Answer:
The marginal product of the second and third workers might be increasing because workers can take advantage of existing machinery which would cause output to increase at an alarming rate.
"The correct explanation is that the marginal product of the second and third workers might be higher than the first due to the concept of increasing marginal returns.
When Joe hires the first worker, that worker can only handle a certain number of tasks at once, given the constraints of time and resources. However, when a second worker is added, the two workers can specialize and divide tasks more efficiently, leading to an increase in the total output (number of customers served) that is greater than the output of the first worker alone. This is because the second worker not only contributes their own productivity but also enhances the productivity of the first worker by allowing for a better division of labor and reduced idle time.
Similarly, when a third worker is added, the potential for specialization and division of labor increases further. The third worker can take on additional tasks or support the first two workers in serving more customers, which can lead to another increase in total output. The marginal product of the third worker might still be high if there is enough work to be done and if the additional worker does not lead to overcrowding or coordination problems.
However, it's important to note that the principle of increasing marginal returns does not hold indefinitely. After a certain point, adding more workers will lead to diminishing marginal returns, where the additional output from each new worker starts to decrease. This happens because each new worker contributes less to the total output as the law of diminishing returns sets in due to factors such as limited space, equipment, and coordination challenges among a larger number of workers.
In summary, the marginal product of the second and third workers can be higher than the first due to the benefits of specialization and division of labor, which lead to increasing marginal returns up to a certain point. Beyond that point, the marginal product of additional workers will likely decrease due to the law of diminishing returns."
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The price of the stock today or the price at which the stock should sell today is $61.30
Explanation:
The price of the stock today can be calculated using the Dividend Discount Model approach which values a stock based on the present value of the expected future dividends from the stock. The price of this stock will be,
P0 = 3.15 * (1+0.2) / (1+0.12) + 3.15 * (1+0.2) * (1+0.15) / (1+0.12)^2 +
3.15 * (1+0.2) * (1+0.15) * (1+0.1) / (1+0.12)^3 +
[(3.15 * (1+0.2) * (1+0.15) * (1+0.1) * (1+0.05) / (0.12 - 0.05)) / (1+0.12)^3]
P0 = $61.296 rounded off to $61.30
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
"Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $ 1 comma 100, variable costs are $ 500, and fixed costs are $ 120 comma 000. How many dresses must the Bridal Shoppe sell to yield afterminustax net income of $ 21 comma 000, assuming the tax rate is 30%?"
Answer:
250 dresses
Explanation:
The first task would be to compute before tax net income when after tax net income is $21,000 at the tax rate of 30%
After tax net income=before tax net income*(1-t)
t is the tax rate of 30% or 0.30
after tax net income is $21,000
$21000=before tax net income*(1-0.3)
$21,000=0.7*before net income
before tax net income=$21,000/0.7=$30,000
Target units for before tax net income of $30,000 is computed thus:
target number of dresses=fixed cost+target profit/contribution per unit
fixed cost is $120,000
contribution per unit=sales price-variable cost
=$1,100-$500=$600
target number of dresses=($120,000+$30,000)/$600=250 dresses
Final answer:
Stephanie's Bridal Shoppe needs to sell 250 dresses to achieve an after-tax net income of $21,000, considering a 30% tax rate.
Explanation:
To determine how many dresses Stephanie's Bridal Shoppe needs to sell to achieve an after-tax net income of $21,000, we first calculate the required pre-tax profit. With a tax rate of 30%, the pre-tax profit needs to be:
Pre-tax profit = After-tax income / (1 - Tax rate) = $21,000 / (1 - 0.30) = $21,000 / 0.70 = $30,000
Next, we need to find out the total revenue required to achieve this pre-tax profit, considering the fixed costs and variable costs per unit.
The formula for total profit is given by Total Revenue - Total Costs (fixed costs + variable costs).
We rearrange this formula to find Total Revenue:
Pre-tax profit = Total Revenue - (Fixed Costs + Variable Costs * Quantity)
Total Revenue = Pre-tax profit + Fixed Costs + (Variable Cost * Quantity)
Given that Fixed Costs are $120,000, Variable Cost per dress is $500, and Pre-tax profit needed is $30,000, we calculate Total Revenue needed.
To find the number of dresses needed to be sold, we divide the Total Revenue by the average selling price per dress:
Number of Dresses = (Pre-tax profit + Fixed Costs) / (Selling Price - Variable Cost)
Number of Dresses = ($30,000 + $120,000) / ($1,100 - $500) = $150,000 / $600 = 250 dresses
Therefore, Stephanie’s Bridal Shoppe must sell 250 dresses to achieve an after-tax net income of $21,000.
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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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.
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.
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
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.
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.
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
Mark owns a stamp collection that he is considering getting insured. Over the course of a year it will cost him $500 to keep his collection insured, but if he his collection is damaged they will pay him $1000. If he estimates there’s a 10% chance of his collection being damaged, what is the expected value of buying the insurance policy?: *
Answer:
EV = -$400
The expected value of buying the insurance policy is -$400
Explanation:
Expected value of buying the insurance policy;
EV = expected benefits - insurance cost
EV = xE - C
chances of collection being damaged x = 10% = 0.1
Insurance cost C = $500
Benefit E = $1000
Substituting the values;
EV = 0.1 × 1000 - 500 = 100 - 500
EV = -$400
The expected value of buying the insurance policy is -$400
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%
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.
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
Becky Smith signed a note in the amount of $200,000 in favor of Country Home Loans, Inc., to obtain a loan to buy a house in Marrero, Louisiana. The note was endorsed "Pay to the order of ____________ without recourse Country Home Loans, Inc." Almost five years later Smith defaulted on the payments. The Federal National Mortgage Association (Fannie Mae) wanted to foreclose on the house and sell it to recover the balance due. Smith argued that the words "to the order of ____________" in the endorsement made the note an incomplete order instrument and that Fannie Mae could not enforce it. What is Fannie Mae's best response to this argument?
Fannie Mae can enforce the note and foreclose on the house to recover the balance due.
Explanation:Fannie Mae's best response to Smith's argument is that the note is not an incomplete order instrument. The words "to the order of ____________" in the endorsement indicate that the note is payable to the holder of the instrument, which includes Country Home Loans, Inc. and any subsequent transferees. This means that Fannie Mae, as a transferee of the note, has the right to enforce it and foreclose on the house to recover the balance due.
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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
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
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)
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.
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.
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
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.
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.
A manager is holding a $1.2 million stock portfolio with a beta of 1.01. She would like to hedge the risk of the portfolio using the S&P 500 stock index futures contract. How many dollars’ worth of the index should she sell in the futures market to minimize the volatility of her position? (Enter your answer in dollar not in millions.)
Answer: $1,212,000 or $1.212 million
Explanation:
To calculate the dollars’ worth of the index the manager should sell in the futures market to minimize the volatility of her position, we can use the following formula,
Dollar worth of index to sell = Value of the Portfolio * Portfolio Beta
Dollar worth of index to sell = 1,200,000 * 1.01
Dollar worth of index to sell = $1,212,000
The manager should sell $1,212,000 worth of the index in the futures market to minimize the volatility of her position.
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.
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
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.
Seven years ago, Halle (currently age 41) contributed $4,000 to a Roth IRA account. The current value of the Roth IRA is $9,000. In the current year Halle withdraws $8,000 of the account balance to use as a down payment on her first home. Assuming Halle's marginal tax rate is 24 percent, how much of the $8,000 withdrawal will she retain after taxes to fund the down payment on her house
Answer:
$7,040 is the amount to be retained after taxes to fund the house down payment
Explanation:
In this question, we are asked to calculate the amount of withdrawal that will be retained after taxes to fund the house payment.
We proceed as follows;
Withdrawal amount = $8000
The Non taxable amount is $4000 (this is because the amount deposited is not taxed)
The amount subject to tax is $4000(contributed to the IRA)
Tax rate = 24%
Penalty rate is zero as the purpose is to buy a house
After tax withdrawal retained= 4000+ 4000*(1-24%) = $7,040
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