Answer:
3.5 year
Explanation:
The computation of the payback period is given below:
Year Cash Inflow Cumulative Cash Inflow
1 $10,000 $10,000
2 $10,000 $20,000
3 $15,000 $35,000
4 $18,000 $53,000
Now the payback period is
= 3 year + ($53,000 - $44,000) ÷ $18,000
= 3 year + 0.5
= 3.5 year
Unearned Revenue: The company collected $24,000 rent in advance on September 1,
debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12
months' rent in advance and occupancy began September 1. Answer the four questions
below as of 12/31. Whenever you see the word "unearned," it always indicates a liability
account. Most liability accounts include the word "payable," as those liabilities will be
paid back. An unearned account is a liability that will be worked off, rather than paid
off.
1. The beginning balance of Unearned Revenue: (5 pts)
Answer:
Time period from September 1 - December 31 is 4 months and this means that the tenant has occupied the place for 4 months. Hence, 4 months rent would be accrued.
12 Month rent amount = $24,000
Per month rent amount = $240,00/12 month = $2,000
So, Rent for 4 months = 4 month * $2,000 = $8,000
Adjusting Entry
Date Account titles Debit Credit
Dec 31 Unearned Rent Revenue $8,000
Rent Revenue $8,000
Front Company had net income of $73,500 based on variable costing. Beginning and ending inventories were 900 units and 1,400 units, respectively. Assume the fixed overhead per unit was $7.95 for both the beginning and ending inventory. What is net income under absorption costing
Answer:
$77,475
Explanation:
Calculation to determine net income under absorption costing
Using this formula
Net income=Net income+(Ending inventories×fixed overhead per unit)- (Beginning Inventories × Fixed overhead per unit)
Let plug in the formula
Net income=$73,500 + (1,400 units x $7.95) - (900 x $7.95)
Net income=$73,500+$11,130-$7,155
Net income=$77,475
Therefore net income under absorption costing is $77,475
a. Sunland Cosmetics acquired 12% of the 287,500 shares of common stock of Elite Fashion at a total cost of $14 per share on March 18, 2019. On June 30, Elite declared and paid a $80,200 dividend. On December 31, Elite reported net income of $228,100 for the year. At December 31, the market price of Elite Fashion was $16 per share.
b. Culver Inc. obtained significant influence over Kasey Corporation by buying 25% of Kasey's 29,100 outstanding shares of common stock at a total cost of $11 per share on January 1, 2020. On June 15, Kasey declared and paid a cash dividend of $38.500. On December 31, Kasey reported a net income of $122.900 for the year.
Required:
Prepare all the necessary journal entries for 2020 for Culver Inc.
Answer:
Mar 18
Dr Available for sales Securities $4,025,000
Cr Cash $4,025,000
June 30
Dr Cash $9624
Cr Dividend Revenue $9624
Dec-31
Dr Securities Fair value Adjustment $575,000
Cr Unrealised gain or Losss- income$575,000
B. Jan 1
Dr Investment in Culver stock $80,025
Cr Cash $80,025
Jan 15
Dr Cash $9,625
Cr Investment in Culver stock $9,625
Dec, 31
Dr Investment in Culver stock $30,725
Cr Revenue $30,725
Explanation:
Preparation of all the necessary journal entries for 2020 for Culver Inc.
Mar 18
Dr Available for sales Securities $4,025,000
(287,500*$14)
Cr Cash $4,025,000
June 30
Dr Cash $9624
Cr Dividend Revenue $9624
($80,200*12%)
Dec-31
Dr Securities Fair value Adjustment $575,000
Cr Unrealised gain or Losss- income$575,000
[(287,500*($16-$14)]
B. Jan 1
Dr Investment in Culver stock $80,025
(29,100*25%*$11)
Cr Cash $80,025
Jan 15
Dr Cash $9,625
($38,500*25%)
Cr Investment in Culver stock $9,625
Dec, 31
Dr Investment in Culver stock $30,725
($122,900*25%)
Cr Revenue $30,725
Nate borrowed $38,672 from bank and his friends to expand his casino business. Nate set up an aim to pay $2,450 at the end of each week for 16 weeks. Assume each year has 52 weeks. What are the nominal rate per year and the effective interest rate per year?
Answer:
Hence, the Nominal annual rate is 20.28%.
Effective annual rate is 22.43%.
Explanation:
Amount borrowed = $38,672.
Weekly repayment for 16 weeks = $2,500.
Loan repayment = (Loan amount x r) / {1-(1+r)-n}
$2,450 = ($38,672 x r)/{1-(1+r)-16}
r= 0.39%
Weekly interest rate = 0.39%
Nominal annual rate = 0.39 % x 52 weeks = 20.28%
Effective annual rate = [tex](1 + 0.0039^{52} ) - 1[/tex] = 0.2243 = 22.43%
theo bạn, 1 sản phẩm đáng bán rất tốt có cần thiết đưa hàng hóa đó lên mạng không?
Supervisor: In general, half of all customers you speak to will ask about any upcoming pricing discounts or promotions. Of those who do ask, only 20% qualify for the discount. Employee: So that means if I speak to 300 customers, __________ will qualify for the discount.
Answer: 30 people
Explanation:
In general, only half of those spoken to will ask about upcoming discounts so out of 300, the number that will ask for discounts is:
= 300 / 2
= 150 people
Out of these 150 people who ask about upcoming discounts, only 20% will qualify. The number that will qualify is:
= 150 * 20%
= 30 people
Froot Loop Inc., a cereal manufacturer, has variable costs of $0.40 per unit of product. In May, the volume of production was 25,000 units, and units sold were 21,600. The total production costs incurred were $30,600. What are the fixed costs per month
Answer:
the fixed cost per month is $20,600
Explanation:
The computation of the fixed cost is given below:
Fixed costs = Total Production Costs - Variable costs
= $30600 - $0.40 per unit × 25000 units
= $30600 - $10,000
= $20,600
hence, the fixed cost per month is $20,600
We simply deduct the variable cost from the total production cost so that the fixed cost could come
34.Mr. Hoffman has always been cautious with his money, but over the past two weeks he has developed grandiose plans to bet his entire life savings on a single horse race. With unrestrained exuberance he has also been giving everybody he sees unsolicited advice on how to make millions in the stock market. Mr. Hoffman's behavior is most indicative of
Answer:
mania
Explanation:
From the question we are informed about Mr. Hoffman who has always been cautious with his money, but over the past two weeks he has developed grandiose plans to bet his entire life savings on a single horse race. With unrestrained exuberance he has also been giving everybody he sees unsolicited advice on how to make millions in the stock market. Mr. Hoffman's behavior is most indicative of mania. Mania can be regarded as psychological condition which is responsible for a person to be experiencing intense moods,delusions as well as unreasonable euphoria and hyperactivity. Mania can also be regarded as manic episodes, and this is a symptom of bipolar disorder, one that is experiencing this may not be able to sleep very well or eat well, they have experience of hallucinations as well as some perceptual disturbances.
MC Qu. 163 Flagstaff Company has budgeted production... Flagstaff Company has budgeted production units for July of 7,500 units. Variable factory overhead is $1.3 per unit. Budgeted fixed factory overhead is $17,000, which includes $2,600 of factory equipment depreciation. Compute the total budgeted overhead to be reported on the factory overhead budget for the month.
Answer:
$26,750
Explanation:
Computation for the total budgeted overhead to be reported on the factory overhead budget for the month.
Using this formula
Total budgeted overhead=Variable factory overhead +Fixed factory overhead X
Let plug in the formula
Total budgeted overhead=($1.3*7,500 units)+$17,000X
Total budgeted overhead=$9,750+$17,000X
Total budgeted overhead=$26,750
Therefore the total budgeted overhead to be reported on the factory overhead budget for the month is $26,750
As operations manager, you are concerned about being able to meet sales requirements in the coming months. You have just been given the following production report: JAN FEB MAR APR Units produced 2,250 1,750 2,750 2,950 Hours per machine 318 194 393 315 Number of machines 5 7 6 5 Find the average of the monthly productivity figures (units per machine hour).
Answer: 2.81 per hour
Explanation:
Average monthly productivity = (January productivity + February productivity + March productivity + April productivity) / 4
January productivity:
= Units produced / ( Hours per machine * Number of machines )
= 2,250 / ( 318 * 2 )
= 3.537
February productivity:
= 1,750/ ( 194 * 4 )
= 2.255
March productivity:
= 2,750 / ( 393 * 3 )
= 2.332
April productivity:
= 2,950/ ( 315 * 3)
= 3.121
Average monthly productivity = (3.537 + 2.255 + 2.332 + 3.121)/ 4
= 2.81 per hour
Magazine sells subscriptions for for issues. The company collects cash in advance and then mails out the magazines to subscribers each month. Apply the revenue recognition principle to determine a. when Magazine should record revenue for this situation. b. the amount of revenue Magazine should record for issues. a. Seacoast Magazine should record revenue whe
Answer:
a. It should record revenue on a monthly basis
The Revenue Recognition principle in accounting posits that revenue should only be recognized after the goods and services that the revenue was paid for, have been delivered.
Seacoast Magazine has not delivered the magazine and will do so monthly for 18 months. It should therefore apportion profits to those months and only recognize the profit after the magazines are delivered.
b. Amount of revenue for 8 issues:
= 36/ 18 issues * 8 issues
= 2 * 8
= $16
On a bank reconciliation, a bank fee for check printing not yet recorded by the company is: A. Noted as a memorandum only. B. Added to the book balance of cash. C. Deducted from the book balance of cash. D. Added to the bank balance of cash. E. Deducted from the bank balance of cash.
Answer:
C) Deducted from the book balance of cash
Explanation:
bank reconciliation can be regarded as process where by bank account balance in an entity’s books of account is been reconciled to balance that is been reported by the financial institution Using the recent bank statement. It should be noted that On a bank reconciliation, a bank fee for check printing not yet recorded by the company is Deducted from the book balance of cash
Which of these are good ways to find a buyer’s agent?
Answer:
1.Search online.
2.Interview agents.
MC Qu. 122 Walter Enterprises expects... Walter Enterprises expects its September sales to be 20% higher than its August sales of $225,000. Purchases were $175,000 in August and are expected to be $195,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 20% in the month of purchase and 80% in the following month. The beginning cash balance on September 1 is $8,400. The ending cash balance on September 30 would be:
Answer:
Ending cash balance $67,900
Explanation:
The computation of the ending cash balance is given below:
Schedule of expected cash collection for September
From august sales (70% of 225,000) 157,500
From sept. sales (30% of 270,000) 81,000
Total cash collection$238,500
Now
Schedule of expected cash payment
For august purchase (80% of 175,000) 140,000
Foor september purchase (20% of 195,000) 39,000
Total cash payment $179,000
Now
Beginning cash balance 8,400
Budgeted cash collection 238,500
Total available cash 246,900
Budgeted cash payment -179,000
Ending cash balance $67,900
The aggregate expenditure (AE) curve Group of answer choices includes expenditures on foreign as well as domestic goods. does not include expenditures on either imports or exports. includes expenditures by domestic residents only. includes all expenditures on domestic goods.
Answer:
includes all expenditures on domestic goods.
Explanation:
AE curve is a combined current value of all the finished goods ad services in the economy. AE curve assumes a fixed price level, here the level of condition, expenditure and net imports would change. The equation of curve is AE = C + I + G + NX.Read the following details and determine why international trade is possible between these two countries.
Koopmansville has many natural lakes and streams. As a result, its residents grow up on the water and have a natural sense of how boats should work and be made. Because of that knowledge, even though there is demand for canoes in both countries, all of the canoe factories have located themselves in Koopmansville to take advantage of local knowledge. Despite their similarities, Cassvania and Koopmansville are able to trade because of:________.
a. external economies of scale.
b. increasing returns to scale
Answer:
Despite their similarities, Cassvania and Koopmansville are able to trade because of:________.
a. external economies of scale.
Explanation:
Koopmansville enjoys external economies of scale over Cassavania in the production of canoes. These benefits come in the form of lower production and operating costs and reduced variable costs per unit as a result of operational efficiencies and synergies. In addition, the residents of Koopmansville, given their environment, have natural sense of boat-making.
On August 1, Batson Company issued a 60-day note with a face amount of $49,800 to Jergens Company for merchandise inventory. (Assume a 360-day year is used for interest calculations.) a. Determine the proceeds of the note assuming the note carries an interest rate of 8%. fill in the blank 1 b. Determine the proceeds of the note assuming the note is discounted at 8%.
Answer: See explanation
Explanation:
a. Determine the proceeds of the note assuming the note carries an interest rate of 8%.
The proceeds of the note is the face value which is $49800.
b. Determine the proceeds of the note assuming the note is discounted at 8%.
Face amount: $49800
Less: Interest = $49800 × 8% × 60/360 = $664
Proceed of the note = $49136
Project Risk Analysis and IdentificationInitial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.Also, provide a graduate-level response to each of the following questions:
1. Explain each of the following steps in risk evaluation and remediation.
Risk identification.
Risk evaluation for chance of occurrence.
Risk evaluation for impact if the risk takes place.
The four types of risk remediation.
What is a project risk owner.
What is a risk threshold.
What is a risk matrix.
2. Complete a risk analysis for a project involving a family vacation where a family of four is driving 1,000 miles one way to Myrtle Beach, SC to stay for one week at a coastal resort. Include the construction of a risk matrix.
Answer:
Checklists.
Lessons Learned.
Subject Matter Experts.
Documentation Review.
SWOT Analysis.
Brainstorming.
Delphi Technique.
Assumptions Analysis.
Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film:
Willingness to Pay (Dollars)
Antonio Dmitri Jake Nick
First film 10 9 8 3
Second film 8 7 6 2
Third film 6 5 4 1
Fourth film 4 3 2 0
Fifth film 2 1 0 0
Within the dorm room, the showing of a movie a public good. If it costs $12 to rent a movie, the roommates should rent movies in order to maximize the total surplus. Suppose the roommates choose to rent the optimal number of movies you just indicated and then split the cost of renting equally. This means that each roommate will pay $_____________ .
The roommates would rent 3 movies to maximise total surplus
Each roommate would pay $9
The roommates would watch the films that yields a positive consumer surplus
Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.
Consumer surplus = willingness to pay – price of the good
Willingness to pay is the highest amount a consumer is willing to pay for a good or service
Consumer surplus is positive if willingness to pay exceeds the price of the movie and it is negative when the price of the good exceeds the willingness to pay of the consumers
Total willingness to pay for the first movie = 10 + 9+ 8+ 3 = 30
Total willingness to pay ($30) exceeds the price of the movie ($12). Consumer surplus is positive. The first movie will be rented
Total willingness to pay for the second movie = 8+ 7+ 6+ 2 = 23
Total willingness to pay ($23) exceeds the price of the movie ($12). Consumer surplus is positive. The second movie will be rented.
Total willingness to pay for the third movie = 6+ 5+ 4+ 1 = 16
Total willingness to pay ($16) exceeds the price of the movie ($12). Consumer surplus is positive. The third movie will be rented.
Total willingness to pay for the fourth movie = 4+ 3+ 2+ 0 = 9
Total willingness to pay ($9) is less than the price of the movie ($12). Consumer surplus is negative. The fourth movie will be rented.
Only three movies would be rented.
Total cost of the 3 three movies = $12 x 3 = $36
Cost to each roommate if the bill is split equally = $36 / 4 = $9
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Cash Short and Over Entries
Listed below are the weekly cash register tape amounts for service fees and the related cash counts during the month of July. A change fund of $100 is maintained.
Date Change Fund Cash Register Actual Cash
Receipt Amount Counted
July 2 $100 $281.80 $379.00
July 9 100 311.50 411.50
July 16 100 304.10 406.90
July 23 100 318.20 416.00
July 30 100 293.60 397.50
1. Determine the ending balance of the cash short and over account.
2. Does it represent an expense or revenue?
Answer:
1. Ending balance of cash short and over account:
Ending cash = 100 beginning balance + Cash register amount - Actual cash counted
July 2 = 100 + 281.80 - 379.00
= $2.80 shortage because actual cash is less than it should be
July 9 = 100 + 311.50 - 411.50
= $0
July 16 = 100 + 304.10 - 406.90
= $2.80 surplus because actual cash is more
July 23 = 100 + 318.20 - 416.00
= $2.20 shortage
July 30 = 100 + 293.60 - 397.50
= $3.90 surplus
Balance = Surplus - shortages
= (3.90 + 2.80) - (2.80 + 2.20)
= $1.70
2. This is revenue because it is a surplus.
Standard Quantities Allowed of Labor and Materials Miel Company produces ready-to-cook oatmeal. Each carton of oatmeal requires 18 ounces of rolled oats per carton (the unit quantity standard) and 0.05 labor hour (the unit labor standard). During the year, 750,000 cartons of oatmeal were produced. Required: 1. Calculate the total amount of oats allowed for the actual output. fill in the blank 1 ounces 2. Calculate the total amount of labor hours allowed for the actual output. fill in the blank 2 hours
Answer:
13,500,000 ounces of oatmeal37,500 labor hoursExplanation:
1. Total amount of oats allowed for the actual output:
= Cartons of oatmeal produced * Oatmeal per carton
= 750,000 * 18
= 13,500,000 ounces of oatmeal
2. Labor hours allowed for actual output:
= Cartons of oatmeal produced * Labor hours required
= 750,000 * 0.05
= 37,500 labor hours
MC Qu. 120 Levelor Company's flexible budget shows... Levelor Company's flexible budget shows $10,640 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.20 per direct labor hour based on a budgeted operating level of 6,050 direct labor hours (90% of capacity). If overhead actually incurred was $11,106 during May, the controllable variance for the month was:
Answer: $466 Unfavorable
Explanation:
The Controllable variance is found by the formula:
= Flexible budget overhead - Actual Overhead incurred
= 10,640 - 11,106
= -$466
As this is a negative, it is an Unfavorable variance because it shows that actual overhead was higher than planned.
Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales $ 17,700,000 Net operating income $ 5,300,000 Average operating assets $ 35,100,000 Required: 1. Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places.) 2. Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places.) 3. Compute the return on investment (ROI) for Alyeska Services Company.
Answer:Profit margin = 29.94%
Asset Turnover =0.50
Return on investment (ROI) =15.09%
Explanation:
Given
Sales for the year = $ 17,700,000
Net Operating Income = $ 5,300,000
Average Operating Assets = $ 35,100,000
a)Profit margin = (Net operating income/Net sales ) x 100%
= $5,300,000/$17,700,000 x 100% = 29.94%.
This shows that the Alyeska Services company has ability to turn income to profit by 29.94%
b. Asset Turnover = Total Sales/ Average Total Assets = $17,700,000/$35,100,000 = 0.50
c. Return on investment (ROI) =Net income/Total investment x 100%
= $ 5,300,000/ $ 35,100,000 x 100% =15.09%
Josh is an HR Manager at RoxCom LLC. He is responsible for conducting performance appraisals for all entry-level employees in his organization. He implements a guided self-appraisal system using management by objectives (MBO). As part of the process, he reviews the job description and the key activities that constitute each employee's job. What is most likely to be Josh's next step?
Answer:
Development of perfomance standards.
Explanation:
Based on the information in the question above, Josh's next step would likely be to develop the performance standards to be implemented in the guided self-assessment system using management by objectives.
The MBO is a management strategy used in organizations so that there is continuous improvement in processes and organizational performance in the internal and external environment, so in a self-assessment system guided by the MBO it is necessary to develop performance standards so that there is a parameter of the sought-after ideal of employee performance, so that self-assessment is guided by such standards. In this type of strategic management, it is necessary to share the objectives throughout the organization, so that they are clear, precise and shared as part of the organizational culture.
Franklin is a research scientist at Insight Research Corporation (IRC). IRC has five research scientists, four assistants, one secretary, and one CEO. Franklin has developed ALS, a disease which binds him to a wheelchair. He is one of the greatest scientists in the world, and can still do his job. Franklin has requested that IRC accommodate his disability, making changes to the company restroom and widening the doors to the building. The changes would be relatively inexpensive, costing only $2,000. If Franklin sues under the Americans with Disabilities Act (ADA), what result
If Franklin sues under the Americans with Disabilities Act (ADA), Franklin will win and this will force IRC to accommodate his disability under this civil rights legislation.
The ADA law was passed to protect persons experiencing physical or mental impairment or disability against workplace discriminations.
While ALS is recognized as a progressive nervous system disease that surely affects Franklin's nerve cells in his brain and spinal cord, which has caused him to lose muscle control, he can still perform his duties as a research scientist at IRC.
Thus, Insight Research Corporation should accommodate Franklin and make the necessary changes, which have been determined to be relatively inexpensive to the company.
Thus, if IRC fails to accommodate Franklin and he sues the company in the court under ADA, he will prevail.
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Your uncle offers you a choice of $112,000 in 10 years or $51,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. If money is discounted at 8 percent, what is the present value of the $112,000
Answer:
the present value of the $112,000 is $51,856
Explanation:
The computation of the present value is given below:
Present Value = Amount × Present value factor at 8% for 10 years
= $112,000 × 0.463
= $51,856
hence, the present value of the $112,000 is $51,856
We simply applied the above formula so that the correct amount could come
Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,400,000 $ 24,000,000 Net operating income $ 752,000 $ 2,400,000 Average operating assets $ 2,350,000 $ 8,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 18%. Compute the residual income for each division.
Answer:
1. Osaka ROI 32 %
Yokohoma ROI 30%
2.Osaka Residual income $329,000
Yokohoma Residual income $960,000
Explanation:
1. Computation for return on investment (ROI) in terms of margin and turnover.
Using this formula
ROI = Net operating income/Average operating assets
Let plug in the morning
Osaka ROI = 752,000/2,350,000
Osaka ROI =32 %
Yokohoma ROI = 2,400,000/$ 8,000,000
Yokohoma ROI =30%
Therefore for return on investment (ROI) in terms of margin and turnover is :
Osaka ROI 32 %
Yokohoma ROI 30%
2. Computation for the residual income for each division.
Using this formula
Residual income = Net operating income - Required return
Let plug in the formula
Osaka Residual income= 752,000 - (2,350,000*18%)
Osaka Residual income= 752,000-423,000
Osaka Residual income = $329,000
Yokohoma Residual income = 2,400,000 - ($8,000,000*18%)
Yokohoma Residual income = 2,400,000-1,440,000
Yokohoma Residual income= $960,000
Therefore the residual income for each division is:
Osaka Residual income $329,000
Yokohoma Residual income $960,000
If Walmart (WMT) recently earned a profit of $5.10 per share and has a P/E ratio of 16.25. The dividend has been growing at a 6 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged?
What would the price be if the P/E ratio declined to 12 in five years?
A) $41.44, $30.60 respectively
B) $82.88, $61.20 respectively
C) $110.91, $81.90 respectively
D) $414.38, $306.00 respectively
Answer:
C) $110.91, $81.90 respectively
Explanation:
Earning per share after year 5 = $5.10*(1+6%)^5
Earning per share after year 5 = $5.10*(1.06)^5
Earning per share after year 5 = $5.10*1.33823
Earning per share after year 5 = $6.825
If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged?
Price per share = P/E ratio * Earning per share
Price per share = 16.25*$6.825
Price per share = $110.91
What would the price be if the P/E ratio declined to 12 in five years?
Price per share = P/E ratio * Earning per share
Price per share = 12*$6.825
Price per share = $81.90
Suppose that XYZ Company hires labor and capital in competitive input markets. Assume that labor costs $200 per day and that a unit of capital costs $150 per day. At the current level of production, labor's marginal product is 40 units of output produced per day and capital's marginal product is 30 units of output per day.
a) Given the information provided, is the firm minimizing the cost of current production? Explain why or why not.
b) If the daily wages were to increase, explain the long run adjustments that the firm would likely make in response to the wage increase.
Answer:
a) Yes, the firm is minimizing the cost of current production. This is because MRPL / w = MRPC / r = 0.20.
b) The long run adjustments that the firm would likely make in response to the wage increase is to use more labor and less capital until MRPL / w = MRPC / r, which is the condition for the cost minimization of a firm.
Explanation:
a) Given the information provided, is the firm minimizing the cost of current production? Explain why or why not.
The condition for the cost minimization of a firm is as follows:
MRPL / w = MRPC / r ……………………………. (1)
Where:
MRPL = Labor's marginal product = 40
w = Cost of labour = $200
MRPC = Capital's marginal product = 30
r = Cost of capital = 150
Therefore, we have:
MRPL / w = 40 / 200 = 0.20
MRPC / r = 30 / 150 = 0.20
Since MRPL / w = MRPC / r = 0.20, this implies that these conditions are consistent with equation (1). Therefore, the firm is minimizing the cost of current production.
b) If the daily wages were to increase, explain the long run adjustments that the firm would likely make in response to the wage increase.
If the daily wages were to increase, the MRPL / w in equation (1) in part a above will fall and we will have:
MRPL / w < MRPC / r …………………… (2)
Since equation (2) is no longer consistent with equation (1), the firm is NOT minimizing the cost of current production.
Therefore, the long run adjustments that the firm would likely make in response to the wage increase is to use more labor and less capital until MRPL / w = MRPC / r, which is the condition for the cost minimization of a firm.
What would happen to the equilibrium price and quantity of lattés if the cost to produce steamed milk, which is used to make lattés, increased, and scientists discovered that lattés lead to a longer life expectancy? Group of answer choices The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous. Both the equilibrium price and quantity would increase. Both the equilibrium price and quantity would decrease. The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous.
Answer:
The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous.
Explanation:
The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous.
The increase in the cost of production will decrease the supply so the supply curve will shift leftward and simultaneously the research by scientists says the consumption of lattes will increase the life expectancy so many people will start consuming t os demand curve will shift rightwards. That means equilibrium price will increase but change in quantity can not be determined.
