Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
   

Harbour has monthly overhead of $187,570, which is divided into the following cost pools:

The company has also compiled the following information about the chosen cost drivers:      

The following matrix, illustrates each support department’s cost and how it spends its time:

Using the step-down method of support department cost allocation, determine the total support cost allocated to each operating department. Allocate costs in the following order: A&A, Personnel, Fleet Operations, Marketing.

Explain why the order of allocation given in part 1, above, may have been chosen.

(a) Haris spends all of his income on apples and oranges. He thinks that apples and oranges are perfect substitutes; one apple is just as good as one orange. Apples cost $4 a unit and oranges cost $5 a unit. His income is given by $120 per month. If the price of apples increases to $6 a unit, calculate the (i) Slutsky substitution (ii) Income and (iii) the total effect of a price decrease on the consumption of apples. (b) Now assume that he thinks apples and oranges are perfect complements. Apples cost $4 a unit and oranges cost $5 a unit. His income is given by $120 per month. If the price of apples decreases to $3 a unit, calculate the (i) Slutsky substitution (ii) Income and (iii) the total effect of a price decrease on the consumption of apples.

Wilson Publishing Company produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7,500 copies. The cost of one copy of the book is $14. The holding cost is based on an 21% annual rate, and production setup costs are $135 per setup. The equipment on which the book is produced has an annual production volume of 23,000 copies. Wilson has 250 working days per year, and the lead time for a production run is 15 days. Use the production lot size model to compute the following values:

1. Maximum inventory. Round your answer to the nearest whole number. Do not round intermediate values.
   
   Maximum inventory =
   
2. Total annual cost. Round your answer to the nearest dollar. Do not round intermediate values.
   
   Total annual cost =

Rocky Mountain Tire Center sells 10,000 go-cart tires per year. The ordering cost for each order is​$40​,and the holding cost is 50​%of the purchase price of the tires per year. The purchase price is​ $21 per tire if fewer than 200 tires are​ ordered,​$19 per tire if 200 or​ more, but fewer than 8,000​ tires are​ ordered, and​ $13 per tire if 8,000 or more tires are ordered.

​a) How many tires should Rocky Mountain order each time it places an​ order?

Rocky​ Mountain's optimal order quantity is ______

units ​(enter your response as a whole​ number).

b) What is the total cost of this​ policy?

Total annual cost of ordering optimal order size = $_____​(round your response to the nearest whole​ number).

10. Examples of monopolistically competitive markets include the markets for

A. postage stamps and wheat.

B. restaurant dining and laundry services

C. furniture and used cars in a large city.

D. All of the above are correct.

E. B and C, only

11. In a monopolistically competitive industry, price is

A. above marginal cost since each firm is a price setter.

B. equal to marginal cost since each firm is a price taker.

C. below marginal cost since each firm is a price taker.

D. always a fraction of marginal cost since each firm is a price setter.

E. always a fraction of marginal cost since each firm is a price taker.

12. Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals ________ and then use the _________ curve to determine the price that is consistent with this particular quantity.

A. average total cost; demand

B. average variable cost; demand

C. average total cost; supply

D. marginal revenue; demand

E. marginal revenue; supply

A firm’s production function is given by: F(L,K) = L^1/4K^3/4. You also know that the wage rate is $2, the price of capital is $6, and the price of the product is $216

a) In the short-run, capital is fixed at 1 unit. How many units of Labor (L) should this firm hire?

b) How much profit is the firm making in the short-run?

c) Assuming that in the long-run both capital (K) and labor (L) are variable inputs, what is the optimal combination (profit-maximizing/cost-minimizing L* and K* ) to produce the same amount of output as in the short-run?

d) What are the profits in the long-run?

e) Assume that the firm has a fixed cost of $200. Find the variable cost function, the total cost function, the marginal cost function, the average total cost function, the average fixed cost function, and the average variable cost function (hint: to answer this question, first, redo all calculations in part (c) in terms of a general level of output Q. In other words, first find L* and K* as a function of Q using the tangency condition, then find cost functions).