Presidio, Inc., produces one model of mountain bike. Partial information for the company follows:

Required:
1. Complete Presidio’s cost data table.
2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620.
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620.

Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620. (Round your Contribution Margin Ratio percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34%.))

Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620. (Round your answers to the nearest whole dollar amount.)

Cost of Production Report: Average Cost Method

Use the average cost method with the following data:

Prepare a cost of production report for the Cutting Department of Tanner Carpet Company for December 2016 using the average cost method. If required, round your cost per equivalent unit answer to two decimal places.

Cost of Production Report: Average Cost Method

Use the average cost method with the following data:

Prepare a cost of production report for the Cutting Department of Tanner Carpet Company for December 2016 using the average cost method. If required, round your cost per equivalent unit answer to two decimal places.

Which of the following is correct?   A. When marginal product is falling, total product must be falling.    B. All of the other answers are incorrect    C. When marginal product is falling, total product must also be falling.    D. Marginal product rises faster than total product and also falls faster than marginal cost.    E. When total product is rising, both average product and marginal cost must also be rising.

What is the dominant strategy for Player 2?

1)Player 2 does not have a dominant strategy.

2) B

3) X

4) Y

5) A

Which of the following is a problem typically seen with a monopoly? There is more than one answer to this question. You must mark all of the correct answers to receive full credit for this question.

more than one choice

1) A monopoly produces less output than is found in a perfectly competitive industry.

2) A monopoly is not efficient from the firm perspective.

3) A monopoly is not efficient from the society perspective.

4) A monopoly charges a higher price than is found in a perfectly competitive industry.

In all market structures, if the average total cost curve dips below the demand curve then the firm has an economic profit.

True

False

Where will the following game end? (Assume a one-shot, simultaneous game.)   

1) X, B

2) Y, B

3) X, A

4) Y, A

The price elasticity of demand for jewelry is estimated to be 2.29 (in absolute value). If a jewelry store raises its prices, you would expect its total revenue to _______.

remain the same

decrease

increase

A graph contains three costs curves that are all U-shaped. One of the curves passes through the minimum points of the other two. Which three cost curves are shown the graph?

1) total fixed cost, average variable cost, average total cost

2) marginal cost, average fixed cost, average total cost

3) marginal cost, average total cost, average variable cost

4) marginal cost, average fixed cost, average variable cost

5) total fixed cost, total variable cost, total cost

Which characteristics make it so that perfectly competitive firms and monopolistically competitive firms have zero economic profit in the long run?

1) heterogeneous product and easy entry/exit

2) easy entry/exit and perfect information

3) homogeneous product and perfect information

4) many buyers/sellers and easy entry/exit

Assume that a traffic accident occurs and the person whose car was hit sues the other party for an amount far above the losses actually incurred. This behavior is an example of which market failure?

an externality

a public good

rent seeking

moral hazard

Assume a perfectly competitive firm has an economic profit. When the transition to the long run is complete, will the price it charges be higher or lower?

The selling price will be the same.

There is no way to answer this question without more information.

The selling price will be higher.

In the kinked demand curve model, a firm faces less elastic demand when it _______ its price than when it _______ its price.

increases, decreases

This question makes no sense since the price elasticity of demand is the same regardless of any price change.

decreases, increases

The selling price will be lower.

The supply curve of a perfectly competitive firm is the entire marginal cost curve of that firm.

True

False

In the kinked demand curve model, if the firm raises its price its total revenue _______. If the firm lowers its price its total revenue _______.

decreases, decreases

decreases, increases

increases, decreases

If you look at the graph of a perfectly competitive firm and see that it has an economic profit, you know the graph is of the short run. However, when you look at the graph of a monopoly and see that it has an economic profit, you are unable to tell if the graph is of the short run or the long run.

True

False

When a firm has increasing returns to scale its average total cost _______.

remains constant

decreases

increases

increases, increases

Assume you see the graph of a monopolistically competitive firm. In the graph, at the output where MR = MC, the average total cost curve is above the demand curve. Which of the following statements is not correct?

The firm’s total cost is greater than its total revenue.

The firm’s opportunity cost is larger than its accounting profit.

The firm is definitely in the long run.

The firm has an economic loss.

A store decreased its prices by 5% and the quantity demanded increased by 7.5%. The price elasticity of demand is _______ (in absolute value) and the demand is _______.  

0.67, elastic

0.67, inelastic

1.50, inelastic

1.50, elastic

Piscataway Plastics Company manufactures a highly specialized plastic that is used extensively in the automobile industry. The following data have been compiled for the month of June. Conversion activity occurs uniformly throughout the production process.

Required:

Prepare schedules to accomplish each of the following process-costing steps for the month of June. Use the weighted-average method of process costing.

1. Analysis of physical flow of units.

2. Calculation of equivalent units.

3. Computation of unit costs.

4. Analysis of total costs.

OPTIONS:

• Direct-material costs
• Units completed and transferred out during June
• Units started during June
• Work in process, June 1
• Work in process, June 30
• Conversion costs
• Costs incurred during June

Analysis of physical flow of units.

Calculation of equivalent units.

Computation of unit costs. (Round "Cost per equivalent unit" to 2 decimal places.)

Analysis of total costs. (Round "Cost per equivalent unit" to 2 decimal places.)

Salisbury Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

At the beginning of March, Salisbury’s management planned to produce 500,000 bottles. The actual number of bottles produced for March was 525,000 bottles. The actual costs for March of the current year were as follows:

a. Prepare the March manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for Salisbury, assuming planned production.

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for March. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Problem 01-1A Cost computation, classification, and analysis LO C2, C3

[The following information applies to the questions displayed below.]

Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $520 each.
  

1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)
  

2. Compute the manufacturing cost per drum set.

. Du Pont Corporation uses Weighted Average process Costing in its paint mixing department. Materials are introduced at various points during work in the Mixing Department. After the cooking is completed, the materials are transferred into the Packaging Department, in which the paint is packaged.

Selected data relating to the Mixing Department during May are:

            Production data:

                        Gallons in process May 1: materials 0%

                        complete; conversion 0% complete……………………     900,000

                        Gallons started into production in May………………….   590,000

                        Gallons completed and transferred to Packaging……… 820,000

                        Gallons in process, May 31: materials 50%

                        complete, conversion 75% complete…………………….. 670,000

            Cost data:

                Work in process inventory, May 1;

                        Materials cost…………………………………………... $1,112,000

                        Conversion cost……………………………………. ….    $560,000      

               Costs added during May;

            Materials...………………………….………………………..   $610,000

            Conversion cost………………………………………………. $350,750

Required: prepare a Production Report for the Cooking department for the month of May. Include:

Units to account for

Equivalent units

Dollar amounts to account for

Cost per equivalent unit, rounded to the nearest cent; and

Total cost reconciliation for the department.

Weighted-Average Method

5. Costs assigned to the Cooking Department:

                                Materials            Conversion Cost         Total

Transferred out:                                                         =

Work in Process          _________         ________           =

Total                                                                          =     

Brief Exercise 169

Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks:

Prepare an incremental analysis which shows the effect of the make-or-buy decision. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)