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# marginal cost

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In exhibit six what is the highest dollar amount to which marginal cost can rise without changing price? Files attached.

https://brainmass.com/economics/neoclassical-economics/marginal-cost-microeconomics-106536

#### Solution Preview

In exhibit six the highest dollar amount the marginal costs can reach without affecting price is \$18. This is because you are dealing with a kinked D curve, and the MC can fluctuate between the area where the marginal revenues slope changes, without affecting price or quantity. Point B represents the highest value in this area: the \$18 price level.

In the ...

#### Solution Summary

Examples of cartels which have suffered a lot of undercutting due to economic incentives are embedded.

\$2.19

## Variable costing

Avant Designs and manufactures polished-nickle fashion bracelets. It offers two bracelets: Aztec
and Mayan. The following data summarized budgeted operations for the current year:

AVANT DESIGNS
Summary of Budgeted Operations
Current Year

Aztec Mayan
Sales price/unit \$12 \$15
Variable cost/unit \$4 \$5
Units sold 30,000 20,000
Machine minutes/units 2 3
Beginning inventory 0 0
Ending inventory 3,000 1,000

Budgeted fixed manufacturing overhead for the year was \$258,000.

Required:
a. Prepare the budgeted income statement for the year using variable costing.

P 10-14: Solution to Avant Designs

[Variable vs. absorption costing with two products]

a. The budgeted variable costing income statement:

Avant Designs
Budgeted Income Statement - Variable Costing
Current Year

Aztec Mayan Total
Sales price \$12 \$15
Variable cost \$4 \$5
Contribution margin
Units sold 30,000 20,000
Net Margin
Budgeted fixed

Net Income

b. Avant Designs
Calculation of Budgeted Machine Minutes
Current Year

Total
Change in Inventory Units Sold Units Produced Machine Minutes/unit Machine Minutes
Aztec

Mayan

Budgeted machine minutes

The next step is calculating the fully absorbed cost of manufacturing each bracelet.

Avant Designs
Calculation of Fully Absorbed Cost per Bracelet
Current Year

Fixed Manufacturing

Variable Cost Mathine Minutes/Units Overhead Rate/Machine Minutes Overhead per Bracelet Fully Absorbed Cost Per Bracelet
Aztec

Mayan

Avant Designs
Budgeted Income Statement - Absorption Costing
Current Year

Aztec Mayan Total
Sales Price
Absorption Cost
Net margin per bracelet
Units sold
Net Margin
Net Income

c. Avant Designs
Reconciliation of Net Incomes Computed Using Absorption and Variable Costing
Current Year

Change in Inventory Machine Minutes per Bracelet Machine Minutes in Inventory

Aztec

Mayan

Total machine minutes in inventory
Fixed manufacturing overhead rate per machine minute
Total fixed manufacturing overhead in inventory

Avant Designs
Reconciliation of Net Incomes Computed Using Absorption and Variable Costing
Current Year

Ending Inventory Variable Cost Per Bracelet Ending Inventory Value
Aztec

Mayan

Ending Inventory (Variable Costing)

Ending Inventory Full Absorption Cost per Bracelet Ending Inventory Value

Aztec

Mayan

Ending Invenroty (Obsorption Costing)

Difference in Inventory Values

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