Kennard Corp.'s basic earnings per share is $1.91.
To calculate the basic earnings per share, we divide the net income by the weighted average number of shares outstanding. First, we calculate the weighted average number of common shares outstanding. The beginning shares of 5 million are reduced by the repurchased shares of 460,000, resulting in 4.54 million shares. Then, we account for the stock split, multiplying the shares by 4 to get 18.16 million shares. Finally, we divide the net income of $48 million by the weighted average number of shares (18.16 million), resulting in basic earnings per share of $1.91.
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In a fractional reserve banking system like the one in the U.S., new deposits are created when
Multiple Choice
a person takes money out of one bank and puts it in another bank.
a bank lends money.
a person takes money out of the banking system and holds it as cash.
All of these options are correct.
a bank borrows dollars from the Federal Reserve.
All of these options are correct. in a fractional reserve banking system like the one in the U.S., new deposits are created through a combination of these actions, including interbank transfers, lending, holding cash as deposits, and borrowing from the central bank.
In a fractional reserve banking system like the one in the U.S., new deposits can be created through various mechanisms. One way is when a person takes money out of one bank and puts it in another bank. When this happens, the original bank loses reserves but the receiving bank gains new deposits. This process effectively increases the total amount of deposits in the banking system.
Another way is when a bank lends money. Banks are allowed to create new deposits by extending loans to borrowers. When a loan is granted, the bank creates a new deposit in the borrower's account, increasing the overall amount of deposits in the system. This is possible due to the fractional reserve system, where banks are only required to hold a fraction of deposits as reserves while lending out the remainder.
Additionally, a person taking money out of the banking system and holding it as cash can also contribute to the creation of new deposits. When cash is withdrawn, it reduces the reserves of the bank. However, if the withdrawn cash is subsequently deposited into another bank, that bank gains new deposits, thereby increasing the total deposits in the system.
Lastly, a bank borrowing dollars from the Federal Reserve can also lead to the creation of new deposits. When a bank borrows from the Federal Reserve, it receives additional reserves that it can use to extend loans or create new deposits. This injection of reserves into the banking system increases the potential for new deposits to be created through lending activities.
Overall, in a fractional reserve banking system like the one in the U.S., new deposits are created through a combination of these actions, including interbank transfers, lending, holding cash as deposits, and borrowing from the central bank.
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A consumer has a utility function over two goods x and y given by U(x, y) = x1/3,2/3 (a) Find the MRS of x for y given this utility function (b) As the ratio of x to y increases, what happens to the MRS? How does this relate to the convexity of indifference curves for this consumer? (c) Consider a different utility function U(x, y) = ln(x) + 2 ln(y) Show that this utility function has the same MRS as the original. Why do you think this is the case? (Hint: what happens if you take a log of the original utility function?) (d) Assume that the consumer has income I, the price of x is Px and the price of y is Py. Setup a Lagrangian for each of the two utility functions above. (e) Solve the Lagrangians to find the optimal choice of x and y as a function of prices and income (Marshallian demand). Show that both utility functions give the same solution. (f) What is the consumer's optimal choice if I = 120, Px = 2 and Py = 8?
A) Find the MRS of x for y given the utility function U(x, y) = x^(1/3)*y^(2/3)The marginal rate of substitution (MRS) is the amount of a good that an individual is willing to give up to obtain one more unit of another good while holding utility constant. To find the MRS, the marginal utility of the numerator good is divided by the marginal utility of the denominator good, resulting in:
MRS = MUx/MUyMUx = ∂U/∂x = (1/3)x^(-2/3)*y^(2/3)MUy = ∂U/∂y = (2/3)x^(1/3)*y^(-1/3)MRS = MUx/MUy = ((1/3)x^(-2/3)*y^(2/3))/((2/3)x^(1/3)*y^(-1/3)) = (1/2) * x^(-1) * yB)
As the ratio of x to y increases, the MRS decreases. This is due to the concavity of the indifference curves, which are bow-shaped and become flatter as they move outward.
Indifference curves are concave because the MRS decreases as one moves down the curve, indicating that individuals need to be compensated with more of one good to give up one unit of another. C) Show that this utility function has the same MRS as the original. U(x, y) = ln(x) + 2 ln(y)MUx = ∂U/∂x = 1/xMUy = ∂U/∂y = 2/yMRS = MUx/MUy = (1/x) / (2/y) = y/(2x) = x^(-1) * yD) For the first utility function, the Lagrangian is L = x^(1/3)*y^(2/3) - λ(I - Px*x - Py*y)For the second utility function, the Lagrangian is L = ln(x) + 2ln(y) - λ(I - Px*x - Py*y)E) To obtain the Marshallian demands for x and y, differentiate the Lagrangians and set the first-order conditions to zero.
For the first utility function:∂L/∂x = (1/3)x^(-2/3)*y^(2/3) - λPx = 0∂L/∂y = (2/3)x^(1/3)*y^(-1/3) - λPy = 0∂L/∂λ = I - Px*x - Py*y = 0Solving this system of equations yields the following demand functions: x = (3/2) * (I/Px)^(3/2) * (Py)^(1/2) y = (3/4) * (I/Py)^(3/2) * (Px)^(-1/2)For the second utility function, the Lagrangian is:
L = ln(x) + 2ln(y) - λ(I - Px*x - Py*y)Taking the first-order conditions and solving for the Marshallian demand functions yields the following:
x = I/2Px y = I/4PyF) When I = 120, Px = 2, and Py = 8, the optimal choice of x and y can be calculated using the Marshallian demand functions derived earlier.
Using the demand functions for the first utility function, x = (3/2) * (I/Px)^(3/2) * (Py)^(1/2) = (3/2) * (120/2)^(3/2) * (8)^(1/2) = 180y = (3/4) * (I/Py)^(3/2) * (Px)^(-1/2) = (3/4) * (120/8)^(3/2) * (2)^(-1/2) = 22.11Using the demand functions for the second utility function, x = I/2Px = 120/4 = 30 y = I/4Py = 120/32 = 3.75
The consumer's optimal choice of goods is thus (180, 22.11) for the first utility function and (30, 3.75) for the second utility function.
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Mondelez hos $3,480 (million) worth of inventory and their COGS are $20,780 million). The average cost of each of their units is $84.3 and their holding cost is 29%. What is the average inventory cost per unit for Mondelez? Instruction: Round your answer to the nearest $0.01. The average inventory cost per unit ...
If the average cost of each of their units is $84.3 and their holding cost is 29%, the average inventory cost per unit for Mondelez is $42.48.
How to find?Given Mondelez has a $3,480 million worth of inventory and their COGS are $20,780 million. The average cost of each of their units is $84.3 and their holding cost is 29%. We need to determine the average inventory cost per unit for Mondelez.Step 1: Calculate the average inventory cost per unit for Mondelez.
Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average InventoryAverage Inventory = Cost of Goods Sold (COGS) / Inventory Turnover Ratio, Average Inventory = $20,780 million / Inventory Turnover RatioLet's assume x is the inventory turnover ratio for Mondelez.
x = COGS / Average Inventory= $20,780 million / ($3,480 million / $84.3) = $507.24Average Inventory = $20,780 million / $507.24 = $40,997,660 million, Average Inventory Cost Per Unit = Average Inventory / Number of UnitsAverage Inventory Cost Per Unit = ($40,997,660 million * 0.29) / (3,480 million / $84.3) = $42.48.
Hence, the average inventory cost per unit for Mondelez is $42.48.
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Exercise 15-2 (Algo) Net Cash Provided by Operating Activities [LO15-2] For the year just completed, Hanna Company had net income of $78,000. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Beginning Year of Year Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Current liabilities: Accounts payable Accrued liabilities Income taxes payable $ 57,000 $ 82,000 $ 168,000 $ 188,000 $ 439,000 $ 346,000 $ 11,500 $ 14,000 $ 366,000 $ 384,000 $ 8,500 $ 11,500 $ 33,000 $ 26,000 The Accumulated Depreciation account had total credits of $44,000 during the year. Hanna Company did not record any gains or losses during the year. Required: Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.) Hanna Company Statement of Cash Flows—Indirect Method (partial) Net income Adjustments to convert net income to a cash basis: Depreciation Decrease in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in accrued liabilities Increase in income taxes payable Net cash provided by operating activities
The net cash provided by operating activities for the year is $209,500. Hanna Company Statement of Cash Flows—Indirect Method (partial)Net income $78,000 Adjustments to convert net income to a cash basis:
Depreciation $44,000Increase in inventory ($168,000-$188,000) $20,000Increase in prepaid expenses ($11,500-$8,500) $3,000Decrease in accounts payable ($439,000-$366,000) $73,000Increase in accrued liabilities ($26,000-$33,000) ($7,000)Increase in income taxes payable ($14,000-$11,500) ($2,500)Net cash provided by operating activities $209,500
The net cash provided by operating activities for the year has been determined using the indirect method. Here, all the cash inflows and outflows that arise from the company's operations have been taken into account for this calculation. The following adjustments have been made to convert the net income to a cash basis: Depreciation: The accumulated depreciation account had total credits of $44,000 during the year. As depreciation is a non-cash expense, it has been added back to the net income to adjust it to a cash basis. Increase in inventory: The balance in the inventory account at the end of the year was higher than the balance at the beginning of the year. Hence, there was an increase in inventory. As a result, it is a cash outflow from the company's operations. Therefore, the increase in inventory amount has been added back to the net income to adjust it to a cash basis. Decrease in prepaid expenses: The balance in the prepaid expenses account at the end of the year was lower than the balance at the beginning of the year. Hence, there was a decrease in prepaid expenses. As a result, it is a cash inflow from the company's operations. Therefore, the decrease in prepaid expenses amount has been added back to the net income to adjust it to a cash basis. Decrease in accounts payable: The balance in the accounts payable account at the end of the year was lower than the balance at the beginning of the year. Hence, there was a decrease in accounts payable. As a result, it is a cash inflow from the company's operations. Therefore, the decrease in accounts payable amount has been added back to the net income to adjust it to a cash basis. Increase in accrued liabilities: The balance in the accrued liabilities account at the end of the year was higher than the balance at the beginning of the year. Hence, there was an increase in accrued liabilities. As a result, it is a cash outflow from the company's operations. Therefore, the increase in accrued liabilities amount has been subtracted from the net income to adjust it to a cash basis. Increase in income taxes payable: The balance in the income taxes payable account at the end of the year was higher than the balance at the beginning of the year. Hence, there was an increase in income taxes payable. As a result, it is a cash outflow from the company's operations. Therefore, the increase in income taxes payable amount has been subtracted from the net income to adjust it to a cash basis. The net cash provided by operating activities for the year is $209,500.
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You work for XYZ Hospital that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $6,100,000, and it would be depreciated straight-line to zero over six years. Because of radiation contamination, it will actually be completely valueless in six years. You can lease it for $1,260,000 per year for six years. Assume that the tax rate is 22 percent. You can borrow at 7 percent before taxes.
The Net Advantage to Leasing (NAL) can be calculated to determine whether it is more beneficial for XYZ Hospital to lease or purchase the diagnostic scanner.
The scanner has a purchase cost of $6,100,000 and a depreciation period of six years, reaching zero value due to radiation contamination. The leasing option is available at $1,260,000 per year for six years. The tax rate is 22%, and the borrowing rate is 7% before taxes.
To calculate the NAL, we compare the after-tax cash flows of leasing and purchasing. First, we calculate the after-tax cost of leasing by subtracting the tax shield from the lease payments. The tax shield is the tax rate multiplied by the lease payments. Next, we calculate the after-tax cash flows of purchasing by considering the depreciation tax shield and subtracting the after-tax salvage value.
By comparing the after-tax cash flows of leasing and purchasing, we can determine the Net Advantage to Leasing (NAL). If the NAL is positive, leasing would be more advantageous, while a negative NAL would indicate that purchasing is the better option.
To calculate the NAL, we need the specific values for the lease payments, salvage value, depreciation tax shield, and the tax shield, which are not provided in the given information. Without these specific values, it is not possible to calculate the NAL in this case.
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5 Jin Li, an employee of ETrain.com, leases a car at O'Hare Airport for a three-day business trip. The rental cost is $468. Prepare the entry by ETrain.com to record Jin Li's short-term car lease cost
The journal entry to record Jin Li's short-term car lease cost by ETrain.com would be as follows
Date: [Date of the transaction]
Expense - Car Lease: $468
Cash (or Accounts Payable): $468
Explanation:
The journal entry increases the Car Lease expense account by $468, representing the cost of the car lease. On the other side, the Cash account is decreased by $468, reflecting the payment made for the lease. If ETrain.com is not paying in cash immediately, but instead using accounts payable, the second account would be Accounts Payable.ETrain.com debits the Car Rental Expense account to increase the expense and credits the Accounts Payable account to reflect the liability created for the car lease cost. By recording this entry, ETrain.com recognizes the cost incurred for Jin Li's short-term car lease as an expense on their financial records.
It's important to note that the specific account titles may vary depending on the chart of accounts and the accounting practices of ETrain.com.
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if $5000 is borrowed at a rate of 6.75% interest per year, compounded quarterly, find the amount due at the end of the given number of years:
Here's the step-by-step explanation to find the amount due at the end of the given number of years when $5,000 is borrowed at a 6.75% interest rate per year, compounded quarterly.
1. Convert the annual interest rate to a decimal: 6.75% = 0.0675.
2. Divide the annual interest rate by the number of compounding periods in a year (quarterly compounding means there are 4 periods in a year): 0.0675 / 4 = 0.016875.
3. Now, we need to know the number of years for which the amount is borrowed. Let's denote it as 'n' years.
4. Calculate the total number of compounding periods: 4 (quarterly compounding periods) * n (years) = 4n.
5. Use the compound interest formula to find the amount due at the end: A = P(1 + r)^nt, where A is the amount due, P is the principal amount ($5,000), r is the quarterly interest rate (0.016875), and t is the total number of compounding periods (4n).
6. Substitute the values into the formula: A = 5000(1 + 0.016875)^(4n).
To find the exact amount due at the end of a specific number of years, replace 'n' with the desired number of years and solve for A.
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For venture capital investors with a medium-term time horizon, how attractive is the Colorado marijuana industry as an investment destination? Explain your answer in detail. At the beginning of 2021, 35 US states and the District of Columbia had legalized the sale of marijuana for medical use and in 15 states the sale of marijuana for recreational use had been legalized. Although the production, possession, and sale of marijuana was still illegal under federal law, the investment opportunities made available by legalization had created a surge of venture capitalist interest in this emerging industry. The case describes major features of the industry including the consumption, cultivation, and distribution sides of the industry and its regulatory structure. Although each state has a different regulatory structure resulting in different competitive conditions, the case dows especially upon the situation in Colorado, Washington, and California-the first two because of the well-developed state of their legal marijuana industries, and California because of its size 10 pts D Question 1 For venture capital investors with a medium-term time horizon, how attractive is the Colorado marijuana industry as an investment destination Explain your answer in detail
The attractiveness of the Colorado marijuana industry as an investment destination for venture capital investors with a medium-term time horizon has to be evaluated based on several factors such as the industry growth rate, the level of competition, and the legal environment.
The Colorado marijuana industry is one of the most attractive marijuana industries in the US. In 2014, Colorado became the first state to legalize recreational marijuana sales. According to the Marijuana Business Factbook, Colorado has one of the largest legal marijuana markets in the world. In 2020, Colorado's marijuana industry generated approximately $2 billion in sales. The growth rate of Colorado's marijuana industry is impressive and investors with a medium-term time horizon can benefit from it. The growth rate is driven by several factors, including increasing consumer acceptance, a growing number of legal dispensaries, and the expanding number of legal marijuana products. Competition is another factor that affects the attractiveness of the Colorado marijuana industry as an investment destination. Colorado has a well-established legal marijuana industry, which means that there are already several players in the market.
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the price elasticy of zero correspinds toa deand curve curve taht is
The price elasticity of zero corresponds to a demand curve that is perfectly inelastic. This means that a change in price will have no effect on the quantity demanded by consumers.
When the price elasticity of demand is zero, it corresponds to a demand curve that is perfectly inelastic.What is price elasticity of demand?Price elasticity of demand is the measure of the responsiveness of the demand for a product to changes in its price. When the price elasticity of demand is zero, it means that a change in the price of a product has no effect on the quantity demanded by consumers. This corresponds to a demand curve that is perfectly inelastic. At the other extreme, when the price elasticity of demand is infinite, it means that a change in the price of a product results in an infinite change in the quantity demanded by consumers, corresponding to a demand curve that is perfectly elastic.Therefore, the price elasticity of zero corresponds to a demand curve that is perfectly inelastic. This means that a change in price will have no effect on the quantity demanded by consumers.
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Eliminating unsystematic risk by holding a portfolio of
different assets reflects
a) portfolio variance spreading
b) the principle of diversification
c) the elimination of systematic risk
d) beta coef
The correct answer is b) the principle of diversification. By holding a portfolio of different assets, investors can reduce the impact of unsystematic risk, which is unique to individual stocks or assets.
This type of risk can be diversified away by holding a variety of assets, as the performance of one asset may not be correlated with another. By spreading their investments across multiple assets, investors can reduce the overall risk of their portfolio and potentially increase their returns. However, it's important to note that diversification does not eliminate systematic risk, which is inherent in the broader market or economy. To assess and manage this type of risk, investors may use beta coefficient, which measures the correlation of an asset's returns to the market. Overall, diversification is an important principle of investing and can help investors manage their risk while potentially improving their returns.
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[The following information applies to the questions displayed below.] Naidu Companies is the world’s leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that Naidu sold a delivery truck for $23,000. Naidu had originally purchased the vehicle and recorded it in the Truck account for $39,000 and had recorded depreciation for three years. Required: Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation—Truck was (a) $16,000, (b) $13,000, and (c) $19,000. (Select "None" if there is no Gain or Loss.
(a) No gain or loss on disposal
(b) Loss on disposal of $3,000
(c) Gain on disposal of $3,000
To calculate the amount of gain or loss on disposal of the delivery truck, we need to determine the net book value of the truck, which is the original cost minus the accumulated depreciation. Then we can compare the net book value to the amount received from the sale to determine if there is a gain or loss.
(a) Accumulated Depreciation—Truck = $16,000
Net Book Value = Original Cost - Accumulated Depreciation
Net Book Value = $39,000 - $16,000
Net Book Value = $23,000
Amount Received from Sale = $23,000
Since the amount received from the sale is equal to the net book value, there is no gain or loss on disposal. The answer is "None."
(b) Accumulated Depreciation—Truck = $13,000
Net Book Value = Original Cost - Accumulated Depreciation
Net Book Value = $39,000 - $13,000
Net Book Value = $26,000
Amount Received from Sale = $23,000
Since the amount received from the sale is less than the net book value, there is a loss on disposal. The amount of loss is calculated as:
Loss on Disposal = Net Book Value - Amount Received
Loss on Disposal = $26,000 - $23,000
Loss on Disposal = $3,000
(c) Accumulated Depreciation—Truck = $19,000
Net Book Value = Original Cost - Accumulated Depreciation
Net Book Value = $39,000 - $19,000
Net Book Value = $20,000
Amount Received from Sale = $23,000
Since the amount received from the sale is greater than the net book value, there is a gain on disposal. The amount of gain is calculated as:
Gain on Disposal = Amount Received - Net Book Value
Gain on Disposal = $23,000 - $20,000
Gain on Disposal = $3,000
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Royalty Income
Some years ago, Lindsey wrote a book entitled "Understanding your Legal Rights", which retails for sale at most good Brisbane book retailers for $29.95. For each book sold, Lindsey receives a royalty of $10 from the book publisher.
On 21 June 2021, Lindsey receives a cheque for $2,560 from the book publisher, representing royalty income in respect of the sale of 256 books during the 2021 income year.
what is the assessable income?
The assessable income in this case would be the total amount of royalty income received by Lindsey from the sale of books during the 2021 income year.
Given that Lindsey receives a royalty of $10 for each book sold and a total of 256 books were sold, we can calculate the assessable income as follows:
Assessable Income = Royalty per book * Number of books sold
Assessable Income = $10/book * 256 books
Assessable Income = $2,560
Therefore, the assessable income for Lindsey in the 2021 income year is $2,560. This amount represents the total income generated from the royalty payments received for the sale of the books.
It's important to note that assessable income refers to the amount of income that is subject to taxation. In this case, Lindsey's royalty income from book sales would be included in her taxable income for the year and taxed according to the applicable tax rates and regulations.
In conclusion, the assessable income for Lindsey from the sale of books during the 2021 income year is $2,560.
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You have recently joined Blue Bob Inc. as a project manager. There is currently a Management Information System (MIS) development project in-progress that is still at the planning stage. A business case was submitted for the project by the previous project manager and the project was subsequently approved with a commitment of funds and other available resources (inclusive of project team members with key skills) by the Project Evaluation Board. Your first responsibility as the project manager together with your project team, is to design the scope management plan for this project. Keep in mind that the quality of your plan will be benchmarked against the successes of the previous project manager (even with scope creep regularly rearing its head on many projects). The scope management plan for this project should therefore be all encompassing, illustrating every finite aspect of scope management planning and should simultaneously be explicit to all relevant stakeholders.
Define the scope of the project. (5 Marks)
The scope of the project refers to the boundaries and deliverables of the Management Information System (MIS) development project. It defines the work that needs to be accomplished to achieve the project objectives and deliver the desired outcomes.
In the case of Blue Bob Inc.'s MIS development project, the scope will encompass the following aspects:
1. Objective: The project aims to develop a robust and user-friendly MIS system that enhances data management, reporting, and decision-making processes within the organization.
2. Deliverables: The project will deliver a fully functional MIS system, including modules for data capture, storage, analysis, reporting, and integration with existing systems.
3. Boundaries: The scope will define the limitations of the project, such as specific functionalities and features to be included, target user groups, and any constraints, such as budget and timeline.
4. Exclusions: The scope will explicitly state what is not included in the project, such as integration with external systems beyond the defined scope, hardware infrastructure upgrades, or training activities for end-users.
5. Assumptions: The scope will outline any assumptions made during the planning stage, such as the availability of key resources, existing data sources, and necessary support from stakeholders.
By clearly defining the scope of the project, all stakeholders, including the project team, management, and users, will have a shared understanding of what will be delivered and what is beyond the project's boundaries. The scope includes both what is included in the project as well as what is excluded. This will help manage expectations, control scope creep, and ensure the successful completion of the MIS development project.
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Cash Account Balance During the month, Warwick Co. received $330,950 in cash and paid out $279,300 in cash. a. Do the data indicate that Warwick Co. had net income of $51,650 during the month? b. If the balance of the cash account is $74,800 at the end of the month, what was the cash balance at the beginning of the month?
a. The data provided do not directly indicate the net income of Warwick Co. Net income is calculated by subtracting total expenses from total revenues, and the given information only includes cash receipts and cash payments.
To determine the net income, additional information such as non-cash expenses and revenues would be needed.
b. To determine the cash balance at the beginning of the month, we need to consider the cash inflows and outflows during the month.
Starting cash balance + Cash receipts - Cash payments = Ending cash balance
Let's denote the starting cash balance as 'x':
x + $330,950 - $279,300 = $74,800
Simplifying the equation:
x = $74,800 - $330,950 + $279,300
x = -$23,850
Based on the calculations, the cash balance at the beginning of the month was -$23,850.
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Suppose the economy is operating at a point where output is
greater than the natural level of output. Given this information,
is the actual price level equal to the expected price level at the
current
In an economy where output is greater than the natural level of output, the actual price level is generally expected to be higher than the expected price level at the current time.
When the economy operates above its natural level of output, it usually experiences an increase in demand for goods and services. This increased demand, coupled with limited supply, leads to upward pressure on prices. As a result, the actual price level tends to rise above the expected price level.
The expected price level is based on the anticipated level of inflation, which takes into account factors such as changes in money supply, fiscal policies, and inflation expectations. However, in a situation where output surpasses the natural level, the demand for goods and services exceeds the economy's productive capacity. As a result, businesses may have to increase prices to balance supply and demand. This upward adjustment in prices leads to a higher actual price level compared to what was initially expected.
It's important to note that this is a simplified explanation, and the relationship between output, price level, and inflation is influenced by various factors and economic dynamics. Additionally, the specific behavior of the actual and expected price levels can vary depending on the particular circumstances and policies in place.
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TRUE / FALSE. Based on the example from class, if society agrees to reduce pollution by 30%. From the perspective of all firms jointly, the most equitable (fair) method of meeting this targeted reduction is to require all polluting firms to reduce emissions by the same % amount. True O False Question 51 2 pts Based on the example from class, if society agrees to reduce pollution by 30%. From the perspective of all firms jointly, the most efficient method of meeting this targeted reduction is to require all polluting firms to reduce emissions by the same % amount. True False
True. From the perspective of all firms jointly, requiring all polluting firms to reduce emissions by the same percentage amount to meet a targeted pollution reduction is fair but not necessarily the most efficient method.
The statement that requiring all polluting firms to reduce emissions by the same percentage amount is the most equitable (fair) method of meeting a targeted pollution reduction is true. This approach ensures that the burden of reducing pollution is distributed equally among all firms, without any particular firm being unfairly burdened or advantaged.
Requiring all firms to reduce emissions by the same percentage may lead to inefficiencies if some firms have higher marginal costs compared to others. It is more efficient to allocate pollution reduction efforts based on the relative costs among firms, such that firms with lower costs of reducing emissions bear a larger share of the reduction burden.
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Question 2 The following are summarised statements for Hollie's Fashion Wholesalers Ltd for 2021: Income statement for the year ended 31 December 2021 Hollie's Fashion Wholesalers Ltd £000 £000 Reve
To calculate the cost of goods sold (COGS) for Hollie's Fashion Wholesalers Ltd for the year ended December 31, 2021,
we need to subtract the closing inventory from the sum of opening inventory and purchases. The COGS can be calculated as follows:
COGS = Opening Inventory + Purchases - Closing Inventory
From the provided information, the opening inventory for 2021 is £80,000, purchases are £140,000, and the closing inventory is £70,000.
COGS = £80,000 + £140,000 - £70,000
COGS = £150,000
Therefore, the cost of goods sold for Hollie's Fashion Wholesalers Ltd for the year ended December 31, 2021, is £150,000.
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country B uses pounds, and Country A uses euros as their currency. In 2019 one
pound trades for €1.30. In 2020 one pound trades for €1.20.
Page 3 of 5
v) Express the nominal exchange rate in 2019 and 2020 in units of pounds
per euro. What happened to the euro from 2019 to 2020? [10
marks]
vi) In 2019 in Country B the cost of a basket of goods containing 8 units of
food and 2 units of drink (i.e. the basket we used to calculate the CPI in
part ii)) is £110. Calculate the real exchange rate for 2019.
[10 marks]
In 2020, the cost of the basket in Country B increases to £130. What
happens to the real exchange rate? Does this effect net exports in Country
A and/or in Country B?
The exchange rate in 2019 was 1 pound for €1.30. The exchange rate in 2020 was 1 pound for €1.20.
The nominal exchange rate for 2019 and 2020 in terms of pounds per euro is 0.77 and 0.83 respectively. The euro got stronger from 2019 to 2020.vi) Real exchange rate (RER) = Nominal exchange rate x (Domestic Price Level / Foreign Price Level)We already know the Nominal exchange rate for 2019 which is 0.77. The price level for 2019 is £110.
Nominal exchange rate refers to the rate at which one country's currency can be exchanged for another country's currency. It represents the value of one currency in terms of another currency. The nominal exchange rate can be expressed in two ways: units of domestic currency per unit of foreign currency or units of foreign currency per unit of domestic currency.
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Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places. Average annual dividend for preferred 4 ✓per share Average annual dividend for common 0.95 X per share 3. Assuming a market price per share of $267 for the preferred stock and $11 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock. Round your answers to two decimal places. Preferred stock 2.08 X % Common stock 8.64 X %
We need to know the annual per-share dividends rate of return for both the common and preferred stock in order to calculate the average annual percentage profit on the initial shareholders' investment.
The preferred stock's yearly dividend per share is $2.50. The common stock's yearly dividend per share is $1.25. Average Annual Percentage Return is to Market Price Per Share x 100 times the Annual dividend.
10% is the average annual percent return ($2.50 + $25) multiplied by 100. We must first determine the total interest paid after 21 installments in order to determine the percentage of the total interest paid.
After 21 payments, total interest paid equals ($1,830 x 21) - $10,000 ($10,000) = $8,910 Then, by multiplying by 100 and dividing the total interest paid after 21 payments by the total interest paid during the loan's term, we can determine the percentage
Using the formula ($8,910 / $9,800) x 100%, the percentage of total interest paid is 91% (rounded to the closest percentage point). We must first determine the total principle paid after 21 payments in order to determine the percentage of the total principal paid$1,830 divided by 21 payments of $8,910 is $24,990 in total principal paid.
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The industry context of the articles is smartphones or mobile computing (in contrast to desktop computing OR traditional mobile phones). Use the chart below to classify the effect of mobile computing as either low or high innovation impact in each category, giving reasons for your answer. You should commit to either the "low" or the "high" cell when answering the question, but if you believe sufficiently strongly that the answer is "both" or somewhere in the middle, you may choose to fill out both cells in the rows below.
The impact of mobile computing is high innovation in all categories.
The emergence of smartphones and mobile computing has revolutionized the way we communicate, work, and entertain ourselves. In the category of hardware, mobile computing has brought about a significant shift towards smaller, more powerful, and more portable devices. The development of mobile operating systems has led to the creation of countless mobile applications that have transformed the way we interact with technology. The rise of mobile commerce has opened up new markets and created new opportunities for businesses. Overall, the impact of mobile computing has been transformative and far-reaching.
In conclusion, the impact of mobile computing is high innovation across all categories. Its impact can be seen in the hardware, software, and business aspects of the industry, leading to significant changes in how we interact with technology and conduct our daily lives.
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1) What is the difference between an Exception To Discharge in Bankruptcy and Objections To Discharge in Bankruptcy?
2) Explain the concept of a reaffirmation agreement
3) What is a debtor In Possession in a bankruptcy reorganization?
4) Explain the concept of the "cram down" provisionin a bankruptcy reorganization?
1) The difference between an Exception to Discharge and Objections to Discharge in bankruptcy lies in their respective purposes and outcomes. An Exception to Discharge refers to specific debts that are not eliminated or discharged through bankruptcy. These are debts that are deemed non-dischargeable by law, such as certain taxes, student loans, child support, and debts incurred through fraud or willful misconduct. Objections to Discharge, on the other hand, are objections raised by creditors or the bankruptcy trustee against the entire discharge of a debtor's debts. These objections are typically based on the debtor's actions, such as fraudulent behavior or failure to comply with bankruptcy requirements, and seek to prevent the debtor from obtaining a complete discharge of their debts.
2) A reaffirmation agreement is a legal contract made between a debtor and a creditor during a bankruptcy proceeding. It allows the debtor to voluntarily agree to continue being responsible for a specific debt, despite it being eligible for discharge in bankruptcy. By signing a reaffirmation agreement, the debtor essentially waives the dischargeability of that particular debt, meaning they remain liable for repaying it according to the agreed terms. Reaffirmation agreements are typically used for secured debts, such as car loans or mortgages, where the debtor wishes to keep the collateral associated with the debt and continue making payments to retain ownership.
3) In a bankruptcy reorganization, a debtor in possession refers to a situation where the debtor (the entity or individual filing for bankruptcy) continues to operate their business or manage their assets while the bankruptcy case is ongoing. In Chapter 11 bankruptcy, for example, the debtor may remain in control of their business operations and act as a "debtor in possession" rather than having a separate trustee appointed. This arrangement allows the debtor to continue running their affairs under the supervision of the bankruptcy court, implementing a reorganization plan to repay creditors and potentially emerge from bankruptcy with a restructured and viable business.
4) The concept of a "cram down" provision in a bankruptcy reorganization pertains to the ability of the bankruptcy court to approve a reorganization plan even if it is not accepted or agreed upon by all creditors. In a cram down, the court can confirm a plan over the objections of certain dissenting classes of creditors. This provision is typically used when a class of creditors rejects a proposed plan, and the court determines that the plan is fair, equitable, and meets certain legal requirements. The court has the authority to "cram down" the plan on the dissenting creditors, meaning their claims are modified or restructured according to the terms set forth in the approved plan. This allows the debtor to move forward with the reorganization, even if not all creditors are in agreement.
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You are investigating the systematic risk for a stock portfolio. The data contains weekly excess returns (in percent for the portfolio (named rer ex and the excess return on the market portfolio (named mkr ex.The sample size is 150. The regression results in the following output (values in parentheses under each coefficient are standard errors): ret_ex=0.20+1.70mkt_exR=0.60,SER=1.4 (0.101.20 a What do the coefficient values,0.20 and 1.70,mean (b Calculate the t-statistics of the two coefficients and use them to determine whether the cocfficients are statistically significantly different from zero at a 5% significance level Clearly show how you reach your conclusions (c) Regression Predictions: (i) Brief explain the data type used in your regression ii What is the predicted excess return of the portfolio if the excess return of market portfolio is 3%? d You extend the original model above by including two additional independent variables from the q-factor model: ROE (high-minus-low ROE stocks and EG (high-minus-low expected growth stocks.The R-squared of the new regression model is 0.65.Use this information to test the null hypothesis that cocfficients of the two new variables are jointly statistically insignificant using F-test. Clearly state the null and alternative hypotheses, the value of the F- statistic and the critical value you use.
a) The coefficient values of 0.20 and 1.70 in the regression output represent the estimated coefficients for the intercept (0.20) and the excess return on the market portfolio (1.70). These coefficients indicate the expected change in the excess return of the portfolio for a one-unit change in the excess return of the market portfolio.
(b) To calculate the t-statistics, we need the coefficient estimates and their standard errors. From the regression output, the coefficient estimates are 0.20 and 1.70, and the standard errors are 0.10 and 1.20, respectively.
The t-statistic for each coefficient is calculated as the coefficient estimate divided by its standard error. For the intercept:
t-statistic = 0.20 / 0.10 = 2.00
For the coefficient of the market portfolio:
t-statistic = 1.70 / 1.20 = 1.42
To determine if the coefficients are statistically significantly different from zero at a 5% significance level, we compare the t-statistics to the critical value of the t-distribution with (n - k - 1) degrees of freedom, where n is the sample size (150) and k is the number of independent variables (1 in this case).
At a 5% significance level, the critical value for a two-tailed test is approximately 1.977. Since both t-statistics are smaller than the critical value, we fail to reject the null hypothesis that the coefficients are equal to zero. In other words, we do not have enough evidence to conclude that the coefficients are statistically significantly different from zero.
(c) (i) The data type used in the regression is likely a panel or time series data since it contains weekly excess returns for both the portfolio and the market portfolio over a sample size of 150 weeks.
(ii) To calculate the predicted excess return of the portfolio, we substitute the given excess return of the market portfolio (3%) into the regression equation:
ret_ex = 0.20 + 1.70 * mkt_ex
ret_ex = 0.20 + 1.70 * 3
= 0.20 + 5.10
= 5.30%
Therefore, the predicted excess return of the portfolio would be 5.30% if the excess return of the market portfolio is 3%.
(d) To test the null hypothesis that the coefficients of the two new variables (ROE and EG) are jointly statistically insignificant using an F-test, we need the R-squared value of the new regression model and the number of additional independent variables.
The null hypothesis is that the coefficients of ROE and EG are jointly equal to zero, while the alternative hypothesis is that at least one of the coefficients is not equal to zero.
The F-statistic is calculated as (R-squared / k) / [(1 - R-squared) / (n - k - 1)], where k is the number of additional independent variables (2 in this case) and n is the sample size (150).
Given that the R-squared of the new regression model is 0.65, we can calculate the F-statistic:
F-statistic = (0.65 / 2) / [(1 - 0.65) / (150 - 2 - 1)]
= 0.325 / (0.35 / 147)
≈ 3.342
To determine the critical value for the F-test at a chosen significance level (e.g., 5%), we compare the F-statistic to the critical value with (k, n - k - 1) degrees of freedom. In this case, the critical value would be determined
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Failure of the 2nd theorem of welfare economics? Consider the following economy with two goods, r and y, and two consumers, A and B. The tastes of the two consumers are represented by the following utility functions. μA = max(x A,YA) and us = min(2B: 4B). There are 10 units of good x and 10 units of good y that are available in this economy, so that xA+ xB= 10 and yA+ yB = 10. The two consumers cannot consume negative amount of each good, i.e., xA ≥ 0,13 ≥ 0, YA ≥ 0, and yB ≥ 0. (a, 5pts) Draw the Edgeworth box that represents this economy (make sure to include a couple of indifference curves for each of the two individuals). (b, 5pts) Find all Pareto-efficient allocation. (c, 5pts) Illustrate that the second welfare theorem fails in this example. Explain why. (d, 5pts) Suppose that the economy is duplicated, i.e., there are two consumer As and two consumer Bs. Illustrate that the second welfare theorem is recovered.
(a) The Edgeworth box represents the allocation of goods between consumers A and B.
The box is a rectangular graph with the x-axis representing good r and the y-axis representing good y. The coordinates (xA, yA) represent the allocation for consumer A, and (xB, yB) represent the allocation for consumer B.
Indifference curves for each consumer can be drawn to represent their preferences. For consumer A, the indifference curves will have a downward slope since the utility function μA = max(xA, yA) implies that consumer A prefers more of the good with higher utility. For consumer B, the indifference curves will have an upward slope since the utility function uB = min(2B, 4B) implies that consumer B prefers less of the good with higher utility.
(b) To find all Pareto-efficient allocations, we need to consider allocations where it is not possible to make one consumer better off without making the other consumer worse off. In this case, any allocation where one consumer has all 10 units of both goods and the other has none would be Pareto-efficient.
(c) The second welfare theorem states that any Pareto-efficient allocation can be achieved through a competitive equilibrium with an appropriate redistribution of initial endowments. However, in this example, the second welfare theorem fails because there is no initial endowment redistribution that can achieve a Pareto-efficient allocation.
Given the fixed initial endowments of 10 units of each good, there is no way to redistribute the goods between consumers A and B to reach a Pareto-efficient allocation. This is because the utility functions of the two consumers are in conflict, with one consumer preferring more of a good while the other prefers less. Thus, no redistribution of initial endowments can satisfy both consumers simultaneously.
(d) If the economy is duplicated, meaning there are two consumer As and two consumer Bs, it is possible to achieve a Pareto-efficient allocation. With the increased number of consumers, there are more possibilities for trades and exchanges, allowing for potential Pareto improvements. By allowing for voluntary exchanges between consumers, a competitive equilibrium can be reached where a Pareto-efficient allocation is achieved. This demonstrates that the second welfare theorem is recovered when the economy is duplicated.
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Understanding Unemployment Differences across Countries. A student looking at Figure 12.2 argues that Spain must have a very high cyclical unemployment compared to Japan because the Spanish unemployment rate is so high. Explain why the student could be right or could be wrong.
The student could be right in their observation that Spain may have a high cyclical unemployment rate compared to Japan, but it's important to consider other factors that contribute to differences in unemployment rates across countries.
Cyclical unemployment: Cyclical unemployment refers to unemployment that is caused by fluctuations in the business cycle. During economic downturns, when aggregate demand decreases, cyclical unemployment tends to rise. If Spain is experiencing a severe economic downturn compared to Japan, it could result in higher cyclical unemployment in Spain, leading to a higher overall unemployment rate.
Structural factors: Unemployment rates can also be influenced by structural factors such as labor market regulations, demographics, education and skill levels, and industry composition. These factors vary across countries and can impact the overall unemployment rate. For example, Spain has faced structural challenges in its labor market, such as high youth unemployment and a reliance on industries vulnerable to economic fluctuations.
Policy responses: The effectiveness of policy responses to address unemployment can also contribute to differences across countries. Some countries may have implemented more proactive measures like active labor market policies, job training programs, or flexible labor market regulations, which can help mitigate the impact of cyclical unemployment and reduce overall unemployment rates.
Therefore, while the student's observation regarding Spain's high unemployment rate and potential high cyclical unemployment may have some merit, it's essential to consider a range of factors such as structural factors and policy responses that influence unemployment differences across countries.
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Your pro forma income statement shows sales of $989,000, cost of goods sold as $482,000, depreciation expense of $99,000, and taxes of $163,200 due to a tax rate of 40%. What are your pre forma eaming
The pro forma income statement provided indicates sales of $989,000, cost of goods sold of $482,000, depreciation expense of $99,000, and taxes of $163,200 at a tax rate of 40%.
To determine the pre-forma earnings, we need to subtract the cost of goods sold and depreciation expense from the sales figure. Therefore, the gross profit can be calculated as $989,000 - $482,000 - $99,000 = $408,000.
Next, we need to account for taxes. Given the tax rate of 40%, we can calculate the tax expense by multiplying the gross profit by the tax rate: $408,000 * 0.4 = $163,200.
Finally, to calculate the pre-forma earnings, we subtract the tax expense from the gross profit: $408,000 - $163,200 = $244,800.
Therefore, the pre-forma earnings, before deducting taxes, would amount to $244,800.
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which channel members buy products directly from producers or wholesalers and sell directly to consumers?
The channel members who buy products directly from producers or wholesalers and sell directly to consumers are called retailers.
The channel members who buy products directly from producers or wholesalers and sell directly to consumers are known as retailers. Retailers are the intermediaries that act as a connection between the manufacturer and the consumers. They are involved in the final step of the distribution channel. The primary goal of retailers is to make a profit by selling the goods they purchase. They stock a variety of goods for consumers to choose from. Retailers also provide a range of services such as delivery, after-sale services, and support to customers. Retailers perform various activities such as buying, storage, selling, promotion, and distribution of goods. They purchase goods from manufacturers in bulk and store them in a warehouse. Retailers then sell these products to consumers through various channels like stores, websites, social media, and mail order catalogs.
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At the beginning of 2022 the stockholders' equity section of PC's balance sheet showed: Common Stock ($4 par value,500,000 shares authorized,
2,500 shares issued) $ 10,000 Paid-in Capital in Excess of Par Value 20,000 Retained Earnings 100,000 You know that the following events took place during the year: 1/5 Issued 10,000 more shares of common stock for $15 per share. 3/1 Paid a 20% stock dividend when the stock's market value was $17 per share. 5/1 Paid a $1 per share cash dividend. 12/31 Net in come for the year was $40,000 (no entry required) Required: a. Record the transactions listed above in journal entry form (except for the 12/31 transaction). b. Prepare a statement of retained earnings for PC Corporation. c. Prepare the stockholders' equity section of PC Corporation's balance sheet.
a. Journal Entries:
1/5: Cash (10,000 x $15) = $150,000
Common Stock (10,000 x $4) = $40,000
Paid-in Capital in Excess of Par Value = $110,000
3/1: Stock Dividend Distributable (2,500 x 20%) = $10,000
Common Stock Dividend Distributable (2,500 x 20% x $17) = $8,500
Retained Earnings (2,500 x 20% x $4) = $2,000
5/1: Retained Earnings = $2,500 (($1 per share) x 2,500 shares))
b. Statement of Retained Earnings:
Retained Earnings, January 1, 2022: $100,000
Add: Net Income for the year ended December 31, 2022: $40,000
Subtotal: $140,000
Less: Dividends Paid: $2,500
Ending Retained Earnings, December 31, 2022: $137,500
c. Stockholder's Equity Section of Balance Sheet:
Common Stock ($4 par value, 500,000 shares authorized, 12,500 shares issued): $50,000
Paid-in Capital in Excess of Par Value: $280,000
Retained Earnings: $137,500
Total Stockholders' Equity: $467,500
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Target Market and Positioning of starbucks : Analyze the target segment for the company’s product, providing a full analysis of its demographic, psychographic, geographic, and behavioral characteristics. Define the company/product’s position relative to competitors? include resourses.
Target Market and Positioning of Starbucks Target Market Analysis Starbucks is a global corporation that provides coffee beverages, snacks, and other items to people of all ages. As a result, the company's target market is a diverse one, ranging from young adults to senior citizens.
However, the company primarily targets middle-aged people aged 25 to 45 who are high earners, both male and female, and those who are more affluent. It is these people that make up the majority of the company's consumer base.Starbucks also targets customers who appreciate the company's coffee and the culture that surrounds it. They also put a premium on high-quality coffee, and they're willing to pay a premium for it, which is where Starbucks comes in. This specific market demographic enjoys a quiet place to work, read, or socialize while enjoying a cup of coffee. The company also provides free internet, music, and additional perks to consumers, making them feel welcome and at ease while inside the store.
According to a recent survey, the company's primary target audience comprises individuals who earn more than $60,000 annually and have a college degree. Starbucks stores are primarily located in urban areas, as well as high-traffic areas such as malls, universities, and airports. The company also has a mobile app that allows consumers to order ahead and skip the line, which appeals to their core demographic. Starbucks has maintained its strong brand image by continuing to provide a premium product to its consumers, resulting in the company becoming synonymous with quality coffee and customer experience. Positioning Analysis The following are some of the company's key competitors in the coffee industry: Dunkin' Donuts, McDonald's, and Costa Coffee, among others. Starbucks' brand position is unique, as the company offers high-quality coffee that is not found in other fast-food chains. Starbucks is more than simply a coffee shop; it is a "third place" where people may come to work, read, or socialize in a welcoming and calm atmosphere. Starbucks also caters to customers who value quality over quantity, which distinguishes them from other competitors who sell more affordable, low-quality coffee products. Starbucks uses high-quality beans from various regions worldwide and uses skilled baristas to create their delicious coffee beverages. The company provides its customers with a unique experience, and it is their culture that draws customers in. Starbucks has established a strong brand image over the years, which is synonymous with quality coffee and exceptional customer experience. Starbucks' social responsibility efforts have also helped to differentiate it from other competitors.
The company is dedicated to creating a sustainable environment for future generations by reducing waste, conserving energy, and encouraging ethical sourcing of its products. Starbucks has effectively positioned itself in the market as a premium brand that provides high-quality coffee beverages and exceptional customer experience, distinguishing itself from other low-quality coffee chains.
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Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit): Product A B C Selling price $ 80.00 $ 54.00 $ 80.00 Variable expenses: Direct materials 24.00 18.00 12.00 Other variable expenses 24.00 25.20 44.00 Total variable expenses 48.00 43.20 56.00 Contribution margin $ 32.00 $ 10.80 $ 24.00 Contribution margin ratio 40 % 20 % 30 % The company estimates that it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $3 per pound with a maximum of 7,000 pounds available each month. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third? 3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 7,000 pounds of materials?
1. Contribution margin per pound: A = $16.00, B = $6.00, C = $16.00.
2. Order of priority: A, C, B.
3. Maximum contribution margin: $48,400 per month.
How to optimize product orders and maximize contribution margin?1. To calculate the contribution margin per pound of the constraining resource (raw material), we need to divide the contribution margin per unit by the pounds of raw material used per unit for each product. The contribution margin per pound is as follows:
- Product A: Contribution margin per pound = Contribution margin per unit / Pounds of raw material per unit = $32.00 / 2 pounds = $16.00 per pound.
- Product B: Contribution margin per pound = Contribution margin per unit / Pounds of raw material per unit = $10.80 / 1.8 pounds = $6.00 per pound.
- Product C: Contribution margin per pound = Contribution margin per unit / Pounds of raw material per unit = $24.00 / 1.5 pounds = $16.00 per pound.
2. Since the company has a limited quantity of raw material available, it should prioritize the products with the highest contribution margin per pound. Therefore, the recommended order for accepting orders would be:
- First: Product A (contribution margin per pound of $16.00).
- Second: Product C (contribution margin per pound of $16.00).
- Third: Product B (contribution margin per pound of $6.00).
3. To determine the maximum contribution margin the company can earn, we need to allocate the available 7,000 pounds of raw material optimally. Considering the order of priority mentioned above, the company should produce 850 units of Product A (requiring 850 * 2 pounds = 1,700 pounds) and 850 units of Product C (requiring 850 * 1.5 pounds = 1,275 pounds). This would leave a remaining balance of 7,000 - (1,700 + 1,275) = 4,025 pounds. As there is no further constraint on the other resources, the remaining pounds can be used to produce Product B. Thus, the maximum contribution margin the company can earn per month is:
(850 units of Product A * $32.00) + (850 units of Product C * $24.00) + (1,675 pounds of Product B * $6.00 per pound) = $48,400.
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Product R is normally sold for $41 per unit. A special price of $36 is offered for the export market. The variable production cost is $25 per unit. An additional export tariff of 16% of revenue must be paid for all export products. Assume that there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) March 16 Reject Order Accept Order (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per unit Costs: Variable manufacturing costs, per unit Export tariff, per unit Income (Loss), per unit $ Should the special order be rejected (Alternative 1) or accepted (Alternative 2)?
Given the Information, Sales price for the export market: $36 per unit. So the special order should be accepted (Alternative 2).
The normal sales price: $41 per unit The variable production cost per unit: $25 per unit Export tariff: 16% of the revenueCalculate the differential analysis to reject (Alternative 1) or accept (Alternative 2) the special order. The formula for differential analysis is given below,Differential analysis = Alternative 2 – Alternative 1Differential analysis:Revenues, per unitAlternative 1: $0Alternative 2: $36Variable manufacturing costs, per unitAlternative 1: $0Alternative 2: $25Export tariff, per unitAlternative 1: $0Alternative 2: $5.76Income (loss)Alternative 1: $0Alternative 2: $5.24 (income per unit) = $36 - $25 - $5.76Differential Effect on IncomeAlternative 2 - Alternative 1Alternative 2 = $5.24Alternative 1 = $0Differential Effect on Income = $5.24 - $0 = $5.24. The result of the differential analysis is positive, indicating that accepting the special order is more beneficial to the company. Therefore, the special order should be accepted (Alternative 2).
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