Consider a firm with the following production function:
Q = K^1/2L^1/2

Assume that we are in the short run so the capital stock is fixed at 4 units. The wage rate is $16 and the rental rate of capital is $10. Please graph the firm's short run margical cost, average variable cost, average fixed cost, and average total cost curves. Remember to label the axes and curves accurately.

Date

Transaction

Number of Units

Per Unit

Total

Jan.1Inventory7,500$ 75.00$ 562,50010Purchase22,50085.001,912,50028Sale11,250150.001,687,50030Sale3,750150.00562,500Feb.5Sale1,500150.00225,00010Purchase54,00087.504,725,00016Sale27,000160.004,320,00028Sale25,500160.004,080,000Mar.5Purchase45,00089.504,027,50014Sale30,000160.004,800,00025Purchase7,50090.00675,00030Sale26,250160.004,200,000

3. Determine the inventory on March 31 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent and use that amount in subsequent computations.

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

1. The balance in the account Work in Process—Filling was as follows on January 1:

   Work in Process—Filling Department
   (1,900 units, 60% completed):
   	Direct materials (1,900 x $10.70)	$20,330
   	Conversion (1,900 x 60% x $6.90)	7,866
   		$28,196

   The following costs were charged to Work in Process—Filling during January:

   Direct materials transferred from Reaction
   	Department: 24,500 units at $10.50 a unit	$257,250
   Direct labor		87,660
   Factory overhead		84,231

   During January, 24,300 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 2,100 units, 50% completed.

   Required:

   1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

   Dover Chemical Company
   Cost of Production Report-Filling Department
   For the Month Ended January 31
   Unit Information
   Units charged to production:
   Inventory in process, January 1
   Received from Reaction Department
   Total units accounted for by the Filling Department
   Units to be assigned costs:
   		Equivalent Units
   	Whole Units	Direct Materials	Conversion
   Inventory in process, January 1
   Started and completed in January
   Transferred to finished goods in January
   Inventory in process, January 31
   Total units to be assigned costs
   Cost Information
   Costs per equivalent unit:
   		Direct Materials	Conversion
   Total costs for January in Filling Department		$	$
   Total equivalent units
   Cost per equivalent unit		$	$
   Costs charged to production:
   	Direct Materials	Conversion	Total
   Inventory in process, January 1			$
   Costs incurred in January
   Total costs accounted for by the Filling Department			$
   Cost allocated to completed and partially completed units:
   Inventory in process, January 1 balance			$
   To complete inventory in process, January 1	$	$
   Cost of completed January 1 work in process			$
   Started and completed in January
   Transferred to finished goods in January			$
   Inventory in process, January 31
   Total costs assigned by the Filling Department			$

   2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the costs transferred from Filling to Finished Goods.

   (1)
   (2)

   3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

   	Increase or Decrease	Amount
   Change in direct materials cost per equivalent unit		$
   Change in conversion cost per equivalent unit

   4. The cost of production report may be used as the basis for allocating product costs between   and  . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Check My Work

question

please analyze that comparison of the overhead allocation to each service unit under both methods, traditional and Activity-Based Costing (ABC), which method is better for this company?

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

The following costs were charged to Work in Process—Filling during January:

During January, 38,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,300 units, 40% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

Feedback

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the costs transferred from Filling to Finished Goods.

Feedback

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. The cost of production report may be used as the basis for allocating product costs between Work in Process  and Finished Goods . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

4A. Consider two rubber companies, Firestone and Goodyear. Both companies create air pollution when they produce rubber. The air pollution can be reduced by the firm, but the abatement comes at a cost. Specifically,

MAC_F = 800 – 4e_F, where e_F = tons of emissions produced by Firestone
MAC_G = 200 – e_G, where e_G = tons of emissions produced by Goodyear

the government wants to use an effluent tax to reduce emissions to 200 tons. What is the optimal number of emissions for Goodyear (firm G) under this policy?

Using the information from question 4A, what is the optimal number of emissions for Firestone (firm F) under this policy?

Given the information from question 4A, what tax level reduces emissions in the most cost-effective way for the firms when they operating at their optimal number of emissions under this policy?

Using the information from question 4A, calculate the total cost (tax cost + abatement cost) for firm F under this effluent tax policy?

Using the information from question 4A, calculate the total cost (tax cost + abatement cost) for firm G under this effluent tax policy

Dotsero Technology, Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Department A is based on machine-hours, and the rate in Department B is based on direct labor hours. At the beginning of the most recent year, the company's management made the following estimates for the year.

Dept. A Dept. B

Machine-hours. . . . . . . . . . . . . . . 30,000 60,000

Direct labor-hours. . . . . . . . . . . . .70,000 20,000

Manufacturing overhead cost. . . . $420,000 $600,000

Job 243 entered into production on April 1 and was completed on May 12. The company's actual cost records show the following information about the job.

Dept. A Dept. B

Machine-hours. . . . . . . . . . . . . . . . . . . 250 60

Direct labor-hours. . . . . . . . . . . . . . . . 70 120

Direct materials cost. . . . . . . . . . . . . . . $840 $1,100

Direct labor cost. . . . . . . . . . . . . . . . . . $610 $880

Compute the total manufacturing cost of Job 243. Note: “Total manufacturing cost” is the sum of direct materials, direct labor, and applied manufacturing overhead cost in both Department A and Department B.

$11,170

$10,240

$7,100

$5,580

$10,530

$4,950

$7,770

$10,630

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $192,500 per year, consisting of $0.24 per ton variable cost and $142,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 65% of the Transport Services Department’s capacity and the Southern Plant requires 35%. During the year, the Transport Services Department actually hauled 130,000 tons of ore to the Northern Plant and 56,900 tons to the Southern Plant. The Transport Services Department incurred $362,000 in cost during the year, of which $53,200 was variable cost and $308,800 was fixed cost.

Required: 1. How much of the Transport Services Department’s variable costs should be charged to each plant?

2. How much of the $308,800 in fixed cost should be charged to each plant?

3. Should any of the Transport Services Department’s actual total cost of $362,000 be treated as a spending variance and not charged to the plants?

The controller of Blossom Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.

(a)

Determine the fixed- and variable-cost components using the high-low method.

eTextbook and Media

(b)

What electricity cost does the cost equation estimate for a level of activity of 460 machine hours?

By what amount does this differ from March’s observed cost for 460 machine hours?

eTextbook and Media

(c)

What electricity cost does the cost equation estimate for a level of activity of 790 machine hours?

By what amount does this differ from June’s observed cost for 790 machine hours?

CH 11.4 HW

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $337,800 per year, consisting of $0.24 per ton variable cost and $287,800 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 53% of the Transport Services Department’s capacity and the Southern Plant requires 47%.

During the year, the Transport Services Department actually hauled 117,000 tons of ore to the Northern Plant and 57,000 tons to the Southern Plant. The Transport Services Department incurred $360,000 in cost during the year, of which $52,400 was variable cost and $307,600 was fixed cost.

1. How much of the Transport Services Department’s variable costs should be charged to each plant?

2. How much of the $307,600 in fixed cost should be charged to each plant?

3. Should any of the Transport Services Department’s actual total cost of $360,000 be treated as a spending variance and not charged to the plants?