A production company has observed that there are changes in revenue every time it tries to manipulate the price. The concerns of management were brought to your attention needing your expertise advice on how price influences quantity and subsequently revenue. The market survey revealed that the quantity demanded of the product follows a Cobb-Douglas function as presented below:

Q"dx"= αP"x^β"+ε^u ........... of the form Q=AL^αK^β (Cobb Douglas production fuction)

Where Qdx is the quantity demanded of commodity X and Px is the price of commodity X. Further, the company observed that from January to October, the Quantity demanded at a given price level was given as in the table below.

As the only company’s economist, management has asked you help them to be able to predict and forecast the sales

a). Estimate the model and interpret the results (15Mks)

b). calculate the price elasticity of demand for this model (5Mks)

c). How much variations in quantity demanded are accounted for by the variations in the price of the commodity (5Mks)

The break-even point tells a company the number of units or the amount of revenue that it must sell or earn in order to pay for all of its costs. At this point, the company has neither profit nor loss.

Companies have two main types of costs: variable costs and fixed costs.

Variable costs are those costs that vary with the number of units produced. Examples of variable costs are direct labor, direct materials and overhead.

Fixed costs are those costs that a company incurs that do not depend on production. For example, most selling, and all administrative costs are fixed. A company must pay these costs even if it does not have any production activity.

The formulas for computing break-even follow:

B/E _{(# units)} = .     Fixed Cost              .

                         Contribution Margin

B/E _(Revenue) = .     Fixed Cost              .

                     Contribution Margin Ratio

If you will notice, both formulas use something called Contribution Margin. Contribution Margin represents the amount of revenue available after all variable costs have been paid for. It represents what is left over to pay for the fixed costs. The Contribution Margin ratio is the percentage Revenue that the Contribution Margin represents. In concept this is similar to Gross Profit.

In Cost Accounting Variable Costs are grouped together, and Fixed Costs are grouped together to create a variation of the traditional Income Statement. This variation is called a Contribution Margin Income Statement.

Read the following ethical dilemma.

Spillproof Company produces molded plastic cup holders for automobiles. Below is a summary of its Contribution Margin Income Statement from last year:

• Revenues: $5,750,000
• Variable costs: $3,850,000
• Fixed costs: $2,000,000
• Net Loss: ($100,000)

Because the company’s CEO is very concerned about the firm’s net losses, she asks the production manager if there are any ways in which they can reduce costs.

A few weeks later, the production manager returns with a proposal to reduce variable costs to 53% of revenues by lowering the cost estimates that the company uses for environmental clean-up costs. Some years the company has to perform waste clean-up and other years it does not. Either way, the company records this estimated cost as part of Variable Cost since it is based on the number of units produced.

The CEO likes the new projected net income and new break-even point, but is concerned that this change in the estimate will misrepresent the potential liability. The manager disagrees. He feels that the company will not be violating any laws by changing their estimate, and that there is only a possibility of environmental costs in the future anyway.

Requirements for your Main thread post:

1. Calculate the CURRENT breakeven revenues using the current Contribution Margin Income Statement information above.  Show us your work!
2. Re-calculate the breakeven revenues if variable costs are 53% of revenues.  Show us your work!
3. Calculate Spillproof’s projected Net Income/Loss.   Show us your work!
4. Discuss the following:

• 1. What are the ethical issues involved in this case? Explain your answer.
  2. Do you feel that the Production Manager is acting improperly or immorally? Why or why not? Please explain your response.
  3. What stakeholders would be affected if the CEO implemented the Production Managers suggestions? Why?
  4. What should the CEO do?

Q5. What product revenue is growing fastest in % terms? Apple company

You are auditing Osakis Electronics Ltd, a subsidiary of a Japanese company, and will issue an audit report covering the balance sheets as of 31 December 2008 and 2007, and the income statements and cash flow statements for the two years then ended. The company's ordinary shares are traded on the Australia and Tokyo stock exchanges. Each of the following is an independent audit reporting situation.

Required:

1 Osakis does not disclose segment information, because Japanese accounting standards do

not require it. Indicate the effect on your audit report, which will be widely used in Australia.

Country Jeans Co. has an annual plant capacity of 65,100 units, and current production is 45,300 units. Monthly fixed costs are $40,600, and variable costs are $25 per unit. The present selling price is $33 per unit. On February 2 the company received an offer from Miller Company for 15,900 units of the product at $27 each. Miller Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Country Jeans Co. a. Prepare a differential analysis dated February 2 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero "0". Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) February 2 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs: Variable manufacturing costs Income (Loss) $ $ $ b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net . c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. $

Please answer the following questions below.

1. Who needs to be involved in preparing forecasts?
2. How has technology had an impact on forecasting?
3. Ben has heard from some of his customers that they will probably cut back on order sizes in the
next quarter. The company he works for has been reducing its sales force due to falling demand and
he worries that he could be next if his sales begin to fall off. Believing that he may be able to convince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter sales to his manager. What are the pros and cons of doing that?

After making a sale, a seller may have customers that return goods. The seller uses the perpetual inventory system. This requires the seller to _____.

A.) reduce sales and cost of goods sold for the period

B.) use historical data to record sales revenue in the amount that is expected to be received

C.) record two adjusting entries to account for the estimated returns

D.) All of the statements are correct.

You are performing an audit test of management’s assertion of proper cutoff for sales revenue transactions for one of your clients. Answer and clearly explain each of the following: A.) What is the purpose of this test? B.) From what accounting period should your evidence be selected? C.) Why would purchase orders from client customers not be a good form of evidence for this test? Be specific

QUESTION 1

1. CC Car Wash specializes in car cleaning services. The services offered by the company, the exact service time, and the resources needed for each of them are described in the table following:

   Service	Description	Processing Time	Resource
   A. Wash	Exterior car washing and drying	10 minutes	1 automated washing machine
   B. Wax	Exterior car waxing	15 minutes	1 automated waxing machine
   C. Wheel Cleaning	Detailed cleaning of all wheels	16 minutes	1 employee
   D. Interior Cleaning	Detailed cleaning inside the car	20 minutes	1 employee

   The company offers the following packages to their customers:

   • Package 1: Includes only car wash (service A).

   • Package 2: Includes car wash and waxing (services A and B).

   • Package 3: Car wash, waxing, and wheel cleaning (services A, B, and C).

   • Package 4: All four services (A, B, C, and D).

   Customers of CC Car Wash visit the station at a constant rate (you can ignore any effects of variability) of 50 customers per day. Of these customers, 30 percent buy Package 1, 30 percent buy Package 2, 15 percent buy Package 3, and 25 percent buy Package 4. The mix does not change over the course of the day. The store operates 10 hours a day.

b. What is the implied utilization rate for the employee at service C (wheel cleaning)? Round your answer to the nearest whole number and ignore the percentage sign. For example, if your answer is 0.45 or 45%, fill in 45; if your answer is 0.76 or 76%, fill in 76.

Your answer is .

1. CC Car Wash specializes in car cleaning services. The services offered by the company, the exact service time, and the resources needed for each of them are described in the table following:

   Service	Description	Processing Time	Resource
   A. Wash	Exterior car washing and drying	10 minutes	1 automated washing machine
   B. Wax	Exterior car waxing	15 minutes	1 automated waxing machine
   C. Wheel Cleaning	Detailed cleaning of all wheels	16 minutes	1 employee
   D. Interior Cleaning	Detailed cleaning inside the car	20 minutes	1 employee

   The company offers the following packages to their customers:

   • Package 1: Includes only car wash (service A).

   • Package 2: Includes car wash and waxing (services A and B).

   • Package 3: Car wash, waxing, and wheel cleaning (services A, B, and C).

   • Package 4: All four services (A, B, C, and D).

   Customers of CC Car Wash visit the station at a constant rate (you can ignore any effects of variability) of 50 customers per day. Of these customers, 30 percent buy Package 1, 30 percent buy Package 2, 15 percent buy Package 3, and 25 percent buy Package 4. The mix does not change over the course of the day. The store operates 10 hours a day.

   f. What is the implied utilization rate for the employee at service C (wheel cleaning)? Round your answer to the nearest whole number and ignore the percentage sign. For example, if your answer is 0.45 or 45%, fill in 45; if your answer is 0.76 or 76%, fill in 76.

   Your answer is .