Suppose a given market is served by a monopoly with constant marginal cost, c. We know that 1st degree price discrimination increases total surplus compared to the outcome where the monopoly charges a single price, pm. One of the criticisms of this result is that price discrimination can be costly to the monopoly, e.g., because it must gather information on willingness-to-pay. Suppose the marginal cost with price discrimination rises to c' > c. Explain with words and a diagram whether total surplus is still higher with 1st degree price discrimination than a single price. What areas on your diagram must be compared?

FIFO and LIFO Costs Under Perpetual Inventory System

The following units of an item were available for sale during the year:

The firm uses the perpetual inventory system, and there are 14 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?
$

b. What is the total cost of the ending inventory according to LIFO?
$

8. You are tasked with trying to restore the biodiversity in a national park. How might your understanding of keystone species affect your management plans?

9. Earth can support more people who are vegetarians than people who regularly consume meat. Why do you think this is?

10. If only 10% of the energy available in a plant is turned into body tissue of a cow, what happens to the other 90%?

11. Which do you think would be a more stable ecosystem: one where each species has only one connection to another species, or one where each species has five connections to other species? Explain your answer.

12. Which community would support the greatest diversity of species—a community composed of species with broad ecological niches or a community composed of species with narrow, specialized ecological niches? Explain your answer.

Which of the following statements about the relationship between underlying cost structure and financial risk is most correct?

a. If a provider is primarily capitated, risk is minimized when variable costs are a large part of total costs.

b. If a provider is primarily capitated, risk is minimized when fixed costs are a large part of total costs.

c. If a provider is primarily fee-for-service, risk is minimized when fixed costs are a large part of total costs.

d. If a provider is primarily fee-for-service, risk is minimized when total variable costs are a large part of total costs.

e. Both b. and d. above are correct.

Data: selling price per large Snowie 4$

Ice per snowie (need one per servin)0.2

Spoon straw (need one per serving)0.02

Napking(need two per snowine) 0.01

Serving per gallon of syrup 28

Cost per gallon of syrup (includes concentrate, preservative, and sugar) 4.25

Hourly rate for workers 10

Even registration fee per day 25

Electricity, insurance, maintenance, and permit cost per month 250

Kiosk rental cost per month (12 month) 650

Purchase cost of two ice shavers (5 year life) 3180

Purchase cost of flavor station (5 year life) 1080

Number of days you anticipate opening the kiosk per month 20

Number of hours you will work (no wages required) per day 6

Number of hours you will pay an employee to work in the kiosk per day 8

Questions:

Syrup cost per Snowie (cost gallon/serving per gallon od syrup)

Cost per day (Hourly rate for workers x Number of hours you will pay an employee)

Cost per month( Cost per day above x Number of days kiosk is open per month)

Total variable cost per snowie

Straight-line depreciation- ice shavers($3180/5years/12month)

Straight-line depreciation – flavour station($1080/5/12)

Total fixed cost per month

Concrete Creations manufactures concrete bird baths that are sold through retail outlets nationwide. The bird baths are made in a two-stage process. In the Forming Department, the concrete is poured into silicone molds where it is allowed to cure and set. Once set, the birdbaths are removed from the mold and sent to the Finishing Department where any imperfections are removed and the birdbaths are sprayed with a special sealant. Information for the Forming Department for the month of May is provided below.

Percent Complete

Units Materials Conversion

Work-in-Process, Beginning 10,000 100% 60%

Started into Production 90,000   

Completed and Transferred Out 80,000

Work-in-Process, Ending 20,000 100% 40%

Materials Conversion

Work-in-Process, Beginning $ 12,600 $12,400

Cost Added During Period $ 167,400 $ 119,350

Questions 1. Assume that Concrete Creations uses the weighted-average method for cost allocation. Determine the equivalent units of production for the Forming Department for the month of May. 2. Assume that Concrete Creations uses the weighted-average method for cost allocation. Compute the cost per equivalent units of production for the Forming Department 3. Assume that Concrete Creations uses the weighted-average method for cost allocation. Calculate the total cost of ending work in process inventory as well as total cost of units transferred out for May. 4. Assume that Concrete Creations uses the weighted-average method for cost allocation. Prepare a cost reconciliation report for the Forming Department for May. 5. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Determine the equivalent units of production for the Forming Department for the month of May. 6. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Compute the cost per equivalent units of production for the Forming Department. 7. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Calculate the total cost of ending work in process inventory as well as total cost of units transferred out for May. 8. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Prepare a cost reconciliation report for the Forming Department for May. 9. Compare the two cost reconciliation reports (weighted average and FIFO). Identify and comment on any significant differences between the two reports. If you were a manager at Concrete Creations, which approach would you recommend and why? Be sure to identify the advantages and disadvantages to both approaches when making your analysis.

The entire answer is needed, but special emphasis on question#9, comparing the two cost reconciilation reports

PA4-3 Selecting Cost Drivers, Assigning Costs Using Activity Rates [LO 4-1, 4-3, 4-4, 4-6 ]

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

Harbour has monthly overhead of $213,390, which is divided into the following cost pools:

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

Required:            
1. Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

    
2. Calculate the production cost per unit for each of Harbour’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

3. Calculate Harbour’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.

    
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.

6. Calculate the production cost per unit for each of Harbour’s products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

7. Calculate Harbour’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

8. Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)

Pineapples grow in Hawaii all year round and there are many farms and gardens that produce pineapples for the local market. The demand curve for pineapples in Hawaii is given by Q = 240−2P, where Q is in tons of pineapples. The marginal cost of producing an additional ton of pineapples is constant and equal to $50 for all producers in the market.

(a) Given that there are many producers of pineapples in Hawaii and that pineapples are a homogeneous good, let’s assume that the market for pineapples is perfectly competitive. Calculate and show on a graph the equilibrium quantity sold in the market, total sur- plus, and deadweight loss. (Hint: recall the relationship between the supply curve and marginal cost curves of firms.)

(b) Now suppose one of the pineapple producers, Noa, inherits a large sum of money and decides to buy out all of the island’s land on which pineapples can be grown (including all the farms and gardens of his competitors). That is, Noa becomes a monopolist in the market for pineapples in Hawaii. Calculate and show on a graph the new equilibrium quantity and price; consumer, producer, and total surplus; and deadweight loss. [For this problem it will help to recall that when the demand curve is linear, the monopolist’s marginal revenue curve is a line with the same “y-intercept” as the demand curve, but a slope that’s twice as steep as the demand curve.]

(c) If Noa produces Q tons of pineapples, his total cost is 250 + 50Q. Calculate Noa’s profit if he operates at his profit-maximizing quantity and price.

(d) Sketch Noa’s average total cost function on a new graph. Does Noa experience increasing, decreasing, or constant returns to scale?