Hummingbird Company uses the product cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing 25,000 units of Product K are as follows:

Hummingbird desires a profit equal to a 5% rate of return on invested assets of $642,500.

a. Determine the amount of desired profit from the production and sale of Product K.
$_________

b. Determine the total manufacturing costs and the cost amount per unit for the production of 25,000 units of Product K.

c. Determine the markup percentage for Product K. Round your answer to one decimal place.
%__________

d. Determine the selling price of Product K. Round your answer to two decimal places.
$_________

A3-10. Imagine a firm with the short run cost structure: Total Cost (TC) = 9 + q 2  Marginal Cost (MC) = 2q.

(a) Write out expressions for total fixed cost (FC), total variable cost (VC), average variable cost (AVC), and average total cost (ATC). Be sure to show your work.

(b) At what quantity is AVC at its minimum (at what AVC level)? At what quantity is ATC at its minimum (at what ATC level)?

(c) Given your results above, sketch MC and AVC from q = 0 to q = 9. Calculate ATC for q = 1, 3, 6, and 9. Use this information to add ATC to your diagram (from q = 1 to q = 9).

(d) Assuming that the firm is a price-taker operating in a competitive market, derive an expression for the firm’s supply curve, (ie. the profit maximizing output for the firm as a function of the market price). What is the shut-down price for this firm (ie. at what price would this firm choose to produce zero)?

(e) Suppose the competitive market is composed of firms (and potential firms) identical to the one described above. Is it possible that a market price of $8 is a short run equilibrium price? Is it possible that a market price of $4 is a short run equilibrium price? Explain.

(f) Assuming that the minimum point of the short run ATC curve for all firms is also the minimum point of the long run average cost curve (LRAC) is it possible that either of the prices identified in part (e) is a long run equilibrium price? Explain.

(g) Under the assumptions of parts (e) and (f), what is the long run equilibrium price in this market? If, at that price, the quantity demanded in the market is 882 units, what is long run equilibrium number of firms in this market?

The following data pertain to an investment proposal

Cost of investment 45,000

annual Cost savings 10,000

Estimated salvage value 0

Expected life of investemnt 5 years

discount Rate 10%

What is the net present Value of the proposed investment

1*Explain the general theory of cost of capital and explain why businesses need to understand cost of capital.

DEF Manufacturing Company presented the following data:

• Cost of goods manufactured and cost of goods sold were P375,000 and P300,000, respectively.
• Purchases of raw materials amounted to twice as much as the net income before tax.
• Gross margin based on sales was 40%. There were no purchase returns but the sales returns amounted to P10,000.
• Inventory valuations were as follows:

1. Raw materials on hand at the end of the period was 1/3 as much as much as at start.
2. Work in process – no beginning inventory but P25,000 was on hand at the end of the period.
3. Finished goods end of the period was four times as larges as at start.

• Breakdown of cost incurred in manufacturing was as follows:

Raw materials                                                    50%

Direct labor                                                         30%

Factory Overhead                                            20%

• Selling expenses amounted to four times as as as general expenses
• Net income after taxes amounted to P52,000. Income tax rate is 35%.

1-A. Raw materials beginning? ________

1-B. Raw materials Purchases? _______

1-C Total direct materials used? _______

1-D Total factory overhead applied? ______

1-E Finished Goods ending? _________

Our company is considering a new machine which cost $1,000,000. The old machine cost $500,000, and was being depreciated to a zero book value over a 10 year period. The old machine is 5 years old, and could be sold for $300,000. The new machine will be depreciated to zero over 10 years, and could be sold for $400,000 at the end of 10 years. The new machine would require $50,000 to install, and increase net working capital by $30,000. The new machine would increase revenue by $200,000 per year and reduce our expenses by $50,000 per year. Calculate the net present value and IRR, with a tax rate of 35%, and a cost of capital of 11%. (Straight line depreciation)

DowlingComputers makes 5,000units of a circuit​ board,CB76 at a cost of $280

each. Variable cost per unit is $220and fixed cost per unit is $60.Peach Electronics offers to supply 5,000units of CB76 for

$260.IfDowlingbuys from Peach it will be able to save $10per unit in fixed costs but continue to incur the remaining $50per unit. Should Dowling

accept​ Peach'soffer? Explain

1. DowlingComputers makes5,000units of a circuit​ board,CB76 at a cost of $280

each. Variable cost per unit is $220and fixed cost per unit is $60.Peach Electronics offers to supply5,000units of CB76 for $260.If Dowlingbuys from Peach it will be able to save $10per unit in fixed costs but continue to incur the remaining $50per unit. Should Dowlingaccept​ Peach'soffer? Explain.

Begin by calculating the relevant cost per unit. ​(Ifa box is not used in the​ table,leave the box​ empty;do not enter a​ zero.)

DowlingComputers should accept/rejectPeach'soffer. When comparing relevant costs between thechoices,Peach's offer price is higher/lowerthan the cost to continue to produce.

Suppose movie downloads cost $1 apiece and game downloads cost $2. If the marginal utility of movie downloads at the optimal mix of consumption is 20 utils, what is the marginal utility of a game download?

Instructions: Enter your answer as a whole number.

utils

12 - What is target cost per​ unit?

A.Target cost per unit is the average total unit cost over the​ product's life cycle.
B.Target cost per unit is the average total unit cost over the contribution margin ratio.
C.Target cost per unit is the contribution margin per unit over the average total unit cost.
D.Target cost per unit is the variable unit cost over the​ product's life cycle.

13 - What is value​ engineering?

A.Charging different prices to different customers for the same product or service.
B. A​ cost-reduction technique, used primarily during the design function in the value​ chain, that uses information about all value chain functions to satisfy customer needs while reducing costs.
C.Continuous improvement during manufacturing.
D.The effect of price changes on sales volume.

The Assembly Department uses a process cost accounting system and a weighted-average cost flow assumption. The department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. During July, RM190,000 of materials costs and RM133,000 in conversion costs were charged to the department. The beginning work in process inventory was RM108,000 on July 1, comprised of RM80,000 of materials costs and RM28,000 of conversion costs.

Other data for the month of July are as follows:

Beginning work in process inventory, 7/1 25,000 units (40% complete)

Units completed and transferred out 90,000 units

Ending work in process inventory, 7/31 10,000 units (20% complete)

Required:

1. Answer the following questions and show computations to support your answers.

2. How many physical units have to be accounted for in July?

3. What are the equivalent units of production for materials and for conversion costs for the month of July?

4. What is the total cost assigned to the 90,000 units that were transferred out of the process in July?

5. What is the total cost of the July 31 inventory?

[TOTAL: 10 MARKS]