Answer: A; D
Explanation: The Keynesian perspective emphasizes the importance of aggregate demand for the short run and states that demand creates its own supply. Say's law emphasizes the importance of aggregate supply, for the long run and holds holds that supply creates its own demand. As a result, Keynes' law is the direct opposite of Say's law.
Keynes argued that economy often produced less than its full potential due to a lack of demand in the economy. This lack of demand as a whole leads to inadequate incentives for firms to increase production, that is, total demand determines the level of GDP.
Keynes' law is the opposite of Say's law and is best described by the notion that a lack of demand can lead to inadequate production incentives for firms. Therefore, options a and d are correct.
Keynes' law is a key concept in macroeconomics and can be summarized as: "Demand creates its own supply." This is in contrast to Say's law, which emphasizes the idea that supply creates demand. Therefore, the statements that apply to Keynes' law are:
a. the opposite of Say's lawd. described by the statement that a lack of demand in the economy as a whole leads to inadequate incentives for firms to produceKeynes' theory posits that during economic downturns, a lack of aggregate demand can result in underutilized resources and unemployment, thus a focus on stimulating demand is essential to encourage production and economic growth
Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,500 per month plus $48 per boat. For the month of April, the company planned for activity of 55 boats, but the actual level of activity was 13 boats. The actual cleaning equipment and supplies for the month was $3,250. The activity variance for cleaning equipment and supplies in April would be closest to: Multiple Choice $2,016 F $1,890 U
Answer: $2,016
Explanation:
Spending variance is known as the difference between the actual and budgeted amount of a project or good.
When the actual amount exceeds the budgeted amount then the variance is known as UNFAVOURABLE. When it is below the budgeted amount it is FAVOURABLE.
Now, the Actual activity on cleaning equipment and supplies in April was 13 boats.
The Budgeted Activity was 55 boats will be calculated thus,
To calculate the variance therefore, we subtract the cost of making the budgeted activity from the actual one.
Activity Variance = (2,500 + ( 13 boats * 48)) - (2,500 + ( 55 boats * 48 ))
= 3,124 - 5,140
= $2,016
Because the budgeted activity was higher than the actual one, it is FAVOURABLE. Hence the Activity Budget for April was $2,016 Favourable.
Super Motors manufactures and sells a wide variety of motors to industrial customers. All motors cost about the same and are assembled on the same line. Switching over from assembling one motor to another requires about two hours. Super assembles motors to be stocked in a distribution center from where they are shipped as orders arrive. HP is the highest-selling motor (in terms of units sold) and LP the lowest selling. Which of the following statements about the average cycle inventory HP motors is TRUE?
A. Higher than the cycle inventory of LP motors.
B. Lower than the cycle inventory of LP motors.
C. Same as the cycle inventory of LP motors.
D. None of the above.
Answer:
A. Higher than the cycle inventory of LP motors.
Explanation:
Given that:
HP is the highest-selling motor (in terms of units sold) and LP the lowest selling.
The average cycle stock is about half-a-period's demand less the target cycle stock. Thus, the average cycle inventory is half of the order size. The order size is directly proportional to the square root of demand,R. This implies that the average cycle inventory is proportional to the square root of the demand, R. Since, R, the demand is high for HP, the order size also becomes more which in turns leads to the average cycle inventory being more. Therefore, the average cycle inventory of HP motors is higher than the cycle inventory of LP motors.
Lauren's salary decreases from $44,000 to $30,000 . She decides to reduce the number of outfits she purchases each year from 20 to 19. Use the midpoint method to calculate the income elasticity of demand for new outfits.Round your answer to two decimal places.income elasticity:This good isa normal good.an inferior good.a luxury good.
To calculate the income elasticity of demand using the midpoint method, we need to know the initial and final quantities of the good and the initial and final incomes. In this case, Lauren's initial salary is $44,000, and it decreases to $30,000. The initial quantity of outfits purchased is 20, and it decreases to 19. The income elasticity of demand for new outfits is -0.0076, indicating that outfits are an inferior good.
Explanation:To calculate the income elasticity of demand using the midpoint method, we need to know the initial and final quantities of the good and the initial and final incomes. In this case, Lauren's initial salary is $44,000, and it decreases to $30,000. The initial quantity of outfits purchased is 20, and it decreases to 19.
Using the midpoint method formula:
Income Elasticity = (Q2 - Q1) / [(Q1 + Q2)/2] / (I2 - I1) / [(I1 + I2)/2]
Substituting the values, we get:
Income Elasticity = (19 - 20) / [(20 + 19)/2] / ($30,000 - $44,000) / [($44,000 + $30,000)/2]
Simplifying the expression, we have:
Income Elasticity = -0.053 / $7,000 = -0.0076
Since the income elasticity is negative, it means that outfits are an inferior good for Lauren. The absolute value of the income elasticity is less than 1, indicating that outfits are a basic necessity rather than a luxury.
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The change in inventory value was created purely by accounting and exchange rate factors, because the subsidiary still has the same inventory and assets in place. However, this change would affect Streep’s consolidated financial statements and ratios. Assuming no other changes occurred, what effect would this have on Streep’s current ratio?
Answer:
It would decrease by $7,504.
Explanation:
The current ratio determines liquidity of a company. The current ratio is calculated by dividing total current assets from total current liabilities. The change in inventory will affect the current ratio of the company. In the consolidated financial statements the value of inventory is decreased due to exchange rate fluctuations. The change in value of inventory will affect the amount reported in the balance sheet of the parent and will ultimately result in reduction of current ratio.
Wala Inc. bases its selling and administrative expense budget on the number of units sold. The variable selling and administrative expense is $4.00 per unit. The budgeted fixed selling and administrative expense is $30,140 per month, which includes depreciation of $3,410. The remainder of the fixed selling and administrative expense represents current cash flows. The sales budget shows 4,100 units are planned to be sold in July.Required:
Prepare the selling and administrative expense budget for July.
Answer:
$43,130
Explanation:
Wala Inc.
Cash disbursements = (Variable selling and administrative cost x Number of direct-labor hours) + (Fixed manufacturing overhead less depreciation)
= (4,100 x $4.00) + ($30,140 - $3,410)
=$16,400+$26,730
=$43,130
Holly took a prospective client to dinner, and after agreeing to a business deal, they went to the theater. Holly paid $350 for the meal and separately paid $226 for the theater tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?
Answer: $175
Explanation:
Here we can see that the business discussion happened only at dinner.
After Dinner they went for entertainment at the Cinema so that amount is not deductible as a business Expense.
The only amount deductible is the $350 for the meal.
Meals with clients are considered to be 50% deductible so solving for that we have,
= 350 * 0.5
= $175
$175 is amount of the expenditures that Holly can deduct as a business expense.
Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $42 per unit and had sales of 24,650 units in the current year, 2018. STI has no inventory on hand at the beginning of 2018 and is projecting sales of 27,950 units in 2019. STI is planning the same production level for 2019 as in 2018, 26,300 units. The variable manufacturing costs for STI are $13, and the variable selling costs are only $0.40 per unit. The fixed manufacturing costs are $184,100 per year, and the fixed selling costs are $630 per year.1. Prepare an income statement for 2012 and 2013 using full costing.2. Prepare an income statement for 2012 and 2013 using variable costing.3. Prepare a reconciliation and explanation of the difference each year in the operating income resulting from the full- and variable-costing methods.
Answer:
Prepare an income statement for 2012 and 2013 using full costing.
2012 2013
Sales 1,035,300 1,173,900
Less Cost of Sales (493,000) (559,600)
Opening Stock 0 33,600
Add Manufacturing Cost ($20×26,300) 526,000 526,000
Less Closing Stock ( 33,000) 0
Gross Profit 542,300 614,300
Less Expenses :
Fixed selling costs (630) (630)
Variable selling costs (9,860) ( 11,180)
Net Income 531,810 602,490
Prepare an income statement for 2012 and 2013 using variable costing.
2012 2013
Sales 1,035,300 1,173,900
Less Cost of Sales (320,450) (363,350)
Opening Stock 0 21,450
Add Manufacturing Cost ($13×26,300) 341,900 341,900
Less Closing Stock ( 21,450) 0
Contribution 714,850 810,550
Less Expenses :
Fixed manufacturing costs (184,100) (184,100)
Fixed selling costs (630) (630)
Variable selling costs (9,860) ( 11,180)
Net Income 520,260 614,640
Reconciliation of Full Costing Profit to Variable Costing Profit
2012 2013
Full Costing Profit 531,810 602,490
Add Opening Stock 0 33,000
Less Closing Stock (33,000) 0
Variable Costing Profit 498,810 635,490
Explanation:
Full Costing Product Cost = Direct Material + Direct Labor + Variable Overheads + Fixed Overheads
= $13+($184,100/26,300 units)
= $20
Prepare an income statement for 2012 and 2013 using full costing.
2012 2013
Sales 1,035,300 1,173,900
Less Cost of Sales (493,000) (559,600)
Opening Stock 0 33,600
Add Manufacturing Cost ($20×26,300) 526,000 526,000
Less Closing Stock ( 33,000) 0
Gross Profit 542,300 614,300
Less Expenses :
Fixed selling costs (630) (630)
Variable selling costs (9,860) ( 11,180)
Net Income 531,810 602,490
Variable Costing Product Cost = Direct Material + Direct Labor + Variable Overheads
= $13
Prepare an income statement for 2012 and 2013 using variable costing.
2012 2013
Sales 1,035,300 1,173,900
Less Cost of Sales (320,450) (363,350)
Opening Stock 0 21,450
Add Manufacturing Cost ($13×26,300) 341,900 341,900
Less Closing Stock ( 21,450) 0
Contribution 714,850 810,550
Less Expenses :
Fixed manufacturing costs (184,100) (184,100)
Fixed selling costs (630) (630)
Variable selling costs (9,860) ( 11,180)
Net Income 520,260 614,640
Reconciliation of Full Costing Profit to Variable Costing Profit
2012 2013
Full Costing Profit 531,810 602,490
Add Opening Stock 0 33,000
Less Closing Stock (33,000) 0
Variable Costing Profit 498,810 635,490
The long-run supply curve for a product is horizontal with ATC = 200. Market demand is defined as P = 1,000 − 4 Q. The market is competitive and is in long-run equilibrium with 50 firms in the industry. If demand increases to P = 1,240 − 4 Q, how many firms will be in the industry at the new long-run equilibrium?
Answer:
65 firms will be in the industry at the new long run equilibrium
Explanation:
in the long run the P=ATC
quantity before the change is
200 = 1000-4Q
4Q = 800
Q= 200
each firm output = Q/number of firms = 200 / 50
q = 4
new quantity is
200 = 1240-4Q
4Q = 1040
Q = 260
number of firms=new Q/q
=260/4 = 65
the number of firms is 65 in the long run.
Firms experience economies of scaleLOADING... for several reasons. What is one such reason? A firm might experience economies of scale because A. large firms may be required to purchase inputs at higher costs than smaller competitorslarge firms may be required to purchase inputs at higher costs than smaller competitors. B. managers become more specialized comma enabling them to become more productive comma as output expandsmanagers become more specialized, enabling them to become more productive, as output expands. C. managers begin to have difficulty coordinating the operation of the firm. D. as a firm expands comma it may have to borrow money at a higher interest rateas a firm expands, it may have to borrow money at a higher interest rate. E. a firm's technology may make it impossible to increase production without a larger proportional increase input usage.
Answer:
managers become more specialized, enabling them to become more productive
Explanation:
Economies of scale is defined as the benefit a company gains by producing at a larger scale. This can result in increased profit because of lower cost per unit input used, use of technology to increase productivity, borrowing of money at lower interest rate.
When a company increases scale of production managers tend to be more specialised and this increases their effiency and productivity in that aspect. This improves overall productivity in the company
Dvorak Company produces a product that requires 5 standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. a. Direct materials price variance $ b. Direct materials quantity variance $ c. Total direct materials cost variance $
Answer:
a. Direct materials price variance $2,250
b. Direct materials quantity variance - $11,250
c. Total direct materials cost variance - $9,000
Explanation:
a. Direct materials price variance
materials price variance =(AP-SP)×AQ
=($3.00-$2.50)× 4,500 pounds
= $2,250
b. Direct materials quantity variance
materials quantity variance = (AQ-SQ)× SP
= (4,500 pounds - 5,000 pounds)×$2.50
= - $11,250
c. Total direct materials cost variance
Total direct materials cost variance=Direct materials price variance+Direct materials quantity variance
= $2,250-$11,250
= - $9,000
Helen Martin is looking to invest in a three-year bond that makes semi-annual coupon payments at a rate of 5.775 percent. If these bonds have a market price of $981.68, what yield to maturity can she expect to earn? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Answer:
The yield to maturity is 6.46% annually
Explanation:
The yield to maturity on the bond can be computed using the rate formula in excel as given below:
=rate(nper,pmt,-pv,fv)
nper is the number of interest payments the bond would make which is 3*2=6
pmt is the semi-annual interest payment of the bond which is 5.775%/2*$1000=$28.88
pv is the current market price of the bond at $981.68
fv is the face value of the bond at $1000
=rate(6,28.88,-981.68,1000)
rate=3.23% semi-annually
rate=6.46%(3.23%*2) annually
Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $327,080 for the year, and machine usage is estimated at 125,800 hours. For the year, $349,600 of overhead costs are incurred and 130,500 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Answer and Explanation:
The computation is shown below:
a. For the manufacturing overhead rate for the year
As we know that
Manufacturing overhead rate = Estimated overhead cost ÷ machine usage
= $327,080 ÷ 125,800 hours
= $2.60 per hour
b. Now the amount of under- or over applied overhead is
= Applied overhead - actual overhead
where,
Applied overhead is
= 130,500 hours × $2.60
= $339,300
And, the actual overhead is $349,600
So, the under overhead applied is $10,300
3. And, the journal entry is
Cost of goods sold $10,300
To Manufacturing overhead $10,300
(Being the under applied overhead is recorded)
Prepare the journal entries to record these transactions on Blossom Company’s books using a periodic inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) (a) On March 2, Blossom Company purchased $860,500 of merchandise from Kingbird Company, terms 2/10, n/30. (b) On March 6, Blossom C
Answer:
(a) Purchase (Dr.) $860,000
Accounts Payable (Cr.) $860,000
Explanation:
Credit discounts are offered by suppliers to realized receivables early than the credit period by offering customers some discount. The terms of payment are decided at the time of sell. The Blossom Company has purchased from Kingbird Company on terms of 2/10, n/30. This means 2% discount will be offered on invoice price if the payment is made within 10 days. The journal entry at the time of purchase will be recorded as accounts payable for complete invoice amount and discount is not incorporated in the entry because it is not realized.
Bo's Home Manufacturing has 410,000 shares outstanding that sell for $46.86 per share. The company has announced that it will repurchase $61,000 of its stock. What will the share price be after the repurchase?
Answer:
The correct answer is $46.86.
Explanation:
According to the scenario, the computation of the given data area as follows:
Shares outstanding = 410,000
Value per share = $46.86
So, total value of outstanding shares = 410,000 × $46.86 = $19,212,600
Repurchase share value = $61,000
So, Number of shares repurchased = $61,000 ÷ $46.86 = 1301.7 shares
So, outstanding shares = 410,000 - 1301.7 = 408,698.3 shares
So, Share price after repurchase = ($19,212,600 - $61,000) ÷ 408,698.3 shares
= $46.86
Waterway Industries incurs the following costs to produce 11800 units of a subcomponent: Direct materials $9912 Direct labor 13334 Variable overhead 14868 Fixed overhead 16200 An outside supplier has offered to sell Waterway the subcomponent for $2.85 a unit. If Waterway accepts the offer, by how much will net income increase (decrease)?
Answer:
If the company buys the subcomponent, the company will save $4,484.
Explanation:
Giving the following information:
Production= 11,800 units
Direct materials= $9,912
Direct labor= $13,334
Variable overhead= $14,868
Total variable cost= $38,114
An outside supplier has offered to sell Waterway the subcomponent for $2.85 a unit.
We have no reason to believe that the fixed costs are avoidable. Therefore, they take no part in the decision making process.
Total cost of production= 38,114
Total cost of buying= 11,800*2.85= 33,630
If the company buys the subcomponent, the company will save $4,484.
Thomas Longbow is the only employee of Presido, Inc. During the first week of January, Longbow earned $1,200.00 and had federal and state income tax withholdings of $60.00 and $22.50, respectively. FICA taxes are 7.65% on earnings up to $117,000. State and federal unemployment taxes for the period are $75.00 and $12.00, respectively. What is Presido's payroll tax expense for the week?
Answer: $178.80
Explanation:
In calculating Presido's payroll tax expense for the week, the following needs to be stated.
As the employer, Presido is not liable to pay the federal and state income tax withholdings of $60.00 and $22.50, respectively.
However they have to pay the FICA taxes of 7.65% on earnings up to $117,000 as well as the state and federal unemployment taxes for the period of $75.00 and $12.00, respectively.
So calculating we have,
= 75 + 12 + (1,200 * 7.65%)
= $178.8
Presido's payroll tax expense for the week is $178.80
Artisan Inspiration, Inc. is a merchandiser of stone ornaments. The company sold 6 comma 500 units during the year. The company has provided the following information: Sales Revenue $ 571 comma 000 Purchases (excluding Freight In) 302 comma 000 Selling and Administrative Expenses 69 comma 000 Freight In 14 comma 000 Beginning Merchandise Inventory 44 comma 000 Ending Merchandise Inventory 43 comma 000 What is the operating income for the year?
Answer:
the operating income for the year is $185,000
Explanation:
Artisan Inspiration, Inc. Income Statement
Sales 571,000
Less Cost of Goods Sold :
Opening Stock 44,000
Add Purchases 302,000
Add Freight In 14,000 316,000
Available 360,000
Less Closing Stock (43,000) (317,000)
Gross Profit 254,000
Less Expenses :
Selling and Administrative Expenses (69,000)
Net Income 185,000
You are doing some analysis on the has a market value that is equal to its book value. Currently, the firm has excess cash of $1,000 million and other assets of $9,000 million. Equity is worth $10,000 million. The firm has 700 million shares of stock outstanding and net income of $1,575 million. What will the new earnings per share be if the firm uses 25 percent of its excess cash to complete a stock repurchase?
Answer:
the new earnings per share will be 231 cents
Explanation:
Earnings per share is Earnings attributable to each Common Share.
Earnings Per Share = Earnings attributable to Holders of Common Stock/ Weighted Average Number of Common Shares
= $1,575 million/ (700 million-250/10000×700 million)
= $1,575 million/(700 million-17,2 million)
= 231 cents
Answer:
Earnings per share is $2.31
Explanation:
value of one share=$10,000 million/700 million=$14.29
25% of excess cash =25%*$1000 million=$250 million
Number of shares repurchased=$250 million/$14.29=17.5 million
Outstanding shares after share repurchase=700 million-17.5 million
=682.5 million
Earnings per share =earnings attributable to common stock/number of common stock
earnings stands at $1,575 million
number of common stock 682.5 million
Earnings per share=1,575 million/682.5 million
Earnings per share=$2.31 or 231 cents
The new earnings per share is $2.31 or 231 cents as shown in the step by step analysis above.
A project is expected to generate annual revenues of $124,100, with variable costs of $77,200, and fixed costs of $17,700. The annual depreciation is $4,250 and the tax rate is 34 percent. What is the annual operating cash flow?
Answer:
$20,717
Explanation:
The calculation of annual operating cash flow is given below:-
Annual Operating cash flow = (Revenue - Variable cost - Fixed cost) × (1 - Tax rate) + Annual depreciation × Tax rate
= ($124,100 - $77,200 - $17,700) × (1 - 34%) + $4,250 × 34%
= $29,200 × 0.66 + $1,445
= $19,272 + $1,445
= $20,717
So, for computing the operating cash flow we simply applied the above formula.
Rufus owns 12 acres of land he purchased as an investment for $5,390. He spent an additional $34,570 subdividing the land into residential parcels and having utility lines run to the property. After the subdividing and utility lines had been completed, he gifted two acres of the land to his sister as a wedding present.
The cost of subdividing the land is added to the initial cost of the 12acres resulting in a basis of $42,000. The basis of the 2 acres gifted to his sister, $7,000 [($42,000 ÷ 12 = $3,500) x 2] reduces the adjustedbasis in the 10 remaining acres to $35,000.
Original cost $5,000
Additional costs for subdividing 37,000
subdividing37,000Basis before gift $42,000
Gift of two acres ($42,000 ÷ 12 = $3,500 x 2) (7,000)
Adjusted basis of ten acres $35,000
Answer:
Adjusted basis of the 2 plots is $7000
Explanation:
The correct question is as follows;
Determine the Adjusted basis
Rufus owns 12 acres of land he purchased as an investment for $5,000. He spent an additional $37,000 subdividing the land into residential parcels and having utility
lines run to the property. After the subdividing and utility lines had been completed, he gifted two acres of the land to his sister as a wedding present.
Solution
In this question, we are to determine the adjusted basis of land
Please check attachment for table
Kindly note that the basics of 1 acre of land before gifting is $3,500 ($42,000/12). This means the basis of gifted property of two acres is $7000($3,500 * 2)
Answer:
$33,300
Explanation:
The cost of subdividing the land is added to the initial cost of the 12 acres resulting in a basis of $39,960.
The basis of the 2 acres gifted to his sister is therefore:
$6,660 [($39,960÷ 12 = $3,330) x 2]
Thus : reduces the adjusted basis in the 10 remaining acres to $33,300.
Original cost $5,390
Additional costs for subdividing $34,570
Basis before gift $39,960
($34,570+$5,390)
Gift of two acre ($39,960 ÷ 12 = $3,330 x2) (6,660)
Adjusted basis of ten acres $33,300
The operations of Knickers Corporation are divided into the Pacers division and the Bulls division. Projections for the next year are as follows: Pacers Bulls Division Division Total Sales revenue $420,000 $252,000 $672,000 Variable expenses 147,000 115,500 262,500 Contribution margin $273,000 $136,500 $409,500 Direct fixed expenses 126,000 105,000 231,000 Segment margin $147,000 $ 31,500 $178,500 Allocated common costs 63,000 47,250 110,250 Total relevant benefit (loss) $ 84,000 $(15,750) $ 68,250 Operating income for Knickers Corporation as a whole if the Bulls division were dropped would be: a.$84,000. b.$99,750. c.$36,750. d.$68,250.
Answer:
c.$36,750
Explanation:
If Bulls Division were dropped, then the total segment margin would be $147,000 and the total common cost would be $110,250, Then:
Operating income = Segment margin - Total cost
= $147,000 - $110,250
= $36,750
Therefore, The Operating income for Knickers Corporation as a whole if the Bulls division were dropped would be $36,750.
To find Knickers Corporation's operating income without the Bulls division, subtract the Bulls' segment margin from the current total operating income and add back any direct fixed expenses that would no longer be incurred. The calculated operating income without the Bulls division is $99,750.
Explanation:In determining the operating income for Knickers Corporation without the Bulls division, we must look at how the elimination of the division will impact the company's finances. Specifically, we should consider only the costs and revenues that will change if the Bulls division is discontinued. The allocated common costs would not be eliminated because these costs are typically corporate overhead and would still be incurred by the company even if the Bulls division was dropped.
The calculation is as follows: Operating income without the Bulls division would be the current total operating income minus the Bulls division's segment margin, but adding back the direct fixed expenses that would be avoided if the division were dropped. Therefore, the operating income without the Bulls division = $178,500 (current total operating income) - $31,500 (Bulls division's segment margin) + $105,000 (Bulls division's direct fixed expenses), resulting in an operating income of $252,000.
Thus, we can conclude that the correct answer would be:
Operating income for Knickers Corporation without the Bulls division = $252,000 - $152,250 (total current segment margin without Bulls' segment margin and adding back Bulls' direct fixed expenses) = $99,750.
A firm is considering whether to introduce a new product. No other firms are considering producing the product. The product costs F to introduce and can be produced at zero marginal cost once the firm has spent F. If the firm introduces the product, it must charge the same per-unit price to all customers. The demand for the product is D(p) = 10 - p where p is price.
a.(10 pts) Are there values of F such that the firm would not introduce the product even though it would be socially optimal to have the product produced? If not, explain. If so, what are the values of F such that the firm does not introduce the product when a social planner would?
b.(10 pts) Consider the following extension of the problem. Suppose that the buyer is a single customer, e.g., a big downstream producer that earns surplus by selling in a final market (although you do not need to analyze activities in the final market to answer this question). Suppose the seller can charge the buyer a fixed fee K in addition to a per unit price p. In this case, are there values of the fixed cost F such that the seller will fail to introduce the product when it would be socially optimal to do so? Explain your answer with reference to the concepts of "business stealing" and "incomplete appropriation."
Answer:
Explanation:
a. Should in case the firm decides to introduce the new product, the total cost sum of variable and fixed cost if F, the variable cost is zero.
The firm could get a total revenue expressed as TR=P*Q=(10-Q)*Q=10Q-Q^2. The marginal revenue is 10-2Q. The marginal cost is 0. Thus, social optimal quantity can be calculated by equating marginal revenue to marginal cost.
MR=MC
10-2Q=0
2Q=10
Q*=5
Hence, the socially optimal quantity is 5.
However, if fixed cost is high enough such that the total profit for the firm is less than zero, the firm will not introduce the product in the market.
Total Profit=Total Revenue-Total cost
=(10-5)*5-F
=25-F
if F>25 then the firm will earn a negative profit, therefore, it will not introduce the product in the market.
B)
The negative effect created on the demand of competitor's goods when the firm changes its price strategy is referred to as business stealing.
If the firm chooses to introduce the new product the total cost sum of variable and fixed cost if F as variable cost is zero. The Total revenue the firm could get is TR=P*Q+K=(10-Q)*Q+K=10Q-Q^2+K. The marginal revenue is 10-2Q. The marginal cost is 0. Therefore socially optimal quantity can be calculated by equating marginal revenue to marginal cost.
MR=MC
10-2Q=0
2Q=10
Q*=5
Therefore, the socially optimal quantity is 5.
However, if fixed cost is high enough such that the total profit for the firm is less than zero, the firm will not introduce the product in the market.
Total Profit=Total Revenue - Total cost
= (10-5)*5+K-F
Total Profit = 25 + K - F
The firm will earn a negative profit if F > 25 + K, thus, it will not introduce the product in the market.
Now if the Fixed cost lies between 25 and 25+K, it will be beneficial for the firm to introduce the product. But the amount the per-unit price buyer has to pay will be P + K/Q.
Karim Corp. requires a minimum $8,800 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $9,200 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. July August September Cash receipts $ 24,800 $ 32,800 $ 40,800 Cash payments 29,200 30,800 32,800 Prepare a cash budget for July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)
Answer and Explanation:
The preparation of cash budget is given below:-
Cash Budget
Particulars July August September
Beginning cash balance $9,200 $8,800 $8,800
Cash receipt from customer $24,800 $32,800 $40,800
Total cash available $34,000 $41,600 $49,600
Cash payment (29,200) (30,800) ($32,800)
Interest on loan 1% (40) (20)
Preliminary cash balance $4,800 $10,760 $16,780
Loan repay $4,000 (1,960) (2,040)
Ending cash balance $8,800 $8,800 $14,740
Loan balance
At the beginning 0 $4,000 $2,040
Additional loan $4,000 (1,960) (2,040)
Loan balance at the end $4000 $2040 0
A cash budget for Karim Corp. for July, August, and September identifies the need for loans in July and August to maintain the company's minimum cash balance, followed by repayment of all loans in September due to an excess in cash.
Explanation:To create a cash budget for Karim Corp. for July, August, and September, we need to consider the company's cash balance, cash receipts, and cash payments, including any loans taken or repaid.
For July, the company begins with $9,200. After adding the cash receipts of $24,800 and subtracting the cash payments of $29,200, we end up with a balance of $4,800. However, this falls below the minimum cash balance required of $8,800, so a loan of $4,000 is taken out, costing an additional $40 in interest. So, the ending cash balance for July is $4,840.
Now, August. We start with the ending balance from July, $4,840. After adding cash receipts of $32,800 and subtracting cash payments of $30,800, the balance is $6,840. The company is still below the minimum balance, so it borrows $1,960. Including interest, the ending balance for August is $8,816.
For September, the beginning balance is that of August's ending balance, $8,816. Adding cash receipts of $40,800 and subtracting cash payments of $32,800, we get a cash balance of $16,816. The company is above the minimum balance, so it pays back all the loan, with the final balance for September at $16,816.
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Vaughn Manufacturing has two divisions; Sporting Goods and Sports Gear. The sales mix is 75% for Sporting Goods and 25% for Sports Gear. Vaughn incurs $6890000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The weighted-average contribution margin ratio is 70%. 35%. 40%. 45%.
Answer:
The correct answer is 35%.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the Weighted average contribution margin ratio by using following formula:
weighted-average contribution margin ratio = (Contribution margin ratio × Sales of sporting goods) + (Contribution margin ratio × Sales of sporting gears)
= ( 30 × 75% ) + ( 50 × 25%)
= 22.5% + 12.5%
= 35%
If the government institutes an effective price ceiling on potato chips, then there will be a decrease in demand for and an increase in supply of potato chips. decrease in supply of potato chips. decrease in quantity supplied of potato chips. decrease in demand for potato chips. decrease in quantity demanded for potato chips.
Final answer:
An effective price ceiling on potato chips would lead to an increase in quantity demanded and a decrease in quantity supplied, resulting in a shortage. This is because the imposed price is below the market equilibrium, encouraging more consumers to buy and discouraging producers from selling.
Explanation:
When a government institutes an effective price ceiling on a product like potato chips, it sets a maximum price for the product that is below the market equilibrium. This results in an increase in quantity demanded for potato chips because consumers are more willing to purchase the product at the lower price. However, there is a decrease in quantity supplied, as producers are less inclined to sell their product at this lower price. These dynamics do not decrease the demand for potato chips, but rather they lead to a shortage as the quantity demanded at this lower price exceeds the quantity supplied.
The correct answer to the student's question is that there would be a decrease in quantity supplied of potato chips, not a decrease in demand. The supply curve moves upwards (or to the left) due to the price ceiling, indicating a decrease in quantity supplied at each and every price level below the equilibrium.
What is one course of action available in every decision making process?
a. Respond in a way which will have only positive consequences
b. Respond in a way which will have no negative consequences
Choose to do nothing about the issue
d. None of the above
Please select the best answer from the choices provided
А
Answer:
Answer C
Explanation:
Final answer:
One course of action in every decision-making process is the option to do nothing about the issue. This is known as the default option. Decision-making also involves the analysis of pros and cons and contemplating the likely consequences, including the potential negatives of inaction.
Explanation:
When confronted by a situation and facing a decision-making process, one course of action available is to choose to do nothing about the issue. This is sometimes referred to as the default option or maintaining the status quo. Making a decision often involves analyzing the pros and cons, anticipating the likely consequences of each action, and considering ethical frameworks such as Utilitarianism, which focuses on the outcomes that would maximize overall happiness or minimize suffering.
However, it's important to note that choosing to do nothing can also have consequences, and this option should not be confused with having no negative consequences. According to the European Commission, ignoring uncertainty, which includes the potential consequences of inaction, may lead to suboptimal decision-making.
Question 1 (8 points) Ocean City Kite Company manufactures & sells kites for $7.50 each. The variable cost per kite is $3.50 with the current annual sales volume of 55,000 kites. This volume is currently Ocean City Kite's breaking even point. Use this information to determine the dollar amount of Ocean City Kite Company's fixed costs. (Round dollar value to the nearest whole dollar & enter as whole dollars only.)
Answer:
The correct answer is $220,000.
Explanation:
According to the scenario, computation of the given data are as follows:
Selling price = $7.5
Variable cost = $3.5
Annual sales = 55,000 kites
We can calculate the fixed cost by using following formula:
Fixed cost = Annual sales × ( Selling price - Variable cost )
Fixed cost = 55,000 × ( $7.5 - $3.5 )
= 55,000 × $4
= $220,000
Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 40%. Portfolios A and B are both well diversified. Portfolio Beta on M1 Beta on M2 Expected Return (%) A 1.8 2.2 30 B 2.1 -0.5 8 What is the expected return–beta relationship in this economy?
Answer:
Explanation:
The picture attached shows the solution to the problem
The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows: $1,165.7 billion in currency, $3.5 billion in traveler's checks, and $1,514.1 billion in checking deposits. Suppose the Fed decided to increase the money supply by decreasing the reserve requirement from 11 percent to 10 percent. Assume all banks were initially loaned up (had no excess reserves) and the quantity of currency and traveler's checks held outside of banks did not change. How large a change in the money supply would have resulted from the change in the reserve requirement? The money supply would change by $ nothing billion. (Round your response to two decimal places and include a minus sign if necessary.)
Answer:
The money supply would change by $168.21 billion.
Explanation:
Checking deposits = $1,514.1 billion
Reserve requirement = 10% or 0.10
Required reserves = $1,514.1 billion * 0.10 = $151.41 billion
Now, reserve requirement has decreased to 9%
New required reserves = $1,514.1 billion * 0.09 = $136.27 billion
Excess reserves created = Old required reserves - new required reserves
Excess reserves created = $151.41 billion - $136.27 billion = $15.14 billion
The excess reserves created is $15.14 billion
Calculate the new money multiplier -
New money multiplier = 1/New reserve requirement = 1/0.09 = 11.11
The new money multiplier is 11.11
Calculate the change in money supply -
Change in money supply = Excess reserves created * New money multiplier
Change in money supply = $15.14 billion * 11.11 = $168.21 billion
Thus,
The money supply would change by $168.21 billion.
Final answer:
The decrease in the reserve requirement from 11% to 10% would result in a potential increase in the money supply by approximately $151.41 billion, assuming all other factors remain constant and banks utilize the full potential of the increased money multiplier.
Explanation:
To calculate the change in the money supply resulting from a decrease in the reserve requirement, we employ the concept of the money multiplier. This is the inverse of the reserve ratio and tells us how much the money supply can potentially expand with each dollar of reserves. When the Fed decreases the reserve requirement ratio from 11% to 10%, the new money multiplier will be 1 divided by 0.10, which equals 10.
Given that all banks were initially loaned up (they didn't hold excess reserves), the full potential of the money multiplier can be utilized. The change in reserves is the amount of checking deposits times the change in the reserve requirement, which is $1,514.1 billion times (0.11 - 0.10) = $15.141 billion in new reserves.
With the new multiplier of 10, the change in money supply is the change in reserves times the multiplier, which is $15.141 billion × 10 = $151.41 billion.
Therefore, the total money supply would increase by approximately $151.41 billion.
Payments on a Jan. 1, 1995 40,000 loan are as follows: 1/1/96 5,000 1/1/97 5,000 1/1/98 5,000 On July 1, 1998 an additional 10,000 is paid on the loan and no more payments are made. If {{d}^{(4)}=0.1} how much is owed on the loan on Jan. 1, 2005?
The amount owed on the loan on Jan. 1, 2005, would be $24,750, which includes the remaining principal of $15,000 and the accrued simple interest of $9,750 over 6.5 years at a 10% annual interest rate.
To calculate how much is owed on the loan on Jan. 1, 2005, we need to account for the payments made and the compounding interest over time. Given that the loan has a decree rate {{d}^{(4)}}=0.1, we can interpret this as an effective annual interest rate of 10%. However, without clarification on how the interest compounds (annually, semi-annually, monthly, etc.), we'll assume simple interest for the sake of this example.
The initial loan is $40,000. Payments of $5,000 were made on Jan 1 of 1996, 1997, and 1998, reducing the principal by $15,000, leaving $25,000. On July 1, 1998, an additional payment of $10,000 was made, further reducing the principal to $15,000. Starting from July 1, 1998, till Jan. 1, 2005, which is 6.5 years, we need to calculate the interest accrued on the remaining $15,000.
The formula for simple interest is I = P * r * t, where I is the interest, P is the principal, r is the annual interest rate, and t is the time in years. Using this formula, we find that the interest accrued will be I = $15,000 * 0.10 * 6.5 which equals $9,750 in interest. Therefore, the amount owed on the loan on Jan. 1, 2005, is the remaining principal plus the accrued interest: $15,000 + $9,750 = $24,750.