Answer: $917 million
Explanation:
From the question, we are informed that the required reserve ratio is 12 percent and that the commercial banking system has $110 million in excess reserves.
Based on the above analysis, the maximum amount of money which the banking system could create will be:
= $110,000,000/12%
= $110,000,000/0.12
= $ 917,000,000
= $917 million
The total debits in the After-Closing Trial Balance will equal:______
a. $25,375.
b. $29,125.
c. $40,875.
d. $18,125.
Complete Question:
Shown below is a trial balance for Novelty Toys, Inc., on December 31,after adjusting entries:
Novelty Toys, Inc.
Trial Balance December 31
Cash $7,750
Accounts Receivable $6,375
Office Equipment $11,250
Accumulated Depreciation $3,000
Accounts Payable $3,875
Capital Stock $11,250
Retained Earnings $0
Dividends $3,750
Fees Earned $22,750
Salaries Expense $8,000
Advertising Expense $1,625
Depreciation Expense $2,125
$40,875 $40,875
The total debits in the After-Closing Trial Balance will equal:
Select one:
a. $25,375.
b. $29,125.
c. $40,875.
d. $18,125.
Answer:
$25,375
Explanation:
The After-Closing Trial Balance is prepared once the closing entries are posted. This results in closing of expense and income accounts for the year and the resulting balance taken forward to retained earnings. This means that After-Closing Trial Balance would contain only permanent general accounts which are balance sheet items. In the given scenario, the balance sheet debit balances are as under:
Cash $7,750
Accounts Receivable $6,375
Office Equipment $11,250
Total Debit Balance $25,375
Hence the option A is correct.
Targaryen Corporation has a target capital structure of 75 percent common stock, 10 percent preferred stock, and 15 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 21 percent.a. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
a.
WACC = 0.07961 or 7.961% rounded off to 7.96%
b.
After tax cost of debt = 0.0474 or 4.74%
Explanation:
a.
The weighted average cost of capital or WACC is the cost of a firm's capital structure. To calculate the WACC, we multiply the weight of each component of the capital structure by the cost of that component. The components of capital structure can be one or all of the following namely debt, preferred stock and common stock.
The formula for WACC is,
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each component r represents the cost of each component D, P and E represents debt, preferred stock and common stock respectively
WACC = 0.15 * 0.06 * (1 - 0.21) + 0.1 * 0.05 + 0.75 * 0.09
WACC = 0.07961 or 7.961% rounded off to 7.96%
b.
The after tax cost of debt is calculated by multiplying the cost of debt by (1 - tax rate) to adjust for the tax advantage provided by debt as interest payments on debt are tax deductible.
After tax cost of debt = 0.06 * (1 - 0.21)
After tax cost of debt = 0.0474 or 4.74%
A man who is going to be living abroad for 2 years wants to buy an ordinary annuity that will provide monthly payments of $750 to his parents at the end of each month while he is gone. The interest rate he can obtain is 6% compounded monthly.
a) Over the 2 years, how much money will his parents receive from their son?
b) What is the amount of the annuity that he must buy now (present value) to generate these payments?
Answer:
a. $18,000
b. $16,922.18
Explanation:
a. The parents will receive $750 every month for 2 years while the man is away.
That means $750 for 24 months.
Total = 750 * 24
= $18,000
b. Payment is monthly so interest and period have to be converted accordingly.
2 years = 24 months
6% per year = 6/12 = 0.5% a month
Present Value of annuity formula;
PV = Pmt x (1 - (1 / (1 + i)^n)) / i
= 750 * ( 1 - (1 / 1.005^24))/0.005
= 750 * 22.5629
= $16,922.18
1. A major controversy that is yet to be resolved about the Medicare Prescription Drug, Improvement and Modernization Act of 2003 is: A. The mechanism for enrollment of new Medicare managed care clients B. Northern versus southern states’ philosophies of “indigent care” C. What the program will ultimately cost the federal government D. None of the above
Answer:
C. What the program will ultimately cost the federal government
Explanation:
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 was an attempt to make improvements or amendments to the Social Security Act. It radically changed the playing field for private plans participating in the Medicare program by substantially raising monthly payment rates in an effort to stabilize the market and reverse the decline in benefit generosity. It also provided for voluntary prescription drugs under the medicare program. However, the utilization and cost of the program skyrocketed as soon as the funding source was established. It has remained unknown what the program will ultimately cost the federal government, no wonder the current administration under Trump wants to turn it upside down.
The following information applies to the questions displayed belowWarnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March Date Activities Units Sold at Cost Units Sold at Retal Mar. 1 Beginning 130 units $51.60 per unit 2 inventory Mar. 5 Purchase 240 units $56.60 per unit Mar. 9 Sales 290 units $86.60 per unit Mar. 18 Purchase 100 units $61.60 per unitMar. 25 Purchase 180 units $63.60 per unitMar. 29 Sales 160 units a $96.60 per unit Totals 650 units 450 units. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 210 units from the March 5 purchase; the March 29 sale consisted of 60 units from the March 18 purchase and 100 units from the March 25 purchase.Gross Margin FIFO LIFO Avg. Cost Spec. IDSales Less: Cost of goods sold 25,220.00 26,340.00 25,679.60 26,070.00Gross profit LIFO
Answer:
Gross profit under LIFO = $40,570 - $26,340 = $14,230
Gross profit under FIFO = $40,570 - $24,520 = $16,050
Gross profit under average cost = $40,570 - $26,238.46 = $14,331.54
Gross profit under specific ID = $40,570 - $26,070 = $14,500
Explanation:
I divided the purchases and sales:
Mar. 1 Beginning 130 units $51.60 per unit
Mar. 5 Purchase 240 units $56.60 per unit
Mar. 18 Purchase 100 units $61.60 per unit
Mar. 25 Purchase 180 units $63.60 per unit
Totals 650 units, $37,900
Mar. 9 Sales 290 units $86.60 per unit
Mar. 29 Sales 160 units a $96.60 per unit
Totals 450 units. $40,570
COGS under LIFO:
(240 x $56.60) + (50 x $51.60) = $16,164
160 x $63.60 = $10,176
total = $26,340
COGS under FIFO:
(160 x $56.60) + (130 x $51.60) = $15,764
(110 x $56.60) + (50 x $61.60) = $8,756
total = $24,520
COGS under average cost:
($37,900 / 650) x (290 + 160) = $26,238.46
COGS under specific ID:
(80 x $51.60 ) + (210 x $56.60) = $16,014
(60 x $61.60) + (100 x $63.60) = $10,056
total = $26,070
n an open economy, why is the supply curve for dollars in the foreign-currency exchange market vertical?
Answer:
In an open economy, the supply curve for dollars in the foreing-currency exhange market is vertical, because the supply does not depend on the exchange currency rate.
The supply of dollars in an open economy depends on the interest rate, which is determined by the difference between imports and exports (which is the same as the difference between purchases and sales of foreign capital).
M Corp. has an employee benefit plan for compensated absences that gives each employee 15 paid vacation days. Vacation days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days. At December 31, 2021, M's unadjusted balance of liability for compensated absences was $28,200. M estimated that there were 200 total vacation days available at December 31, 2021. M's employees earn an average of $141 per day. In its December 31, 2021, balance sheet, what amount of liability for compensated absences is M required to report
Answer: $28,200
Explanation;
There are 200 vacation days available as at December 31, 2021.
The liability compensated absences will be the amount that M Corp. owes employees should they take those 200 vacation days.
= 200 * 141 per day
= $28,200
Which of the following is not a way of reducig the costs of operatiions through adopting lean concepts?
A. Reducing or eliminating over-production waste.
B. Reducing or eliminating process reengineering waste.
C. Reducing or eliminating transportation waste.
D. Reducing or eliminating inventory waste.
Answer: . Reducing or eliminating process reengineering waste
Explanation:
The ways of reducing the cost of operations by using lean concepts are reducing or eliminating over-production waste, reducing or eliminating transportation waste and reducing or eliminating inventory waste.
Therefore, reducing or eliminating process reengineering waste isn't a way of reducing operational cost.
What if the meaning of the cumulative EAC (cell M105) at the conclusion of Period 6?
Answer:
The meaning of the cumulative EAC ( cell M105 ) at the conclusion of period 6 is the total accumulation of the cost inquired within the period expressed as a percentage of the cost of completed tasks to the accumulating costs set aside for the entirety of the task.
Explanation:
The meaning of the cumulative EAC ( cell M105 ) at the conclusion of period 6 is the total accumulation of the cost inquired within the period expressed as a percentage of the cost of completed tasks to the accumulating costs set aside for the entirety of the task.
EAC ( estimate at completion ) is the estimation of the cost of the final cost of a project,and it is estimated based on the performance of the project at completion
g A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is: Group of answer choices
Answer:
14,000 units
Explanation:
Break even point in unit is calculated as ; Fixed costs / Contribution margin
Where contribution margin = Sales per unit - Variable cost per unit
Therefore, Break even point in unit is
= $98,000 / ($12 - $5)
= 14,000 units
A deferred tax valuation allowance account is used to recognize a reduction in the potential benefit due to:
Answer: deferred tax
Explanation: A deferred tax valuation allowance account is used to recognize a reduction in a deferred tax asset which represents the increase in taxes saved in future years as a result of a temporary deductible differences and carryforwards. This usually can result in a change in taxes payable or refundable in future periods and as a consequence, a deferred tax valuation allowance account is created if there is a greater probability that the business will not realize some portion of the asset.
To record the purchase of supplies for cash, the correct entry in the accounting equation would include an increase to (equipment/cash/supplies) ________ and a decrease to (e/c/s) __________
Answer:
The answer is increase supplies and decrease cash
Explanation:
The correct entry is to:
Dr Supplies
Cr Cash
To debit supplies account means to increase it while to credit cash means decrease cash account.
Note:
Increase in asset and expense(debit side) while decrease in asset and expense(credit side)
Decrease in income, equity and liability(debit side) while increase in income, equity and liability( (credit side)
A company had net income of $930,000 in 2016. Depreciation expense is $104,000. During the year, Accounts Receivable and Inventory increased $60,000 and $160,000, respectively. Prepaid Expenses and Accounts Payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities in 2016
Answer:Cash provided by operating activities= $818,000
Explanation:
Cash Flow from operating activities is the amount of cash generated from the inflows and outflows of the business activities in a company.
Cash Flow from operating activities in 2016
Net income $930,000
Add
Depreciation $104,000
Loss on sale of equipment $ 12,000
Prepaid expenses decrease $ 8,000
Deduct
Accounts receivable increase -$ 60,000
Inventory increase -$160,000
Accounts payable decrease -$16,000
Cash provided by operating activities $818,000
g A company has an overhead application rate of 160% and allocates overhead based on direct material cost. During the current period, direct labor cost is $50,000 and direct materials used cost $80,000. Determine the amount of overhead Lowden Company should record in the current period. Group of answer choices
Answer:
Allocated MOH= $128,000
Explanation:
Giving the following information:
Predetermined overhead rate= 160% of direct material cost.
Actual direct material= $80,000
To allocate overhead, we need to use the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 1.6*80,000
Allocated MOH= $128,000
Which of the following is a true statement?
a) A fiduciary entity is a legal entity that takes possession of property for the benefit of a person.
b) An estate is a fiduciary entity that comes into existence upon a person's death to transfer the decedent's real and personal property.
c) A trust is also a fiduciary entity whose purpose is to hold and administer the corpus for other persons (beneficiaries).
d) An estate exists only temporarily, but a trust may have a prolonged or even indefinite existence.
e) All of the choices are true.
Answer:
e) All of the choices are true.
Explanation:
The definition of a fiduciary are;
a) A fiduciary entity is a legal entity that takes possession of property for the benefit of a person.
b) An estate is a fiduciary entity that comes into existence upon a person's death to transfer the decedent's real and personal property.
c) A trust is also a fiduciary entity whose purpose is to hold and administer the corpus for other persons (beneficiaries).
d) An estate exists only temporarily, but a trust may have a prolonged or even indefinite existence.
Generally, a fiduciary is saddled with the responsibility of providing duties in good faith, ethics and trust.
Benton Company issues $10,000,000 of 10-year, 9% bonds on April 1, 2017 at 95 plus accrued interest. The bonds are dated January 1, 2017, and pay interest on June 30 and December 31. What is the total cash received on the issue date?
Answer:
$9,725,000
Explanation:
The total cash received on the issue date is made of 95% of the bond's face value of $10,000,000 plus the three-month interest up to April 1 2017.
95% of face value=95%*$10,000,000=$9,500,000
three month interest accrued=$10,000,000*9%*3/12=$225,000
Total cash proceeds from bond issue=$9,500,000+$225,000
Total cash proceeds from bond issue=$9,725,000
Match the following statements to the appropriate terms.
Price-earnings ratio select the appropriate term
Return on assets select the appropriate term
Accounts receivable turnover select the appropriate term
Earnings per share select the appropriate term
Payout ratio select the appropriate term
Working capital select the appropriate term
Current ratio select the appropriate term
Debt to assets ratio select the appropriate term
Free cash flow select the appropriate term Inventory turnover select the appropriate term
Answer:
Matching Statements to Appropriate Terms:
Price-earnings ratio = Profitability Ratio
Return on Assets = Profitability Ratio
Accounts Receivable Turnover = Liquidity Ratio
Earnings per share = Profitability Ratio
Payout ratio = Profitability Ratio
Working capital = Liquidity Ratio
Current ratio = Liquidity Ratio
Debt to Assets = Solvency Ratio
Free Cash Flow = Solvency Ratio
Explanation:
Profitability Ratios are one of the classes of financial metrics that measure a business's ability to generate earnings relative to its revenue, operating costs, assets, or shareholders' equity during a period of time.
Liquidity Ratios measure the ability of the company to pay its maturing short-term debt obligations from its current assets. They include the working capital, the current ratio, and the acid-test ratio.
Solvency Ratios measure the ability of the company to pay its maturing long-term debt obligations from its assets.
__________either are owned and run by entrepreneurs or are divisions of larger retail corporations. They buy at less than regular wholesale prices and charge consumers less than retail.
Answer: off price retailers
Explanation:
Off price retailers are owned and run by entrepreneurs or are divisions of larger retail corporations and they buy at less than regular wholesale prices and charge consumers less than retail.
It should be noted that there are three main types of off price retailers and they are factory outlets, independents, and warehouse clubs.
Mark Stan elects to receive his retirement benefit over 20 years at the rate of 2,000 per month beginning one month from now. The monthly benefit increases by 5% each year. At a nominal interest rate of 6% convertible monthly, calculate the present value of the retirement benefit.
Answer:
$419,253
Explanation:
we must find the present value of a growing annuity:
present value = [monthly payment / (i - g)] x [1 - [(1 + g)ⁿ x (1 + i)⁻ⁿ]
monthly payment = $2,000 i = (1 + 0.06/12)¹² - 1 = 0.061678 / 12 = 0.005139833 g = 5% / 12 = 0.004166667 n = 20 x 12 = 240present value = [$2,000 / (0.00514 - 0.00416)] x [1 - [(1 + 0.00416)²⁴⁰ x (1 + 0.00514)⁻²⁴⁰] = $2,040,816 x [1 - (2.7083 x 0.293) = $2,040,816 x (1 - 0.794566) = $419,252.99 = $419,253
The existence of conflict has a positive side which can stimulate the following EXCEPT FOR:_________.
A) innovation.
B) complacency.
C) change.
D) creativity.
Answer:
B) complacency.
Explanation:
Conflict can be defined as a state of misunderstanding or disagreement between two or more parties, as a result of breakdown in decision making. It is usually caused by factors such as dissent of beliefs, opinions, needs, values, resources, attitudes, ideologies, goals etc. It is generally perceived that conflict usually has a negative consequence.
However, the existence of conflict has a positive side which can stimulate the following innovation, change, creativity but not complacency because it connotes a negative effect of unsatisfaction.
As chief engineer for a small manufacturing firm, you are considering whether to invest $40,000 in a new piece of equipment that will save $3000 annually in operating costs. If the equipment has an expected lifetime of 20 years and a salvage value of $12,000, is this an attractive investment at an interest rate of 6%? Why or why not?
Answer:
NPV = ($1,848.57)
Explanation:
The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
Initial cost = 40,000
Salvage value = 12,000
Savings in operating cost = 3,000
PV of annual savings : 3000× (1- 1.06^-20)/0.06 =34,409.76
PV of salvage value = 12,000 × 1.06^(-20)=3,741.65
Total PV of cash inflow 34,409.76 + 3,741.65= 38,151.42
NPV = 38,151.42038 - 40,000 = $(1,848.57)
The project should not be implemented because it would delete the shareholders wealth by $1,848.57
NPV = ($1,848.57)
You are given the following information about a portfolio you are to manage. For the long term, you are bullish, but you think the market may fall over the next month. Portfolio Value $ 1 million Portfolio's Beta 0.60 Current S&P500 Value 990
Anticipated S&P500 Value 915
1. What is the dollar value of your expected loss?
A. $142,900
B. $65,200
C. $85,700
D. $30,000
E. $64,200
2. How many S&P contracts should you buy or sell to hedge your position? (Not the e-mini but the standard S&P 500 contract) Allow fractions of contracts in your answer.
A. sell 3.477
B. buy 3.477
C. sell 4.236
D. buy 4.236
E. sell 11.235
Answer:
C. $85,700
number of contracts to hedge =2.4242
Explanation:
Here we are working with a standard contract so our multiplier will be $250
1. We first calculate expected drop in index
Expected Drop in Index = (1200-1400)/1400
-14.29%
To calculate expected loss in dollars,
we calculate expected Loss on the portfolio
= Beta*Expected Drop in Index
0.60*(-14.29%)
-8.57%
The dollar value of expected Loss is therefore = 1000000*(-8.57%)
=$-85700
2. Number of contracts to sell for hedging
= (Portfolio value * Beta)/(Current S&P 500 value * contract size)
= (1,000,000 * 0.60)/(990 * 250)
=600000/247500
=2.4242
Answer is not in the options
Gelb Company currently manufactures 42,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $87,000 per year, and allocated fixed costs are $84,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 42,000 units and buying 42,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
Answer:
It is more convenient to buy the component.
Explanation:
Giving the following information:
Production= 42,000 units
Variable costs are $6.25 per unit, fixed costs related to making this component are $87,000 per year
The company is considering buying this component from a supplier for $3.70 per unit.
We will take into account only the incremental costs.
Make in-house:
Total cost= 87,000 + 6.25*42,000
Total cost= $349,500
Buy:
Total cost= 3.7*42,000= $155,400
It is more convenient to buy the component.
What is another term for accountability?
Answer:
responsibility
liability
answer-ability
reporting
obedience
Explanation:
Answer:
Responsibility
Explanation:
plato
Which costs of inflation could the government take action to reduce without reducing inflation?
a. shoeleather cost
b. unintended changes in tax liablities
c. menu costs
d. none of the above is correct
Answer:
The correct answer will be Option b (unintended changes in tax liabilities).
Explanation:
Government should minimize the inevitable increases in tax liabilities, besides obvious reasons adjusted for inflation, earnings will increase, but mostly individuals will indeed be healthier and more productive income level and might have to pay more in taxes. The objective is to reduce this, thereby directly increasing the chances of inflation or unemployment.Some other alternatives offered are not in relation to the condition in question. So Choice b has been the appropriate one.
During 2018, ABC had the following cash flows: received cash of $5,000 billed to a customer in 2017; earned $20,000 of net income; paid interest of $6,000 on a corporate bond issued; paid dividends of $8,000 to its stockholders; borrowed $40,000 from a local bank; purchased its own shares of common stock for $10,000. What is ABC's net cash flows from financing activities for 2018?
Answer:
Cash flow from financing Activities $22,000
Explanation:
Financial activities Cash flow
Particulars Amount
Dividends Paid -$8,000
Borrowing from Bank $40,000
Stock Repurchased -$10,000
Cash flow from financing Activities $22,000
Raggs, Ltd. a clothing firm, determines that in order to sell x suits, the price per suit must be pequals160 minus 0.75 x. It also determines that the total cost of producing x suits is given by Upper C (x )equals4000 plus 0.5 x squared. a) Find the total revenue, Upper R (x ). b) Find the total profit, Upper P (x ). c) How many suits must the company produce and sell in order to maximize profit? d) What is the maximum profit? e) What price per suit must be charged in order to maximize profit?
Answer:
a) R(x) = 160x - 0.5x^2
b) P(x) = 160x - x^2 - 4000
c) The company must produce and sell 107 suits in order to maximize profit.
d) The maximum profit is $1,671.
e) The price per suit that must be charged in order to maximize profit is $106.50.
Explanation:
Given;
Price = p = 160 - 0.5x .....................,............. (1)
Total cost = C(x) = 4000 + 0.5x^2 ............. (2)
We can solve as follows:
a) Find the total revenue
Total revenue = R(x) = p * x ........................(3)
Since from equation (1) p = 160 - 0.75x, we therefore substitute into equation (3) solve to have:
R(x) = (160 - 0.5x)x
R(x) = 160x - 0.5x^2 ................................... (4) <---------- Total revenue
b) Find the total profit, Upper P(x).
P(x) = R(x) - C(x) ........................................... (5)
Substituting equations (2) and (4) into equation (5) and solve, we have:
P(x) = 160x - 0.5x^2 - (4000 + 0.5x^2)
P(x) = 160x - 0.5x^2 - 4000 - 0.5x^2
P(x) = 160x - x^2 - 4000 ........................... (6) <------------------ Total profit
c) How many suits must the company produce and sell in order to maximize profit?
Profit is maximized where Marginal Revenue (MR) is equal to Marginal Cost (MC). That is where;
MR = MC ................................................ (7)
Where MR = price = p = 160 - 0.5x
MC is obtained buy differentiating equation (2) with respect to x as follows:
MC = C'(x) = x
Substituting for MR and MC in equation (7) and solve for x, we have:
160 - 0.5x = x
160 = x + 0.5X
160 = 1.5x
x = 160 / 1.5
x = 107
Therefore, the company must produce and sell 107 suits in order to maximize profit.
d) What is the maximum profit?
To obtain this, we substitute x = 107 into equation (6) and solve as follows:
P(x) = 160(107) - 107^2 - 4000
P(x) = (160 * 107) - 107^2 - 4000
P(x) = 17,120 - 11,449 - 4000
P(x) = 1,671
Therefore, the maximum profit is $1,671.
e) What price per suit must be charged in order to maximize profit?
To obtain this, we substitute x = 107 into equation (1) and solve as follows:
p = 160 - 0.5(107)
p = 160 - (0.5 * 107)
p = 160 - 53.50
p = 106.50
Therefore, price per suit that must be charged in order to maximize profit is $106.50.
For each of the following fiscal policy proposals, determine whether the primary focus is on aggregate demand, aggregate supply, or both.
a. $1,000 per person tax reduction
b. a 5% reduction in all tax rates
c. Pell Grants, which are government subsidies for college education
d. government-sponsored prizes for new scientific discoveries
e. an increase in unemployment compensation
1. (i) both; (ii) supply-side; (iii) supply-side; (iv) both; (v) demand-side
2. (i) demand-side; (ii) both; (iii) supply-side; (iv) supply-side; (v) both
3. (i) demand-side; (ii) both; (iii) both; (iv) supply-side; (v) demand-side
4. (i) supply-side; (ii) demand-side; (iii) demand-side; (iv) both; (v) both
5. (i) supply-side; (ii) supply-side; (iii) demand-side; (iv) both; (v) both
Answer:
2. (i) demand-side; (ii) both; (iii) supply-side; (iv) supply-side; (v) both
Explanation:
a. $1,000 per person tax reduction ⇒ focus on aggregate demand (more money for consumers to spend)
b. a 5% reduction in all tax rates ⇒ focus on both aggregate demand and supply (more money for consumers and suppliers)
c. Pell Grants, which are government subsidies for college education ⇒ focus on aggregate supply (more money for suppliers of college education)
d. government-sponsored prizes for new scientific discoveries ⇒ focus on aggregate supply (more money for suppliers of new scientific discoveries)
e. an increase in unemployment compensation ⇒ focus on both aggregate demand and supply (more money for consumers resulting in higher prices and lower output)
g A farmer is preparing to plant corn and expects to deliver his crop to the market in 1 year. The yield on US t-bills is 3.7% and it costs 0.2% to store corn for 1 year. If the spot price of corn is $3.07/bushel today, what price can the farmer expect to lock in with a 1 year futures contract
Answer:
$3.19208 per bushel
Explanation:
As we know that:
Future Price = Spot rate * e ^[(Rf + Storage Cost)*T]
Here
Future price is the price that the farmer wants to lock with a 1 year future contract
Spot rate is the price of corn today which is $3.07 per bushel
Rf is the risk free rate of return which is 3.7%
The incremental storage cost is 0.2% to store a single bushel of corn
T is the number of years which is 1 year in this case
By putting values, we have:
Future Price = $3.07 per bushel * e^[(3.7% + 0.2%)*1 year]
Future Price = $3.19208 per bushel
g Swifty Corporation, Inc. can produce 100 units of a component part with the following costs: Direct Materials $19000 Direct Labor 3500 Variable Overhead 17000 Fixed Overhead 11000 If Swifty Corporation can purchase the component part externally for $44000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
Answer:
Swift Corporation should make the components
Explanation:
For a make or buy decision the relevant cash flows include
1. the differential variable of the two options
2. savings from avoidable fixed costs associated with internal production
Variable cost of producing $
(19,000 + 3500 + 17,000) 39,500
External purchase cost 44,000
Extra variable cost of external purchase 4,500
Savings in fixed cost (4,000)
Net extra ccost of external purchase 500
Decision:
Making the components internally would save the Swift Corporation
$500
Swift Corporation should make the components