Answer the Following Questions Using the Information Below

question 64

Multiple Choice

Answer the following questions using the information below:
Merrill Company makes a household appliance with model number X800.The goal for Year 2 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of X800 units that can be produced.The industry market size for appliances increased 5% from Year 1 to Year 2.The following additional data are available for Years 1 and 2:

-What is the Merrill Company's cost effect of the growth component for direct materials?

• A)$15,000 U
• B)$10,000 U
• C)$10,000 F
• D)$16,500 F
• E)$7,500 F

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Definitions:

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded, typically downward sloping, indicating an inverse relationship.

Marginal Cost

The cost of producing one more unit of a good or service, considering variable costs but not fixed costs.

Block Pricing

Practice of charging different prices for different quantities or “blocks” of a good.

Price Discrimination

Practice of charging different prices to different consumers for similar goods.