Production Costs

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Production Costs

When looking at productivity what is the relationship between TPL and MPL?

When the total product of labor is increasing, the marginal product of labor remains positive, but when the total product of labor is falling, the marginal product of labor becomes negative.

What is the difference between the short run (SR) and long run (LR) for a business from a microeconomics standpoint?

The short run is a period when the quantity of a single or more inputs does not vary and the quantities of the other inputs vary or can be varied. Contrary to this, the long run is a period when the amounts of all inputs can vary. The difference between these concepts entirely depends on how many inputs that affect production vary or the number of fixed inputs.

What will be some fixed cost and variable costs associated with producing an album?

Fixed costs of producing an album include rehearsal space, album artwork, gear. Variable costs include studio sessions, sound engineer, mixing and mastering, studio time, and publicity.

Where does the Law of Diminishing Returns sets in?

The law of diminishing returns sets in when an input value increases to a point where the marginal increase in outputs starts to diminish with all other factors held constant. The law sets in at a point where the effect of each additional until is to decrease output.

Workers per day TP MP AP TF AF

0 0 0 $0 0

1 2 2 2 100 50

2 5 3 2.5 200 40

3 9 4 3 300 33.33

4 12 3 3 400 33.33

5 14 2 2.8 500 35.71

6 15 1 2.5 600 40

7 15 0 2.07 700 46.67

8 14 -1 1.23 800 53.33

Purpose of Assignment

The materials covered this week distinguish between the different costing methods and provides needed tools for decision making. This case study focuses on determining equivalent units in a production business setting.

Assignment Steps

Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC)

Tutorial help on Excel^® and Word functions can be found on the Microsoft^® Office website. There are also additional tutorials via the web offering support for Office products.

Scenario: Davis Skaros has recently been promoted to production manager. He has just started to receive various managerial reports, including the production cost report you prepared. It showed his department had 2,000 equivalent units in ending inventory. His department has had a history of not keeping enough inventory on hand to meet demand. He has come to you, very angry, and wants to know why you credited him with only 2,000 units when he knows he had at least twice that many on hand.

Prepare a maximum 700-word informal memo and explain to Mr. Skaros why his production cost report showed only 2,000 equivalent units in ending inventory. Using a professional tone, explain to him clearly why your report is accurate.

Format the assignment consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.