The FSOJ Company Undertakes the Following Activities in Its Production

question 26

Multiple Choice

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 20x2: $\begin{array}{lr}\text { Harvest apples } & \$ 25,000 \\\text { Prepare apples for processing } & 20,000 \\\text { Extract juice from apples } & 18,000\\\text { Process juice into apple juice concentrate, }\\\text { apple juice or apple cider } & 30,000 \\\text { Package completed products } & 9,000\end{array}$ Processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $15,000 for the first half of 20x2. Each product requires a different set up on the processing machines, so FSOJ normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce apple juice for the next 2 weeks. Finally, workers set up the same machines to produce apple cider during the last week of each month.
During the first half of 20x2, 20% of the apples harvested were turned into apple juice concentrate, 50% were processed into apple juice, and 30% became apple cider. The relative sales values of each product were: 75% for apple juice, 20% for apple juice concentrate, and 5% for apple cider. The apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively.
Which of the preceding costs would most likely have "number of setups" as its cost driver?

• A) Harvest apples
• B) Package completed products
• C) Process juice
• D) Extract juice

Differentiate between fixed and variable costs with examples.

Understand economic decision-making regarding operation, shutdown, staying in business, or going out of business in the short and long run.

Analyze the impact of economies of scale on production efficiency.

Apply principles of cost analysis to fill in cost and output tables.

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Definitions:

Shifting Demand Curve

A shifting demand curve occurs when there is a change in a non-price factor, such as consumer preference or income, altering the quantity demanded at any given price.

Price-Consumption Curve

A graphical representation that shows the combination of two goods that a consumer can purchase at different prices, keeping utility constant.

Utility

A measure of satisfaction or happiness that a consumer derives from consuming goods and services.

Income-Consumption Curve

Curve tracing the utility-maximizing combinations of two goods as a consumer’s income changes.