25. What is an opportunity cost? Incremental cost? Sunk cost? Out-of-pocket cost? Relevant Cost? Irrelevant cost?

26. How are costs calculated and prices set under the total cost method?

27. What is meant by sales mix?

A profit-maximizing monopolist charges a price of $36. The intersection of the marginal revenue and marginal cost curves occurs where output is 20,000 units and marginal cost is $24. Average total cost for 20,000 units of output is $32. As a result, the monopolist’s profit is more than $80,000.

true or false

The continuous downward slope of the average total cost curve suggests that the profit-maximizing natural monopolist is able to exploit economies of scale to keep competitors from successfully entering the market

true or false

Suppose that a monopoly firm maximizes its profit by producing 10,000 units of output. At that level of output, its marginal revenue is $30, its average revenue is $50, its average total cost is $45 and average variable cost is $38. If the firm operates at the output amount where marginal cost is $30, then the firm’s profit is less than $75,000 but more than $60,000.

true or false

Exercise 2. Two plants

A firm has two plants, both with increasing marginal costs. Plant 1 is more efficient than plant 2. Specifically, the cost function in plant 1 is c₁(y₁)=2y₁², while the cost function in plant 2 is c₂(y₂)=3y₂². Output produced in plant 1, y₁, is identical to output produced in plant 2, y₂. For any overall output level Y=y₁+y₂the firm wants to minimize costs.

1. What is the marginal cost in plant 1? Find ∂c₁/∂y₁.

2. What is the marginal cost in plant 2? Find ∂c₂/∂y₂.

3. The firm needs to produce a total of Y=10 units. If it decides to produce all of them in plant 1 (y₁=100 and y₂=0), what is the total cost?

4. What is the optimal production level, y₁^*and y₂^*, that would minimize cost? What is the total cost now?

Task

Smokey and the Bandit produces “sports towels.” These are towels that has the promotion of an event or a logo printed on it. These towels come in five sizes: regular, mid-size, hand, large, special. Data has been collected related to direct materials and direct labor for the five types of towels. Smokey and the Bandit has also collected information on four possible cost drivers (units, orders, machine hours, labor hours). All this information is listed below.

Total overhead cost to be allocated: $94,360

Required:

Use the VLOOKUP function to construct a spreadsheet that will allocate overhead for each of these alternative drivers and will calculate the total per unit cost (round to two decimal points) for each type of towel. Each time you construct a spreadsheet for a cost driver, copy and paste (use paste special - Values function) this to a new worksheet to summarize the effect of different cost drivers on the overhead allocated and the resulting cost per unit. Name the new worksheet as “Summary Worksheet”. Therefore, your summary worksheet should contain 4 spreadsheets to show the effect of the four cost drivers on the Overhead calculated and the unit costs.

After constructing your spreadsheet answer the following questions separately under Section B?

What is the total cost per unit of each type of towel when machine hours are used as the cost driver for overhead allocation?

How much overhead is allocated to the Hand towels when direct labor hours are used as the cost driver for overhead allocation?

What is the total cost of the Special towels when direct labor hours are used as the cost driver for overhead allocation?

What is the total cost per unit of the Large towels when the number of orders is used as the cost driver for overhead allocation?

What is the allocation rate when units are used as the cost driver?

NOTE

Here is what i have so far in excel. I am not sure if my calculations are wrong.

Figure 3-3. Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. Machine Lease cost hours

Month                   Lease cost               Machine hours

April                      $21,000                    550

May                       $16,500                   420

June                      $19,000                   510

July                        $22,230                  570

1 Refer to Figure 3-3. Using the high-low method calculate the variable rate for the lease cost

a. $38.18

b. $38.20

c. $61.50

d. $37.25 2.

Refer to Figure 3-3. Using the high-low method calculate the fixed cost of leasing

a. $482

b. $516

c. $420

d. $456

3. Refer to Figure 3-3. What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range? a. total lease cost = $456 + ($38.20 × machine hours)

b. total lease cost = $516 + ($38.18 × machine hours)

c. total lease cost = $420 + ($37.25 × machine hours)

d. none of these are correct

4. Refer to Figure 3-3. What would the estimate of Okafor Company's total lease cost be at a level of 500 machine hours?

a. $19,606

b. $19,556

c. $16,464

d. $18,546

Figure 3-4. Botana Company constructed the following formula for monthly utility cost.

Total utility cost = $1,200 + ($8.10 × labor hours)

Assume that 775 labor hours are budgeted for the month of April.

5. Refer to Figure 3-4. Calculate the total variable utility cost for the month of April.

a. $1,200.00

b. $7,477.50

c. $6,277.50

d. $5,077.50 6.

Refer to Figure 3-4. Calculate the total utility cost for the month of April.

a. $7,477.50

b. $6,277.50

c. $1,200.00

d. $5,077.50 7.

Refer to Figure 3-4. If Botana Company incurs 9,600 labor hours for the year, what would be the estimate of total utility cost?

a. $76,560

b. $78,960

c. $92,160

d. none of these are correct

Figure 3-5. Maxwell Company makes treadmills. The company controller wants to calculate the fixed and variable costs associated with the janitorial costs incurred in the factory. Data for the past four months were collected.

Month                  Janitoral Cost                     Machine hours

September           $11,000                            575

October                  11,400                              610

November              10,200                              510

December              10,725                              550

8. Refer to Figure 3-5. Using the high-low method calculate the fixed cost of the janitorial services

a. $4,080

b. $7,320

c. $6,120

d. none of these are correct

9. Refer to Figure 3-5. What would Maxwell Company's estimate of total janitorial cost be at a level of 600 machine hours?

a. $11,280

b. $7,500

c. $4,080

d. $6,120

Figure 3-7. Margola Company produces hand-held calculators. The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected.

Month                     Mainetnance Cost                     Machine hours

June                       $4,180                                       328

July                         3,956                                         310

August                    4,686                                         386

September              4,240                                         352 ​

Coefficients shown by a regression program are: Intercept 1,150 X Variable 1 9.06 10.

Refer to Figure 3-7. Using the results of regression, calculate the fixed cost of maintenance.

a. $1,150.00

b. $978.37

c. $9.06

d. None of these are correct.

1. Explain the concept of profit maximization when the marginal revenue equals marginal cost

2. Differentiate: Average Fixed Cost, Average Variable Cost, and Average Total Cost

Beginning inventory, purchases, and sales data for portable game players are as follows:

The business maintains a perpetual inventory system, costing by the last-in, first-out method.

Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

1. Beginning inventory, purchases, and sales data for portable DVD players are as follows:

   Apr. 1		Inventory	59 units @ $79
   10		Sale	44 units
   15		Purchase	25 units @ $83
   20		Sale	23 units
   24		Sale	13 units
   30		Purchase	36 units @ $88

   The business maintains a perpetual inventory system, costing by the first-in, first-out method.

   Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.

   a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

   Cost of the Merchandise Sold Schedule
   First-in, First-out Method
   Portable DVD Players
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
   Apr. 1								$	$
   Apr. 10					$	$
   Apr. 15		$	$
   Apr. 20
   Apr. 24
   Apr. 30
   Apr. 30	Balances					$			$

   b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
   

Check My Work2 more Check My Work uses remaining.

Can you please double check the answer thank you.

Ivonne Callen sells beauty supplies. Her annual demand for a particular skin lotion is 1,000 units. The cost of placing an order is $100, while the holding cost per unit per year is 20% of the cost. This item currently cost $50 if the order quantity is less than 100. For orders between 100 and 399 units, the unit cost falls to $49. For orders of 400 units or more, the unit cost falls to $48. To minimize total Inventory cost: (1) How many units should Ivonne order each time she places an order? (2) What is the minimum annual total cost? Show work.

Ivonne Callen sells beauty supplies. Her annual demand for a particular skin lotion is 1,000 units. The cost of placing an order is $100, while the holding cost per unit per year is 20% of the cost. This item currently cost $50 if the order quantity is less than 100. For orders between 100 and 399 units, the unit cost falls to $49. For orders of 400 units or more, the unit cost falls to $48. To minimize total Inventory cost:

(1) How many units should Ivonne order each time she places an order?

(2) What is the minimum annual total cost? Show work.