Consider the markets for Milky Way and Snickers candy bars. Evaluated at the market equilibrium, the estimated price elasticities of demand are 1.6 and 0.7, respectively. Assume the price elasticity of supply for each good is 1.0.

a. Construct side-by-side diagrams in which the prices of both goods are assumed to be equal. Identify the equilibrium price and quantity in both markets.

b. Suppose a rise in input prices reduces the supply of both goods proportionately. Illustrate the impact of the supply reduction on the equilibrium price and quantity.

c. Using the graphs drawn to answer (b), which good experiences a relatively larger change in price, and which good experiences a relatively larger change in quantity?

d. What happens to consumer spending (i.e. total revenue) in each market? Explain your answer by identifying and explaining the price and quantity effects.

A university proposed a parking fee increase. The university administration recommended gradually increasing the daily parking fee on this campus from $6.00 in the year 2004, by an increase of 8% every year after that. Call this plan A. Several other plans were also proposed; one of them, plan B, recommended that every year after 2004 the rate be increased by 60 cents.

a. Let t=0 for year 2004 and fill in the chart for parking fees under plans A and B.

Round your answers for the values under Plan A to two decimal places, and enter the exact answers for the values under Plan B.

b. Write an equation for parking fees FA as a function of t (years since 2004) for plan A and an equation FB for plan B.

Enter the exact answers.

FA=

Edit

FB=

Edit

c. What will the daily parking fee be by the year 2025 under each plan?

Round your answer for the value under Plan A to two decimal places, and enter the exact answer for the value under Plan B.

Under plan A, the daily parking fee in the year 2025 with be $.

Under plan B, the daily parking fee in the year 2025 with be $.

d. Imagine that you are the student representative to the Board of Trustees. Which plan would you recommend for adoption?

For students,

Plan APlan B

is less expensive over the next  years, so it should be recommended.

A survey of 500 major U.S. manufacturing plants was completed in order to gain information about water pollution near each plant facility. Data have been collected on the amount of WATER POLLUTANTS (PL) found within ½ mile of each plant. (No plants were within 50 miles of each other). The pollutants were measured as the average parts per million based on each gallon of water sampled for each plant. For each plant, the AMOUNT OF WATER (W) used and the AVERAGE RAINFALL (R) was recorded. Plants were classified to be within one of four TYPES (chemical, paper, consumer durable goods, others) and the plant AGE (under 15 years; 15 years or older) was noted. A scale for LOCAL ENVIRONMENTAL REGULATIONS ENFORCEMENT was made (Strong enforcement; Moderate enforcement; Minimal to No Enforcement). Using these data, (20 points) a. Specify a linear model that would allow you test the effects of the impact of each variable above. b. Interpret each parameter in your model. c. Show how you would test the hypothesis that chemical and paper plant pollution is equal. d. How would you test the impact of local regulation enforcement on plant’s pollution

3. Nacho Company is a retailer of durable, light-weight backpack bag and consistently known for their high-quality and innovation. The firm is considering dropping the Pink backpack product and only to sell the traveler backpack. Nacho Company allocates fixed costs (both corporate and selling/administrative) to products based on sales revenue. When the president of the company saw the product-line income statements (presented below), he agreed that the Pink product should be dropped. If this is done, sales of traveller are expected to increase by 20% next year; the firm's cost structure will remain the same.

Required:

1. Find the expected change in annual operating income by dropping the Pink product and selling only the traveler product. Show calculations to support your answer.

2. What strategic factors should be considered?

Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 1

Required

A. October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. Prepare a sales budget.

B. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

C. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $13,600. Assume that all purchases are made on account. Prepare an inventory purchases budget.

D. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

E. Budgeted selling and administrative expenses per month follow:

*The capital expenditures budget indicates that Vernon will spend $237,600 on October 1 for store fixtures, which are expected to have a $36,000 salvage value and a three-year (36-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

F. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

G. Vernon borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $28,000 cash cushion. Prepare a cash budget.

Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6

[The following information applies to the questions displayed below.]

Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 2

H. Prepare a pro forma income statement for the quarter.

I. Prepare a pro forma balance sheet at the end of the quarter.

H.

Overall Materiality Calculation- Example 1

Use the guidelines for Willis and Adams for the materiality bases and their respective ranges.  You have been tasked with determining the overall materiality assessment for your audit client, TechToys for the year-ended 2018.  You have begun your planning procedures in July of 2018. The client has provided you with the actual pretax income for the first quarter 2018 ($4 million) and the second quarter 2018 ($10 million).  TechToys expects pretax income to remain stable for the third quarter.  It also expects an increase of 30% from the third to fourth quarter for the holiday season.  This growth is consistent with the prior year pretax income, which has been steadily increase 2-3% each year.   Assets at June 30, 2018 are $10 billion and revenues are forecasted to be $200 million for the year.  Assets and revenues also remain stable year over year.

In addition, the below lists provides some information regarding you client, ABC Company:

The entity is publicly traded and is regulated entity.

A material audit differences was identified in the prior year.

The technology space for tech gadgets, such as the fitness watch, has begun to decline in the past year.

Sage Company sells 8% bonds having a maturity value of $2,620,000 for $2,421,360. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization under the effective-interest method.

Sage Company sells 9% bonds having a maturity value of $1,610,000 for $1,435,895. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization under the straight-line method.

1. What is NAFTA and when was it formed?

2. What is the real reasons that NAFTA was formed and tell me 2-3 positives and negatives that are the result of NAFTA?

3. What stage of integration is NAFTA and where do you think it will be by 2025?

4. How is USMCA different from NAFTA?

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $185,400.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,370 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $104,580.

Other Information

The Cash balance on December 31, 2019, totaled $102,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.60 per share for 5,280 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $490,000 equipment purchase is planned for February.

Question:

For the first quarter of 2020, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decimal places, e.g. 2,520.)