Discuss the importance and process of financial forecasting. Provide examples of both revenue and expense forecasting methods. please include mathematical equations for clarification when appropriate.

Both the perfectly competitive firm and the monopolist produce at the output where marginal revenue equal marginal cost, but only the perfect competitive firm achieves allocative efficiency. Explain why?

1. Identify the situation below that will result in a favorable variance.

Multiple Choice

• Actual revenue is higher than budgeted revenue.

• Actual revenue is lower than budgeted revenue.

• Actual income is lower than expected income.

• Actual costs are higher than budgeted costs.

• Actual expenses are higher than budgeted expenses.

2 Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock’s labor rate variance for August?

Multiple Choice

• $2,000 favorable.

• $2,104 unfavorable.

• $2,104 favorable.

• $4,160 favorable.

• $2,000 unfavorable.

A flexible budget may be prepared:

Multiple Choice

• Before the operating period only.

• After the operating period only.

• During the operating period only.

• At any time in the planning period.

• Only when the company encounters excessive costs.

Which department is often responsible for the direct materials price variance?

Multiple Choice

• The accounting department.

• The production department.

• The purchasing department.

• The finance department.

• The budgeting department.

Grant Co. uses the following standard to produce a single unit of its product: Variable overhead (2 hrs. per unit @ $4/hr.) Actual data for the month show total variable overhead costs of $190,000, and 23,000 units produced. The total variable overhead variance is:

Multiple Choice

• $6,000F.

• $6,000U.

• $78,000U.

• $78,000F.

• $0.

Using the information below, compute the manufacturing cycle time:

Multiple Choice

• 7.5 hours.

• 6.5 hours.

• 8.0 hours.

• 80.0 hours.

• 7.1 hours.

The table given below reports the marginal revenue and marginal cost of the Fortune Travel Inc. for each client. Table 12 Number of Clients Marginal Revenue Marginal Cost 1 100 $200 2 90 $100 3 80 $80 4 70 $40 5 60 $45 6 50 $50 7 40 $60 8 30 $70 9 20 $90 10 10 $120

In Table 12, assume that the total fixed cost of the Fortune Travel Inc. is zero. Compute the profit earned by the Fortune Travel Inc.with six clients. Show your work. (Show your work to earn credits. No Work, No Credit.)

A) Suppose the Commissioner General (CG) of the Ghana Revenue Authority considers reforming the income tax schedule in line with the president’s election campaign promise. The government introduced a GHS4000 exemption per family member. The proposed tax schedule is presented in the following table
Income
Tax rate

First GH₵ 20,000 ..... tax at 10%

Next GH₵30,000.......tax at 25%

All taxable income above GH₵ 50,000..... tax at 40%

In the final stages of the policy design you have been hired to perform the following tasks and advice the CG accordingly.

i. Suppose the Adams Family has three members (Joses, the sole earner – and his two sons), and earns GHS54,000 per year. Calculate their marginal and average tax rates. How much will the family pay in taxes?

ii. The Asare Family has four members (Serena, the sole earner – and her three daughters), and earns GHS74,000 per year. Calculate their marginal and average tax rates. How much will the family pay in taxes?

iii. Suppose the new tax system considers levying taxes at the household level (i.e. the marginal tax rates apply to combined spousal income). Will Joses and Serena have any financial incentive to marry each other?

B) Now suppose a flat tax rate of 30% is considered under the proposed reform, keeping the GHS4,000 per family member exemption. Furthermore, suppose that all other families in Ghana are identical to either the Adams or Asare families, and in fact these two types of families exist in equal numbers (e.g. if there are 40 families in Ghana, 20 are identical to the Adams’).

i. Would this change in the tax system make the system more progressive, more regressive, or neither? Explain. Which family (or family type) will likely benefit from the new tax system - or are both types better off?
How has the incentive or disincentive for marriage changed from that in the previous system described in part A?

ii. Suppose you have been able to gather enough information from previous tax reforms and found that the elasticity of pre-tax income with respect to the marginal tax rate is -0.2.

iii. Why is it necessary to know the elasticity of pre-tax income with respect to the marginal tax rate to correctly identify the revenue costs or gains of this change in the tax system?
Assuming that the elasticity of -0.2 is a correct estimate, would revenues increase or decrease from the tax system in (A)?

What's the impact of the foreign trade factor ingesting when it joins the revenue-spending model ?

Consider total cost and total revenue, given in the following table:

In the final column, enter profit for each quantity. (Note: If the firm suffers a loss, enter a negative number in the appropriate cell.)

In order to maximize profit, how many units should the firm produce? Check all that apply.

4

5

6

7

In the previous table, enter marginal revenue and marginal cost for each quantity.

On the following graph, use the green points (triangle symbol) to graph the marginal-revenue curve, then use the orange points (square symbol) to plot the marginal-cost curve. (Note: Be sure to plot from left to right and to plot between integers. For example, if the marginal cost of increasing production from 1 unit to 2 units is $5, then you would plot a point at (1.5, 5).)

Marginal RevenueMarginal Cost01234567109876543210Revenue and CostsQuantity

The marginal-revenue curve and the marginal-cost curve cross at a quantity   .

This firm   in a competitive industry, because marginal revenue is   as quantity increases.

True or False: The industry is in a long-run equilibrium.

True

False

why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Thome and Crede, CPAs, are preparing their service revenue (sales) budget for the coming year (2017). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below. Department Quarter 1 Quarter 2 Quarter 3 Quarter 4 Auditing 2,450 1,840 2,330 2,710 Tax 3,130 2,650 2,300 2,800 Consulting 1,640 1,640 1,640 1,640 Average hourly billing rates are auditing $84, tax $94, and consulting $105. Prepare the service revenue (sales) budget for 2017 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

Discuss your position on the following concerning Section 936 of the Internal Revenue Code: The 936 companies were criticized for arguing that they only defended their tax benefits without supporting local development as a research and high-tech center.