Suppose a firm can sell its product for a price of $75 (no more, no less). Suppose that the marginal cost curve and average variable cost curves cross at $100 and a quantity of 10. Assume that fixed costs are $0. At a quantity of 10, total revenue would be: 750
At a quantity of 10, variable cost would be: ________ 0 or 1,000
Since fixed costs are $0, profit at 10 units of output would therefore be: ________ -250, 0 ,750
However, if the firm chose to produce nothing, total revenue would instead be: _________ 0, 750, 75
and variable cost would be: _______ 250, -750, 0
Therefore if the firm produces nothing profit would be -250 .
The BEST course of action for this firm would be to produce: ________Nothing because P < AVC or Produce 10 units of Output
In: Economics
1.
Sam's Smoothies hires workers to produce smoothies. The market for smoothies is perfectly competitive and the price of smoothies is $4. The labor market is competitive and the wage rate is $40 a day. That table shows the workers' total product schedule.
|
|
Quantity Produced (Smoothies per day) |
|
1 |
40 |
|
2 |
100 |
|
3 |
180 |
|
4 |
240 |
|
5 |
290 |
|
6 |
330 |
|
7 |
360 |
|
8 |
380 |
How many workers will Sam's Smoothies hire to maximize profit and how many smoothies a day will it produce?
2. A company's cost function is estimated as: C(Q) = 300 + 2Q + Q2 . If it produces 300 units per day, then what will be its: (a) average (total) cost? (b) average Variable cost, and (c) Marginal cost?
In: Economics
The IBP Grocery orders most of its items in lot sizes of 10 units. Average annual demand per side of beef is 720 units per year. Ordering costs are $25 per order with an average purchasing price of $100. Annual inventory carrying costs are estimated to be 40% of the unit cost.
Required:
a. Determine the economic order quantity
b. Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity
c. Since the shelf life is limited, the IBP Grocery must keep the inventory moving. Assuming a 360-day year, determine the optimal lot size under each of the following:
(1) a 20-day shelf life and (2) a 10-day shelf life.
In: Accounting
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
| Sales | $ | 20,000 |
| Variable expenses | 12,000 | |
| Contribution margin | 8,000 | |
| Fixed expenses | 6,000 | |
| Net operating income | $ | 2,000 |
Required:
1. What is the contribution margin per unit?
2.. What is the contribution margin ratio?
3.What is the variable expense ratio?
4. If sales increase to 1,001 units, what would be the increase in net operating income?
5. If sales decline to 900 units, what would be the net operating income?
6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?
In: Accounting
| Chapter 7: Applying Excel | ||||
| Data | ||||
| Manufacturing overhead | $500,000 | |||
| Selling and administrative overhead | $300,000 | |||
| Assembling Units | Processing Orders | Supporting Customers | Other | |
| Manufacturing overhead | 50% | 35% | 5% | 10% |
| Selling and administrative overhead | 10% | 45% | 25% | 20% |
| Total activity | 1,000 | 250 | 100 | |
| units | orders | customers | ||
| OfficeMart orders: | ||||
| Customers | 1 | customer | ||
| Orders | 16 | orders | ||
| Number of filing cabinets ordered in total | 80 | units | ||
| Selling price | $595 | |||
| Direct materials | $180 | |||
| Direct labor | $50 |
(a) What is the customer margin under activity-based costing when the number of orders increases to 16?
(b) What is the product margin under the traditional costing system when the number of orders increases to 16?
In: Accounting
Taku-Tau company has provided you with the following information:
Selling price per unit = N$90
Variable cost per unit= N$30
Activity driver | Cost driver rate | Level of activity driver |
Set-ups | N$ 800 | 90 |
Inspection | N$ 65 | 500 |
Other data: | ||
Total fixed costs (traditional) | N$900 000 | |
Total fixed costs (ABC) | N$450 000 |
If the company reduces the set-up costs by N$100 per set-up and reduces the number of inspections needed to 400, how many units must be sold to break-even?
Select one:
a. 8 938 units
b. 9 338 units
c. 8 983 units
d. None of all
e. 8 839 units
In: Accounting
Consultants in a particular industry are currently paid $100 per hour and the typical work day lasts 10 hours. Demand for labour in that industry increases, resulting in the average hourly rate increasing to $150 per hour. However, a labour survey reveals that most consultants now work two fewer hours per day than they did prior to the rise in the price of their labour. A newspaper comments that this is at odds with the “law of supply”, such that higher prices should result in greater quantities supplied. Explain why individual consultants’ labour supply curves can be backward bending, such that higher wages lead to fewer hours worked, and explain whether the market labour supply curve for consultants is likely to violate the “law of supply”. Use appropriate diagrams to illustrate your answer.
In: Economics
Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable.
Data as follows:
Customer AAA BBB
Component Type A999 B999
Contract Value($) $27,000 $100,000
Contract Quantity 1,000 unit 2,000 units
Material cost/unit $15 $20
Molding time/batch 5 hours 7.5 hours
Batch Size 100 units 50 units
Annual Budgeted overheads as follows:
Activity Cost Driver Cost driver Cost
volume/year pool
Molding Molding hours 2,000 $150,000
Inspection Batches 150 $75,000
Production Mgmt Contracts 20 $125,000
Calculate the activity-based costs and profits for each contract.
In: Accounting
In: Accounting
Rockwood Enterprises is currently an all equity firm and has just announced plans to expand their current business. In order to fund this expansion, Rockwood will need toraise $100 million in new capital. After the expansion, Rockwood is expected to produce earnings before interest and taxes of $50 million per year in perpetuity. Rockwood has already announced the planned expansion, but has not yet determined how best to fund the expansion. Rockwood currently has 16 million shares outstanding and following the expansion announcement these shares are trading at $25 per share. Rockwood has the ability to borrow at a rate of 5% or to issue new equity at $25 per share. Show mathematically that the stock price of Rockwood does not depend on whether they issue new stock or borrow to fund their expansion.
In: Finance