cost / Equivalent unit | $ | b. | $ | b. | ||
| Beginning inventory | ||||||
| Costs incurred in Month 0 | $ | |||||
| Costs incurred in Month 1 | ||||||
| Started and finished | ||||||
| Cost of Goods Manufactured | $ | c. | ||||
| Ending Inventory: | ||||||
| Direct Materials | $ | |||||
| Conversion costs | ||||||
| Cost of Ending Inventory | $ | d. | ||||
| Total Costs Allocated | $ | e. | ||||
In: Accounting
1) If a price that a perfectly competitive firm is able to get is above its average variable cost but below its average total cost then
a. The firm will suffer economic losses and should shut down immediately
b. The firm will be able to earn economic profit as soon as it can increase the size of its factory
c. The firm will suffer economic losses but should continue to operate
d. None of the above
2) In the short run, if price falls, the firm will respond by
a. Shutting down regardless of how high its variable costs are
b. Equating average variable cost to marginal revenue
c. Reducing output along its marginal cost curve as long as marginal cost curve as long as marginal revenue exceeds average variable cost
d. None of the above
3) Suppose a competitive firm is in equilibrium then the price of one of its inputs falls. What will happen?
a. The firm will hire more of the lower priced input
b. The firm will produce more output
c.The firm cost curves will downward
d. All of the above
4. A competitive industry will be in a long run equilibrium when
a. Each firm in the industry is earning zero economic profit
b. No entry or exit occurs
c.The total quantity produced at the prevailing price equals the total quantity consumers want to purchase
d. All of the above
5. In an increasing cost competitive industry, if prices rises above its long run equilibrium level which of the following will occur as the industry adjusts to a new long equilibrium ?
a. Firms will exit the industry
b. Economic profits will exits
c. Input prices will rise only when firms leave the industry
d. Price will return to its original level
6.The marginal revenue curve of a monopolist lies below the demand curve ( in the absence of price discrimination) becaus
a. The demand curve is unit elastic
b. The monopolist must lower price on all units sold in order to sell additional units
c. The monopolist is a price taker
d. The marginal revenue curve coincides with the average revenue curve
7. The demand curve for a monopolist's slopes downward because
a. Profit per unit declines
b. Demand elasticity is greater than one in the portion of the demand curve where the monopolist operates
c.It price discriminates
d. It faces the market demand curve
8. If a monopolist's is operating in the elastic portion of its demand curve then
a. An increase in price will increase total revenue
b. An increase in price will decrease total revenue
c. Marginal revenue is negative
d. An increase in price will leave total revenue unchanged
9. Marginal revenue is negative when
a. The demand curve is downward sloping
b. Demand curve is elastic
c. Demand curve is inelastic
d. Demand is unit elastic
10. The lerner index
a. Measures the monopoly power as the markup of price over average cost
b. Measures the monopoly power as the markup of price over marginal cost
c. Measures the market share of a firm
d. Measures the market capitalization of a firm
11. Compared to a competitive industry, ceteris paribus a standard monopoly firm
a. Sells more units and charges a higher price
b. Sells the same amount of units but at a higher price
c. Does not try to maximize profits as do firms in competitive industry
d. Restricts output and charges a higher price
12. A monopoly will produce the efficient rate of output if it
a. Engages in perfect price discrimination
b. Engages in no price discrimination
c. Engages in third degree price discrimination
d. Is regulates and average cost pricing is enforced
13. Which of the following types of mergers directly reduces the number of competitors in an industry?
a. Congolomerate
b. Horizontal
c. Vertical
d. Bivariate
14. Why do gas stations near airport often charge more for gasoline ?
a. They have higher costs
b. They are inconvenient
c. They face a smaller elasticity of demand
d. They must pay the airport agency for space
15. The deadweight loss due to monopoly restriction of output occurs over units of output
a. For which the willingness to pay would be greater than MC but don't get produces
b. For which the willingness to pay is greater than MC and do not get produced
c. Up until the profit maximizing level of output
d. For which the willingness to pay is less than MC but don't get produced
16. First degree discrimination
a. Is perfect because consumers benefit the most
b. Is called first degree because it does not apply to resale of products
c. Is also known as perfect price discrimination
d. Is the easiest form of price discrimination
In: Economics