The economic principle of substitution says that when there are two houses in the same neighborhood with the same size, appeal, and utility, the lower-priced one will tend to sell first.
<h3>The economic principle of substitution</h3>
- According to the principle of substitution, the cost of purchasing a substitute that is just as desired tends to establish the upper limit of value, assuming no inopportune delays.
- A shrewd investor would not spend more on an asset that generates income than it would cost to construct or buy an asset of a similar nature.
- According to this theory, the cost of acquiring a comparable substitute property with the same use, design, and revenue determine the maximum value of a property in most cases.
- For instance, why would somebody pay $1,000,000 for a home when they could pay $750,000 for a different but as appealing home in the same neighborhood?
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Answer:
35,000 equivalent units
Explanation:
Equivalent Units E.U) are notional whole units which represent incomplete work and are used to apportion costs between between work in progress and completed work.
To compute as
Equivalent Units = Degree of completion (%) × units
Items Units Workings E.U
Completed 28,000 28,000× 100% 28,000
Closing WIP 14,000 14,000 × 50% 7,000
Total equivalent units 35000
The total equivalents for conversion cost
= 28,000 + 7,000
= 35,000
Answer:
Total unitary cost= $16.2
Explanation:
<u>First, we need to compute the total fixed overhead:</u>
Total fixed overhead= 10,000*6= 60,000
<u>Now, the unitary absorption cost for 12,500 units:</u>
Direct labor= 2.8
Direct materials= 3.8
Variable overhead= 4.8
Total variable cost= $11.4
Fixed overhead= (60,000/12,500)= 4.8
Total unitary cost= $16.2
The unitary cost is lower.
