Joan is on summer break and spends most of her time either playing video games

or browsing the internet. Her utility function is U(q1; q2) = 3q0:2

1 q0:8

2 , where q1 represents the

hours spent browsing the internet and q2 hours playing video games. Joan does not have a budget

constraint but she has 15 hours to spend on both activities.

(a) (5 points) Write the equation for one of Joan’s indifference curves when the level of utility is

equal to 100.

(b) (5 points) Write Joan’s time constraint.

(c) (10 points) Find the amount of hours that Joan will spend on each activity that maximizes her

utility and satisfies her time constraint. Use either the substitution or Lagrangian method.

(d) (5 points) Can Joan afford any bundle that yields a utility of 50? Explain.

(e) (5 points) How does Joan’s optimum amount of time spent on each activity change if her

utility function is U(q1; q2) = 5ln(3) + ln(q1) + 4ln(q2)?

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Joan Salmon is the 35 year old daughter of Garret Salmon the owner of a medium sized party invitation company “Invitations Inc.” Joan has recently received a degree from UMUC in Business Management and is anxious to take over her father’s company.  She is a single mother, very attractive but a little retiring in her manner.  She and her father have been planning her take over for several years, ever since her ex-husband left the business after their divorce, an event that did not go unnoticed within the company.  Joan has always worked in some capacity within the company but never in a serious leadership role. She is simply known as the “boss’ daughter”.  Joan and her father have agreed that she will take over as CEO in the next two months. No one knows of this decision.

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Job 218 was one of the many jobs started and completed during the year. The job required $4,000 in direct materials and 400 hours of direct labor time at a rate of $13 per hour. If the job contained 560 units and the company billed at 65% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

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Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production ActivityIndirect Labor Indirect Materials Other OverheadGrinding$350,000         Polishing    $215,000     Product modification 400,000         Providing power        $220,000 System calibration 540,000         

Additional information on the drivers for its production activities follows.

   Grinding15,000machine hoursPolishing15,000machine hoursProduct modification1,900engineering hoursProviding power13,000direct labor hoursSystem calibration1,050batches

 Job 3175Job 4286Number of units220units2,750unitsMachine hours300MH3,000MHEngineering hours29eng. hours24eng. hoursBatches35batches105batchesDirect labor hours420DLH3,780DLH

2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the following jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round “overhead assigned” to the nearest whole dollar.)

Job 3175Job 4286ActivityOverhead CostActivity DriversActivity RateActivity driver incurredOverheadActivity driverOverheadassignedincurredassignedGrinding & PolishingMachine hoursProduct modificationEngineering hrsProviding powerDirect labor hrs .System calibrationbatches

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