Lorimar Watch Company Manufactures Travel Clocks

question 165

Multiple Choice

Lorimar Watch Company manufactures travel clocks. The daily marginal cost function associated with producing these clocks is ​ ​
Where is measured in dollars/unit and x denotes the number of units produced. Management has determined that the daily fixed cost incurred in producing these clocks is $130. Find the total cost incurred by Lorimar in producing the first 400 travel clocks/day.
​

• A) $2,802
• B) $2,672
• C) $1,444
• D) $1,371
• E) $52,000

Identify costs involved in the acquisition of fixed assets.

Understand how changes in estimates affect depreciation calculation.

Discriminate between capital and revenue expenditures.

Understand the accounting treatment for disposal of plant assets.

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Definitions:

ATC

Average Total Cost, the total cost per unit of output calculated by dividing the total cost by the quantity produced.

Economic Profit

The gap between the total amount earned and the aggregate of all charges, considering both out-of-pocket and hidden expenses.

Pure Monopolist

A market participant that is the sole seller of a product or service, having significant control over its price.

Marginal Cost

Marginal cost is the additional cost incurred by producing one more unit of a good or service, a critical concept for understanding production decisions.