Final answer:
Solomon might use two different manufacturing overhead cost pools to accurately allocate costs among multiple manufacturing plants, each possibly with different overhead types and costs, affecting the long-run average cost curve.
Step-by-step explanation:
Solomon may use two different manufacturing overhead cost pools in its job-costing system to more accurately allocate costs based on the diversity of its operations. If Solomon owns multiple manufacturing plants with varying sizes and production capacities, it makes sense to separate overhead costs into different pools. This can help in assigning costs more precisely to individual jobs, reflecting variations in activities, technology, or scale. For example, smaller plants may incur different types of overhead compared to larger ones, such as facility-related costs or managerial expenses, due to differences in their production processes or technologies employed.
Understanding the long-run average cost curve indicates that firms can compete effectively regardless of size due to the flat segment of the curve where the average costs remain constant despite the number of plants operated. However, managing more plants eventually increases the cost of coordination sharply, influencing the slope of the long-run average cost curve.