Incremental Cost.South Park Software, Inc. produces innovative interior decorating software that it sells to design studios, home furnishing stores, and so on.The yearly volume of output is 15,000 units.Selling price and costs per unit are as follows:

Selling Price $250

Costs:

Direct material $40

Direct labor 60

Variable overhead 30

Variable selling expenses 25

Fixed selling expenses 20 -$175

Unit profit before tax $75

Management is evaluating the possibility of using the Internet to sell its software directly to consumers at a price of $300 per unit.Although no added capital investment is required, additional shipping and handling costs are estimated as follows:

Direct labor $30 per unit

Variable overhead $5 per unit

Variable selling expenses $2 per unit

Fixed selling expenses $20,000 per year

Calculate the incremental profit that South Park would earn by customizing its instruments and marketing them directly to end users.

Anthony Figueroa is a CPA, who works for an accounting consulting firm. His annual salary income is $70,000. Anthony is considering opening up his own consulting firm. He estimates that the annual rent for an office would cost him $20,000; a secretary would cost $24,000 per year. If he would rent office equipment, he would have to pay $11,000 per year. The purchase of required supplies, payment of electricity bills, water and telephone bills, would cost approximately $5,000 a year. Anthony estimates that the revenues that he would generate with consulting services would be $120,000 a year.

a.Calculate Anthonyhis explicit cost for operating his consulting firm for a year

b.What is Anthony's accounting cost?

c.What is Anthony's implicit cost?

d.Should Anthony Figueroa start his own practice? Explain why.

Suppose that the economist of Corporation XYZ estimates the following long run cost function for a product M that the company produces and sells.

TC = 5Q²+ 10Q +180

The market price for product M is fixed at P = $70

a.What is the total fixed cost?

b.What is the total variable cost function?

c.Suppose that Company XYZ would like to minimize average total cost. What volume of output of

product M should be produced?

d.AtP = $70, calculate whether the firm has economic profits, economic loss ornormal profits. Explain why.