Table 7-9 -Refer to Table 7-9.Clock It to Me Manufactures Clock Radios.The

question 61

Essay

Table 7-9

-Refer to Table 7-9.Clock It To Me manufactures clock radios.The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes.
a.You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes.Record your calculations in the table below.
Average Cost of Production

b.For each of the three output levels,which plant size will generate the lowest average total cost of production?
c.Suppose the firm currently sells 8000 clock radios per period (using the optimal plant size for this output level).Now,however,it has just secured a long-term contract to supply 20 000 clock radios per period.In the short run,what is the average total cost of producing 20 000 clock radios? Provide a numerical value based on your answer in part a.
d.What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.

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Definitions:

Principle of Exceptions

The principle of exceptions is a management concept focusing on identifying and dealing with cases that deviate from the normal operation or standards, thus streamlining processes and oversight.

Standard Costs

Predetermined costs for manufacturing or acquiring products, used as a benchmark to compare with actual production costs for budgeting and performance evaluation.

Actual Costs

Refers to the genuine expenses incurred in the production, acquisition, or delivery of products and services.

Nonfinancial Measure

A metric that assesses a business's performance using qualitative indicators such as customer satisfaction or employee turnover, not directly related to monetary values.