Northridge Inc

question 65

Multiple Choice

Northridge Inc., uses the high-low method to analyze cost behaviour. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity jumped to 24,000 machine hours, which is still within the relevant range, the total maintenance costs averaged $9.75 per machine hour. On the basis of this information, the company's fixed maintenance costs are:

• A)$20,000.
• B)$24,000.
• C)$90,000.
• D)$210,000.
• E)$234,000.

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Definitions:

Long Run

a period in which all factors of production and costs are variable, allowing firms to adjust all inputs.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for product differentiation and some degree of market power.

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, equating to its opportunity costs.

Economic Profit

The surplus remaining after total costs (including both explicit and implicit costs) are subtracted from total revenues, reflecting the opportunity costs of all resources.