1. Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:

Sales are budgeted at $308,000 for November, $328,000 for December, and $228,000 for January.

Collections are expected to be 65% in the month of sale and 35% in the month following the sale.

The cost of goods sold is 80% of sales.

The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.

Other monthly expenses to be paid in cash are $22,900.

Monthly depreciation is $30,000.

Ignore taxes.

The difference between cash receipts and cash disbursements for December would be:

2. Haylock Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,900 direct labor-hours will be required in August. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,520 per month, which includes depreciation of $8,830. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

3. Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $42,000. Budgeted cash receipts total $123,000 and budgeted cash disbursements total $117,000. The desired ending cash balance is $65,500. To attain its desired ending cash balance for March, the company needs to borrow:

4. Which of the following statements is NOT correct concerning the Cash Budget?

a The Cash Budget builds on earlier budgets and schedules as well as additional data.

b The Cash Budget should be prepared before the Budgeted Balance Sheet.

c The Cash Budget should be prepared before the Budgeted Income Statement.

d It is not necessary to prepare any other budgets before preparing the Cash Budget.

5, In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units). true or false

On a Saturday morning, pickup trucks and sport utility vehicles carrying garbage to the town dump form a nearly steady procession on a country road, all traveling at21.8 m/s. From one direction, two trucks arrive at the dump every two minutes. A bicyclist is also traveling toward the dump, at 4.12 m/s.

(a) With what frequency do the trucks pass him?
?min^-1
(b) A hill does not slow down the trucks, but makes the out-of-shape cyclist's speed drop to 1.56 m/s. How often do noisy, smelly, inefficient, garbage-dipping, roadhogging trucks whiz past him now?
? min^-1

Leyton and Dustin run a service station in a country town, the service station sells petrol and a number of other goods, which are displayed near the cash register and outside the office. Leyton and Dustin are partners in the business, though they have an old written agreement that states that neither will order goods or services over the value of $3,000 unless the contract contains signatures from both partners.

Leyton has been approached by a supplier of magazines who offers the business the delivery of 100 copies of a particular publication each month. Leyton convinced that the magazine is popular and will make some money, signs a contract with a promise to pay $5,000 in instalments for the delivery of the magazines.

The magazines arrive and Dustin is very upset, first because the magazine is quite unsuitable for display in the business and may result in a loss of customers if they see this publication, but he is also upset that Leyton has made an agreement without consulting him. There is an argument between the partners and Leyton takes sick leave and stays at home to recover from the stress of the argument. In the meantime, Dustin communicates with the supplier of the magazines and declares that the agreement to supply the publication is invalid due to a breach of the partnership agreement, and that the magazines will be returned and no payments will be forthcoming from the business.

Explain, with reference to partnership law:

1. Whether Dustin can cancel the contract with supplier of the magazines?         

[Answer here]

2. Whether Dustin can be liable for the actions of Leyton?                  

[Answer here]

In the town, the weather pattern has three categories each day: Windy, Rainy or Sunny. The weather pattern each day follows a Markov chain model. If it is windy on a day, the following day will be sunny for sure; if it is rainy, the following day will be rainy with probability 0.25 otherwise sunny; and if it is sunny, the following day will be windy with probability 0.25, Rainy with probability 0.25 and sunny otherwise. A worker is paid $175, $125 and $75 on days work depending on if it is Windy, Rainy or Sunny, respectively.

a. Write the transition matrix for this weather pattern
b. How much does the worker get paid on an average day?

The cartel

Consider a town in which only two residents, Hubert and Kate, own wells that produce water safe for drinking. Hubert and Kate can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.

Suppose Hubert and Kate form a cartel and behave as a monopolist. The profit-maximizing price is

per gallon, and the total output is

gallons. As part of their cartel agreement, Hubert and Kate agree to split production equally. Therefore, Hubert's profit is

, and Kate's profit is

.

Suppose that Hubert and Kate have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Hubert says to himself, "Kate and I aren't the best of friends anyway. If I increase my production by 40 gallons, I can increase my profit even though her profit goes down. I will do that starting tomorrow."

After Hubert implements his new plan, the price of water   to

per gallon. Given Kate and Hubert's production levels, Hubert's profit becomes

and Kate's profit becomes

.

Because Hubert has deviated from the cartel agreement and increased his output of water by 40 gallons, Kate decides that she will also increase her production by 40 gallons.

After Kate increases her production, Hubert's profit becomes

, Kate's profit becomes

, and total profit (the sum of the profits of Hubert and Kate) is now

.

Note that Hubert and Kate started by behaving cooperatively. However, once Hubert decided to cheat, Kate decided to cheat as well. In other words, Kate's output decisions are based on Hubert's actions.

This behavior is an example of?

Montpelier, a small town in Ohio, earns $75 million and spends $46.5 million. If their income falls to $67 million, they will spend $41 million. Full employment is achieved when income is $79 million.

1. Calculate the average propensity to consume when Montpelier earns $75 million
2. Calculate the average propensity to save when Montpelier earns $75 million
3. Calculate the marginal propensity to consume when income falls from $75 million to $67 million
4. Calculate the spending multiplier for Montpelier
5. Is Montpelier in a recessionary or inflationary period?
6. If the government wants to change their spending level to get Montpelier to reach full employment, how much will they have to adjust their spending when Montpelier is earning $67 million

Consider a small town, with two restaurants: a tapas bar and a bistro. Both restaurants have a set menu and the cost of serving each customer is $8 for both restaurants. Tapas bar chooses its price for the menu denoted by Pt, and bistro chooses its price for the menu denoted by Pb. Both restaurants are trying to maximize their profits. Tapas bar faces the demand curve Qt = 44 − 2Pt + Pb and bistro faces the demand curve Qb = 44 − 2Pb + Pt.

a) Write down the profit function of the tapas bar.

b) Write down the profit function of the bistro.

c) Find the best reply function of the tapas bar.

d) Find the best reply function of the bistro.

e) Find the Nash equilibrium using the best reply functions you derived in part c and d.

f) Draw the best reply functions you found in part c and d in the same graph. Show the Nash 2 equilibrium on your graph.

g) Does the Nash equilibrium you found generate the highest possible total profits (that is the sum of profits of the tapas bar and the profits of the bistro) for the two firms? If so, argue why this is the case. If not, argue why this is not the case and find the point that generates the highest possible total profits for the two firms.

TotsPoses, Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price shown in the following table. Assume George has no fixed costs, and his cost of producing each portrait is $35.

a. Complete the following table.

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Enter your responses as whole numbers.

How much should George charge if he must charge a single price to all customers? $__

At this price, how many portraits will George produce each day? __ portraits

What will be his economic profit? $__ per day

b. How much consumer surplus is generated each day at this price? $__

c. What is the socially efficient number of portraits? __ portraits

d. George is very experienced in the business and knows the reservation price of each of his customers. If he is allowed to charge any price he likes to any consumer, how many portraits will he produce each day? __ portraits.

What will his economic profit be? $__ per day

e. In this case, how much consumer surplus is generated each day? $__

TotsPoses, Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price shown in the following table. Assume George has no fixed costs, and his cost of producing each portrait is $25.

a. Suppose George is permitted to charge two prices. He knows that customers with a reservation price above $30 never bother with coupons, whereas those with a reservation price of $30 or less always use them. At what level should George set the list price of a portrait? At what level should he set the discount price? How many photo portraits will he sell at each price?

List price of a portrait: $__   

Number of portraits to be sold at the list price: __portraits

Discount price of a portrait: $__   

Number of portraits to be sold at the discounted price: __portraits

b. In this case, what is George’s economic profit and how much consumer surplus is generated each day?

Economic profit: $__   

Consumer surplus: $__