Answer:
Total annual cost= $123
Explanation:
Giving the following information we need to calculate the annual cost:
Fixed monthly cost= $3.25
Variable cost= $0.35 per check
Q=20 month
Total annual cost= Fixed monthly cost*12+ (Variable cost*20)*12
Total annual cost= (3,25*12)+(0,35*20)*12= $123
Final answer:
The net annual cost of the checking account with a monthly fee of $3.25 and a processing fee of $0.35 per check, with an average of 20 checks written per month, is $123.00.
Explanation:
To calculate the net annual cost of a checking account with a monthly fee and a per-check processing fee, we need to consider both the fixed monthly cost and the variable cost dependent on the number of checks written. The question specifies a monthly fee of $3.25 and a processing fee of $0.35 per check, with an average of 20 checks written per month.
Calculating the Annual Cost
Monthly Fee: Since the monthly fee is consistent, we multiply it by 12 to find the annual cost from this portion. Monthly fee = $3.25, so Annual fee from monthly charges = $3.25 * 12 months = $39.00.Processing Fee: To find the annual cost from processing fees, we calculate the cost per month and then multiply by 12. The processing fee per check is $0.35, and with 20 checks per month, the monthly cost from processing fees is $0.35 * 20 = $7.00. Therefore, the Annual fee from processing charges = $7.00 * 12 months = $84.00.Total Annual Cost: We sum the annual cost from monthly fees with the annual cost from processing fees to find the net annual cost. Total Annual Cost = $39.00 (from monthly fees) + $84.00 (from processing fees) = $123.00.The net annual cost of the checking account is $123.00.
Wiley Company purchased new equipment for $42,000. Wiley paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $3,000; sales tax paid $2,400; and installation cost, $2,300. The cost recorded for the equipment was:
Answer: $49,700
Explanation:
Given that,
Purchased new equipment = $42,000
Transportation costs = $3,000
Sales tax paid = $2,400
Installation cost = $2,300
Cost recorded for the equipment = purchased new equipment + Transportation costs + Sales tax paid + Installation cost
= $42,000 + $3,000 + $2,400 + $2,300
= $49,700
The market value of the equity of Ginger, Inc., is $635,000. The balance sheet shows $39,000 in cash and $215,000 in debt, while the income statement has EBIT of $96,400 and a total of $168,000 in depreciation and amortization. What is the enterprise value–EBITDA multiple for this company? The market value of the equity of Ginger, Inc., is $635,000. The balance sheet shows $39,000 in cash and $215,000 in debt, while the income statement has EBIT of $96,400 and a total of $168,000 in depreciation and amortization. What is the enterprise value–EBITDA multiple for this company?
Answer:
EBITDA Multiple = 3,067
Explanation:
The EBITDA multiple is a financial ratio that compares a company’s Enterprise Value to its annual EBITDA. This multiple is used to determine the value of a company and compare it to the value of other, similar businesses. The ratio takes a company’s enterprise value (which represents market capitalization plus net debt) and compares it to the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for a given period.
Formula:
EBITDA Multiple = Enterprise Value / EBITDA
To Determine the Enterprise Value and EBITDA:
Enterprise Value = (market capitalization + value of debt + minority interest + preferred shares) – (cash and cash equivalents)
EBITDA = Earnings Before Tax + Interest + Depreciation + Amortization
In this exercise:
Enterprise Value= market value + value of debt - cash= 635000+ 215000 - 39000=$811000
Ebitda= ebit + depreciation and amortization = 96400+168000= $264400
EBITDA Multiple = Enterprise Value / EBITDA=811000/264400=3,067
Which of the following is true of the Great Transformation?
a. It does not take purchasing power parity (PPP) into account.
b. It is the linear story of the high speed economic growth of the developed world.
c. It refers to emerging economies struggling to compete with developed nations.
d. It refers to the shift in economic weight and engines of growth toward emerging economies.
Answer:
b. It is the linear story of the high speed economic growth of the developed world.
Explanation:
"The Great Transformation"
Is an ecoomic book about how England socety and politics change withing the industrial revolution timeframe.
It argues about how the modern market economies developed the modern state and how this are linked in history. It change the mentalities to "rational transsactions" from local social relationships and institutions.
This transformation remove the pre-modern structure of tradition, redistribution an reciprocity for factors returns.
While it acknowledge the material wealth of free market. The respect for the free-market means to subordinate the substance of society itself to the laws of the market.
The Great Transformation refers to the shift in economic weight towards emerging economies, characterized by rapid GDP growth in countries like China and India and improvements in the standard of living through market-oriented reforms and human capital development.
Explanation:The term "Great Transformation" refers to the significant shift in economic power and growth dynamics from the traditional economic powerhouses - typically developed nations - to emerging economies. This is exemplified by the rapid growth of countries such as China and India which have demonstrated that low-income countries can have GDP growth rates faster than those of middle-income and high-income countries.
Market-Oriented Economic Reforms have led to a dramatic increase in the standard of living for billions worldwide, especially in nations like the East Asian Tigers, as well as in much of Latin America and Eastern Europe. These positive trends have been fueled by investments in human capital development and the embrace of global trade and financial flows, although associated challenges such as trade deficits and financial crises (like the Asian Financial Crisis of the late 1990s) serve as cautionary tales of potential risks.
Given this context, the correct answer to the student's question is option d. It refers to the shift in economic weight and engines of growth toward emerging economies.
What is the difference between marginal values and average values? A. Marginal values show the total benefit or cost from consuming a good, while average values are the total benefit or cost from consuming a good divided by the amount of the good consumed. B. Marginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good. C. Marginal values show the ordinal benefit or cost from consuming an additional unit of a good, while average values are the cardinal benefit or cost from consuming an additional unit of a good. D. Marginal values show the benefit or cost from consuming one unit of a good, while average values are the benefit or cost from consuming all units of a good. E. Marginal values show the benefit from consuming an additional unit of a good, while average values are the cost from consuming an additional unit of a good.
Answer:
B
Explanation:
We can derive the answer from the mathematical definitions. For example for Marginal Costs and Average Costs
Marginal Costs are defined as the derivative of Total Cost with respect to the quantity produced: [tex]\frac{\partial TC}{\partial q}[/tex]. Which can be interpreted as the additional cost of producing an additional unitMarginal Costs are defined as the ratio between Total Cost and quantity produced: [tex]\frac{TC}{q}[/tex], so it's the cost per unit producedMarginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good.
Explanation:Marginal values show the additional benefit or cost of consuming an additional unit of a good, while average values are the benefit or cost per unit of a good. For example, if you're studying the marginal benefit of studying for 1 more hour, you look at how much more you'll benefit from that additional hour.
On the other hand, if you're looking at the average benefit of studying, you divide the total benefit of all the hours studied by the number of hours studied. So marginal values focus on the change resulting from consuming an extra unit, while average values give you an overall measure per unit.
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Alpaca Corporation had revenues of $300,000 in its first year of operations. The company has not collected on $19,900 of its sales and still owes $28,000 on $96,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,700 in salaries. Owners invested $19,000 in the business and $19,000 was borrowed on a five-year note. The company paid $4,600 in interest that was the amount owed for the year, and paid $8,600 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. (Assume taxes are paid in the same year). Compute the cash balance at the end of the first year for Alpaca Corporation.
Answer:
Cash at the end of the year: 150,820
Explanation:
sales 300,000
uncollected: (19,900)
collected: 280,100
purchase 96,000
unpaid (28,000)
paid 68,000
Operating activities
Operating
collected 280,100
paid to supplies (68,000)
salaries (13,700)
insurance paid (8,600)
income tax paid (72,560) (A)
generated from operating 117,240
Financing:
contribution 19,000
note payabke 19,000
interest payment (4,600)
generated from financing 33,400
Cash at the end of the year: 117,240 + 33,400 = 150,820
(A) the tax expense will be calculating the income statement.
net income:
sales revenue 300,000
COGS (96,000) (B)
salaries expense (13,700)
interest expense (4,600)
insurance expense (4,300) (C)
pre-tax income 181,400
tax expense 40% (72,560)
net income 108,840
(B) There is no inventory at hand so, all the purchase are cost of goods sold.
(C) The insurance expense will be the expense for half the contract value because, it is for two years
Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable.What is the weighted-average interest rate used for interest capitalization purposes? a. 11% b. 10.85% c. 10.5% d. 10.65%What is the avoidable interest for Arlington Company? a. $288,000 b. $927,615 c. $328,562 d. $704,415What is the actual interest for Arlington Company? a. $1,758,000 b. $1,782,000 c. $1,470,000 d. $704,415What amount of interest should be charged to expense? a. $765,584 b. $1,470,000 c. $1,053,585 d. $830,384
Answer:
b. 10.65%
capitalized interest
d. $704,415
actual interest
a. $1,758,000
interest expense
c. $1,053,585
Explanation:
the average cost of debt for general funds:
4,800,000 x 10% = 480,000
9,000,000 x 11% = 990,000
13,800,000 1,470,000
1,470,000 / 13,800,000 = 10.65%
capitalized fund:
4,800,000 x 10/12= 4,000,000
3,960,000 x 7/12 = 2,310,000
total 6,310,000
specifit borrowing: 2,400,000 x 12% = 288,000
remainder 3910000 x 10.65% = 416,415
capitalized cost 704,415
actual interest:
1,470,000 + 288,000 = 1,758,000
interest expense
1,758,000 - 704,415 = 1,053,585
The weighted-average interest rate used for interest capitalization purposes is d. 10.65%
The avoidable interest for Arlington Company is d. $704,415
What is the actual interest for Arlington Company is a. $1,758,000
The amount of interest should be charged to expense is c. $1,053,585
Explanation:Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable.
What is the weighted-average interest rate used for interest capitalization purposes?
a. 11%
b. 10.85%
c. 10.5%
d. 10.65%
The weighted average interest rate is the aggregate rate of interest paid on all debt. the average cost of debt for general funds:
[tex]4,800,000 * 10 \%= 480,000\\9,000,000 * 11\% = 990,000\\ 4,800,000+ 9,000,000 = 13,800,000\\ 480,000+ 990,000= 1,470,000[/tex]
[tex]\frac{1,470,000}{13,800,000} = 10.65\%[/tex]
What is the avoidable interest for Arlington Company?
a. $288,000
b. $927,615
c. $328,562
d. $704,415
Avoidable interest is the interest amount that could have been avoided had the project not taken place
[tex]4,800,000 * \frac{10}{12} = 4,000,000\\3,960,000 * \frac{7}{12} = 2,310,000[/tex]
[tex]total =4,000,000+2,310,000= 6,310,000[/tex]
[tex]specifit borrowing: 2,400,000 * 12\% = 288,000\\remainder: 3910000 * 10.65\% = 416,415[/tex]
[tex]capitalized cost = 288,000+ 416,415=704,415[/tex]
What is the actual interest for Arlington Company?
a. $1,758,000
b. $1,782,000
c. $1,470,000
d. $704,415
The actual interest rate is the rate that will discount all of the future cash receipts back to the amount of cash paid to buy the bond
[tex]= ((4,800,000 *10\%)+ (9,000,000 * 11\%))+ specifit borrowing\\ = 1,470,000 + 288,000\\ = 1,758,000[/tex]
What amount of interest should be charged to expense?
a. $765,584
b. $1,470,000
c. $1,053,585
d. $830,384
Interest is the charge for the privilege of borrowing money.
[tex]=actual interest - capitalized cost = \\=1,758,000 - 704,415\\ = 1,053,585[/tex]
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Consider a sequential game between a shopkeeper and a haggling customer. The party who moves first chooses either a high price ($50) or low price ($20) and the second mover either agrees to the price or walks away from the deal and neither party gets anything. Ignore costs and assume the customer values the item at $60.
If the shopkeeper goes first and quotes a low price, what is the best response of the customer?
(A) Walk away from the deal
(B) Accept the low price happily
(C) Laugh at the storeowner
(D) Slam the storeowner’s door on the way out
Answer:
(B) Accept the low price happily
Explanation:
As the customer was willing to pay up to 60 dollars for the item, the offer of 50 dollars will be acceptable as it is creating a consumer surplus of 10 dollars.
The customer will look for his own benefit and to his judgement, the deal is good as it saves 10 dollars.
The amount earn by the seller is irrelevant.
Answer:
The correct answer is letter "B": Accept the low price happily.
Explanation:
As the purpose of the game was determining the price of a good out of the outcome of the sequential game, if the shopkeeper wins but chooses a low price ($20 according to the example), the shopkeeper will be playing to the customer's favor. The customer valued the item at $60 but only a $20 payment is needed. Then, there are $40 the customer will save out of the purchase, thus, it is likely the customer will take the price and walk away with the item happily.
Identify each account as Asset, Liability, or Equity. a. Accounts Payable Liability b. Cash Asset c. Common Stock Equity d. Accounts Receivable e. Rent Expense ▼ f. Service Revenue g. Office Supplies Asset h. Dividends i. Land Asset j. Salaries Expe
Answer & Explanation:
Account Payable: Liability it represent the amount owed to suppliers
Cash: asset it represent the money in possesion ofthe business.
Common Stock: Equity are the shares issued of the company
Account receivable: Assets it represent the right to claim our billed amount to customers.
Rent expense: Equity it decrease the equity, it is an expense account which decreases the period result
Service revenue: Equity it increase the equity, it is the earned amount from the company main activity
Office supplies: Assets it represent the stock supplies used in the office
Dividends: Equity it decrease from the retained earnings of the business
Land: Asset are real state owned by the firm
Salaries Expense: Equity, it is the cost associate with the employee, it decrease the period result.
At the beginning of the year, Culver had an inventory of $350000. During the year, the company purchased goods costing $1230000. If Culver reported ending inventory of $480000 and sales of $1900000, their cost of goods sold and gross profit rate would be
Answer: cost of goods sold = $1,100,000
Gross profit = $800,000
Explanation: As we know that :-
Gross profit = Sales - Cost of goods sold
Now we can compute cost of goods sold using following formula :-
Cost of goods sold = opening inventory + purchase - closing inventory
putting the values into equation we get :-
Cost of goods sold = $350,000 + $1,230,000 - $480,000
= $1,100,000
Therefore,
Gross profit = $1,900,000 - $1,100,000
= $800,000
Final answer:
Culver's cost of goods sold is $1,100,000, and the gross profit rate is 42.1%.
Explanation:
To calculate the cost of goods sold (COGS) for Culver, we use the following formula:
COGS = Beginning Inventory + Purchases - Ending Inventory
COGS = $350,000 + $1,230,000 - $480,000 = $1,100,000.
With COGS and sales known, the gross profit can be calculated as follows:
Gross Profit = Sales - COGS
Gross Profit = $1,900,000 - $1,100,000 = $800,000.
To find the gross profit rate, we divide the gross profit by the sales:
Gross Profit Rate = Gross Profit / Sales
Gross Profit Rate = $800,000 / $1,900,000
Gross Profit Rate = 0.421 or 42.1%
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State NoName U is:
Answer: $15,000
Explanation:
Given that,
Elite U:
Costs $50,000 per year
Larry values attending Elite U = $60,000 per year
State College:
Costs = $30,000 per year
Offered Larry an annual scholarship = $10,000
Larry values attending State College = $40,000 per year
No Name U:
Costs = $20,000 per year
Offered Larry a full annual scholarship = $20,000
Larry values attending No Name = $15,000 per year
Larry gets economic surplus from:
Elite U = $60,000 - $50,000
= $10,000
State college = $40,000 + $10,000 - $30,000
= $20,000
No Name U = $15,000 + $20,000 - $20,000
= $15,000
State college > No Name > Elite U
Therefore, the opportunity cost of attending State college is the value of the next best alternative that is No Name U.
Hence, the opportunity cost is $15,000.
Larry's opportunity cost of attending NoName University is $30,000. This amount represents what he would lose in satisfaction by not choosing his next best option, which is State College, considering the value he places on attending each school and the scholarships offered.
Explanation:The opportunity cost of attending a certain school is traditionally understood as the value of the next best alternative, or what you're giving up by making a certain decision. In Larry's case, we need to consider both the monetary costs of tuition and his personal value or satisfaction derived from attending each of the institutions.
If Larry chooses to attend NoName U, his costs are fully covered by the scholarship, so his direct financial cost is $0. However, he needs to give up his next best option, which is attending State College. As Larry values attending State College at $40,000 and he's offered a $10,000 scholarship, his real cost or 'loss' of satisfaction by choosing NoName would be $30,000. Therefore, Larry's opportunity cost of attending NoName U is $30,000.
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Accounting Cycle Review Do IT 0-10a Cullumber Company shows the following balances in selected accounts of its adjusted trial balance. Supplies $30,080 Supplies Expense 5,640 Accounts Receivable 11,280 Dividends 20,680 Retained Earnings 65,800 Service Revenue 101,520 Salaries and Wages Expense 37,600 Utilities Expense 7,520 Rent Expense 16,920 Prepare the remaining closing entries at December 31. (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 the amount is entered. Do not indent manually.)
Answer:
Explanation:
The closing entry for the following accounts are shown below:
1. Service Revenue A/c Dr $101,520
To Income Summary $101,520
(Being revenue account closed)
2. Income summary A/c Dr $67,680
To Supplies Expense $5,640
To Salaries and Wages Expense $37,600
To Utility Expense $7,520
To Rent Expense $16,920
(Being expenses accounts are closed)
3. Income summary A/c Dr $33,840
To Retained earning $33,840
(Being the difference is credited to retained earning)
4. Retained earnings A/c Dr $20,680
To Dividend A/c $20,680
(Being dividend account is closed)
The student is asked to prepare closing entries for Cullumber Company, which involves closing all temporary accounts to Retained Earnings at year-end. This includes debiting revenue accounts, crediting expense accounts, and handling dividends to reset the balances of these accounts for the new accounting period.
The student is tasked with preparing the remaining closing entries for Cullumber Company at year-end, which involves closing all temporary accounts, also known as nominal accounts, to Retained Earnings. To do this, we need to ensure that all income statement accounts with balances have been closed to the Retained Earnings account. The temporary accounts that will typically be closed include all revenue accounts, expense accounts, and dividends.
As a part of the accounting cycle, certain entries would not be necessary based on the provided data, such as for accounts receivable or supplies, which are permanent accounts and not subject to the closing process. However, to close out revenues and expenses, we must debit Service Revenue to offset the credit balance, and credit Retained Earnings. For expenses, we credit each expense account and debit Retained Earnings. Lastly, Dividends is closed by debiting Retained Earnings and crediting Dividends.
In summary:
Service Revenue would be debited and Retained Earnings credited for 101,520.All expense accounts would be credited and Retained Earnings debited for the total amount of those expenses.Dividends would be credited and Retained Earnings debited for 20,680.Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Retro issues 5,000 shares of common stock to pay its recent attorney's bill of $25,000 for legal services on a land access dispute, which of the following would be the best journal entry for Retro to record?a. Legal Expense 5,000Common Stock 5,000b. Legal Expense 25,000Common Stock 25,000c. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Stated Value - Common 20,000d. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Par value - Common 20,000
Answer:
d. Legal Expense 25,000Common Stock 5,000Paid-in Capital in Excess of Par value - Common 20,000
Explanation:
The legal fees will declared as expense.
The common stock issued have a face value of 1 dollar
The company issued 5,000 common stock so the common stock account will have a 5,000 x 1 = 5,000 dollar credit
The difference between the face value and the amount of the legal fees will go into additional paid-in capital in excess of par value.
Which of the following characteristics leads to an upward-sloping supply curve? Instructions: Click the box with a check mark for correct or click a second time to clear the box for incorrect. Increasing opportunity costs unanswered Increasing marginal costs unanswered Diminishing marginal utility unanswered A decrease in resource prices unanswered An increase in resource prices unanswered Increasing labor productivity
Answer:
-Increasing opportunity costs
-Increasing marginal costs
-Increase labor productivity
Explanation:
A supply curve is a graphical form of representation of the price of the product and the quantity of the product which the seller can supply in the market. The supply curve slopes towards upward. This represents that the higher price brings with it an increase in the high amount of profit. Also, there is a direct relationship among the quantity of the commodity and the price which he is willing to sell.
Answer:
-Increasing opportunity costs
-Increasing marginal costs
-Increase labor productivity
Explanation:
A supply curve is a graphical form of representation of the price of the product and the quantity of the product which the seller can supply in the market. The supply curve slopes towards upward. This represents that the higher price brings with it an increase in the high amount of profit. Also, there is a direct relationship among the quantity of the commodity and the price which he is willing to sell.
On December 31, Rivera Company receives a utility bill in the mail for $440. Rivera Company intends to pay the bill in early January of next year. If the appropriate adjusting entry is not made at the end of the year, what will be the effect on: (a) Income statement accounts (overstated, understated, or no effect)? (b) Net income (overstated, understated, or no effect)? (c) Balance sheet accounts (overstated, understated, or no effect)?
Answer:
(a)overstated
(b)overstated
(c)no effect
Explanation:
(a) As there is an expense account (utilities expense) which, is not included in the income statement, result for the year will be higher than if was.
(b)The revenues account will be oaky. But, the total expenses will be lower, as there are cost of the period which are not included.
So the Net incoem will be higher than a correct income as their expenses do not include this utilities expense
(c) The balance sheet will have no effect in the total Asset or Total Liaiblities+SE but, it is a change in the composition.
The income (reained earnings) should be lower as the income will be lower and a liability will be create (utilities payable) to fill this so:
with the mistake:
liab 0 equity (+400)
ammending the mistake
liab 400 equity 0
the net effect is zero.
It will decrease equity and increase liability, but the su of both will be the same
You are planning to save $1,000,000 for retirement over the next 30 years. If you are earning interest at the rate of 6% and you spend all the money in 20 years after retirement, what annual level of living expenses will those savings support?
Answer:
The retirement fund will provide 87,148.56 dollars per year during 20 years
Explanation:
The plan is to achieve 1,000,000 in 30 years.
Then we will spend them equally during a period of 20 years
We want to knwo how much will the retirement account provide.
So, we need to calculate the cuota of an annuity of 20 years with a presenet vale of 1,000,000 dollars at 6% discount rate:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV $1,000,000.00
time 20 years
rate 6% = 6/100 = 0.06
[tex]1000000 \times \frac{1-(1+0.06)^{-20} }{0.06} = C\\[/tex]
C $ 87,184.56
The retirement fund will provide 87,148.56 dollars per year during 20 years
Given the following adjusted trial balance:
Debit Credit
Cash $1762
Accounts receivable 2224
Inventory 3311
Prepaid rent 91
Equipment 320
Accumulated depreciation-equipment
$55
Accounts payable 87
Unearned service revenue
129
Common stock 218
Retained earnings 7010
Service revenue 390
Interest revenue 59
Salaries and wages expense
170
Travel expense 70
Total $7948
Net income for the year is
Answer:
The net income for the year is $209
Explanation:
Net income: It the income which is left after paying all the expenses.
In the simplest form,
The net income = Total revenue - total expenditure
So, the net income would equal to
= Service revenue + interest revenue - Salaries and wages expense - Travel expense
= $390 + $59 - $170 - $70
= $209
All other items which are presented in the question are related to the balance sheet so these all items would not be considered in the computation part.
Match the following statements to Involves acquiring the resources necessary to run the business. appropriate terms. Distributions of cash from a corporation to its stock holders. select an appropriate term Consumed assets or services. select an appropriate term Ownership is limited to one person. select an appropriate term Officers and others who manage the business. select an appropriate term Creditor claims against the assets of the business. select an appropriate term A separate legal entity under state laws. select an appropriate term A report prepared by management that presents financial information. select an appropriate term A section of the annual report that presents management’s views. select an appropriate term Future economic benefits. select an appropriate term Involves acquiring the resources necessary to run the business
Answer:
Distributions of cash from a corporation to its stock holders - Dividends
Consumed assets or services - Expenses
Ownership is limited to one person - Sole Proprietorship
Officers and others who manage the business - Internal users
Creditor claims against the assets of the business - Liabilities
A separate legal entity under state laws - Corporation
A report prepared by management that presents financial information - Annual Report
A section of the annual report that presents management’s views - Management discussion and analysis
Future economic benefits - Investing activities
You just received a bonus at your job of $4,000 which you decide to put in a saving account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar.
(a) The reserve requirement is 18%, how much will your deposit increase the total value of checkable deposits?
(b) If the reserve requirement is 7%, how much will your deposit increase the total value of checkable deposits?
Answer:
(A) 22,222.22
(B) 57,142.86
Explanation:
we will divide the deposit by the reserve requirement to know how much will expand the money supply.
4,000/0.18 = 22,222.22
4,000/0.07 = 57,142.86
The reasoning behind this multiplier effect is the following:
you deposit 4,000
the bank leave 18% = 920
And lend the remaninder: 3,080
Then, when this are deposit, again takes the minimun reserve and lend the remainder:
3,080 x 18% = 554.4
3,080 - 554.4 = 2,525.6
This process is repeated giving diminished amount to money available to lend. Thus, finding a limit on the division between fund and reserve requirement.
4,000/0.18 = 22,222.22
Hello. My name is Eric! I'm looking for some advice on what type of investments to consider. I'm 53, my kids are through college and out on their own, and I have what I feel is a pretty healthy, diversified portfolio of stocks, bonds, mutual funds, and real estate. I'm earning more on dividends and interest payments than I need to supportmy family right now, so I'd like to find something to do with this money to make it grow. What should I consider?
Eric should consider whether he is comfortable enough with risk to move his extra money into speculative investing.
What is Financial Advising ?The key point is that he has a diversified portfolio - the goal of step four - and assets left over, indicating that he is ready to proceed to the fifth step if he is comfortable with that level of risk.
Financial advice refers to the process of advising others on the planning and/or execution of advice on selecting, purchasing, or selling financial products to meet investment, risk management, or risk mitigation objectives.
Your adviser will assess and monitor your financial goals, investment time frame, and risk tolerance over time. A financial adviser also offers advice during market downturns and personal financial stress, ensuring that your plan is tailored to your changing needs and circumstances.
Learn more about Financial Advising here
https://brainly.com/question/28476534
# SPJ 2
Eric can consider investing in an S&P 500 Index Fund for long-term growth, and might also explore Mixed Mutual Funds with a combination of stocks and bonds. The critical aspect is diversification and understanding one's risk tolerance as retirement approaches.
Explanation:Investment Recommendations for a Diversified PortfolioHello Eric, considering your current financial position, with a well-diversified portfolio and surplus income from dividends and interest payments, looking for further growth is a wise step. Given the historical performance and the inherent diversification provided, an investment in an S&P 500 Index Fund could be a solid choice for long-term growth. This fund replicates the performance of the S&P 500 index, which has historically returned an average of 10.1% per year from 1926 to 2018, encompassing both bear and bull markets. It's essential to remain patient during market downturns to avoid the common pitfall of selling in panic.
Based on your stage in life, traditional advice may suggest shifting towards a more conservative portfolio as you approach retirement. However, some experts challenge this view, advocating for maintaining a significant portion in stocks even as one ages. The decision largely depends on your risk tolerance and financial goals. If opting for the conservative route, you might consider a Mixed Mutual Fund with a composition of 60% stocks and 40% bonds, or 70% stocks and 30% bonds, which aims to provide balanced stability through different economic cycles.
Regardless of the specific investment vehicles you choose, the key is diversification to reduce risk and stability, a principle you seem to have applied well in your investment strategy thus far.
3. Suppose that during 2018, C Corp received a $30,000 dividend from Apple Inc. and that C Corp owns less than 1 percent of the Apple Inc. stock. Further assume that C Corp’s taxable income before the dividend received deduction was $50,000. To arrive at the taxable income of $50,000 (before the DRD), C Corp deducted a $3,000 NOL Carryover and a $4,000 Capital Loss Carryover. What is C Corp Dividends Received Deduction
Answer:
$15,000
Explanation:
Given:
dividend C Corp received = $30,000
C Corp’s taxable income before the dividend received deduction = $50,000
NOL Carryover deducted = $3,000
Capital Loss Carryover = $4,000
C Corp owns less than 1 percent of the Apple Inc. stock,
Thus, dividend received deduction will be 50%
DRD = Dividend × 50% = $30,000 × 50% = $15,000
Total taxable income = $30,000 + $3000 + $4000 = $57,000
Now,
50% of the total taxable income = 50% of $57,000 = $28,500
Since, the DRD on total on total taxable income (i.e $28,500) is greater than the DRD on divided (i.e $15,000)
Hence, the C Corp Dividends Received Deduction will be $15,000
Bond Yields and Rates of Return A 30-year, 10% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $1,050. (Assume that the bond has just been issued.) What is the bond's yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
Answer:
The bond's yield to maturity is 9.45% using Excel to get exact values, and 9.59% using approximate method.
Explanation:
We can calculate is using 2 ways, using Excel to get the exact percentage or with approximate methods, calculating the semi-annual Yield to Maturity using the following formula
[tex]YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}[/tex]
And from there we can calculate the Yield to Maturity just by multiplying the semi-annual one by 2.
Identifying the given information.
We have a period of 30 years, so for the semiannual bond we have [tex]n=2(30) = 60[/tex] periods.
The face value, FV, is $1000, the coupon rate is 0.10, thus we can use them to find the interest per period PMT.
[tex]PMT=0.10 \times \cfrac{1000}{2}\\PMT=\$ 50[/tex]
The current price of the bond, PV is $1050.
Replacing the values on the semiannual Yield to Maturity
[tex]YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}[/tex]
[tex]YTM_{sm}=\cfrac{50+\cfrac{1000-1050}{60}}{\cfrac{1000+1050}{2}}[/tex]
Simplifying we get
[tex]YTM_{sm}=4.797\%\\[/tex]
Finding the Yield to Maturity.
We can just multiply by 2 to get the Yield to Maturity from our previous result and rounding it to 2 decimals we get
[tex]YTM = 2 YTM_{sm}\\YTM=9.59\%[/tex]
Alternatively we can use Excel and write:
RATE(n, PMT, PV, FV)*2
That is
RATE(60,50,1050,1000)*2
And we will get the exact Yield to maturity 9.49%
A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is _______
(A) 0.38 bushels of corn
(B) 16.00 bushels of corn
(C) 2.67 bushels of corn
(D) 2.99 bushels of corn
Answer:
C. 2.67 bushels of corn
Explanation:
The opportunity cost is the cost of the best alternative not taken. In this case, if you choose to produce beans, you choose not to produce corn (this is the bets altenative not taken.. in this case the only one alternative).
For every 6 bushels of beans, you choose not to produce 16 bushels of corn, so:
6 bushels of beans= 16 bushels of corn
1 bushel of beans = (16 bushels of corn/6)
1 bushel of beans= 2.67 bushels of corn
Quantitative Problem: You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 8% annual return. What will be your annual loan payments? Round your answer to the nearest cent. Do not round intermediate calculations. $ 6038.4 How much of your first payment will be applied to interest and to principal repayment? Round your answer to the nearest cent. Do not round intermediate calculations. Interest: $ Principal repayment
Answer:
Ans. the annual payment will be $6,038.42, applied to interest $1,600, applied to principal $4,438.42
Explanation:
Hi, in order to find the amount to be paid for 4 years, we need to use the following formula.
[tex]PresentValue=\frac{A((1+r)^{n}-1) }{r(1+r)^{n} }[/tex]
Where:
r= interest rate
n= periods of periodic payment
A= periodic payments
Present Value= amount of money of the loan
Everything should look like this.
[tex]20,000=\frac{A((1+0.08)^{4}-1) }{0.08(1+0.08)^{4} }[/tex]
[tex]20,000=\frac{0.36048896}{0.108839117} A[/tex]
[tex]20,000=A(3.31212684)[/tex]
[tex]A= 6,038.42[/tex]
Now, in order to find the amount paid in interest for the first payment, we just multiply 20,000*0.08= 1,600
And the amount paid to principal is just the payment - interest, that is:
$6,038.42 - $1,600 = $4,438.42
Best of luck.
Final answer:
To purchase a $20,000 used car, annual loan payments to your uncle, under an 8% annual return, would be $6038.4. The first payment would involve $1,600 going towards interest and $4,438.4 towards the principal repayment.
Explanation:
You need $20,000 to purchase a used car, with your wealthy uncle offering to lend you the money as an amortized loan requiring annual payments for 4 years, at a 8% annual return. Your annual loan payments will be calculated using the formula for an amortization payment, which factors in the principal amount, the interest rate, and the number of payments. The formula is given as:
PMT = [tex]P * [i(1+i)^n] / [(1+i)^n - 1][/tex], where PMT is the payment amount, P is the principal amount ($20,000), i is the monthly interest rate (0.08/1 since it's an annual payment), and n is the total number of payments (4).Calculating the Payment:
[tex]PMT = 20000 * [0.08(1+0.08)^4] / [(1+0.08)^4 - 1] = $6038.4[/tex] (rounded to the nearest cent)To understand how much of the first payment will be applied to the interest and to the principal repayment, we need first to calculate the interest for the first year, which is $20,000 * 8% = $1,600. Since our annual payment is $6,038.4, subtracting the interest portion leaves $4,438.4 as the principal repayment.
Annual Payment: $6038.4Interest of First Payment: $1,600Principal Repayment of First Payment: $4,438.4Suppose that Greece and Sweden both produce oil and stained glass. Greece's opportunity cost of producing a pane of stained glass is 4 barrels of oil while Sweden's opportunity cost of producing a pane of stained glass is 8 barrels of oil.
By comparing the opportunity cost of producing stained glass in the two countries, you can tell that _____ has a comparative advantage in the production of stained glass and _____ has a comparative advantage in the production of oil.
Answer: Greece; Sweden
Explanation:
A country or a firm has a comparative advantage in producing a commodity if the opportunity cost of producing that commodity in terms of other commodity is lower in that country or firm as compared to the other country or firm.
Greece's opportunity cost of producing a pane of stained glass = 4 barrels of oil
Sweden's opportunity cost of producing a pane of stained glass = 8 barrels of oil
Therefore, opportunity cost of producing a pane of stained glass is lower in Greece as compared to the Sweden.
Hence, Greece has a comparative advantage in producing stained glass.
Greece's opportunity cost of producing a barrel of oil = [tex]\frac{1}{4}[/tex]
= 0.25 pane of stained glass
Sweden's opportunity cost of producing a barrel of oil = [tex]\frac{1}{8}[/tex]
= 0.125 pane of Stained glass
Therefore, opportunity cost of producing a barrel of oil is lower in Sweden as compared to the Greece.
Hence, Sweden has a comparative advantage in producing Oil.
By comparing the opportunity cost of producing stained glass in the two countries, you can tell that Greece has a comparative advantage in the production of stained glass and Sweden has a comparative advantage in the production of oil.
Comparative advantage is defined as the ability of a country to produce a good at a lower opportunity cost than another country. In this case, Greece's opportunity cost of producing a pane of stained glass is 4 barrels of oil, while Sweden's opportunity cost is 8 barrels of oil.
Therefore, Greece has a comparative advantage in producing stained glass because its opportunity cost is lower compared to Sweden. On the other hand, Sweden has a comparative advantage in producing oil because its opportunity cost for oil is lower when compared to Greece's higher cost of producing stained glass.
In summary, Greece has a comparative advantage in the production of stained glass, and Sweden has a comparative advantage in the production of oil.
Harris Company manufactures and sells a single product. A partially completed schedule of company's total and per unit costs over relevant range of $30,000- 50,000 units produced and sold eventually is given:
Units Produced/Sold=30,000
Total Costs
Variable Costs.....$180,000
Fixed Costs........300,000
Total Costs..........$480,000
Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?
Units Produced/Sold=40,000
Total Costs
Variable Costs.....?
Fixed Costs........?
Total Costs.........?
Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?
Units Produced/Sold=50,000
Total Costs
Variable Costs.....?
Fixed Costs........?
Total Costs..........?
Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?
Required:
1. Complete schedule of company's total and unit costs above.
2. Assume company produces and sells 45,000 units during the year at a selling price of $16 per unit. Prepare contribution formal income statement for the year.
Answer:
1) Follow explanation
2)Revenues= $720000
COGS= 45000*6=$270000 (-)
Gross profit= $450000
Fixed costs= $300000 (-)
Net profit=$150000
Explanation:
Harris Company manufactures and sells a single product.
With the following information we need to complete the schedule and make an income statement:
Relevant range of $30,000- 50,000 units produced and sold eventually is given:
Units Produced/Sold=30,000
Total Costs
Variable Costs.....$180,000
Fixed Costs........300,000
Total Costs..........$480,000
Cost per unit:
Variable Cost=Total VC/units= $6
Fixed Cost= Total FC/Units= $10
Total Cost per unit= $16
Units Produced/Sold=40,000
Total Costs
Variable Costs= 40000*6= $240000
Fixed Costs= $300000
Total Costs= $540000
Cost per unit:
Variable Cost= $6
Fixed Cost= $7,5
Total Cost per unit= $13,5
Units Produced/Sold=50,000
Total Costs
Variable Costs=500000*6= $300000
Fixed Costs= $300000
Total Costs= $600000
Cost per unit:
Variable Cost= $6
Fixed Cost= 300000/50000=$6
Total Cost per unit= $12
2)
The general structure of an income statement proceeds as follow:
Revenue/Sales (+)
Cost of Goods Sold (COGS) (-)
=Gross Profit
Marketing, Advertising, and Promotion Expenses (-)
General and Administrative (G&A) Expenses (-)
=EBITDA
Depreciation & Amortization Expense (-)
=Operating Income or EBIT
Interest (-)
Other Expenses (-)
=EBT (Pre-Tax Income)
Income Taxes (-)
=Net Income
In this exercise:
Units sold= 45000 Price=$16
Revenues= $720000
COGS= 45000*6=$270000 (-)
Gross profit= $450000
Fixed costs= $300000 (-)
Net profit=$150000
The schedule of total and unit costs is completed by calculating costs per unit at different levels of production. For 45,000 units, the contribution format income statement shows total sales of $720,000 and a net income of $150,000.
The question asks to complete the schedule of the company's total and unit costs and prepare a contribution format income statement for a hypothetical scenario where the company sells 45,000 units.
Completing the Schedule
For the 30,000 units scenario:
Variable Cost per unit = Total Variable Costs \/ Units Produced = $180,000 \/ 30,000 = $6 per unitFixed Cost per unit = Total Fixed Costs \/ Units Produced = $300,000 \/ 30,000 = $10 per unitTotal Cost per unit = Variable Cost + Fixed Cost per unit = $6 + $10 = $16 per unitFor variable costs, they rise with the number of units, while fixed costs remain the same irrespective of units produced. Here, we can assume that the variable cost per unit is constant.
For the 40,000 units and 50,000 units scenarios, we apply the same variable cost per unit but maintain the fixed total cost:
At 40,000 units: Total Variable Costs = 40,000 * $6 = $240,000Fixed Costs remain at $300,000Total Costs = Variable Costs + Fixed Costs = $240,000 + $300,000 = $540,000Variable Cost per unit remains at $6Fixed Cost per unit = $300,000 \/ 40,000 = $7.50 per unitTotal Cost per unit = Variable Cost per unit + Fixed Cost per unit = $6 + $7.50 = $13.50 per unitAnd similarly for 50,000 units.
Contribution Format Income Statement
If the company produces and sells 45,000 units at a selling price of $16 per unit, the income statement would reflect:
Total Sales = 45,000 units * $16 per unit = $720,000Total Variable Costs = 45,000 units * $6 per unit = $270,000Contribution Margin = Total Sales - Total Variable Costs = $720,000 - $270,000 = $450,000Fixed Costs = $300,000Net Income = Contribution Margin - Fixed Costs = $450,000 - $300,000 = $150,000Suppose there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. At present, Iowa produces 20 million bushels of wheat and 120 million bushels of corn, while Nebraska produces 20 million bushels of corn and 120 million bushels of wheat.
...
a. Explain how, with trade, Nebraska can end up with 40 million bushels of wheat and 120 million bushels of corn while Iowa can end up with 40 million bushels of corn and 120 million bushels of wheat.
b. If the states ended up with the numbers given in a, assuming the person who arranges the trade (the trader) gets the remainder, how much would the trader get?
Final answer:
Nebraska can end up with 40 million bushels of wheat and 120 million bushels of corn, while Iowa can end up with 40 million bushels of corn and 120 million bushels of wheat through specialization and comparative advantage.
Explanation:
In this scenario, with trade, Nebraska can end up with 40 million bushels of wheat and 120 million bushels of corn, while Iowa can end up with 40 million bushels of corn and 120 million bushels of wheat. This can be achieved through specialization and comparative advantage.
Nebraska has a lower opportunity cost for producing corn compared to wheat, while Iowa has a lower opportunity cost for producing wheat compared to corn. It means that Nebraska has a comparative advantage in corn production, and Iowa has a comparative advantage in wheat production.
By specializing in the goods they have a comparative advantage in and trading with each other, both states can benefit. Nebraska can increase its corn production and trade the surplus for wheat with Iowa, while Iowa can increase its wheat production and trade the surplus for corn with Nebraska.
Final answer:
Iowa and Nebraska can each benefit from specializing in the good they produce more efficiently and then trading, according to their opportunity costs. Without specific trade ratios, it's assumed that a perfect trade occurs, leaving no remainder for the trader.
Explanation:
Understanding Opportunity Costs and Gains from Trade
In this scenario, both Iowa and Nebraska can increase their consumption of goods by specializing in the production of the good with the lowest opportunity cost and then trading. For Iowa, the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska, the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. This means Iowa is relatively better at producing corn, while Nebraska is relatively better at producing wheat.
With trade, if Iowa specializes in corn, it can trade some of its corn for Nebraska's wheat, and vice versa. To reach the desired outcome in the question, where Nebraska ends up with 40 million bushels of wheat and 120 million bushels of corn, and Iowa ends up with 40 million bushels of corn and 120 million bushels of wheat, a mutually beneficial trade would occur based on their respective opportunity costs.
For part b of the question, if we assume that Iowa and Nebraska trade such that they both reach the desired outcome of 40 million bushels of their less efficient commodity and 120 million bushels of their efficient commodity, then the amount of goods traded would equate to the difference between their initial and final amounts. Since no specifics on trade quantities are provided, it would be necessary to determine a trade ratio acceptable to both parties that would lead to the final desired quantities without any remainder. Hence, the trader would not have any remainder if such a perfect trade is achieved.
Inflation and unemployment
Suppose that the government believes the economy is not producing goods and services at its optimal level. In an attempt to stimulate the economy, the government increases the quantity of money in the economy by printing more money.
This monetary policy ____ the economy's demand for goods and services, leading to ____ product prices. In the short run, the change in prices induces firms to produce _____ goods and services. This, in turn, leads to a ____ level of unemployment.
In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to ____ unemployment.
Answer:
The correct answer is: increases; an increase; more; lower; lower
Explanation:
Suppose the government of an economy adopts an expansionary policy by printing more money. This will lead to an increase in the money supply. As the money supply increases, interest rates will be lower. There will be an increase in private consumption and investment expenditure.
People will demand more goods and services, this increase in demand will further cause an increase in the price of the product. At higher prices, firms will prefer to supply more. They will need more inputs to produce more. Consequently, the unemployment rate will fall.
This example shows that there is a trade-off between inflation and unemployment. Higher inflation means that unemployment will be lower.
Each scenario below illustrates a basic underlying principle of economics of how economies work through the interactions of individual choices. Please label each scenario accordingly.
* ( ) The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and thus, closes shop until the temperature warms back up near summertime.
* ( ) The local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river.
* ( ) At a high end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station and one chef, who has an artistic eye, plate the food they are given. The result is increased speed, as more customers get serviced during an evening.
* ( ) During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and civilians enjoy the fruits of the farmers labor.
(Governmment intervention ) (Market Efficiency) (Specialization ) (Equilibrium)
Answer:
The correct answer is: market efficiency; government intervention; specialization; equilibrium.
Explanation:
The owner of the snow cones realizes that the demand for snow cones has decreased in winter, and thus, closes shop to open back. This is an example of market efficiency.
The local river is being polluted too much because of the amount of chemicals being dumped in the river. The government puts regulation on the amount of chemicals being dumped. This is an example of government intervention in the economy.
At a restaurant one chef is placed at the vegetable station, one chef is at meat station, and one is to plate the food. This an example of specialization the management is placing chef that specializes in vegetable, meat and in plating at their respective positions.
The favorable whether leads to increase in supply of oranges. This causes a rightward shift in supply curve. The price of oranges fall as a result. This is an example of change in equilibrium.
Which of the following errors would cause the adjusted trial balance to be unequal? a. The adjustment for prepaid insurance was omitted. b. The adjustment for unearned revenue was omitted. c. The adjustment for depreciation of $3,545 was journalized as debit to Depreciation Expense for $3,454 and a credit to Accumulated Depreciation of $3,545. d. The adjustment for accrued fees of $16,340 was journalized as a debit to Accounts Payable for $16,340 and a credit to Fees Earned of $16,340.
Answer: Option (C) is correct.
Explanation:
There is a adjustment entry for depreciation of $3,545 but the amount that is debited as depreciation expense is different from the amount that is credited as accumulated depreciation.
Depreciation Expense A/C Dr. $3,454
To Accumulated Depreciation $3,545
This will lead to an unequal adjusted trial balance.
Option 'A' and 'B' has no effect on the adjusted trail balance to be unequal because whole transaction is omitted.
Option 'D' also has no effect on adjusted trail balance because the debit and credit amount will still match.
8. Suppose that the demand for bentonite is given by Q = 40 − 0.5P, where Q is in tons of bentonite per day and P is the price per ton. Bentonite is produced by a monopolist at a constant marginal and average total cost of $10 per ton. How much profit is earned per day if the profit-maximizing quantity of bentonite is sold at the profit-maximizing price?
Answer:
The total profit is 612.5
Explanation:
First we need to find the profit maximizing quantity. Since the monopolist faces the entire demand his profit ([tex]\Pi[/tex])equation would be
[tex]\Pi=Q\times P- 10 Q[/tex]
where PxQ is his revenue and 10Q is his total cost.
We can replace P in the above equation from the equation demand[tex]Q=40-\frac{P}{2}\rightarrow P=80-2Q[/tex]
Then
[tex]\Pi=Q\times (80-2Q)- 10 Q=80Q-2Q^2-10Q[/tex]
taking derivatives with respect to Q
[tex]\frac{\partial \Pi}{\partial Q}=80-4Q-10=0[/tex]
then Q=17.5 and P=45.
The total profit is then 612.5
The monopolist will produce 17.5 tons of bentonite at a profit-maximizing price of $45 per ton, resulting in a daily profit of $612.50.
To determine the profit-maximizing quantity and price for the monopolist producing bentonite, we need to find the intersection of the marginal revenue (MR) and the marginal cost (MC).
Assuming the marginal cost is constant at $10, we can derive the marginal revenue curve from the given inverse demand function Q = 40 - 0.5P, by recognizing that MR is the derivative of the total revenue function with respect to Q.
We must differentiate the inverse demand curve to find the slope of the total revenue curve. The marginal revenue function will have twice the slope of the demand function. Given the demand function P = 80 - 2Q (solving for P in the original demand equation), the MR function will be MR = 80 - 4Q. Setting MC equal to MR (because MC = $10), we get $10 = 80 - 4Q, and solving for Q gives us 17.5 tons per day as the profit-maximizing quantity.
To find the profit-maximizing price, we substitute the profit-maximizing quantity into the original demand equation: P = 80 - 2(17.5) = 80 - 35 = $45 per ton. Total revenue (TR) is then 17.5 tons times $45/ton = $787.50.
Total cost (TC) is the quantity times the marginal cost, so 17.5 tons times $10/ton = $175. Therefore, daily profit is TR - TC, or $787.50 - $175 = $612.50.