An on-demand printing company has monthly overhead costs of $1,900 in rent, $450 in electricity, $80 for phone service, and $230 for advertising and marketing. The printing cost is $40 per thousand pages for paper and ink. The average cost for printing x thousand pages can be represented by the function C(x) = (2,660+40x) / x. For a given month, if the printing company could print an unlimited number of pages, what value would the average cost per thousand pages approach? What does this mean in the context of the problem? Select one: a. The average cost would approach $0 per thousand pages. The more pages the company prints, the lower the average cost. b. The average cost would approach infinity. The more pages the company prints, the higher the average cost. c. The average cost would approach $40 per thousand pages or equivalently $0.04 per page. This is the cost per page in the absence of fixed costs. d. The average cost would approach $2.660 per thousand pages. This is the total of the fixed monthly costs.
Answers
Answer:
Explanation:
Base on the question been given to us, the solution to the given problem is in the file attached below
Related Questions
Cream and Crimson Foods has a target capital structure of calling for 45.00 percent debt, 4.00 percent preferred stock, and 51.00 percent common equity (retained earnings plus common stock). Its before-tax cost of debt is 12.00 percent. The tax rate is 40.00%. Its cost of preferred stock is 10.41%. Its cost of common equity is 12.38%. Find the WACC for Cream and Crimson Foods
Answers
Answer:
9.9702%
Explanation:
After-tax cost of debt=12*(1-tax rate)
= 12* (1-0.4) =7.2%
WACC=Respective cost*Respective weight
=(7.2×0.45)+(10.41×0.04)+(12.38×0.51)
=9.9702%
Answer:
9.9578%
Explanation:
Solution
Given that:
Cream and Crimson foods target a structure capital of calling =5.00%
Stock preferred = 4%
Common equity = 51.00%
Before tax-cost = 12.00%
Rate of tax= 40.00%
preferred stock cost = 10.41%
Now,
After-tax cost of debt=12*(1-tax rate)
=12*(1-0.4)=7.2%
Thus,
The WACC=Respective costs*Respective weight
=(0.45*7.2)+(0.04*10.1)+(0.51*12.38)
=9.9578%
Therefore, the WACC for Cream and Crimson Food is 9.9578%
A company has budgeted direct materials purchases of $210000 in July and $390000 in August. Past experience indicates that the company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. During August, the following items were budgeted:
Wages Expense $50000
Purchase of office equipment 62000
Selling and Administrative Expenses 38000
Depreciation Expense 26000
The budgeted cash disbursements for August are:
Answers
Answer:
$486,000
Explanation:
According to the scenario, computation of the given data are as follow:-
Budgeted Cash Disbursements for August
Particular Amount ($)
Direct material purchase for July ($210,000 × 30%) 63,000
Direct material purchase for August ($390,000 × 70%) 273,000
Add-wages paid 50,000
Add: Office equipment purchase 62,000
Add: Selling and administrative expenses 38,000
Total 486,000
The depreciation is a non cash expense and the same is not relevant. Hence, ignored it
The financial statements for Dividendosaurus, Inc., for the current year are as follows: Balance Sheet Statement of Income and Retained Earnings Cash $100,Sales $3,000 Accounts receivable 200,Cost of goods sold (1,600),Inventory 50,Net fixed assets 600,Gross profit $1,400,Operations expenses (970),Total $950,Operating income $430 Accounts payable $140, Interest expense (30) ,Long-term debt 300,Income before tax $400,Capital stock 260 ,Income tax (200), Retained earnings 250 ,Net income $200 ,Total $950 Add: Jan.1 retained earnings 150 Less: dividends (100) Dec.31 retained earnings $250,Dividendosaurus has a dividend-payout ratio of:_______.
A. 19.6%
B. 28.6%
C. 40.0%
D. 50.0%
Answers
Answer:
Option D,50% is the correct answer.
Explanation:
Dividend payout ratio is an important financial measure which measures the ratio of company's dividends payment to net income of the company.
This implies the portion of income earned in a year given to shareholders as dividends while the remains is kept in the business as source of further growth.
Dividend payout ratio=dividends/net income=$100/$200=50%
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 126,000 kilometers during a year, the average operating cost is 13.3 cents per kilometer. If a truck is driven only 84,000 kilometers during a year, the average operating cost increases to 15.5 cents per kilometer. Required:1. Using the high-low method, estimate the variable operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks.2. Express the variable and fixed costs in the form Y = a + bX.3. If a truck were driven 105,000 kilometers during a year, what total operating cost would you expect to be incurred?
Answers
Answer:
Hoi Chong Transport, Ltd.
1. Using high-low method to estimate the variable operating cost per kilometer and the annual fixed operating cost:
High point 126,000Km, cost = $16,758 (13.3 cents x 126,000)
Low point 84,000km, cost = $13,020 (15.5 cents x 84,000)
Difference 42,000km, cost = $3,738
i) Variable Cost per km = $3,738/42,000 = $0.09
ii) Fixed cost using low point = $13,020 - (84,000 x $0.09) = $5,460
2. Variable and fixed costs in the form of Y = a + bX
where Y = total costs
a = fixed cost
b = variable cost
X = kilometers driven
Y = $5,460 + $0.09X
3. Total operating cost (Y), if truck were driven 105,000
Y = $5,460 + $0.09 x 105,000 = $14,910
Explanation:
The high-low method is a technique for determining the variable and fixed elements of total cost. The techniques uses the highest quantity with its total cost and the lowest quantity with its total cost. The resulting cost is the variable cost. Then the variable cost per unit is determined by dividing the cost with the quantity.
Then, the variable cost per unit is superimposed on the formula, Y = a + bX, where Y is the total cost, a is the fixed cost, b is the variable cost, and X is the quantity. Solving for a or fixed cost, gives a = Y - bX.
Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $6,800,000; Value Lodges estimates furnishings for the motel will cost an additional $200,000 and will require replacement every 5 years.
Annual operating and maintenance costs for the motel are estimated to be $540,000. The average rental rate for a unit is anticipated to be $25/day. Value Lodges expects the motel to have a life of 15 years and a salvage value of $900,000 at the end of 15 years. This estimated salvage value assumes that the furnishings are not new. Furnishings have no salvage value at the end of each 5-year replacement interval.
Required:
1. Assuming average daily occupancy percentages of 50 percent, 60 percent, 70 percent, and 80 percent for years 1 through 4, respectively, and 90 percent for the fifth through fifteenth years, a MARR of 12 percent/year, 365 operating days/year, and ignoring the cost of land, should the motel be built? Base your decision on an internal rate of return analysis.
Answers
Answer:
The motel should not be built because the IRR is 9.31%, which is lower than the company's MARR (12%).
Explanation:
cost to build the new 200 unit motel $6,800,000 + $200,000 = $7,000,000
the furnishing must be replaced every 5 years
annual operating costs $540,000
average rental rate
useful life 15 years with a salvage value of $900,000
expected cash flows:
year total revenue costs furnishing total
0 -$6,800,000 -$200,000 -$7,000,000
1 $912,500 -$540,000 $372,500
2 $1,095,000 -$540,000 $555,000
3 $1,277,500 -$540,000 $737,500
4 $1,460,000 -$540,000 $920,000
5 $1,642,500 -$540,000 $1,102,500
6 $1,642,500 -$540,000 -$200,000 $902,500
7 $1,642,500 -$540,000 $1,102,500
8 $1,642,500 -$540,000 $1,102,500
9 $1,642,500 -$540,000 $1,102,500
10 $1,642,500 -$540,000 $1,102,500
11 $1,642,500 -$540,000 -$200,000 $902,500
12 $1,642,500 -$540,000 $1,102,500
13 $1,642,500 -$540,000 $1,102,500
14 $1,642,500 -$540,000 $1,102,500
15 $2,542,500 -$540,000 $2,002,500
now using an excel spreadsheet I calculated both the NPV and IRR:
NPV = -$1,113,875IRR = 9.31% < 12% (MARR)The model should not be built because the IRR is 9.31%, which is lower than the company's MARR (12%).
The calculation is as follows:cost to build the new 200 unit motel should be
= $6,800,000 + $200,000
= $7,000,000
expected cash flows:
year total revenue costs furnishing total
0 -$6,800,000 -$200,000 -$7,000,000
1 $912,500 -$540,000 $372,500
2 $1,095,000 -$540,000 $555,000
3 1,277,500 -$540,000 $737,500
4 $1,460,000 -$540,000 $920,000
5 $1,642,500 -$540,000 $1,102,500
6 $1,642,500 -$540,000 -$200,000 $902,500
7 $1,642,500 -$540,000 $1,102,500
8 $1,642,500 -$540,000 $1,102,500
9 $1,642,500 -$540,000 $1,102,500
10 $1,642,500 -$540,000 $1,102,500
11 $1,642,500 -$540,000 -$200,000 $902,500
12 $1,642,500 -$540,000 $1,102,500
13 $1,642,500 -$540,000 $1,102,500
14 $1,642,500 -$540,000 $1,102,500
15 $2,542,500 -$540,000 $2,002,500
here we used the excel for calculating both the NPV and IRR:
NPV = -$1,113,875
IRR = 9.31% < 12% (MARR)
Learn more: https://brainly.com/question/1022920
Consider the following situations for Shocker:
a, On November 28, 2021, Shocker receives a $3,150 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue is credited.
b. On December 1, 2021, the company pays a local radio station $2,430 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.
c. Employee salaries for the month of December totaling $7,100 will be paid on January 7, 2022.
d. On August 31, 2021, Shocker borrows $61,000 from a local bank. A note is signed with principal and 9% interest to be paid on August 31, 2022.
Required:
1. Record the necessary adjusting entries for Shocker at December 31, 2021. No adjusting entries were made during the year.
Answers
Answer:
a.
Dec 31, 2021 Deferred Revenue 1050 Dr
Revenue 1050 Cr
b.
Dec 31, 2021 Advertising Expense 810 Dr
Prepaid Advertising 810 Cr
c.
Dec 31, 2021 Salaries Expense 7100 Dr
Salaries Payable 7100 Cr
d.
Dec 31, 2021 Interest Expense 1830 Dr
Interest Payable 1830 Cr
Explanation:
a.
The revenue is received in advance for December 2021, January and February 2022. At the end of the year, the revenue for December has been earned and will be recorded as revenue and a decrease in liability of deferred revenue.
Revenue December = 3150 / 3 = 1050
b.
The advertisement expenses were paid in advance. On 31 December, the ads for december has been consumed and the expense will be recorded.
Advertising expense december = (2430 / 30) * 10 = 810
c.
The salaries relating to december are accrued and will be paid in January. Thus, an accrual will be recorded against the salaries expense.
d.
The note carries interest that becomes due over the lifetime of the note. The accrual principle matches the revenues and expenses of a particular period. Thus, interest relating to 4 months from September 2021 to December 2021 will be recorded as an expense and a liability in adjusting entry made on 31 december 2021.
Interest expense 2021 = 61000 * 0.09 * 4/12 = 1830
The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $110 per share, and the price of a 3-month call option at an exercise price of $110 is $6.53. a. If the risk-free interest rate is 8% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $110? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answers
Answer:
$3.86
Explanation:
According to the scenario, computation of the given data are as follow:-
Current price of stock (S0) = $110
Call option at exercise price X is $110
Three month call option price (C) = $6.53
Risk free interest rate = 8%
Price of the three month P.U.T.T option (P) = C - S0 + PV (X)
= $6.53 - $140 + $140 ÷ (1+8%)^(3÷12 )
= $6.53 - $140 + $140 ÷ (1+8%)^.25
= $6.53 - $140 + $140 ÷ 1.019427
= $6.53 - $140 + $137.33
= $3.86
Q2: In the expenditure cycle, the majority of payments made are by check. What are some
control issues related to payment of vendors by check?
Answers
Answer:
Key control problems in the area of payment by check can give rise to fraudulent activity.
Explanation:
Paying employees by check offers a level of security of employee payments.
The Campus Collective company, which creates unique apps for colleges, has recently lost three large university clients that made up 40% of its total revenue. This has hit the company hard and management finds it necessary to reduce staff or wages. The economy also appears to be headed toward a recession and gaining more clients will most likely be harder to accomplish. Because it is a smaller company everyone knows each other and knows there are tough choices ahead. Management brings up the idea of an across the board wage reduction so that no one be let go, but some employees don’t believe that a wage cut will be equally applied to all. The employees are also not sure if other people working their same jobs in the economy are getting reduced wages. They start to argue against wage reduction and things get a bit heated. Which theory best illustrate this wage stickiness scenario?
Answers
Answer:
Relative wage coordination argument
Explanation:
Relative wage coordination argument states that even though workers are willing to accept wage cuts due to economic hardships. Wide implementation of wage cuts is hard because workers believe that not everyone will experience wage cuts.
So they will will fight against implementation of wage cuts.
In this scenario Campus Collective company has recently lost three large university clients that made up 40% of its total revenue. This has hit the company hard and management finds it necessary to reduce staff or wages.
Although employees are aware of the hardship they still fight against management on wage cuts because employees are also not sure if other people working their same jobs in the economy are getting reduced wages.
At the beginning of the month, the Forming Department of Martin Manufacturing had 14,000 units in inventory, 40% complete as to materials, and 20% complete as to conversion. During the month the department started 64,000 units and transferred 68,000 units to the next manufacturing department. At the end of the month, the department had 10,000 units in inventory, 85% complete as to materials, and 60% complete as to conversion. If Martin Manufacturing uses the weighted-average method of process costing, compute the equivalent units for materials and conversion respectively for the Forming Department.
Answers
Answer:
total equivalent units using weighted average method:
materials = 76,500 unitsconversion = 74,000 unitsExplanation:
beginning inventory 14,000 units
40% complete to materials = 5,600 equivalent units20% complete to conversion = 2,800 equivalent unitsduring the month 64,000 were started
68,000 units were transferred out
ending inventory 10,000 units
85% complete to materials = 8,500 equivalent units60% complete to conversion = 6,000 equivalent unitstotal equivalent units using weighted average method:
materials = units completed and transferred out + ending inventory = 68,000 + 8,500 = 76,500 unitsconversion = units completed and transferred out + ending inventory = 68,000 + 6,000 = 74,000 unitsThe common stock of the C.A.L.L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $95 is $6.00. a. If the risk-free interest rate is 9% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.).3
Answers
Answer:
$ 8.02
Explanation:
Solution
Given that:
The trading narrow range of the CALL corporation = $95
The range stay = 3 months
The price of a 3 month put option with a price exercise = $6.00
Risk free interest rate = 9%
Now
Recall the call put parity equation:
C = P + S - K x (1 + r)-T
= 6 + 95 - 95 x (1 + 9%)-3/12 = $ 8.02
Therefore the price he price of a 3-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money is $ 8.02
The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 200, Camera A Price: 300). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and prices (P) of each model:
NA = 195 - 0.5PA + 0.35PB
NB = 300 + 0.06PA - 0.5PB
Construct a model for the total revenue and implement it on a spreadsheet. Develop two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10.
Max profit occurs at Camera A price of $ .
Max profit occurs at Camera B price of $
Answers
Answer:
Max Revenue (not necessarily profit) occurs at Camera A price of $380
Max Revenue (not necessarily profit) occurs at Camera B price of $460
Explanation:
Assuming prices varying between $250 to $500 with $10 intervals, the total revenues of camera A are shown below:
Statement showing maximum reveue of Camera A
Price -A 250 260 270 280 290 300 310 320 330 340 350 360 370 380 390 400 410 420 430 440 450 460 470 480 490 500
Price B
250 26875 26390 25785 25060 24215 23250 22165 20960 19635 18190 16625 14940 13135 11210 9165 7000 4715 2310 -215 -2860 -5625 -8510 -11515 -14640 -17885 -21250
260 27500 27040 26460 25760 24940 24000 22940 21760 20460 19040 17500 15840 14060 12160 10140 8000 5740 3360 860 -1760 -4500 -7360 -10340 -13440 -16660 -20000
270 28125 27690 27135 26460 25665 24750 23715 22560 21285 19890 18375 16740 14985 13110 11115 9000 6765 4410 1935 -660 -3375 -6210 -9165 -12240 -15435 -18750
280 28750 28340 27810 27160 26390 25500 24490 23360 22110 20740 19250 17640 15910 14060 12090 10000 7790 5460 3010 440 -2250 -5060 -7990 -11040 -14210 -17500
290 29375 28990 28485 27860 27115 26250 25265 24160 22935 21590 20125 18540 16835 15010 13065 11000 8815 6510 4085 1540 -1125 -3910 -6815 -9840 -12985 -16250
300 30000 29640 29160 28560 27840 27000 26040 24960 23760 22440 21000 19440 17760 15960 14040 12000 9840 7560 5160 2640 0 -2760 -5640 -8640 -11760 -15000
310 30625 30290 29835 29260 28565 27750 26815 25760 24585 23290 21875 20340 18685 16910 15015 13000 10865 8610 6235 3740 1125 -1610 -4465 -7440 -10535 -13750
320 31250 30940 30510 29960 29290 28500 27590 26560 25410 24140 22750 21240 19610 17860 15990 14000 11890 9660 7310 4840 2250 -460 -3290 -6240 -9310 -12500
330 31875 31590 31185 30660 30015 29250 28365 27360 26235 24990 23625 22140 20535 18810 16965 15000 12915 10710 8385 5940 3375 690 -2115 -5040 -8085 -11250
340 32500 32240 31860 31360 30740 30000 29140 28160 27060 25840 24500 23040 21460 19760 17940 16000 13940 11760 9460 7040 4500 1840 -940 -3840 -6860 -10000
350 33125 32890 32535 32060 31465 30750 29915 28960 27885 26690 25375 23940 22385 20710 18915 17000 14965 12810 10535 8140 5625 2990 235 -2640 -5635 -8750
360 33750 33540 33210 32760 32190 31500 30690 29760 28710 27540 26250 24840 23310 21660 19890 18000 15990 13860 11610 9240 6750 4140 1410 -1440 -4410 -7500
370 34375 34190 33885 33460 32915 32250 31465 30560 29535 28390 27125 25740 24235 22610 20865 19000 17015 14910 12685 10340 7875 5290 2585 -240 -3185 -6250
380 35000 34840 34560 34160 33640 33000 32240 31360 30360 29240 28000 26640 25160 23560 21840 20000 18040 15960 13760 11440 9000 6440 3760 960 -1960 -5000
390 35625 35490 35235 34860 34365 33750 33015 32160 31185 30090 28875 27540 26085 24510 22815 21000 19065 17010 14835 12540 10125 7590 4935 2160 -735 -3750
400 36250 36140 35910 35560 35090 34500 33790 32960 32010 30940 29750 28440 27010 25460 23790 22000 20090 18060 15910 13640 11250 8740 6110 3360 490 -2500
410 36875 36790 36585 36260 35815 35250 34565 33760 32835 31790 30625 29340 27935 26410 24765 23000 21115 19110 16985 14740 12375 9890 7285 4560 1715 -1250
420 37500 37440 37260 36960 36540 36000 35340 34560 33660 32640 31500 30240 28860 27360 25740 24000 22140 20160 18060 15840 13500 11040 8460 5760 2940 0
430 38125 38090 37935 37660 37265 36750 36115 35360 34485 33490 32375 31140 29785 28310 26715 25000 23165 21210 19135 16940 14625 12190 9635 6960 4165 1250
440 38750 38740 38610 38360 37990 37500 36890 36160 35310 34340 33250 32040 30710 29260 27690 26000 24190 22260 20210 18040 15750 13340 10810 8160 5390 2500
450 39375 39390 39285 39060 38715 38250 37665 36960 36135 35190 34125 32940 31635 30210 28665 27000 25215 23310 21285 19140 16875 14490 11985 9360 6615 3750
460 40000 40040 39960 39760 39440 39000 38440 37760 36960 36040 35000 33840 32560 31160 29640 28000 26240 24360 22360 20240 18000 15640 13160 10560 7840 5000
470 40625 40690 40635 40460 40165 39750 39215 38560 37785 36890 35875 34740 33485 32110 30615 29000 27265 25410 23435 21340 19125 16790 14335 11760 9065 6250
480 41250 41340 41310 41160 40890 40500 39990 39360 38610 37740 36750 35640 34410 33060 31590 30000 28290 26460 24510 22440 20250 17940 15510 12960 10290 7500
490 41875 41990 41985 41860 41615 41250 40765 40160 39435 38590 37625 36540 35335 34010 32565 31000 29315 27510 25585 23540 21375 19090 16685 14160 11515 8750
500 42500 42640 42660 42560 42340 42000 41540 40960 40260 39440 38500 37440 36260 34960 33540 32000 30340 28560 26660 24640 22500 20240 17860 15360 12740 10000
Max Revenue (not necessarily profit) occurs at Camera A price of $380
Max Revenue (not necessarily profit) occurs at Camera B price of $460
The Gamer Company is a video game production company that specializes in educational video games for kids. The company’s R&D department is always looking for great ideas for new games. On average, the R&D department generates about 25 new ideas a week. To go from idea to approved product, the idea must pass through the following stages: paper screening (a 1-page document describing the idea and giving a rough sketch of the design), prototype development, testing, and a focus group. At the end of each stage, successful ideas enter the next stage. All other ideas are dropped. The following chart depicts this process, and the probability of succeeding at each stage.
The paper screening for each idea takes 2 hours of a staff member’s time. After that, there is a stage of designing and producing a prototype. A designer spends 4 hours designing the game in a computer-aided-design (CAD) package. The actual creation of the mock-up is outsourced to one of many suppliers with essentially limitless capacity. It takes 4 days to get the prototype programmed, and multiple prototypes can be created simultaneously. A staff member of the testing team needs 2 days to test an idea. Running the focus group takes 2 hours of a staff member’s time per idea, and only one game is tested in each focus group. Finally, the management team meets for 3 hours per idea to decide if the game should go into production.Available working hours for each staff member are 8 hours per day, 5 days a week. The current staffing plan is as follows:A. Paper screening: 3 staff members.B. Design and Production: 4 staff members.C. Testing: 6 staff members.D. Focus Group: 1 staff member.E. Final Decision: 1 management teama. How many new ideas would Gamer Co. approve for production per week if it had unlimited capacity (staff) in its R&D process?b.Which stage is the bottleneck according to the current staffing plan?A. Design and productionB. Focus groupC. TestingD. Paper screeningE. Final decisionc. With the current staffing plan, how many new ideas will be put into production per week?
Answers
Answer:
Therefore 13.3 ideas per week
Explanation:
We can use the following method to do the calculations
And we are given
The average number of ideas per week =25
Ideas approved per week = 25×0.6×0.5×0.35×0.75
= 1.968 ideas
b)
The maximum time that will be taking stage is Testing therefore it is the bottleneck base on current staffing plan.
c)
Capacity per hour = number of staff ÷ number of hour
We have capacity per week = Capacity per hour ×5× 8
Demand is lowest of all capacity
= 13.3
Paper screening
Capacity= 3/2=1.5 idea/ hour
= 60 idea per week
Demand =13.3
Utilization=0.22
Design & production
Capacity= 4/4=1 idea/ hour
= 40 idea per week
Demand =13.3
Utilization=0.33
Testing
Capacity= 6/16=0.38 idea/ hour
= 15 idea per week
Demand =13.3
Utilization=0.88
Focus group
Capacity= 1/2=0.5 idea/ hour
= 20 idea per week
Demand =20
Utilization=0.66
Final decision
Capacity= 1/3=0.33 idea/ hour
= 13.3 idea per week
Demand =13.3
Utilization=1
Thus 13.3 ideas per week as our answer
The Lopez-Portillo Company has $11.3 million in assets, 90 percent financed by debt, and 10 percent financed by common stock. The interest rate on the debt is 10 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $21.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 10 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 30 percent.
a. If EBIT is 11 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives
Earnings Per Share
Current $
Plan A $
Plan B $
b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2 decimal places.)
Degree Of
Financial Leverage
Current
Plan A
Plan B
c. If stock could be sold at $20 per share due to increased expectations for the firm’s sales and earnings, what impact would this have on earnings per share for the two expansion alternatives? Compute earnings per share for each. (Round your answers to 2 decimal places.)
Earnings Per Share
Plan A $
Plan B $
Answers
Answer:
Explanation:
Current Plan A Plan B
EBIT 1.243 2.365 2.365
Interest 1.017 1.935 1.017
EBT 0.226 0.43 1.348
Tax (30%) 0.0678 0.129 0.4044
Net Income 0.1582 0.301 0.9436
EPS $ 1.40 $ 1.40 $ 0.83
No. of shares 0.113 0.215 1.133
DFL 5.50 5.50 1.75
In the current plan, Debt = 90% x 11.3 = 10.17m
Interest expense = 10% x 10.17 = 1.017m
No. of shares = Equity / Par value = 11.3 x 10% / 10 = 0.113m
EBIT = 11% x 11.3 = 1.243m
EPS = Net Income / No. of shares = 0.1582m / 0.113m = $1.40
In Plan A, Debt = 90% x 21.5 = 19.35m
Interest expense = 10% x 19.35 = 1.935m
No. of shares = Equity / Par value = 21.5 x 10% / 10 = 0.215m
EBIT = 11% x 21.5 = 2.365m
EPS = Net Income / No. of shares = 0.301m / 0.215m = $1.40
In Plan B, Debt = 90% x 11.3 = 10.17m
Interest expense = 10% x 10.17 = 1.017m
No. of shares = Equity / Par value = (21.5 - 10.17) / 10 = 1.133m
EBIT = 11% x 21.5 = 2.365m
EPS = Net Income / No. of shares = 0.9436m / 1.133m = $0.83
DFL = EBIT / EBT
cost allocationClipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper costs $5 and has a sales price of $9. The high-end model costs $9 and sales for $15. Fixed costs associated with this product line amount to $35,880. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Based on this information what is the total number of clippers that must be sold to earn a $12,420 profit
Answers
Answer:
Break-even point (units)= 10,500 clippers
Explanation:
Giving the following information:
The economy clipper costs $5 and has a sales price of $9.
The high-end model costs $9 and sales for $15.
Fixed costs associated with this product line amount to $35,880.
Sales participation:
Economy clippers= 0.70
High-end= 0.30
Desired profit= $12,420
To calculate the number of clippers to be sold for the company, we need to use the following formula:
Break-even point (units)= (Total fixed costs + desired profit) / Weighted average contribution margin ratio
Weighted average contribution margin ratio= (weighted average selling price - weighted average unitary variable cost)
Weighted average contribution margin ratio= (0.7*9 + 0.3*15) - (0.7*5 + 0.3*9)
Weighted average contribution margin ratio= $4.6
Break-even point (units)= (35,880 + 12,420) / 4.6
Break-even point (units)= 10,500 clippers
Answer:
Units to be sold to achieve target profit = 10,500 units
Explanation:
The units to be sold to achieve target profit is determined as follows:
Units to be sold to achieve target profit
= (Fixed cost + Target Profit)/Average contribution per unit
Economy High-end
Contribution per unit = 9-5=$4 15-9 = $6
Average contribution per unit= ($4× 70%) + (30%×$6) = $4.6
Units to be sold to earn a profit of $12,420
= Fixed cost + Target Profit/Average contribution per unit
= (35,880 + 12,420)/4.6
= 10,500 units
Units to be sold to achieve target profit = 10,500 units
Longview Hospital performs blood tests in its laboratory. The following standards have been set for each blood test performed:
Standard quantity or hours Standard price or Rate
Direct materials 2.0 plates $2.75 per plate
Direct labor 0.2 hours $15.00 per hour
Variable manufacturing overhead 0.2 hours $7.00 per hour
During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable overhead is assigned to blood tests on the basis of standard direct labor-hours. The following events occurred during May:
• 3,600 plates were purchased for $9,540
• 3,200 plates were used for blood tests
• 340 actual direct labor-hours were worked at a cost of $5,550 The direct materials purchases variance is computed when the materials are purchased.
56/75.The materials price variance for May is: A. $360 F B. $360 U C. $740 F D. $740 U
57/76.The materials quantity variance for May is: A. $1,650 F B. $1,650 U C. $550 U D. $720 F
58/77.The labor rate variance for May is: A. $225 F B. $225 U C. $450 F D. $450 U
59/78.The labor efficiency variance for May is: A. $600 F B. $600 U C. $515 U D. $515 F
60/79.The variable overhead efficiency variance for May is A. $350 F B. $350 U C. $280 U D. $280 F
Answers
Answer:
Instructions are below.
Explanation:
Giving the following information:
Standard:
Direct materials 2.0 plates $2.75 per plate
Direct labor 0.2 hours $15.00 per hour
Variable manufacturing overhead 0.2 hours $7.00 per hour
Actual:
1,500 blood tests.
3,600 plates were purchased for $9,540
3,200 plates were used for blood tests
340 actual direct labor-hours were worked for $5,550
1)The materials price variance:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (2.75 - 2.65)*3,600= $360 favorable
2) The materials quantity variance:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (2*1,500 - 3,200)*2.75
Direct material quantity variance= $550 unfavorable
3) The labor rate variance:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (15 - 16.32)*340= $448.8 unfavorable
4) The labor efficiency variance:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (1,500*0.2 - 340)*15
Direct labor time (efficiency) variance= $600 unfavorable
5) The variable overhead efficiency variance:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Variable overhead efficiency variance= (1,500*0.2 - 340)*7
Variable overhead efficiency variance= $280 unfavorable
he following financial statement data for years ending December 31 for Holland Company are shown below. 20Y4 20Y3 Cost of merchandise sold $1,489,200 $945,934 Inventories: Beginning of year 359,160 251,120 End of year 516,840 359,160 a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place. Inventory Turnover 20Y4 20Y3 b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations and final answers to one decimal place. Days' Sales in Inventory 20Y4 days 20Y3 days
Answers
Answer:
Year 2014 Year 2013
a) Inventory Turnover ratio 3.4 times and 3.1 times
b) Number of days' sales in inventory 107.3 days and 117.7 days
Explanation:
As per the data given in the question,
For Year 2014 :
Average inventory = ($359,160 + $516,840)÷2
= $438,000
Inventory Turnover ratio = $1,489,200÷$438,000
= 3.4 times
For Year 2013 :
Average inventory = ($251,120 + $359,160)÷2
= $305,140
Inventory Turnover ratio = $945,934÷$305,140
= 3.1 times
Number of days' sales in inventory = Number of days in a year ÷ Inventory Turnover ratio
For 2014 = 365÷3.4 = 107.3 days
For 2013 = 365÷3.1 = 117.7 days
In the Heckscher-Ohlin model, when there is international-trade equilibrium:
A. the capital-rich country will charge more for the capital-intensive good than the price paid by the capital-poor country for the capital-intensive good.
B. workers in the capital-rich country will earn more than those in the poor country.
C. the workers in the capital-rich country will earn less than those in the poor country.
D. the capital-rich country will charge less for the capital-intensive good than the price paid by the capital-poor country for the capital-intensive good.
E. the relative price of the capital-intensive good in the capital-rich country will be the same as that in the capital-poor country.
Answers
Answer:
E. the relative price of the capital-intensive good in the capital-rich country will be the same as that in the capital-poor country.
Explanation:
Heckscher-Ohlin International Trade theory states that : a country should export the good which uses its abundant resource intensively, & import the good which uses its its scarce resource intensively.
Example : If country 1 is capital abundant, it should export capita intensive good C. And, it should import labour intensive good L from capital abundant country 2.
Implication : Capital abundant (rich) country has low price of capital intensive good, Capital scarce (poor) country has high price of capital intensive good. This provides the rationale of above specialisation export - import benefit
Export of capital intensive good from capital abundant (capital rich) country decreases their domestic supply. This increases their price in exporting country. Import of these goods in capital scarce (capital poor) country increases supply in imported markets. So, it decreases their price in importing country.This happens till relative price of the capital-intensive good in the capital-rich country will be the same as that in the capital-poor country.
"Harold and Maude are married and live in a common-law state. Neither has made any taxable gifts and Maude owns (holds title to) all their property. She dies with a taxable estate of $25 million and leaves it all to Harold. He dies several years later, leaving the entire $25 million to their three children. (Refer to Exhibit 25-1 and Exhibit 25-2.)"
Answers
Answer:
$5528000
Explanation:
Solution
Given that:
Now,
The 2018 estate tax exemption 11180000$ above that the estate inherited are taxed at 40%.
So,
25000000-11180000 = taxable estate 13820000$
The estate tax due= 13820000*40%
= 5528000$
Note: This is reference from Exhibit 25-1 and Exhibit 25-2.
During 2022 Concord Corporation had sales on account of $596000, cash sales of $235000, and collections on account of $342000. In addition, they collected $9200 which had been written off as uncollectible in 2021. As a result of these transactions the change in the accounts receivable balance from the beginning of the year to the end of the year indicates a:_______
Answers
Answer:
$254,000
Explanation:
First and foremost,the cash of $9,200 collected in respect of debt already written off as uncollectible would not affect the balance in accounts receivable since the debt would reinstated and also taken out of accounts receivable simultaneously.
The change in accounts is the difference between the sales on account of $596,000 and collections in respect of accounts receivable of $342,000
change in accounts receivable=$596,000-$342,000=$254,000
Use the following to answer the next 4 questions Suppose gold mining in the US was a perfectly competitive industry with N = 40 firms. Over the years Mr. Barrick purchased the all individual gold mines. The industry is now a monopoly owned by Mr. Barrick $ 70 60 40 30 MC = AC 10 20 30 40 50 60 Q MR 32) The profit Mr. Barrick earns as a monopolist is a. $700 b. $600 c. $900 d. $1000 e. none of the above 33) Before Mr. Barrick monopolized the industry, the total industry output of N = 40 competitive firms was Q = a. 20 b. 30 c. 40 d. 60 e. none of the above 34) After monopolization price per unit increased by a. 20 b. 30 c. 40 d. 60 e. none of the above 35) What is the extent of inefficiency (DWL = loss of total surplus) as a result of monopolization of what used to be a competitive industry? a. 450 b. 400 c. 500 d. 350 e. none of the above
Answers
Answer:
32) - Option c i.e., $900.
33) - Option d i.e., 60.
34) - Option d i.e., 60.
35) - Option a i.e., $450.
Explanation:
32) - Mr. Barrick 's income as a corporation is $900.
Then, we apply the formula of profit maximization that is :
[tex]Profit = quantity \times (price - AC)[/tex]
[tex]=30\times(60-30)[/tex]
[tex]=30\times30=900[/tex]
[tex]Profit=\$900[/tex]
33) - While Mr. Barrick controlled the market, the total manufacturing production of N = 40 competitive companies was Q = 60.
In a reasonably marketplace, companies can sell where the marginal cost remains equivalent to the demand curve or that MC remains equivalent to the demand curve at 60.
34) - After the monopoly cost per unit raised by $60.
Price as well as quantity shall be determined by the monopoly where MR = MC. Price is determined mostly on demand curve relating to that same points where MR = MC has been 60 as well and the quantities are determined also on the y-axis that is 30.
35) - [tex]DWL(Dead\;Weight\;Loss) =\frac{1}{2} \times(60-30)\times(60-30)[/tex]
[tex]=\frac{1}{2} \times30\times30[/tex]
[tex]=\frac{1}{2} \times900=450[/tex]
[tex]DWL=\$450[/tex]
Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company's production costs for the year were: direct labor, $26,000; direct materials, $46,000; and factory overhead applied $5,600. The overhead application rate was:_______.
a. 17.69%.
b. 21.54%.
c. 464.29%.
d. 4.64%.
e. 12.17%.
Answers
Answer:
b. 21.54%.
Explanation:
The formula and the computation of the overhead application rate is shown below:
As we know that
Overhead application rate is
= (Applied factory overhead ÷ Direct labor cost)
where,
Applied factory overhead is $5,600
And, the direct labor cost is $26,000
Now putting these values to the above formula
So, the overhead application rate is
= ($5600 ÷ $26000)
= 21.54%
We simply divided the applied factory overhead which is indirect cost by the direct labor cost i.e direct cost so that the overhead application rate could come
The following transactions apply to Ozark Sales for Year 1:
The business was started when the company received $49,000 from the issue of common stock.
Purchased equipment inventory of $176,500 on account.
Sold equipment for $203,000 cash (not including sales tax).
Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $128,000.
Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales.
Paid the sales tax to the state agency on $153,000 of the sales.
On September 1, Year 1, borrowed $20,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, Year 2.
Paid $5,500 for warranty repairs during the year.
Paid operating expenses of $53,500 for the year.
Paid $124,200 of accounts payable.
Recorded accrued interest on the note issued in transaction no. 6.
Prepare the income statement, balance sheet, and statement of cash flows for year 1.
Answers
Answer and Explanation:
According to the scenario, The presentation of the each financial statement is presented below:
Income Statement
Particular Amount ($)
Sales 203,000
Less - merchandise cost 128,000
Gross Profit 75,000
Less-Operating expenses paid 53,500
Less-Paid warranty repairs 5,500
Less-Provision for warranty($203,000 ×3%) 6,090
Less-interest expenses($20,000 × 6% × 4 ÷ 12) 400
Net Income 9510
Balance Sheet
Assets Amount ($) Liabilities
& stockholder’s equity Amount ($)
Cash 92,300 Accounts payable
($176,500-$124,200) 52,300
Merchandise
inventory
($176,500-$128,000) 48,500 Sales tax payable
{($203,000 × 7%) - $10,710} 3,500
Warranty payable 6,090
Interest payable 400
Notes payable 20,000
Common stock equity 49,000
Retained earnings 9,510
Total 140,800 Total 140,800
Cash Flow Statement
Particular Amount($)
Cash flow from operating activities:-
Cash receipt from sale 217,210
Less - Paid accounts payable -124,200
Less - Sales tax paid -10,710
Less - Paid warranty repairs -5,500
Less - paid operating expenses -53,500
Total amount of Cash flow from operating activities 23,300
Cash flow from investing activities:-
Cash flow from financing activities:-
Issue of common stock 49,000
Add-Borrowing from local bank 20,000
Total amount of Cash flow from financing activities 69,000
Net increase in cash 92,300
Opening cash balance -
Ending cash balance 92,300
Working note:
Total Cash Amount
Particulars Amount ($)
Amount received from issue of common stock 49,000
Add-Sold equipment $203,000 + ($203,000 × 7%) 217,210
Less-Sales tax paid to the state agency ($153,000 × 7%) 10,710
Add-Borrowed from local bank 20,000
Less-Paid warranty repairs 5,500
Less-Paid operating expenses 53,500
Less-Paid accounts payable 124,200
Net cash 92,300
Retained Earnings
Particulars Amount ($)
Sold equipment 203,000
Less-Merchandise cost 128,000
Less-Paid warranty repairs 5,500
Less-Paid operating expenses 53,500
Less-interest expenses 400
Less-Provision for warranty 6,090
Net Retained earnings 9,510
These are items of the financial statement i.e listed above
Much of the empirical evidence on the behavior of costs for real-world firms suggests that:
A. there is no relationship between the marginal and average variable costs of production.
B. for many firms, marginal and average variable costs are constant over wide ranges of output.
C. average costs functions are U-shaped as suggested by economic theory.
D. for most firms, marginal costs are declining in the range in which the firms operate.
Answers
Answer:
B. for many firms, marginal and average variable costs are constant over wide ranges of output.
Explanation:
Traditional Cost Theory : Marginal & Average Variable Cost are U shaped.
Modern theory of cost behaviour for real world firms suggest - 'short run average variable cost (SAVC)' is saucer shape curve, ie flat (constant) stretch over a wide range of output.
Such shape of SAVC is due to 'reserve capacity' of production by firms, to meet up unexpected demand change due to seasonal or consumer taste changes. This reserve capacity prevents the SAVC to rise immediately after falling (as per U shape) & rather sustains it constant for a wide range of output (as a saucer shape)
The ledger of Mai Company includes the following accounts with normal balances: Common Stock, $9,000; Dividends, $800; Services Revenue, $13,000; Wages Expense, $8,400; and Rent Expense, $1,600.
Prepare the necessary closing entries from the available information at December 31.
Answers
Answer:
Explanation:
The closing entries is purposely to transfer account balances to permanents books of account , with all income statements banalces transferred to retained earnings.
Common stock - $9000
Dividends - $800
Service revenue - $13,000
Wages Expenses - $ $8,400
Rent Expenses - $1,600
Closing Entries
Particulars Dr Cr
Income Summary $10,000
Wages Expenses $8,400
Rent Expenses $1,600
Service Revenue $13,000
Income Summary $13,000
Income Summary $3,000
(13000-10000)
Retained Earnings $3,000
Retained Earnings $800
Dividends $800
Amazon Appliance Company has three installers. Larry earns $355 per week, Curly earns $430 per week, and Moe earns $560 per week. The company's SUTA rate is 5.4%, and the FUTA rate is 6% minus the SUTA. As usual, these taxes are paid on the first $7,000 of each employee's earnings.
A. How much SUTA and FUTA tax does Amazon owe for the first quarter of the year?
B. How much SUTA and FUTA tax does Amazon owe for the second quarter of the year?
Answers
Answer:
A. SUTA = $929.07
FUTA = $103.23
B. SUTA = $204.93
FUTA = $22.77
Explanation:
A. First Quarter
52 weeks in a year.
Quarterly therefore there are,
= 52/4
= 13 weeks in a quarter.
In a quarter the employees makes the following,
Larry
= 355 * 13
= $4,615
Curly
= 430 * 13
= $5,590
Moe
= 560 * 13
= $7,280
SUTA Taxes are on first $7,000 so Moe will not pay full 5.4%.
SUTA Taxes
Larry
= 4,615 * 5.4%
= $249.21
Curly
= 5,590 * 5.4%
= $301.86
Moe
= 7,000 * 5.4%
= $378
In total for SUTA,
= 249.21 + 301.86 + 378
= $929.07
For FUTA
Tax is 6% - SUTA so,
= 6% - 5.4%
= 0.6%
Larry
= 4,615 * 0.6%
= $27.69
Curly
= 5,590 * 0.6%
= $33.54
Moe
= 7,000 * 0.6%
= $42
In total for FUTA,
= 27.69 + 33.54 + 42
= $103.23
B. Second Quarter.
Here bear in mind that Moe no longer has to be paid for as he has earned $7,000 in the first quarter.
This leaves just Larry and Curly who have already earned something in the first quarter which should be removed from $7,000 to find out how much they are to pay taxes on.
SUTA Taxes
First $7,000.
Larry has already been paid 4,615 leaving,
= 7,000 - 4,615
= $2,385 is the figure that SUTA and FUTA should be based on.
For Curly
= 7,000 - 5,590
= $1,410 is the figure that SUTA and FUTA should be based on.
Larry SUTA
= 2,385 * 5.4%
= $128.79
Curly SUTA
= 1,410 * 5.4%
= 76.14
Total for SUTA is,
= 128.79 + 76.14
= $204.93
Then FUTA using the same figures.
Larry FUTA
= 2,385 * 0.6%
= $14.31
Curly SUTA
= 1,410 * 0.6%
= $8.46
Total for FUTA is,
= 14.31 + 8.46
= $22.77
Why would there be a problem within the team if there is an coworker displaying attitude and temper problems?
Answers
Answer:
Workplace
Explanation:
The attitude and temper problems of the one coworker could hinder the capabilites of the rest of the team
The number of parking tickets issued in a certain city on any given weekday has a Poisson distribution with parameter = 50.
(a) Calculate the approximate probability that between 35 and 70 tickets are given out on a particular day.
(b) Calculate the approximate probability that the total number of tickets given out during a 5-day week is between 225 and 275.
(c) Use software to obtain the exact probabilities in (a) and (b) and compare to their approximations.
Answers
Answer:
Explanation:
(a) Calculate the approximate probability that between 35 and 70 tickets are given out on a particular day.
[tex]P(35\leq X\leq 70) =P(34.5\leq X \leq 70.5)[/tex] (using continuity correction)
[tex]=P(\frac{34.5- \mu}{\sqrt{\mu} } \leq \frac{X - \mu}{\sqrt{\mu} } \leq \frac{70.5-\mu}{\sqrt{\mu} } )\\\\=P(\frac{34.5-50}{\sqrt{50} } \leq Z \leq\frac{70.5-50}{\sqrt{50} } \\\\=P(-2.19\leq Z \leq 2.90)\\\\=P(Z\leq 2.90)-P(Z\leq -2.19)[/tex]
= 0.9981 - 0.0143 (using standard normal tables)
= 0.9839
b) Consider [tex]X_t[/tex] is the random variable that represents the number of parking tickets issued in certain city in a 5-day week
The mean number of parking ticket issued in a particular city on 5-day week is
[tex]\mu_t = \mu *t\\\\=5 \times 50 = 250[/tex]
Therefore, the required probability is
[tex]P(225\leq X_t \leq 275)=(224.5\leq X_t\leq 275.5)\\\\=P(\frac{224.5-\mu_t}{\sqrt{\mu_t} } \leq \frac{X_t-\mu_t}{\sqrt{\mu_t} } \leq \frac{275.5-\mu_t}{\sqrt{\mu_t} } )\\\\=P(\frac{224.5-250}{\sqrt{250} } \leq Z \leq \frac{275.5-250}{\sqrt{250} } \\\\=P(-1.61\leq Z\leq 1.61)\\\\=P(Z\leq 1.61)-P(Z\leq -1.61)[/tex]
= 0.9463 - 0.0537 (using standard normal tables)
= 0.8926
c) see the attached file
image 1 (the approximate probability of part a )
image 2 (the approximate probability of part b )
From the two graph observed that the probability obtained using software is approximately same as calculated by manually
A banana costs $0.50 and a piece of candy costs $0.25 at the local cafeteria. You have $1.25 in your pocket and you value money. The money-equivalent value (payoff ) you get from eating your first banana is $1.20, and that of each additional banana is half the previous one (the second banana gives you a value of $0.60, the third $0.30, and so on). Similarly the payoff you get from eating your first piece of candy is $0.40, and that of each additional piece is half the previous one ($0.20, $0.10, and so on). Your value from eating bananas is not affected by how many pieces of candy you eat and vice versa.
Required:
a. What is the set of possible actions you can take given your budget of $1.25?
b. Draw the decision tree that is associated with this decision problem.
c. Should you spend all your money at the cafeteria? Justify your answer with a rational choice argument.
Answers
Answer:
a. What is the set of possible actions you can take given your budget of $1.25?
bananas candies total utils
0 5 $0.78
1 3 $1.90
2 1 $2.20
b. Draw the decision tree that is associated with this decision problem.
I attached a decision tree on PDF
c. Should you spend all your money at the cafeteria? Justify your answer with a rational choice argument.
Yes, since you can obtain more benefits from purchasing 2 bananas and 1 candy than the money that you have (total benefits $2.20 vs $1.25 in cash).
Explanation:
utility obtained from first banana $1.20, payoff per $ spent = 2.4
utility obtained from second banana $0.60, payoff per $ spent = 1.2
utility obtained from third banana $0.30, payoff per $ spent = 0.6
utility obtained from first candy $0.40, payoff per $ spent = 1.6
utility obtained from second banana $0.20, payoff per $ spent = 0.8
utility obtained from third banana $0.10, payoff per $ spent = 0.4
Fast Photo operates four film developing labs in upstate New York. The four labs are identical: They employ the same production technology, process the same mix of films, and buy raw materials from the same companies at the same prices. Wage rates are also the same at the four plants. In reviewing operating results for November, the newly hired assistant controller, Matt Paige, became quite confused over the numbers:
Plant A
Plant B
Plant C
Plant D
Number of rolls processed
50,000
55,000
60,000
65,000
Revenue ($000s)
$500
$550
$600
$650
Less:
Variable costs
(195)
(242)
(298)
(352)
Fixed costs
(300)
(300)
(300)
(300)
Profit (loss)
$ 5
$ 8
$ 2
$ (2)
Upon further study, Matt learned that each plant had fixed overhead of $300,000. Matt remembered from his managerial accounting class that as volume increases, average fixed cost per unit falls. Because Plant D had much lower average fixed costs per roll than Plants A and B, Matt expected Plant D to be more profitable than Plants A and B. But the numbers show just the opposite. Write a concise but clear memo to Matt that will resolve his confusion.
Answers
Answer:
Fast Photo
Memo to Matt:
From: Financial Controller
To: Matt Paige (Asst Controller)
Subject: Fixed Overhead and Plant D's Profit
Date: June 5, 2020
The above subject refers.
I wish to clarify the issue of fixed cost per unit. It is true that fixed cost per unit decreases with increased volume. It is also true that Plant D had much lower average fixed costs per roll $4.62 ($300,000/65,000) than Plants A's $6 ($300,000/50,000), B's $5.45 ($300,000/55,000) and even C's $5 ($300,000/60,000).
However, the issue of profit is not dependent on the fixed cost per unit alone. There are other variables. Profit is also determined by the variable cost per unit and the selling price. Since the four plants have the same selling price, we shall not consider selling price as a factor hence.
Therefore, note the variable cost per unit for each plant stated as follows: A = $3.90, B = $4.40, C= $4.97, and D = $5.42. This shows that it costs more per unit of variable cost to produce in Plant D. The difference will be explained by efficiencies in technology use, processing, quantity of materials used and wasted, and the number of labor hours spent in Plant D vis-a-vis other plants.
It is then necessary to review these variances as stated in order to explain why Plant D recorded a net loss of $2,000.
I hope that this issue has been clarified.
Regards,
FC
Explanation:
a) Operating Results for November:
Plant A Plant B Plant C Plant D
Number of rolls processed 50,000 55,000 60,000 65,000
Revenue ($000s) $500 $550 $600 $650
Less:
Variable costs (195) (242) (298) (352)
Fixed costs (300) (300) (300) (300)
Profit (loss) $ 5 $ 8 $ 2 $ (2)
b) Profit is not determined by fixed costs only. It is also influenced by the variable costs and selling price.