Na Li is a South Asian immigrant in New Jersey who was divorced by her husband after 34 years of marriage. She can proficiently
1 answer:
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Answer:
Job 334 total cost: $ 8,400
Unit cost: 8,400 / 200 = $ 42
Explanation:
Total cost: Material + Labor + Overhead
Material: 5,000
Labor: 2,400
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<u>Overhead:</u>
We distribute the expected cost over the expected base:
expected cost: 100,000
cost driver: 40,000 labor hours
cost per hour: 100,000 / 40,000 = <u>2.5 predetermined overhead</u>
Now we multiply this rate by the hours of the job to know Applied Overhead:
job labor hours x overhead rate:
Job #334 had 2,400 labor cost / $6 rate per hour = 400 hours
400 x 2.5 = 1,000
Total cost: 5,000 + 2,400 + 1,000 = 8,400
Answer:
(a) Q* = 6
(b) The price in the market is $7 and the monopoly's loss is also 7.
(c) The monopoly should operate because the price of 7 is greater than the AVC of 4.
Explanation:
(a) Use profit maximization to determine the profit maximizing quantity, Q*, for the monopoly. Show all steps for the profit maximization process.
Given ............................ (1)
MC = C'(Q) = 1 + Q ............................................... (2)
p = 13 — Q ................................................................(3)
Profit is maximized when P = MC, Therefore, we equate equations (2) and (3) and have:
1 + Q = 13 - Q
Q + Q = 13 - 1
2Q = 12
Q* = 12/2
Q* = 6 <-------------- Profit maximizing Q*
(b) At Q*, what is the price in the market and what is the monopoly's profit?
Substituting 6 for Q in equation (3), we have:
p = 13 — 6
p = 7 <-------------- The price in the market
Revenue = Q*P = 6 * 7 = 42
To obtain cost, substitute 6 for Q in equation as follows:
Cost =
= 31 + (0.5 * 36)
= 31 + 18
Cost = 49
Profit (loss) = Revenue - Cost = 42 - 49 = - 7 loss
(c) In the short run, should the monopoly operate or shut down? Why?
From equation (1), we have:
Fixed cost = 25
Variable cost (VC) =
Average variable cost (AVC) = VC/Q = 24/6 = 4
p > AVC => 7 > 4
The monopoly should operate because price of 7 is greater than the AVC of 4. Continuing operation will therefore enable the monopoly to cover variable costs fully and some part of the fixed cost. This way, loss will be minimized.