Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup. During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 20% discount each time they return with the cup to buy a cup of coffee.

Each week Starcups serves 41,000 customers who purchase an average of 2.00 cups of coffee per week (82,000 cups total). Starcups’s contribution margin income statement for a typical week is shown below:

Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows:

• Starcups estimates that 25% of its current customers (10,250) will participate in the promotion. The remainder of its existing customer base (30,750) will continue to buy an average of 2.00 cups of coffee per week.
• Starcups expected to attract 5,100 new customers to participate in the promotion.
• Customers who participate in the promotion will pay an additional $1.00 for the reusable cup. They will then receive a 20% discount on repeat visits when they bring back their reusable cup.
• The additional variable cost of purchasing the reusable cup is $1.60. The variable cost savings of the paper cup is $.30.
• Starcups expects that customers who participate in the reusable cup promotion will visit an average of 5 times per week, including the first purchase of the reusable cup.
• Starcups will spend a total of $11,000 per week advertising the reusable cup promotion.

Required:
1. Prepare a contribution margin income statement to predict how the reusable cup promotion will impact weekly net operating income.



2. Compute the difference in total revenue, total variable costs, total contribution margin, total fixed costs, and total operating income before and after the promotion.

1. Consider a farmer that grows hazelnuts using the production q = AL^2/3 , where q is the amount of

hazelnuts produced in a year (in tonnes), L represents the number of labor hours employed on the farm during the year, and A is the size of orchard which is fixed. The annual winter pruning of the orchard cost $1000, and is already paid by the farmer. The hourly wage rate paid for labor is $12.

1. Derive the equation for the marginal product of labor.
2. Does the production function exhibit diminishing returns to labor? Explain.
3. Derive variable cost (VC), fixed cost (FC), and total cost (C) functions.
4. Derive the average cost, average variable cost, and average fixed cost functions.

Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 54,000 $ 34,000 Work in process ? $ 31,000 Finished goods $ 37,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $30,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. Required: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.)

Costs per Equivalent Unit

Georgia Products Inc. completed and transferred 89,000 particle board units of production from the Pressing Department. There was no beginning inventory in process in the department. The ending in-process inventory was 2,400 units, which were 3⁄5 complete as to conversion cost. All materials are added at the beginning of the process. Direct materials cost incurred was $219,360, direct labor cost incurred was $28,100, and factory overhead applied was $12,598.

Determine the following for the Pressing Department. Round "cost per equivalent unit" answers to the nearest cent.

Q1: A firm uses physical capital, which is fixed at 4 units, and labour (L) to make its product. The price of physical capital is $250 per unit and the price of labour is $100 per unit.

a) Complete the following table by filling in the columns for marginal product of labour (MP_L), average product of labour (AP_L), total fixed cost (TFC), total variable cost (TVC), total cost (TC), average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) and marginal cost (MC). Show values to 2 decimal places if they are not whole numbers. Hint: Do not confuse L, the amount of labour used with Q, the amount of output produced.

b) Why does MC increase at some point when the firm’s output increases? Hint: MC is related to MP_L.

c) How does AVC change (increase, decrease or no change) when the firm uses more labour and AP_L increases?

d) Why does AFC decrease when the firm’s output increases?

e) Why does AVC increase at some point when the firm’s output increases? Hint: How will your ECON 1220 mark will affect your GPA?

f) Which costs would change if the price of physical capital increased from $250 per unit to $300 per unit AND how would these costs change (increase or decrease)?

g) Which costs would change if the price of labour increased from $100 per unit $150 per unit AND how would these costs change (increase or decrease)?

Mountain RidesMountain Rides

manufactures snowboards. Its cost of making

19 comma 00019,000

bindings is as​ follows:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . .

$22,000

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81,000

Variable manufacturing overhead. . . . . . . . . . . . . . . .

44,000

Fixed manufacturing overhead. . . . . . . . . . . . . . . . . . .

81,000

Total manufacturing costs. . . . . . . . . . . . . . . . . . . .

$228,000

Cost per pair ($228,000 / 19,000). . . . . . . . . . . . . . . .

$12.00

Requirement 1.

Mountain Rides'Mountain Rides'

accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid

$ 2 comma 100$2,100

of fixed overhead. Prepare an analysis to show whether

Mountain RidesMountain Rides

should make or buy the bindings. ​(Enter a​ "0" for any zero balances. Round any per unit amounts to the nearest cent and your final answers to the nearest whole dollar. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to​ buy.)

​Decision:

▼

Buy the bindings.

Make the bindings.

Requirement 2. The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute

$ 3 comma 100$3,100

to profit. Total fixed costs will be the same as if

Mountain RidesMountain Rides

had produced the bindings. Show which alternative makes the best use of

Mountain Rides'Mountain Rides's

​facilities: (a) make​ bindings, (b) buy bindings and leave facilities​ idle, or​ (c) buy bindings and make another product. ​(Enter a​ "0" for any zero balances. Round any per unit amounts to the nearest cent and your final answers to the nearest whole​ dollar.)

​Decision:

▼

Continue to make the bindings.

Buy the bindings and use the facilities to make another product.

Buy the bindings and leave the facilities idle.

Denton Company manufactures and sells a single product. Cost data for the product are given:

The product sells for $52 per unit. Production and sales data for July and August, the first two months of operations, follow:

The company’s Accounting Department has prepared the following absorption costing income statements for July and August:

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare variable costing income statements for July and August

3. Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.)

Q1: A firm uses physical capital, which is fixed at 4 units, and labour (L) to make its product. The price of physical capital is $250 per unit and the price of labour is $100 per unit.

a) Complete the following table by filling in the columns for marginal product of labour (MP_L), average product of labour (AP_L), total fixed cost (TFC), total variable cost (TVC), total cost (TC), average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) and marginal cost (MC). Show values to 2 decimal places if they are not whole numbers. Hint: Do not confuse L, the amount of labour used with Q, the amount of output produced.

b) Why does MC increase at some point when the firm’s output increases? Hint: MC is related to MP_L.

c) How does AVC change (increase, decrease or no change) when the firm uses more labour and AP_L increases?

d) Why does AFC decrease when the firm’s output increases?

e) Why does AVC increase at some point when the firm’s output increases? Hint: How will your ECON 1220 mark will affect your GPA?

f) Which costs would change if the price of physical capital increased from $250 per unit to $300 per unit AND how would these costs change (increase or decrease)?

g) Which costs would change if the price of labour increased from $100 per unit $150 per unit AND how would these costs change (increase or decrease)?

Q1: A firm uses physical capital, which is fixed at 4 units, and labour (L) to make its product. The price of physical capital is $250 per unit and the price of labour is $100 per unit.

a) Complete the following table by filling in the columns for marginal product of labour (MP_L), average product of labour (AP_L), total fixed cost (TFC), total variable cost (TVC), total cost (TC), average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) and marginal cost (MC). Show values to 2 decimal places if they are not whole numbers. Hint: Do not confuse L, the amount of labour used with Q, the amount of output produced.

b) Why does MC increase at some point when the firm’s output increases? Hint: MC is related to MP_L.

c) How does AVC change (increase, decrease or no change) when the firm uses more labour and AP_L increases?

d) Why does AFC decrease when the firm’s output increases?

e) Why does AVC increase at some point when the firm’s output increases? Hint: How will your ECON 1220 mark will affect your GPA?

f) Which costs would change if the price of physical capital increased from $250 per unit to $300 per unit AND how would these costs change (increase or decrease)?

g) Which costs would change if the price of labour increased from $100 per unit $150 per unit AND how would these costs change (increase or decrease

1. If overhead used was $50,000 and direct materials used was $100,000 and direct labor used was $60,000 then how much was prime cost?

Group of answer choices

$210,000

$160,000

$150,000

$110,000


2. R Company uses a predetermined overhead rate of $12 per direct labor hour to apply overhead. During the year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $320,000. The overhead variance is:

Group of answer choices

$35,560 underapplied

$40,000 underapplied

$36,000 overapplied

$36,000 underapplied

$40,000 overapplied


3. Beginning inventory for J Company was 1,000 units and ending inventory was 6,000 units. The direct labor cost per unit was $40. The direct material cost per unit was $20. The variable overhead cost per unit was $10. The fixed overhead cost per unit was $30. The variable selling and administrative cost per unit was $6. The fixed selling and administrative cost per unit was $14. What is the value of the ending inventory using the absorption costing method?

Group of answer choices

$420,000

$240,000

$380,000

$360,000

$600,000

4.  R Corporation has a $150 per unit sales price for its only product. Variable production costs per unit manufactured are $40. Variable selling and administrative expenses per unit sold are $16. Total fixed production costs are $200,000. Total fixed selling and administrative expenses are $140,000. During the period there were 10,000 units produced and 8,000 units sold. There were no beginning inventories. What is the net income for F Company using the variable costing method?

Group of answer choices

$600,000

$1,200,000

$452,000

$412,000

$480,000

5. Using the high-low method, a company determined that per-unit variable costs were $12 and total fixed costs were $51,000. What total costs would the company forecast assuming it plans to sell 8,000 units next period?

Group of answer choices

$125,000

$147,000

$51,000

$96,000