In mid-December 2018, the manager of Beau Apparel was preparing the firm’s production plan for the...

In mid-December 2018, the manager of Beau Apparel was preparing the firm’s production plan for the first quarter of 2019. The fore cast of the wholesale price of shirts would be used in making the production decision. The marketing researchers provided the manager with three price forecasts based on three different assumptions about economic conditions in the first quarter of 2019.

High: $20 Medium: $15 Low: $10

The total fixed costs of the production is $30,000. Beau Apparel also estimated an average variable cost function as followed:

AVC=20-0.003Q+0.00000025Q2

Under the high-price forecast, middle-price forecast and low-price forecast, answer the following questions respectively:
(a) Should the firm produce or shut down?
(b) If production is warranted, how much should the firm produce?

Solutions

Expert Solution

Rahul Sunny answered 1 week ago

Next > < Previous

Related Solutions

You are auditing a retail apparel company as of December 2018. The inventory for black down...

You are auditing a retail apparel company as of December 2018. The inventory for black down jackets show 1,263 jackets. When you look at the invoices for the jackets from the wholesaler from which the company purchases those jackets, you see the following: Inventory # Date Quantity Unit Price Total 12732 10/22/17 1,000 $282 282,000 12844 12/03/18 800 $277 221,600 12905 01/28/18 600 $275 165,000 1.Assuming the company uses LIFO as the inventory valuation method, determine the cost of inventory...

Cone Corporation is in the process of preparing its December 31, 2018, balance sheet. There are...

Cone Corporation is in the process of preparing its December 31, 2018, balance sheet. There are some questions as to the proper classification of the following items: $56,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2022. Prepaid rent of $30,000, covering the period January 1, 2019, through December 31, 2020. Note payable of $212,000. The note is payable in annual installments of $26,000 each, with the first installment payable on March 1,...

A manager at a furniture production plant created an incentive plan for her carpenters in order...

A manager at a furniture production plant created an incentive plan for her carpenters in order to decrease the number of defects in the furniture production. She wants to check if the incentive plan worked. The manager selected 9 carpenters at random, recorded their annual defects before and after the incentive and came up with the following: Salesperson Before After Adrian Gilbert 29 17 Nikki Edwards 33 23 Abigail Gage 38 19 Marc Phillips 25 15 Orla Dille 26 32...

Colander Co is preparing its financial statements for the year ended 31 December 2018 and has...

Colander Co is preparing its financial statements for the year ended 31 December 2018 and has a number of issues to deal with regarding non-current assets. (1) Colander has suffered an impairment loss of €90,000 to one of its cash-generating units. The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment are: €'000 Goodwill 60 Land and buildings 100 Plant and machinery 50 Net current assets 10 (2) During the year to 31 December 2018...

I am preparing the working papers for the December 31, 2018 year-end audit to present to...

I am preparing the working papers for the December 31, 2018 year-end audit to present to the company’s auditors when they arrive late next week. In reviewing the draft financial statements and other information, I have identified a number of issues that need to be addressed: Inventory Errors: in reviewing the documentation obtained during the December 31, 2018 inventory count for the heavy equipment division, I discovered a number of errors. The details are provided below. We received an invoice...

MAJOR LEAGUE APPAREL Balance Sheet (Stockholders' Equity Section) December 31, 2018 Stockholders' equity: Preferred stock $570,000...

MAJOR LEAGUE APPAREL Balance Sheet (Stockholders' Equity Section) December 31, 2018 Stockholders' equity: Preferred stock $570,000 Common stock 110,000 Additional paid in capital 7,401,500 Total paid-in capital 8,081,500 Retained earnings Treasury stock Total stockholders' equity $8,081,500 Date General Journal Debit Credit December 01, 2018 Dividends Dividends payable Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2018, its first year of operations: January 2...

Port Inc. is preparing its annual budgets for the year ending December 31, 2018. Accounting assistants...

Port Inc. is preparing its annual budgets for the year ending December 31, 2018. Accounting assistants furnish the data shown below. Product A Product B Sales budget: Anticipated volume in units 300,000 400,000 Unit selling price $10 $15 Production budget: Desired ending finished goods units 20,000 10,000 Beginning finished goods units 15,000 5,000 Direct materials budget: Direct materials per unit (pounds) 4 2 Desired ending direct materials pounds 20,000 15,000 Beginning direct materials pounds 30,000 10,000 Cost per pound $2...

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2018 (the end of...

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2018 (the end of Beale's fiscal year), the following pension-related data were available: Projected Benefit Obligation ($ in millions) Balance, January 1, 2018 $ 620 Service cost 64 Interest cost, discount rate, 5% 31 Gain due to changes in actuarial assumptions in 2018 (15 ) Pension benefits paid (31 ) Balance, December 31, 2018 $ 669 Plan Assets ($ in millions) Balance, January 1, 2018 $ 640 Actual...

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2018 (the end of...

Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2018 (the end of Beale's fiscal year), the following pension-related data were available: Projected Benefit Obligation ($ in millions) Balance, January 1, 2018 $ 400 Service cost 42 Interest cost, discount rate, 5% 20 Gain due to changes in actuarial assumptions in 2018 (11 ) Pension benefits paid (20 ) Balance, December 31, 2018 $ 431 Plan Assets ($ in millions) Balance, January 1, 2018 $ 420 Actual...

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott and...

Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2018, Abbott and Abbott received the following information: Projected Benefit Obligation ($ in millions) Balance, January 1 $ 160 Service cost 24 Interest cost 16 Benefits paid (11 ) Balance, December 31 $ 189 Plan Assets Balance, January 1 $ 80 Actual return on plan assets 11 Contributions 2018 24 Benefits paid (11 ) Balance, December 31 $ 104 The expected long-term rate of return on plan...

Subjects