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Labor & Manufacturing Cost Considerations in Maximizing Profit

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Company A seeks help making employment decisions. It employs labor and trucks by the hour and obtains both in competitive markets. It currently employs 100 hours of labor and 20 hours of trucking services at \$24 and \$36 per hour, respectively. It sells its output in a competitive market at \$10 per unit. Output is currently 500 per hour. It knows that output rises by about 6 when it employs an additional hour of labor hours of trucking services remains constant at 20 and that output rises by about 12 when it employs an additional hour of trucking services and labor hours remains constant at 100.

a. If long-term contract prevent the firm from changing the amount of trucking services it rents, should the firm increase, decrease, or leave constant the amount of labor employed? The goal is to maximize profit. Show clearly and explain your analysis.
b. Can the firm reduce its total cost of producing 500 units per hour if both inputs are variable? Either explain how or why not. Show clearly and explain your analysis.

https://brainmass.com/economics/pricing-output-decisions/labor-manufacturing-cost-considerations-maximizing-profit-574072

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a. If long-term contract prevent the firm from changing the amount of trucking services it rents, should the firm increase, decrease, or leave constant the amount of labor employed? The goal is to maximize profit. Show clearly and explain your analysis.

Marginal Product of labor-hour=MPL=6 (keeping trucking services at 20 hours)
Marginal Cost of labor-hour=MCL=\$24
Marginal ...

Solution Summary

Solution depicts the steps to check for optimal input combination in the given case.

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Accounting Multiple Choice

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Would it be:
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2. Specific customers
3. Specific production departments

Not absolutely sure on a choice.

B) Which of the following is a period cost?
Would it be:
1. Manufacturing plant maintenance
2. Wages for production line workers
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Would it be:
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I think it is Antique furniture restorer or Automobile repair shop. Not absolutely sure.

D) Which is most likely to be a variable cost?

Would it be:
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I think it is cost of material used in production. Not absolutely sure.

E) Full costing includes which of the following in determining product cost?
Would it be:
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Not absolutely sure on a choice.

F) Which of the following is likely to be a fixed cost?
Would it be:
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G) The contribution margin ratio measures?
Would it be:
1. Profit per dollar of sales
2. Profit per unit
3. Contribution margin per dollar of sales
4. Ratio of variable to fixed costs

H) To determine the profit-maximizing price, a manager must do what?
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I) Controllable costs for a manager of department A include what?
Would it be:
1. All costs related to department A's final product
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J) Allocation of indirect costs?
Would it be:
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2. Is an inherently arbitrary process, a characteristic that can lead to problems.
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4. Both 1 and 2

K) In the cost allocation process, an allocation base?
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L. Full costing differs from variable costing in that?
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Not absolutely sure on a choice.

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