3. Assume a firm faces these costs: total cost of capital $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials = $8 per raw-material unit.
a. If the firm can produce 2000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials, then what are the total cost and average total cost of producing the 2,000 units of output?
b.The firm now improves its production process so that it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. What are the total cost and average total cost of producing the 3,000 units of output?
c.Based on the data, what conclusion can you draw about the effect of process innovation on economic efficiency?
3. Assume a firm faces these costs: total cost of capital $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials = $8 per raw-material unit.
a. If the firm can produce 2000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials, then what are the total cost and average total cost of producing the 2,000 units of output?
b.The firm now improves its production process so that it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. What are the total cost and average total cost of producing the 3,000 units of output?
c.Based on the data, what conclusion can you draw about the effect of process innovation on economic efficiency?
Related questions
| Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations: |
| a. | The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,000, 21,000, 23,000, and 24,000 units, respectively. All sales are on credit. | ||
| b. | Thirty percent of credit sales are collected in the month of the sale and 70% in the following month. | ||
| c. | The ending finished goods inventory equals 30% of the following monthâs unit sales. | ||
| d. | The ending raw materials inventory equals 20% of the following monthâs raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.70 per pound. | ||
| e. | Twenty percent of raw materials purchases are paid for in the month of purchase and 80% in the following month. | ||
| f. | The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours. | ||
| g. | The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $60,000.
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Kubin Companyâs relevant range of production is 21,000 to 25,000 units. When it produces and sells 23,000 units, its average costs per unit are as follows:
| Average Cost per Unit | ||
| Direct materials | $ | 8.10 |
| Direct labor | $ | 5.10 |
| Variable manufacturing overhead | $ | 2.60 |
| Fixed manufacturing overhead | $ | 6.10 |
| Fixed selling expense | $ | 4.60 |
| Fixed administrative expense | $ | 3.60 |
| Sales commissions | $ | 2.10 |
| Variable administrative expense | $ | 1.60 |
2. Assume the cost object is the Manufacturing Department and that its total output is 23,000 units.
a. How much total manufacturing cost is directly traceable to the Manufacturing Department?
b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?
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