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    Law of Demand

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    * During the month of July, McElroy Company's direct labor cost totaled $36,000, and direct labor cost was 60% of prime cost. If total manufacturing costs during July were $85,000, the manufacturing overhead was:

    a. $60,000
    b. $25,000
    c. $30,000
    d. $51,000

    * Suppose that the price of Product A falls from $20 to $15. In
    response, the quantity demanded of A increases from 100 to 120 units.
    The quantity demanded for Product B increases from 200 to 300. Calculate
    the arc cross elasticity between Product B and Product A. Is B a
    substitute or complement for A? Explain. Does Product A follow the "law
    of demand?" Explain

    * Suppose that the marginal product of labor is: MP = 100 - L, where L
    is the number of workers hired. You can sell the product in the
    marketplace for $50 per unit and the wage rate for labor is $100. How
    many workers should you hire?

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    Solution Preview


    Prime Cost = 36,000/60% = 60,000

    Therfore overhead = 85,000 - 60,000 = 25,000


    change in price of A = -25%

    Increase in demand of A = +20%

    Increase in demand ...

    Solution Summary

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