If the standard cost for a pound of direct material 'X' for Company Zeta is $2.50, but the purchasing manager found a source of 'X' outside the company's normal supply chain for $2.00 per pound. Discuss any pros and cons you may foresee from the purchasing manager sourcing the $2.00 per pound material.

In an article about the cost of health care, Money magazine reported that a visit to a hospital emergency room for something as simple as a sore throat has a mean cost of $328 (Money, January 2009). Assume that the cost for this type of hospital emergency room visit is normally distributed with a standard deviation of $92. Answer the following questions about the cost of a hospital emergency room visit for this medical service.

1. What is the probability that the cost will be more than $500?
2. What is the probability that the cost will be less than $250?
3. What is the probability that the cost will be between $300 and $400?
4. If the cost to a patient is in the lower 8% of charges for this medical service, what was the cost of this patient’s emergency room visit?

Q5. Explain the treatment of over and under absorption of overheads in cost accounts.

A firm and its supplier are going to negotiate a deal. Since the supplier’s cost is $10 million per quarter and the value to the firm is $13 million per quarter, there is $3 million per quarter to split between the two. However, they can each hire a negotiation consultant for $500,000 per negotiation. If neither hires the consultant, each expects to get half of the $3 million pot. If only one hires the consultant, it expects to get three-fourths of the pot minus the consultant costs, leaving the other firm to gain 0 (and incur in 0 cost as well). If they both hire consultants, their consultants suggest additional expenditures that erases the potential gain of $3, leaving the firm and the supplier with the cost of hiring the consultants.

What is the equilibrium of this simultaneous move game? Hint: set up the 2x2 table and fill in the pay-off values in the cells, then determine the Dominant Strategies (if any) and Nash Equilibrium (if any)? Explain your reasoning.

Show Work.

Suppose that at the certain factory setup cost is directly proportional to the number of machines used, and operating cost is inversely proportional to the number of machines used. Show that when the total costs is minimal, the setup cost is equal to the operating cost. Hint: Total cost = setup cost + operating cost)

Advertising expenses are a significant component of the cost of goods sold. Listed below is a frequency distribution showing the advertising expenditures for 71 manufacturing companies located in the Southwest. The mean expense is $50.28 million and the standard deviation is $11.46 million. Is it reasonable to conclude the sample data are from a population that follows a normal probability distribution?

Advertising Expense ($Million)                          Number of Companies

25 up to 35                                                                 8

35 up to 45                                                                 12

45 up to 55                                                                    30

55 up to 65                                                                    12

65 up to 75                                                                     9

Total                                                                                 71

A.) State the decision rule. Use the 0.10 significance level. (round 2 decimal places)

H0: The population of advertising expenses follows a normal distribution

H1: The population of advertising expenses does not follow a normal distribution

B.) Compute the value of the chi-square. (round 2 decimal places)

Advertising expenses are a significant component of the cost of goods sold. Listed below is a frequency distribution showing the advertising expenditures for 71 manufacturing companies located in the Southwest. The mean expense is $50.28 million and the standard deviation is $11.46 million. Is it reasonable to conclude the sample data are from a population that follows a normal probability distribution?

Advertising Expense ($Million)                          Number of Companies

25 up to 35                                                                 8

35 up to 45                                                                 12

45 up to 55                                                                    30

55 up to 65                                                                    12

65 up to 75                                                                     9

Total                                                                                 71

A.) State the decision rule. Use the 0.10 significance level. (round 2 decimal places)

H0: The population of advertising expenses follows a normal distribution

H1: The population of advertising expenses does not follow a normal distribution

B.) Compute the value of the chi-square. (round 2 decimal places)

The market demand is given as;

P = 100 – Q

Marginal cost of production is given as;

MC = 10

1. Calculate the level at which market decides to produce and market price   
2. Total Revenue ( TR) and Total Cost (TC)
3. Economic Profit (π)
4. Identify the market structure; either perfect competition or monopoly?