Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 8, Problem 1P
To determine
Identify the production cost and periodic cost.
Expert Solution & Answer
Explanation of Solution
Production cost are those cost that incurred during the manufacturing or purchasing of the goods. Thus, the costs storage and material handling cost for raw material, Lubricant for the machinery,
Periodic cost are those cost that are not involved in the process of manufacturing or purchasing of the goods. Thus, gains or loss from the disposable of asset, depreciation of the company value and leasehold cost are tge periodic costs.
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Students have asked these similar questions
Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a
synthetic diamond is $80. The fixed costs incurred each year for factory upkeep and administrative expenses are $800,000. The
machinery costs $1.12 million and is depreciated straight-line over 10 years to a salvage value of zero.
a. What is the accounting break-even level of sales in terms of number of diamonds sold?
Accounting break-even
diamonds
b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole number.
NPV break-even level of sales
diamonds
Cost Flow Relationships
The following information is available for the first month of operations of Bahadir Company, a manufacturer of mechanical pencils:
Sales
$792,000
Gross profit
462,000
Cost of goods manufactured
396,000
Indirect labor
171,600
Factory depreciation
26,400
Materials purchased
244,200
Total manufacturing costs for the period
455,400
Materials inventory, ending
33,000
Using the above information, determine the following missing amounts:
a. Cost of goods sold
$330,000
b. Finished goods inventory at the end of the month
66,000
c. Direct materials cost
211,200
d. Direct labor cost
e. Work in process inventory at the end of the month
Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices.
Time Period
Price
Quantity Sold
Total Contribution
($)
(Million)
($ Million)
1
2,400
0.2
2
2,200
0.2
3
2,000
0.2
4
1,800
0.2
5
1,700
0.2
6
1,600
0.2
7
1,500
0.2
8
1,400
0.2
9
1,300
0.2
10
1,200
0.2
Over the 10 periods, the total contribution to profits and fixed costs from price skimming is
million.
Chapter 8 Solutions
Contemporary Engineering Economics (6th Edition)
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