During a year of operation, a firm collects $5,100,000 in revenue and spends $3,600,000 on labor expenses, raw materials, rent, and utilities. The firm's owner has provided $1,000,000 of her own money instead of investing the money and earning a 12% annual rate of return. a. The explicit costs of the firm are $______. The implicit costs are $______. The total economic cost is $_____.

b. The firm earns accounting profit of $____.

c. The firm's economic profit is $_____.

d. If the owner could earn 15% annually on the money she has invested in the firm, the economic profit of the firm would be _____ (when revenue is $5,000,000.)

Understand the concept of relevant revenues and costs. What makes a revenue or cost relevant?

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Know and understand the following terms:

Avoidable costs _______________________________________________________________

Opportunity costs _____________________________________________________________

Relevant Costs ________________________________________________________________

Differential Costs ______________________________________________________________

Sunk Costs ___________________________________________________________________

Differential Revenues ___________________________________________________________

Understand the concept of Cost Hierarchy and Cost Avoidance. What are the different cost hierarchies and when are they eliminated?

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Review examples of costs in the above 4 categories that we covered in class or in problems.

Understand the difference between Qualitative and Quantitative information – both are relevant to decision making.

Special Order Decisions

What is a Special Order Decision? ____________________________________________

Review how to determine relevant (differential) revenues and relevant (differential) costs to make the decision whether or not to take a Special Order.

Outsourcing Decisions

What is an Outsourcing Decision? ____________________________________________

What level costs generally are relevant to a decision to outsource?

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What is vertical integration?

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How does outsourcing impact vertical integration? ____________________________________

Asset Replacement Decisions

What do Asset Replacement Decisions involve? ______________________________________________________________________________

What are the relevant cost levels involved in an asset replacement decision?

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A company sold a total of 1,000 units for total sales revenue of $70,000. The company incurred total variable expenses of $38,500 and total fixed expenses of $ 23,310. Based on this, the company reported a total contribution margin of $31,500 and net operating income of $ 8,190. Use this information to answer the following questions. Assume that all units are within the relevant range.

1.Calculate the per-unit contribution margin

2.Calculate the contribution margin ratio.

3. Calculate the increase in net operating income if sales increase to 1,001 units

4.Calculate the net operating income if the selling price increases by $2 per unit and the sales volume decreases by 100 units.

1. Draw an overall conclusion about internal controls related to the revenue cycle of business.

(a) Taxes are primary revenue yielding tools of the Government of modern ages. You are required to state any three non-revenue objectives which the Government achieves by imposing taxation. (05) (b) List any five taxes which can be imposed by the Federal Government.

(solve in the context of pakistan)

The following have been bifurcated into capital expenditure or revenue expenditure. Are the
classifications correct? In either case- yes or no, please giving reasons for the same.

Revenue Expenditure:
a. Annual maintenance charges for the machinery
b. Buying additional factory space for installing machinery
c. Modification to machinery to increase its efficiency
d. Buying a new delivery van
e. Changing the tires of the old delivery van

Capital Expenditure:
a. New engine in the old delivery van
b. Paying a driver to drive the delivery van on a full-time basis
c. Paying rent for a parking space for the van
d. Acquiring a patent to diversify your business
e. Amortization of the patent

What is the relationship between the demand curve and the Marginal Revenue curve facing a single firm in a non- competitive market? Explain clearly

The tax system is how the U.S. Government raises the revenue it needs to provide goods and services for its citizens. Do you think our tax system shares the burden of these goods and services fairly amongst all Americans? If you were in charge, what would be your policy position--or approach--to the U.S. tax system?

if a plastic surgeon has a sale and reduces the price, total revenue for her service will go up if what happens?