The Perry Corporation recorded the following budgeted and actual information relating to fixed overhead costs for its Z-Line of
1 answer:
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Answer:
a. $700,000
b. 6/7 or 85.7%
c. No they will not.
Explanation:
a. Jacobs will earn the normal salary that the other designers in the other companies are getting in addition to the incremental income he brings to the company as a result of his talents.
Incremental income = Revenue with Jacobs - Revenue without Jacobs
= 1,000,000 - 400,000
= $600,000
Jacobs earnings = Normal designer earnings + incremental income
= 100,000 + 600,000
= $700,000
b. Economic rent is the excess amount that the company is paying Jacobs over what it should normally cost to get a designer.
Normal cost of designer is $100,000. Company is therefore paying an economic rent of $600,000.
Proportion of Jacobs salary that is economic rent =
=
= 6/7 or 85.7%
c. The company hiring Jacobs will not be making an economic profit because for them to make an economic profit they would have to be making more than the $400,000 that the other firms make. They cannot make this amount because for them to do so they would have to reduce the amount they pay Jacobs. If they do so, Jacobs would leave for greener pastures and then they would be making the same $400,000 that the rest are making.
Answer:
The level of production x that will maximize the profit is: 22,966
Explanation:
C(x) = 50,000 + 100x + x³
R(x) = 3400x
P(x) = R(x) - C(x)
= 3400x - [50,000 + 100x + x³]
= 3400x - 50,000 - 100x - x³
= 3300x - 50,000 - x³ .................... (A)
P'(x) = 3300(1) - 0 - 3x²
= 3300 - 3x²
At a critical point, P'(x) = 0
∴ 0 = 3300 - 3x²
3x² = 3300
x² = 1100
x = ±
P"(x) = -6x
P() = -6 (
) < 0
by second derivative, 'P' max at x = = 33.17 (rounds)
since x = ,
recall that P(x) = 3300x - 50,000 - x³ from equation (A)
Therefore, Maximum Profit
P() = 3300
- 50000 -
= 3300(33.17) - 50,000 - 33.17³
= 109461 -50,000 - 36495.26
= 22,965.74
Maximum profit is 22,966 to the nearest whole number