You are currently working as a Senior Economist for the Congressional Budget Office in Washington DC making $108,000 per year. Your lifelong ambition, however, has been to open your own cupcake store. You decide to quit your job as an economist to open your dream store near the River Walk in San Antonio. You estimate that you will be able to sell 10,000 cupcakes per month at a price of $3.40 per cupcake. You will have to pay monthly rent of $5,000 for renting the retail space and will have other cash costs of $2,500 per month (utilities etc.). The ingredients will cost you $2.00 per cupcake.

1. (3 points) Calculate monthly accounting profits

2. (3 points) Calculate monthly economic profits

3. (3 points) Would an economist recommend that you start this business? Why or Why not?

Marie and Alex just paid $250,000 for a house. They made a down payment of $50,000 and assumed a 30-year $200,000 mortgage with a fixed annual interest rate of 5.50%. The house will serve as a residence for several years, but Marie and Alex also view it as an investment, as property values in the neighborhood are projected to increase at a rate of 5% per year in the near future. Property taxes on their home will be $4,236 the first year and are expected to increase 3% a year. Homeowners insurance will cost $632 the first year and is expected to increase at a rate of 2% each year. The couple plans to sell the house after eight years. Answer the following questions.

What will the couple pay in total mortgage payments over the 8 years (Mortgage payments include an Escrow Account that pays for Homeowners Insurance and Property Taxes. See questions 1, 2, 3 and 4 for amounts. )?

Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $160,000, and budgeted direct labor hours were 16,000. The average wage rate for direct labor is expected to be $20 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow: Job 39 Job 40 Job 41 Job 42 Beginning balance $23,300 $32,900 $19,700 $700 Materials requisitioned 19,800 20,800 12,900 15,200 Direct labor cost 10,900 17,900 7,550 6,100 Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 120 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month.

Required: 1. Calculate the balance in Work in Process as of June 30. $

2. Calculate the balance in Finished Goods as of June 30. $

3. Calculate the cost of goods sold for June. $

4. Calculate the price charged for Job 39. Round your answer to the nearest cent. $

Canadian Solar (NASDAQ: CSIQ) and other solar panel manufacturers are facing a shortage of a key raw material used in the production of solar panels, polysilicon. Environmental regulators in China shut down several factories, triggering the shortage. The cost of polysilicon has risen by as much as 35% in the past several months. A kilogram of polysilicon went from $14 to $19 near the end of 2017.

In addition to the rise in the cost of polysilicon, the selling price of solar panels has been falling throughout the world.

Assignment:

You are a financial officer of Canadian Solar. The company president has asked you for information on the three specific topics below. In a memo format the questions that were asked and at least one more financial ratio/tool that would be impacted by these changes.

Begin you memo by briefly restating the request that was made. This will help define the scope of the assignment. Your one additional ratio should come after you have covered the requested material.

1. What would be the impact of the increase in the cost of the polysilicon on Canadian Solar’s gross profit? Explain.

2. What would be the impact of the decrease in the selling price of solar panels on Canadian Solar’s gross margin? Explain.

3. Assume that Canadian Solar uses a standard costing system for tracking the production of its solar panels. What variance(s), if any, have been impacted by the increase in the cost of polysilicon? Explain

Chapter 6 Homework

Required information

Exercise 6A-2 Least-Squares Regression [LO6-11]

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

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 6A-2 Part 2

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round your Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

Required information

Exercise 5A-2 (Algo) Least-Squares Regression [LO5-11]

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

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 5A-2 Part 2 (Algo)

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirements below.

Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.

1. Cuenca Company is considering the purchase of new equipment that will speed up the process for producing flash drives. The equipment will cost $7,200,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project follow:

   Year		Cash Revenues		Cash Expenses
   1		$8,000,000		$6,000,000
   2		8,000,000		6,000,000
   3		8,000,000		6,000,000
   4		8,000,000		6,000,000
   5		8,000,000		6,000,000

2. Kathy Shorts is evaluating an investment in an information system that will save $240,000 per year. She estimates that the system will last 10 years. The system will cost $1,248,000. Her company's cost of capital is 10%.
3. Elmo Enterprises just announced that a new plant would be built in Helper, Utah. Elmo told its stockholders that the plant has an expected life of 15 years and an expected IRR equal to 25%. The cost of building the plant is expected to be $2,880,000.

Required:

1. Calculate the IRR for Cuenca Company. The company's cost of capital is 16%. Round your answer to the nearest percent.
%

Should the new equipment be purchased?
No

2. Calculate Kathy Short's IRR. Round your answer to the nearest percent.
%

Should she acquire the new system?
Yes

3. What should be Elmo Enterprises' expected annual cash flow from the plant? Round your answer to the nearest dollar.
$

Feedback

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 44,000 of these balls, with the following results:

Required:

1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $123,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $123,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 44,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.

Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

REQ 2

REQ 3

Refer to the data in Required (2). If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $123,000, as last year? (Round your answer to the nearest whole unit.)

REQ 4

Refer again to the data in Required (2). The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places.)

Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

Show less

If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $123,000, as last year? (Round your answer to the nearest whole unit.

Assume the new plant is built and that next year the company manufactures and sells 44,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. (Round "Degree of operating leverage" to 2 decimal places.)

QUESTION 6

1. Other things equal, as perceived risk falls for a country,

QUESTION 7

1. Suppose investors and currency speculators expect that a currency will depreciate in about six months. This will cause the currency to begin depreciating now.

True

False

QUESTION 8

1. Which of the following tends to cause markets to expect a currency to have a higher value in the near future?

QUESTION 9

1. Suppose a country maintains a fixed exchange rate below the market exchange rate.

QUESTION 10

1. Suppose a country borrows somewhat more internationally than in the past. Keeping other things equal (like inflation and risk), this country's currency tends to weaken.

True

False

1) A 6.47 mm high firefly sits on the axis of, and 11.5 cm in front of, the thin lens A, whose focal length is 6.11 cm . Behind lens A there is another thin lens, lens B, with a focal length of 20.7 cm . The two lenses share a common axis and are 61.5 cm apart. Is the image of the firefly that lens B forms real or virtual? What is the height of this image? Express the answer as a positive number (nm)?

image distance from lens B cm:

2)

One of the inevitable consequences of aging is a decrease in the flexibility of the lens. This leads to the farsighted condition called presbyopia (elder eye). Almost every aging human will experience it to some extent. However, for the myopic, or nearsighted, person it is possible that far vision will be limited by a subpar far point and near vision will be hampered by an expanding near point. One solution is to wear bifocal lenses that are diverging in the upper half to correct the nearsightedness and converging in the lower half to correct the farsightedness.

Suppose one such individual asks for your help. The patient complains that she can’t see far enough to safely drive (her far point dfar=114 cmd and she can’t read the font of her smart phone without holding it beyond arm’s length (her near point dnear=81.0 cm? Prescribe the bifocals that will correct the visual issues for your patient.

a)What is the focal length fns of the part of the bifocal lens that corrects the patient's nearsightedness?

b) What is the focal length ffsffs of the part of the bifocal lens that corrects the patient's farsightedness?