Answer: earnings per share on common stock may be lower
Explanation:
Some of the advantages of the issuance of bonds instead of common stock is that it helps in saving tax.
Also, the income to the common shareholders may increase and there is no impact on the control of the stockholder.
It should be noted that "earnings per share on common stock may be lower" isn't an advantage of issuing bonds instead of common stock.
Black Diamond Company produces snow skis . Each ski requires 2 pounds of carbon fiber . The company's management predicts that 6,000 skis and 7,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 160.000 will be sold during the next ( third ) quarter . A set of two skis sells for $ 400 . Management wants to end the third quarter with 4,500 skis and 5,000 pounds of carbon fiber in inventory . Carbon fiber can be purchased for $ 25 per pound Each ski requires 0.5 hours of direct labor at $ 30 per hour . Variable overhead is applied at the rate of $ 18 per direct labor hour . The company budgets fixed overhead of $ 1,792,000 for the quarter . Required : 1. Prepare the third - quarter production budget for skis .
Answer:
158,500
Explanation:
Preparation of the third - quarter production budget for skis .
BLACK DIAMOND COMPANY Production Budget (in units)Third Quarter
Budgeted ending inventory (skis) 4,500
Add budgeted sale 160,000
Required units of available production 164,500
(4500+160,000)
Deduct beginning inventory (skis) (6,000)
Units to be manufactured 158,500
(164,500-6,000)
Therefore the third - quarter production budget for skis is 158,500
An accurate assessment of a company's cost structure and customer value proposition requires that managers Multiple choice question. examine current accounting data. evaluate the specific value chain activities under their control. understand the value system for the entire industry. separate their activities from those of their distribution channel allies.
Answer:
understand the value system for the entire industry.
Explanation:
An industry value chain can be defined as a physical representation of all of the activities and processes undertaken by a company or business firm for the manufacturing of goods and services, especially starting with the purchase of raw materials, manufacturing of finished goods and then ending with the delivery of the finished goods (products) to the market and consumers through a supply chain.
Generally, an accurate assessment of a company's cost structure and customer value proposition requires that managers completely understand the value system for the entire industry.
This ultimately implies that, a manager must ensure that the industry value chain comprises of the costs, margins of suppliers, value-creating activities and processes, and forward channel partners (allies).
Maize Plastics manufactures and sells bottles per day. Fixed Costs are $30,000 and the variable costs for manufacturing 50 bottles are $10,000. Each bottle is sold for $1,000. How would the daily profit be affected if the daily volume of sales drop by 10%?
a. profits are reduced by $4,000
b. profits are reduced by $1,000
c. profits are reduced by $5,000
d. profits are reduced by $6,000
Answer:
a. profits are reduced by $4,000
Explanation:
Calculation to determine How would the daily profit be affected if the daily volume of sales drop by 10%
First step is to calculate the Variable cost per unit
Variable cost per unit = $10,000 / 50
Variable cost per unit = $200
Second step is to calculate the Profit for 50 bottles
Profit for 50 bottles = ($1,000 × 50) - ($30,000 + $10,000)
Profit for 50 bottles = $10,000
Third step is to calculate the Sales after 10% drop
Sales after 10% drop = 50 × (1 - 0.10)
Sales after 10% drop= 45
Fourth step is to calculate the Profit for 45 bottles
Profit for 45 bottles = ($1,000 × 45) - ($30,000 + (45 × 200))
Profit for 45 bottles= $6,000
Now let determine the Change in profit
Change in profit = $10,000 - $6,000
Change in profit= $4,000
Therefore How would the daily profit be affected if the daily volume of sales drop by 10% is that the PROFITS ARE REDUCED BY $4,000
Verslas is a firm operating in a monopolistically competitive market. It is currently maximizing profit with an output of 1,200 units and a price of $5. Based on this information, which of the following statements must be true?
a. Verslas could not sell more units by lowering its price.
b. Verslas is earning normal profit.
c. Verslas is earning $3,600 in profit.
d. Verslas has a marginal revenue less than $5.
e. Verslas has a marginal revenue greater than $5.
Answer:
b
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopolistic competition has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.
An example of monopolistic competition are restaurants
When firms are earning positive economic profit, in the long run, firms enter into the industry. This drives economic profit to zero
If firms are earning negative economic profit, in the long run, firms leave the industry. This drives economic profit to zero
in the long run, only normal profit is earned
If Verslas is producing at a profit maximising point, it means that marginal revenue equal marginal revenue and the firm is earning a normal profit
Beginning inventory, purchases and sales data for tennis rackets are as follows:
Apr. 1 Inventory 12 units at $45
Apr. 11 Purchase 13 units at $47
Apr. 14 Sale 18 units
Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculate merchandise sold and ending inventory using LIFO.
Assume the selling price for the units sold on April 14 was $100.
Answer:
Cost of goods sold = $836
Ending inventory = $315
Explanation:
a) Data and Calculations:
Date Description Units Unit Price Balance
Apr. 1 Inventory 12 $45 $540
Apr. 11 Purchase 13 $47 $1,151 ($540 + 13 * $47)
Apr. 14 Sale (18) $100 $315 ($7 * $45)
Sales revenue = $1,800 ($100 * 18)
Cost of goods sold = $836 ($47 * 13 + $45 * 5)
Ending inventory = $315 ($7 * $45)
b) Under the LIFO (Last in, First out) inventory valuation method, it is assumed that goods that were purchased closest to the selling date were the ones to be sold while those purchased earlier remain in inventory.
Classity each of the following items as a final good or an intermediate good, and classifly the expenditure on each final good.
Item 1. A DVD bought by a household.
item 2. New computers bought by PepsiCo
Item 3. New aircraft bought by Southwest Airlines
item 4. Fertilizer bought by a Florida tomato grower.
Item 1 is ________ and Item 2 _________.
Answer:
Item 1. A DVD bought by a household. - This is a final good, to be used for entertainment purposes, and a consumption expenditure.
item 2. New computers bought by PepsiCo - This is a final good, meant to be used for administrative purposes by PepsiCo. It is an investment expenditure because the new computers are an asset.
Item 3. New aircraft bought by Southwest Airlines - This is a final good, to be used as an asset by the airline in order to transport passengers from one place to another. This is an investment expenditure because the aircraft will be used to produce economic benefits for the company.
item 4. Fertilizer bought by a Florida tomato grower - This is an intermediate good, because it is bought in order to be used in the production process of another good, an agricultural product. This is an investment expenditure, because it is essentially intermediate inventory, a type of asset, and assets are investments.
• A bond’s is generally $1,000 and represents the amount borrowed from the bond’s first purchaser. • A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue’s restrictive covenants. • The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called . • A bond’s allows a bondholder or preferred stockholder to convert their bond or preferred share, respectively, into a specified number or value of common shares.
Answer: 1. Face value
2. Default
3. Indenture
4. convertibility provision
Explanation:
• A bond’s (face value) is generally $1,000 and represents the amount borrowed from the bond’s first purchaser.
• A bond issuer is said to be in (default) if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue’s restrictive covenants.
• The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called (indenture)
• A bond’s (convertibility provision) allows a bondholder or preferred stockholder to convert their bond or preferred share, respectively, into a specified number or value of common shares.
On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $15 and its retail selling price is $70. The company expects warranty costs to equal 6% of dollar sales. The following transactions occurred.
2012
Nov.
11 Sold 60 razors for $4,800 cash.
30 Recognized warranty expense related to November sales with an adjusting entry.
Dec.
9 Replaced 12 razors that were returned under the warranty.
16 Sold 180 razors for $14,400 cash.
29 Replaced 24 razors that were returned under the warranty.
31 Recognized warranty expense related to December sales with an adjusting entry.
2013
Jan.
5 Sold 120 razors for $9,600 cash.
17 Replaced 29 razors that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Required:
Prepare journal entries to record above transactions and adjustments.
Answer:
1. Cash (Dr.) $4,800
Sales (Cr.) $4,800
2. Warranty Expense 6% * $4800 (Dr.) $288
Estimated warranty Liability (Cr.) $288
3. Estimated warranty liability $15 * 12 razors (Dr.) $180
Inventory (Cr.) $180
4. Cash (Dr.) $14,400
Sales (Cr.) $14,400
5. Warranty Expense 6% * $14,400 (Dr.) $864
Estimated warranty Liability (Cr.) $864
6. Warranty liability $15 * 24 razors (Dr.) $360
Inventory (Cr.) $360
7. Cash (Dr.) $9,600
Sales (Cr.) $9,600
8. Warranty Expense 6% * $9600 (Dr.) $576
Estimated warranty Liability (Cr.) $576
9. Estimated warranty liability $15 * 29 razors (Dr.) $435
Inventory (Cr.) $435
Explanation:
Lobo Co sells razors to customer. It provides 90 day return warranty. The estimated returns are 6% of sales made. The estimated warranty liability is recognized at the time of sales. The expense for return of razor is recognized as warranty expense as company discards the returned razors which costs it $15 per razor.
evaluate 3|-3| A.-6 B.6 C.9 D.-9
Answer:
9
Explanation:
3|-3|
|-3| is the absolute value of - 3 which is 3
Hence,
3 * 3 = 9
At the beginning of the year, accounts receivable were $45,000 and the allowance for bad debts was $4,200. During the year, sales (all on account) were $180,000, cash collections were $165,000, bad debts expense totaled $3,100, and $2,600 of accounts receivable were written off as bad debts. The balance at the end of the year for the Accounts Receivable account was: Multiple Choice $42,400. $54,300. $57,400. $60,000.
Answer:
$57,400
Explanation:
Calculation to determine what The balance at the end of the year for the Accounts Receivable account was
Using this formula
Ending balance in accounts receivable = Accounts receivable-Accounts receivable written off as bad debts+Sales on account-Cash collections
Let plug in the formula
Ending balance in accounts receivable = $45,000 - $2,600 + $180,000 - $165,000
Ending balance in accounts receivable = $57,400
Therefore The balance at the end of the year for the Accounts Receivable account was $57,400
Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production 235,000 Fixed manufacturing overhead cost $ 3,760,000 Variable manufacturing overhead cost per machine-hour $ 2.00
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $3,900. The following information was available with respect to this job: Direct materials $ 1,794 Direct labor cost $ 1,287 Machine-hours used 86
Compute the total manufacturing cost assigned to Job P90.
Answer:
Results are below.
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (3,760,000 / 235,000) + 2
Predetermined manufacturing overhead rate= $18 per machine hour
Job P90:
Direct materials $ 1,794
Direct labor cost $ 1,287
Machine-hours used 86
We need to allocate overhead costs:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 18*86= $1,548
Total manufacturing costs= 1,548 + 1,794 + 1,287
Total manufacturing costs= $4,629
Company A, a British manufacturer, wishes to borrow US dollars at a fixed rate of interest. Company B, a US multinational, wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum ( adjusted for differential tax effects):
Sterling US dollars
Company A 11.0% 7.0%
Company B 10.6% 6.2%
Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies.
Answer:
Company b 11.0 % 7.o%
Explanation:
Is this ok
A tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation's capital stock by 5%. What happens to current employment and the real wage rate
Answer:
Both employment and the real wage rate would decrease
Explanation:
Given that the capital stock of a nation or country jas a direct impact on such country in terms of savings and investments which directly translates to additional.economic development.
Hence, in this case, when a tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation's capital stock by 5%. What happens to current employment and the real wage rate is that "Both employment and the real wage rate would decrease"
This because there won't be adequate money available to create more employment. And with lease employment opportunities than the available labor, the real wage rate tends to decrease over time.
Discuss the principles of professionalism.
Answer:
Maintain confidentiality in professional relationships. ... Fulfill commitments in a reliable, responsive and efficient manner. Be fully accountable for actions, use of resources and financial dealings.
Perit Industries has $110,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:
Project A Project B
Cost of equipment required $110,000 $0
Working capital investment required $0 $110,000
Annual cash inflows $20,000 $68,000
Salvage value of
equipment in six years $8,600 $0
Life of the project 6 years 6 years
The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 16%.
Required:
1. Compute the net present value of Project A.
2. Compute the net present value of Project B.
3. Which investment alternative (if either) would you recommend that the company accept?
Answer:
$-32,775.48
$185,710.69
Project B
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Project A
Cash flow in year 0 = -$110,000
Cash flow in year 1 - 5 = $20,000
Cash flow in year 6 = $20,000 + $8,600 = 28,600
I = 16%
NPV = $-32775.48
Project B
Cash flow in year 0 = -$110,000
Cash flow in year 1 - 5 = $68,000
Cash flow in year 6 = $68,000 + $110,000 = $178,000
I = 16%
NPV = $185,710.69
Project B should be chosen because its NPV is positive
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
For each of the following situations involving annuities, solve for the unknown. Assume that interest is compounded annually and that all annuity amounts are received at the end of each period.-interest rate, and n number of years EV of $1, PV of $1, EVA of $1 PVA of $1, EVAD of $1 and PVAD of $ Use appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar.
Present Value Annuity Amount i = n =
1. ___________ $2,600 8% 5
2. 507,866 135,000 ___ 4
3. 661,241 170,000 9% ____
4. 540,000 78,557 ___ 8
5. 230,000 _____________ 10% 4
Answer:
Following are the solution to the given question:
Explanation:
For point 1:
[tex]Annuity\ Amount= \$2,600\\\\i=8\%\\\\n=5\\\\Present\ Value=?[/tex]
Our table shows that the factor is equal at 3.99271 for 8 percent and 5 periods. In addition to this, the present value is $10,381 dollars in the annuity.
For point 2:
[tex]Present \ Value=507,866\\\\ Annuity \ Amount= 135,000\\\\ i =?\\\\n =4[/tex]
[tex]\text{Present Value of Ordinary Annuity = Annuity Amount} \times PVOA \ Factor[/tex]
[tex]507,866 = 135,000 \times PVOA \ Factor\\\\\frac{507,866}{135,000} = PVOA \ Factor\\\\3.76197 = PVOA\ Factor[/tex]
When looking at our n=4 row table, we notice that perhaps the factor of PVOA is equal to 3,56197 whenever the rate is equal to 2,5%.
For point 3:
[tex]Present\ Value=661,241\\\\ Annuity\ Amount= 170,000\\\\ i = 9\% \\\\n =?[/tex]
[tex]\text{Present Value of Ordinary Annuity = Annuity Amount} \times PVOA \ Factor[/tex]
[tex]661,241 = 170,000 \times PVOA\ Factor \\\\\frac{661,241}{170,000} = PVOA \ Factor\\\\3.88965 = PVOA \ Factor[/tex]
If you really are looking at our table in column i = 9%, we found PVOA is 3.88965 if n is 5.
For point 4:
[tex]Present\ Value= 540,000 \\\\Annuity \ Amount=78,557\\\\ i = ?\\\\n =8[/tex]
[tex]\text{Present Value of Ordinary Annuity = Annuity Amount} \times PVOA \ Factor[/tex]
[tex]540,000 = 78,557 \times PVOA\ Factor\\\\\frac{540,000}{78,557} = PVOA \ Factor\\\\6.873989 = PVOA \ Factor[/tex]
If you verify our table for n = 8 lines, the PVOA factor is approximately 6.87399 when the rate of interest is 3.5 percent.
For point 5:
[tex]Present\ Value=230,000\\\\ Annuity\ Amount=?\\\\ i =10\%\\\\ n =4[/tex]
The PVOA factor is 3.16997 when we search our table with i = 10% and n = 4.
[tex]230,000 = Annuity \ Amount \times 3.16987\\\\\frac{230,000}{3.16987} = Annuity\ Amount\\\\72,558 = Annuity\ Amount\\\\annuity\ total= \$72,558.[/tex]
The adjusted trial balance of Bramble Corp. at December 31, 2019, includes the following accounts:
Common Stock $16,700
Dividends $7,300
Service Revenue $37,900
Salaries and Wages Expense $16,000
Insurance Expense $2,900
Rent Expense $3,400
Supplies Expense $2,500
Depreciation Expense $1,700
Required:
Prepare an income statement for the year.
Answer:
$11,400
Explanation:
Income Statement
For the year ended December 31, 2019
Particulars Amount
Revenues
Service revenue $37,900
Expense
Salaries & wages expense $16,000
Insurance expense $2,900
Rent expense $3,400
Supplies expense $2,500
Depreciation expense $1,700
Total expenses $26,500
Net income (loss) $11,400
name business sector in which kpm is operating
Answer:
1. banking and capital markets ( banking, capital markets and insurance.)
2. healthcare and life sciences.
g A company's flexible budget for 15,000 units of production showed sales, $60,000; variable costs, $22,500; and fixed costs, $17,000. The sales expected if the company produces and sells 19,000 units is (Do not round intermediate calculations):
Answer:
$76,000
Explanation:
The first step is to find the sales price per unit
= 60,000/15,000
= $4
Therefore the sales expected from the company can be calculated as follow
= 4×19,000
= 76,000
Hence the expected sales is $76,000
Beaverton Lumber purchased a milling machine for $35,000. In addition to the purchase price, Beaverton made the following expenditures: freight, $1,500; installation, $3,000; testing, $2,000; personal property tax on the machine for the first year, $500. What is the initial cost of the machine?
Answer:
$41,500
Explanation:
Calculation to determine What was the initial cost of the machine to be capitalized
Purchase price $35,000
Add Freight $1,500
Add Installation $3,000
Add Testing $2,000
Total Cost $41,500
Therefore the initial cost of the machine is $41,500
Rob consumes two goods, x and y. He has an allowance of $50 per week and is not endowed with either of the goods. If the price of good x increases and his substitution and income effects change demand in opposite directions.
a. good x must be a Giffen good.
b. good x must be an inferior good.
c. WARP is violated.
d. good x must be a normal good.
e. There is not enough information to judge whether good x is a normal or inferior good.
Answer:
B
Explanation:
Inferior good is a good whose demand decreases when income increases
The substitution effect looks at the change in price of a good relative to other goods. When the price of good x increases, rob should increase consumption of good y and reduce that of good x if it were a normal good
The income effect looks at how a change in price affects real disposable income
Bermuda Cruises issues only common stock and coupon bonds. The firm has a debt–equity ratio of .73. The cost of equity is 11.5 percent and the pretax cost of debt is 6.6 percent. What is the capital structure weight of the firm's equity if the firm's tax rate is 39 percent?
Answer:
0.5780
Explanation:
Calculation to determine the capital structure weight of the firm's equity
Using this formula
Weight of equity = 1 / (1 + D-E)
Let plug in the formula
Weight of equity = 1 / (1 + .73)
Weight of equity = 1 / 1.73
Weight of equity = 0.5780
Therefore the capital structure weight of the firm's equity is 0.5780
Suppose that the total value of dividends to be paid by companies in the Narnian stock market index is $100 billion. Investors expect dividends to grow over the long term by 5% annually, and they require a 10% return. Now a collapse in the economy leads investors to revise their growth estimate down to 4%. By how much should market values change
Answer:
The correct answer is "16.67%".
Explanation:
Given:
Dividend,
= $100 billion
Rate of return,
= 10%
= 0.10
Growth rate,
= 5%
= 0.05
Now,
Market value will be:
= [tex]\frac{Dividend}{Rate \ of\ return-Growth \ rate}[/tex]
= [tex]\frac{100}{0.10-0.05}[/tex]
= [tex]\frac{100}{0.05}[/tex]
= [tex]2000 \ Billion[/tex] ($)
After collapse,
The market value will be:
= [tex]\frac{100}{(.10-.04)}[/tex]
= [tex]\frac{100}{.06}[/tex]
= [tex]1666.67[/tex] ($)
Change in market value will be:
= [tex]2000-1666.67[/tex]
= [tex]333.33 \ Billion[/tex] ($)
hence,
The percentage change in market value will be:
= [tex]\frac{333.33}{2000}[/tex]
= [tex]16.67[/tex]%
The following information relates to the manufacturing operations of the Abbra Publishing Company for the year: Beginning Ending Raw materials inventory $ 547,000 $ 610,000 The raw materials used in manufacturing during the year totaled $1,018,000. Raw materials purchased during the year amount to: Multiple Choice
Answer:
the Raw materials purchased during the year is $1,081,000
Explanation:
the computation of the Raw materials purchased during the year is shown below;
Material used in production $1,018,000.00
Add: Ending Raw Material $610,000.00
Less: Beginning Rawmaterial $547,000.00
Purchase $1,081,000.00
Hence, the Raw materials purchased during the year is $1,081,000
The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by:_________
a) export spending.
b) investment spending.
c) government spending.
d) the level of aggregate expenditure.
Future pension liabilities are estimated based on all of the following except a.expected employee compensation levels. b.federal withholding income tax. c.employee life expectancy. d.employee turnover.
Answer:
The answer is B.
Explanation:
The correct option is B. - federal withholding income tax.
Pension liability is the amount of money that a company or government at any level(federal or state) has to account for in order to make future pension payments. It is a future payment that a company or government is obligated to pay its retired employees.
They take into considerations:
1. Their employees turnover
2. Their employees life expectancy
3. Their employees compensation level.
Federal tax level is not the issue because the payment is futuristic and federal tax can change.
what is meant by access payment
Answer:
Excess Payment means the portion of the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and described in a Board Resolution) of other consideration payable in respect of any tender offer or other negotiated transaction by the Company or a Subsidiary for all or any portion of the Common Stock that is in excess of an amount equal to the product of (x) the number of shares of Common Stock with respect to which the aggregate tender offer or negotiated purchase consideration is payable times (y) the Reference Price.
Explanation:
Goodluck!!
Select the financial statement on which the user would most likely find the answer to the question given. (Select all that apply.) Did the company purchase any intangible assets during the year?
Answer: Balance sheet
Explanation:
Intangible assets are recorded in the balance sheet along with other assets. Specifically, they are recorded as fixed assets because they represent assets that last for more than a year.
To see if any intangible assets have been purchased in a year therefore, one needs to take a look at the balance sheet to see if the Intangible asset balance has increased from the previous year. If it has then some new intangible assets were purchased.
Classify each of the following items as a final good or an intermediate good, and classify the expenditure on each final good as consumption expenditure or investment:
a. Fertilizer bought by a Florida tomato grower.
b. A haircut bought by a student.
c. New cars bought by Hertz comma the car rental firm.
d.. A new bridge across the creek in the Augusta National Golf Club.
Answer:
Classification of Goods
a. Intermediate good; Investment
b. Final Good = Consumption
c. Intermediate good; Investment
d. Intermediate good = Investment
Explanation:
An intermediate good produces a final good for consumption. Intermediate goods are used for investment to generate more resources that can be consumed in the future. A final good, in most cases, does not require further processing. It is consumed immediately by the buyer.
A Consumer Expenditure Survey in the city of Firestorm shows that people buy only firecrackers and bandages. s AConsumer Expenditure Survey in 2016 shows that the average household spent $216 on firecrackers and $18 on bandages. In 2016, the reference base year, the price of a firecracker was $6, and the price of bandages was $2 a pack. In the current year, 2017, firecrackers are $5 each and bandages are $3 a pack Calculate the CPI market basket and the percentage of a household's budget spent on firecrackers in the base year.
The CPI market basket is nothing ______ and nothing _______ packs of bandages dollars worth of bandages . The percentage of a household's budget spent on firecrackers in the base year is_______ percent.
Answer: 92.3%
Explanation:
The total budget which is the sum of all the expenditure by the household will be the addition of the $216 spent on firecrackers and $18 on bandages. This will be:
= $216 + $18
= $234
Price of a firecracker = $6
Price of bandages = $2 a pack
Number of firecrackers = $216/$6 = 36
Number of bandages = $18/$2 = 9
CPI market basket is 36 firecrackers and 9 bandages.
Therefore, the percentage of a household's budget spent on firecrackers in the base year will be:
= Expenditures on firecrackers/Total expenditure
= $216 / $234
= 92.3%