Answer:
18.18%
Explanation:
Calculation for the expected holding-period return on Coca Cola
First step is to calculate the Expected Price in one year
Expected Price in one year = 50*25% + 60*40% + 70*35%
Expected Price in one year =12.5+24+24.5
Expected Price in one year = $61
Last step is to get Calculate the Holding period return using this formula
Holding period return = (Price after 1 year + Dividend - Price amount paid)/Price amount paid
Let plug in the formula
Holding period return= (61+4-55)/55
Holding period return=10/55
Holding period return=0.1818*100
Holding period return= 18.18%
Therefore the expected holding-period return on Coca Cola will be 18.18%
what is acknowledgement
Answer: it means to accept something or recognition
Nancy Company has an idle machine that originally cost $200,000. The book value of the machine is $100,000. The company is considering three alternative uses of the idle machine: Alternative 1: Disposal of machine. Disposal value of machine is $50,000. Alternative 2: Use the idle machine to increase production of Product A. Contribution margin from additional sales of Product A is estimated to be $60,000. Alternative 3: Use the idle machine to increase production of Product B. Contribution margin from additional sales of Product B is estimated to be $70,000. When considering Alternative 2, what is the opportunity cost of the idle machine
Answer:
$10,000
Explanation:
The opportunity cost of the idle machine when considering Alternative 2 can be calculated by deducting the benefit from alternative 2 from the benefits of alternative 3
DATA
Benefits from alternative 1 = $50,000
Benefit from alternative 2 = $60,000
Benefit from alternative 3 = $70,000
Net financial benefit from Alternative 3 = Benefit from alternative 3 - opportunity cost
Net financial benefit from Alternative 3 = $70000-60000
Net financial benefit from Alternative 3 = $10000
Simpleton, Inc. budgeted a material cost of $10 per lb. They ended up purchasing 2,300 lbs at $16 per lb. and using 1,800 lbs for production. The material price variance is:
Answer:
Direct material price variance= $13,800 unfavorable
Explanation:
Giving the following information:
Simpleton, Inc. budgeted a material cost of $10 per lb.
Actual:
2,300 lbs at $16 per lb.
To calculate the direct material price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (10 - 16)*2,300
Direct material price variance= $13,800 unfavorable
The journal entry to record the transfer of units to the next department in process accounting is a(n):
Answer:
Decrease in one asset and an increase in another asset
Explanation:
The journal entry to record the transfer of units to the next department in process accounting is a(n):
i. Decrease in one asset
ii. Increase in another asset
Donald is an agent representing Xmart, a large department store chain. Xmart has sent him to deal with Fred in regard to purchasing Fred's land in order to erect a new store. When Donald first meets Fred, Fred calls Xmart to verify that Donald is in fact an agent authorized to deal on Xmart's behalf. Xmart sends Fred a written confirmation of Donald's authorization to act as its agent and states that a contract signed by Donald will be honored by Xmart. Donald and Fred meet every other day during the negotiations. While the negotiations are still ongoing, Donald is fired by Xmart because it doesn't feel that he is making sufficient progress. Why is it important for Xmart to communicate with Fred regarding Donald's firing
Answer:
If Xmart doesn't notify Fred that Donald is not there agent anymore, then any agreement made between Donald and Fred will be valid and binding to Xmart.
Donald is no longer Xmart's agent, but unless Fred is notified, he still may act as an apparent agent. Apparent agents are people that someone could assume are acting on behalf of a principal, e.g. a person that wears a store's uniform inside a store is presumably a salesperson or someone that works for the store, therefore, he/she is an apparent agent. You do not ask for employment contracts when you enter a store.
Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw materials to provide the customer a perfect fit. The new equipment costs $107,000 and is expected to generate an additional $43,000 in cash flows for five years. A bank will make a $107,000 loan to the company at a 15% interest rate for this equipment’s purchase. Compute the recovery time for both the payback period and break-even time. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Chart Values are Based on:
10%
Cumulative Cash Inflow Present Value of Inflow Year Present Value PV Factor (Outflow) (Outflow)
(91,000) x 1.0000- (91,000) $ (91,000) 36,000 x 36,000 x 2.5 years
Answer:
Payback period = 2.49 years
Break-even time = 3.36 years
Explanation:
a. Calculation of payback period
The payback period can be described as the amount of time it will take a firm recover its cost on a project or an investment.
The payback period can be calculated as follows:
Equipment cost = $107,000
Annual cash flow = $43,000
Payback period = Equipment cost / Annual cash flow = $107,000 / $43,000 = 2.49 years
b. Calculation of break-even time
Note: See the attached excel file for the computation of the cumulative present value of inflow (outflow).
In the attached excel, the present value (PV) factor is calculated using the following formula:
PV factor = 1/(1 + r)^n ............................... (1)
Where;
r = interest rate = 15%
n = a particular year from 1 to 5.
Break even time can be described as the amount of time that is needed for both the discounted cash flows and the initial cost of a project to be equal.
The break-even time is calculated using the following formula:
Break-even time = X + (Y / Z) .................... (2)
X = Last year with a negative cumulative cash flow = 3
Y = Absolute value of cumulative cash flow at the end of period X = $8,821.32
Z = Present value of cash inflow for the period following X = $24,585.39
Break-even time = 3 + ($8,821.32 / $24,585.39) = 3 + 0.36 = 3.36 years
A contractor builds two types of homes. The Carolina requires one lot, $160,000 capital, and 160 worker-days of labor, whereas the Savannah requires one lot, $240,000 capital, and 160 worker-days of labor. The contractor owns 300 lots and has $48,000,000 available capital and 43,200 worker-days of labor. The profit on the Carolina is $80,000 and the profit on the Savannah is $90,000. Find how many of each type of home should be built to maximize profit.
Answer:
the contractor should build 210 Carolina type homes and 60 Savannah type homes
Explanation:
you have to maximize the following equation: 80000C + 90000S
Where:
C = Carolina type homes
S = Savannah type homes
the constraints are:
160000C + 240000S ≤ 48000000
160C + 160S ≤ 43,200
C ≥ 0
S ≥ 0
using solver, the optimal solution is 210C + 60S = $22,200,000
During a recent week, Maya Schneiderman worked 42 regular hours. She earns $9.25/hour, is paid an overtime rate of 1.5 times her regular wage rate, and has requested that 3% of her gross pay be withheld and contributed to a 401(k) retirement plan. Maya's taxable pay for federal income tax withholding is
Answer:
$385.82
Explanation:
Maya's total earnings = (40 x $9.25) + (2 x $9.25 x 1.5) = $397.75
Contributions to her 401k retirement plan reduce her taxable income (they are above the line deductions. She will contribute $397.75 x 3% = $11.93.
Her taxable income for federal income tax withholding = $397.75 - $11.93 = $385.82.
The actual amount withheld will depend on Maya's W-4 form (includes information about filing status, dependents, other income, etc.)
Suppose that Congress passes legislation making it more difficult for firms to fire workers. One example might be a law requiring severance pay for fired workers. The goal of this legislation is to reduce the rate of job separation without affecting the rate of job finding. Use this information to answer the following three questions. (Assume the size of the labor force remains constant.) If this legislation reduces the rate of job separation (s) without affecting the rate of job finding (f), how would the natural rate of unemployment change
Answer:
If the new law reduces the rate of job separation without affecting the rate of job finding, then, the natural rate of unemployment will fall.
This is because of the formula
U / L = s / (s + f)
Where U is unemployment, L is labor force, s is rate of separation, and f is rate of job finding.
The reason why the rate of natural unemployment will fall is because if employees are harder to fire, companies will be more careful when hiring workers, since the cost of firing a worker is now higher.
A company forecasts growth of 6 percent for the next five years and 3 percent thereafter. Given last year's free cash flow was $100, what is its horizon value (PV looking forward from year 4) if the company cost of capital is 8 percent?
a. $0
b. $1,672
c. $2,000
d. $2,676
Answer:
d. $2,676
Explanation:
The computation of the horizontal value is shown below:
FCF1 = (100 × 1.06) = 106
FCF2 = (106 × 1.06) = 112.36
FCF3 = (112.36 × 1.06) = 119.1016
FCF4 = (119.1016 × 1.06) = 126.247696
FCF5 = (126.247696 × 1.06) = 133.8225578
Now
Horizon value is
= FCF5 ÷ (Cost of capital - Growth rate)
= 133.8225578 ÷ (0.08 - 0.03)
= $2,676
Hence, the correct option is d.
According to the question,
The computation of the horizontal value will be:
→ [tex]FCF_1 = 100\times 1.06[/tex]
[tex]= 106[/tex]
→ [tex]FCF_2 = 106\times 1.06[/tex]
[tex]= 112.36[/tex]
→ [tex]FCF_3 = 112.36\times 1.06[/tex]
[tex]= 119.1016[/tex]
→ [tex]FCF_4 = 119.1016\times 1.06[/tex]
[tex]= 126.25[/tex]
→ [tex]FCF_5 = 126.25\times 1.06[/tex]
[tex]= 133.8226[/tex]
hence,
The horizon value will be:
= [tex]\frac{FCF_5}{Cost \ of \ capital - Growth \ rate}[/tex]
By putting the values, we get
= [tex]\frac{133.8226}{0.08-0.03}[/tex]
= [tex]2,676[/tex] ($)
Thus the above approach i.e., "option d" is right.
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Consider a mutual fund with $240 million in assets at the start of the year and 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $2.5 million. The stocks included in the fund's portfolio increase in price by 5%, but no securities are sold and there are no capital gains distributions. The fund charges 12b-1 fees of .75%, which are deducted from portfolio assets at year-end. a. What is the fund's net asset value at the start and end of the year
Answer:
Net asset value at the start of the year = $240,000,000 / 10,000,000 shares
Net asset value at the start of the year = $24
Asset in the beginning $240,000,000
Increase in value $240,000,000*5% $12,000,000
Assets at the end $352,000,000
Less: 12b-1 Charges $352,000,000 * 0.75%) $2,640,000
Asset at the end $349,360,000
Net asset value at the end of the year = $349,360,000/10,000,000 shares
Net asset value at the end of the year = $34.936
Sydney accepts delivery of $39,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $26,130.
Sydney pays $440 cash to Express Shipping for delivery charges on the merchandise.
Sydney returns $1,100 of the $39,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $737.
Sydney pays Troy for the amount owed. Troy receives the cash immediately.
part 2 Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.
Record the merchandise sold on account.
Record the cost of goods sold.
Record the sales return.
Record the cost of sales return.
Record the cash collected for credit sales.
Answer:
39,000 Explanation:
FOB shipping point. The goods cost Troy $26,130.
1. When will countries trade? Assuming 2 goods, food and clothing, and that both countries’ preferences are homothetic (but not necessarily identical), determine whether two countries will trade in each of the following situations: (a) Countries have identical preferences and identical endowments. (b) Countries have identical preferences, their endowments differ, and their endowments are not in the same ratio of food to clothing. (c) Countries have identical preferences, their endowments differ, but the ratio of food to clothing is the same in both countries. (d) Countries have identical endowments but different preferences. (e) Countries have both different preferences and different endowments.
Answer:
(a) Countries have identical preferences and identical endowments.
Explanation:
Analyzing the statement, there is information that the preferences of countries are homothetic (but not necessarily identical) with respect to the 2 goods, food and clothing.
That is why it is correct to state that countries will not trade with each other, as countries have identical preferences and identical allocations, which means that the demands for these goods will be related to the prices of the goods and not in relation to income or preferences.
Therefore, there is no need to commercialize these two goods between these countries, except in situations of scarcity.
If the interest rate this year is 8.8% and the interest rate next year will be 10.8%, what is the future value of $1 after 2 years? What is the present value of a payment of $1 to be received in 2 years?
Answer:
Results are below.
Explanation:
Giving the following information:
The interest rate this year is 8.8% and the interest rate next year will be 10.8%.
a) To calculate the future value, we need to use the following formula:
FV= PV*(1+i)^n
FV1= 1*1.088= 1.088
FV2= 1.088*1.108=$1.206
b) To calculate the present value, we need to use the following formula:
PV=FV/(1+i)^n
PV2= 1/1.108= 0.903
PV1= 0.903/1.088= $0.83
Answer the following questions on the basis of the following three sets of data for the country of North Vaudeville: (A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110 235 110 285 100 210 100 235 100 260 100 235 95 235 95 235 100 260 90 235 90 210 100 285 a. Which set of data illustrates aggregate supply in the immediate short run in North Vaudeville? (Click to select) The short run? (Click to select) The long run? (Click to select) b. Assuming no change in hours of work, if real output per hour of work decreases by 5 percent, what will be the new levels of real GDP in the right column of B?
Question attached
Answer and Explanation:
1a. We can see immediate short run aggregate supply in North vaudeville in column A. This is because the price is fixed while output increases
1b. We can see short run aggregate supply in North vaudeville in column c. This is because output increases with price increase.
1c we can see long run aggregate supply in North vaudeville in column B. This is because output is constant with price increase.
Assuming output per hour of work decreases by 25% for column C then for each price, output is:
2A. Given price P= 110, output is 285(1-0.25) = 213.75
2B. Given price P = 100, output is 260(1-0.25) = 195
2C. Given price P = 95, output is 235(1-0.25) = 176.25
2D. Given price P = 90, output is 210(1-0.25) = 157.50
3. The new data from question 2 reflects a decrease in aggregate supply.
A business buys $5000 worth of resources to produce a good. The business makes 100 units of the good and each of them sells for $65. The value added by the business to these products is:
a. $5,000
b. $6,500
c. $1,500
d. $1,000
Answer:
$1,500
Explanation:
A business buys $5000 worth of resources resources to produce a good
The business makes 100 unit of of the good and sell each for $65
Therefore the value added by the business to the product can be calculated as follows
= $65×100
= $6500
$6,500-$5,000
= $1,500
Hence the value added by the business to the product is $1,500
true or false. a factor that can come between the purchase intention and purchase decision is the attitude of others g
Answer:
True
Explanation:
Before a consumer makes a decision to buy a product, several factors can affect him. Two distinct factors are the attitude of others and unexpected situational factors. When the customer notices that a lot of people around him have a negative disposition or opinion about a product, they are likely to be discouraged from buying that product.
This is even more likely to happen if the consumer lacks enough motivation to buy that product. So the attitude of others can affect the buyer's intention which is his motivation and the final decision to purchase that product.
A lot of factors can come between purchase intensions. A factor that can come between the purchase intention and purchase decision is the attitude of others is a true statement.
The more positive a person's attitude toward the a product, the greater their purchase intentions.
Another factor consider is perceived playfulness that also affects purchase intention positively.
The factors that affect a consumer's purchase intention can be said to be product perception, shopping experience, customer service etc.
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Lincoln’s landlord has included a clause in the rental contract that makes it possible for him to increase Lincoln’s monthly rent if taxes on the property go up. Which clause was included in the contract?
a. tariffs clause.
b. variable costs clause.
c. escalator clause.
d. elastic demand clause.
e. elevator clause.
Answer:
The appropriate answer is Option c (Escalator clause).
Explanation:
The landlord of Lincoln also put a disclaimer throughout the rental lease which allows him to raise the mortgage payment of Lincoln if property wages increase. The deal had an escalator clause.An Escalator clause would be a clause inside a leasing contract as well as rent disclosure that ensures the improvement in rent sum regardless of the reasons which were not under influence of all the participants. Throughout this situation the taxation on land is raised by that of the government therefore adjustment in taxes wasn't in the jurisdiction of all entities.The other options given aren't connected to just the given case. In such a way that the response above is right.
Skipper Company manufactures toy boats and uses an activitybased costing system. The following information is provided for the month of May: Activity Estimated Indirect Activity Costs Allocation Base Estimated Quantity of Allocation Base Materials handling Number of parts parts Assembling Number of parts parts Packaging Number of boats boats Each boat consists of four parts, and the direct materials cost per boat is . There is no direct labor. What is the total manufacturing cost per boat? (Round any intermediate calculations and your final answer to the nearest cent.)
Answer:
$ 22.97
Explanation:
Calculation for the total manufacturing cost per boat
First step is to Calculate the Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Materials handling Number of Part
$ 3,300÷ 3000 =$ 1.10 Per Part
Assembling Number of Part
$ 4,800÷3000 =$ 1.60 Per Part
Packaging Number of Boat
$ 6,000÷ 1300 =$ 4.62 Per Boat
Second step is to Calculate the Cost assigned to Boat
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Materials handling
$ 1.10 × 4.00=$ 4.40
Assembling
$ 1.60 × 4.00 =$ 6.40
Packaging
$ 4.62 × 1.00 = $ 4.62
Total Overheads assigned per boat $ 15.42
($4.40+$6.40+$4.62)
Last step is to Calculate for the total manufacturing cost per boat
Boat
Direct material $ 7.55
Direct labor $0
Overheads $15.42
Total Cost per unit $ 22.97
($7.55+$15.42)
Therefore the total manufacturing cost per boat is $ 22.97
eorge and Weezy received $30,200 of Social Security benefits this year ($12,000 for George; $18,200 for Weezy). They also received $5,000 of interest from jointly owned City of Ranburne Bonds and dividend income. What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations
Answer:
$0
Explanation:
George and Weezy will not get any amount as social security benefit if they file married joint. The sum of their modified AGI plus the 50% of their social security benefit is [$5,000 + $8,000 + $15,100]. This equals to $28,100 which is below the minimum amount of social security.
During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: 2019 understated by $ 124,000 2020 overstated by 154,000 WMC uses a periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors.
Answer:
WMC Corporation
Misstatement of Ending Inventories:
1. Effect of these errors on Retained Earnings at January 1, 2021:
a) The understated amount by $124,000 in 2019 has self-corrected in 2020 with the Beginning Inventory also understated. So, it has no effect on the Retained Earnings at January 1, 2021.
b) The overstated ending inventories by $154,000 will overstate the Retained Earnings at January 1, 2021 by the same amount. Since it has not self-corrected like (a), the correction will be to reduce the Retained Earnings and reduce the Beginning Inventories by $154,000.
2. Journal Entry:
Debit Retained Earnings $154,000
Credit Beginning Inventories $154,000
To reverse the overstated inventories.
Explanation:
a) Data:
2019 understated by $ 124,000
2020 overstated by 154,000
Inventory system = periodic
Inventory method = FIFO
According to Nohria, Groysberg, and Lee, within an organization, the primary lever to address the drive to ____ is the reward system.
Answer:
Civillization
Explanation:
8.Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fair market value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a $10,000 loan that KS Partnership is assuming. What amount represents Kline's initial basis in the partnership
Answer: $40,000
Explanation:
Kline brings in equipment that is worth $60,000 but has a basis of $45,000.
The equipment however is subject to a loan of $10,000.
This loan will have to be deducted from the basis. The partnership however is assuming the loan and Kline is only 50% liable in the partnership so Kline's basis will only be affected by half of the loan.
Basis = 45,000 - 5,000
= $40,000
Which type of educational worker will most likely help students find books outside the classroom to help them write research papers? administrator librarian designer principal
Answer:
Librarian
Explanation: Enjoy (っ＾▿＾)۶٩(˘◡˘ )
The type of educational worker that will most likely help students find books outside the classroom to help them write research papers is librarian.
Who is a librarian?A librarian can be defined as the person that works in the library whose soles reponsibility is to find, sort and arrange bookes.
A librarian is the right position to help a student find books because that is the duty or work of a librarian.
Therefore the type of educational worker that will most likely help students find books is librarian.
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$50 an hour is a
A salary
B commission
C wage
D pension
Answer: C.) Wage
Explanation: A salary is a set cost that is due to you over an agreed amount of time. A commission is a percentage that you get from the original cost. A wage is the income one makes daily, or per hour. A pension is the gradual amount of money being added up during the years one works. Therefore, $50 an hour is a wage.
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Lightfoot Company sells its product for $55 per unit and has variable costs of $30 per unit. Total fixed costs are $25,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units if variable costs increase by $5 due to an increase in the cost of directmaterials?
A. It will increase by 250 units.
B. It will decrease by 167 units.
C. It will decrease by 250 units.
D. It will increase by 167 units.
Answer:
The Break-even point in units will increase by 250 units.
Explanation:
Giving the following information:
Fixed costs= $25,000
Selling price= $55
Unitary varaible cost= $30
First, we need to calculate the current break-even point in units:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 25,000 / 25
Break-even point in units= 1,000
Now, the new Break-even point in units:
Break-even point in units= 25,000 / (55 - 35)
Break-even point in units= 1,250
The Break-even point in units will increase by 250 units.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 80% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 5% per year. If the required return on the stock is 13%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)
Answer:
The answer is "$ 52.17"
Explanation:
Third-year dividend, [tex]D_3 = \$ \ 2.00[/tex] Increasing at [tex]80 \ \%[/tex] per year in years 4 and 5.
[tex]\to D_4 = 2.00(1.80)=3.6\\\\\to D_5 = 3.6 (1.80) = 4.48\\\\[/tex]
Now, rising at a steady rate of 5 percent per year in year 6
[tex]\to D_6 = 6.48(1.05) =6.804[/tex]
[tex]\text{Price of the stock} = \frac{Expected \ dividend}{(Required \ return - growth \ rate)}[/tex]
[tex]=\frac{6.804}{(0.13 - 0.05)}\\\\ =\frac{6.804}{(0.08)}\\\\ = \$ \ 85.05[/tex]
The present value of all flows of cash:
[tex]= \frac{2.00}{(1.13)^3} + \frac{3.6}{(1.13)^4} + \frac{(4.48+ 85.05)}{(1.13)^5}\\\\ = \frac{2.00}{1.442897} + \frac{3.6}{1.63047361} + \frac{(4.48+ 85.05)}{1.84243518}\\\\ = \frac{2.00}{1.442897} + \frac{3.6}{1.63047361} + \frac{(89.53)}{1.84243518}\\\\= 1.38 +2.20+ 48.59\\\\=52.17[/tex]
Roger owns some farmland that he rents to a tenant. The tenant lives in an old farmhouse on the property and raises crops on the land. Roger is concerned about legal liability if the tenant injures someone. Roger requires the tenant to have liability insurance and to add himself to the liability coverage through an endorsement. Under the tenant's liability insurance, Roger is a(n)
Answer:
additional insured
Explanation:
An additional insured endorsement refers to an amendment clause made to an exiting policy which adds someone else, and therefore, extends the coverage of the policy to include this recently added party.
In this case, Roger was included or added to his tenant's liability insurance policy, therefore, he will be covered by it.
Karla owns a monopolistically competitive firm that has many competitors that advertise. What can Karla realistically hope to achieve if she decides to advertise as well?
Answer:
1.) Katy can educate her consumers about the differences between her store and her competitors.
2.) Katy can protect her consumer base.
Explanation:
Using advertisements, Katy can show her consumer the differences and advantages that her products have over those of her competitors thereby encouraging them to patronise her.
She can also use these adverts to protect her customer base from her competitors because when they see the adverts, they will be even more encouraged to keep buying from Katy and will thus be less likely to switch to her competitors.
The other two options are incorrect.
Assume that if Ivanhoe Water accepts Clifton’s offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 80,410 of the new lights each year at a price of $13. Variable costs of the lights are expected to be $10 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.
Question Completion:
Question 2 Ivanhoe Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,330 timers, the company has calculated the following unit costs Direct fixed costs include supervisory and clerical salaries and equipment depreciation. Direct materials Direct labor Variable manufacturing overhead Direct fixed manufacturing overhead Allocated fixed manufacturing overhead $12 10 (30% salaries, 70% depreciation) 10 Total unit cost $42 Clifton Clocks has offered to provide the timer units to Sandhill at a price of $34 per unit. If Sandhill accepts the offer, the current timer unit supervisory and clerical staff will be laid off (a1) Your answer is correct. Calculate the total relevant cost to make or buy the timer units. (Round answers to O decimal places, eg, S250.) Make Buy 100825 1371220
Answer:
Ivanhoe Water
1. Total relevant cost to make the timer units:
If Ivanhoe does not accept the Clifton's offer, its total cost = $35 * 40,330 = $1,411,5500
If it accepts Clifton's offer, the total cost = $34 * 40,330 = $1,371,220
2. Net cost = $40,330
Explanation:
a) Data and Calculations:
Cost of producing 40,330 timers
Direct materials $12
Direct labor 7
Variable manufacturing overhead 3
Direct fixed manufacturing overhead 10
Allocated fixed manufacturing overhead 10 (30% salaries, 70% depreciation)
Total unit cost $42
Clifton's offer = $34 per unit
Total relevant cost to make the timer units:
If Ivanhoe does not accept the Clifton's offer, its total cost = $35 * 40,330 = $1,411,5500
If it accepts Clifton's offer, the total cost = $34 * 40,330 = $1,371,220
Net cost = $40,330
Out of the total cost of $42, $7 for the depreciation is not considered relevant. This leaves the relevant cost at $35 per unit. Any cost that cannot be eliminated by a decision is not relevant, it is a sunk cost. The salaries of the supervisory and clerical staff can be eliminated, so it is relevant here.