8. actual, full costing Return to problem 3−14 where Ralph manages a two product firm.

Demand now limits him to producing q1 = 100 units of the first product and q2 = 150 units of the second. Labor used exclusively for the first product cost a total of 7, 500 and labor used exclusively for the second product cost a total of 19, 687.50. In addition, the machine used for both products cost 20, 000. This gives us three cost pools, direct labor for each product and an overhead pool. You should verify that these factor expenditures are consistent with the technology and factor prices specified in the original problem. Having done that, now determine the unit cost of each product. Do this by allocating overhead equally between the products, by allocating overhead on the basis of physical units of output, and by allocating overhead on the basis of direct labor dollars. Contrast your unit cost constructions with marginal cost, presuming of course q1 = 100 and q2 = 150.