Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year’s operations (revenues and costs in thousands of dollars).

Required:

a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues.
b. Managers estimate that one of the proposed stores will have revenues of $2.5 million. What are the estimated monthly overhead costs, assuming no inflation?
c. Managers are also considering a “mega-store” with revenues of $10 million. What are the estimated monthly overhead costs, assuming no inflation?

Does trade between the United States and Vietnam make the countries better off or worse off?

Imagine the USA can make 4,000,000 cars, 1,000,000 textiles, or some combination of the two, while Vietnam can make 150,000 cars, 950,000 textiles, or some combination of the two. Draw and label PPFs, calculate opportunity costs and label specialization as points A, and state and label an efficient, mutually beneficial trade as points B.

1. The United States just imposed a tariff on aluminum imports.

-What would you expect this to do to the employment of workers in the American

aluminum industry?

-What would you expect the aluminum tariff to do to the output of the American beverage industry? What does that imply is likely to happen to employment in this industry?

-American farmers have expressed concern about the effects of the new tariffs on farm exports. How might you explain this?

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission rate (to 23%) for the upcoming year. As a result, Lionel’s president has decided to investigate the possibility of hiring its own sales staff in place of the network of sales agents and has asked Alan Chen, Lionel’s controller, to gather information on the costs associated with this change.

Alan estimates that Lionel must hire eight salespeople to cover the current market area, at an average annual payroll cost for each employee of $80,000, including fringe benefits expense. Travel and entertainment expenses is expected to total $770,000 for the year, and the annual cost of hiring a sales manager and sales secretary will be $235,000. In addition to their salaries, the eight salespeople will each earn commissions at the rate of 10% of sales. The president believes that Lionel also should increase its advertising budget by $670,000 if the eight salespeople are hired.

Required

1. Determine Lionel’s breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if the company hires its own sales force and increases its advertising costs. Prove this by constructing a contribution income statement.

2. If Lionel continues to sell through its network of sales agents and pays the higher commission rate, determine the estimated volume in sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.

Approximately 60% of all part-time college students in the United States are female. In random samples of size 100 taken from the population of all part-time college students:

• Describe the sampling distribution of the sample proportion of part-time female college students.

• What is the probability that the sample proportion of part-time female college students is at most 0.51?

• What is the probability that the sample proportion of part-time female college students is at least 0.67?

• What is the probability that the sample proportion of part-time female college students is between 0.53 and 0.60?

NAFTA is a multilateral trade agreement between Canada, United States, and Mexico enacted in the 1990's. This agreement eliminates trade barriers between these countries and allows trade to move freely without tariffs or restrictions.

However, there is a downside to this. Look at "in the News" on pg. 782 of the text on jobs relating to NAFTA. How do agricultural workers feel about this agreement? How about construction workers? The comparative advantage in these countries has changed due to NAFTA. Bottom line, do you feel NAFTA is a good thing? Is it really beneficial to the citizens of each country? Do you think Mexico benefits more?

Shamrock Burrito Inc. sells franchises to independent operators throughout the northwestern part of the United States. The contract with the franchisee includes the following provisions.

Management of Shamrock Burrito estimates that the value of the services rendered to the franchisee at the time the contract is signed amounts to at least $20,000. All franchisees to date have opened their locations at the scheduled time, and none have defaulted on any of the notes receivable. The credit ratings of all franchisees would entitle them to borrow at the current interest rate of 8%.

(b) Prepare the journal entries for the initial and continuing franchise fees, assuming: (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

Please help me solve the following that have question marks. The ones I have listed my answers to are correct.

*please note, "interest revenue" is NOT correct to recognize collection of note and interest revenue on this last part of the answer!

Flexible Steel of the United States is considering expanding its business in Zaire. Under current law, 100% of foreign investor cash flow from depreciation and 50% of accounting income must be retained within Zaire until the investment is 5 years old. Blocked funds may be reinvested in treasury deposits at 5% per annum, tax free, and compounded annually. Flexible Steel is contemplating a new steel plant investment as follows. All cash flows will be valued if they occur on December 31. Thus the investment outlay occurs on December 31, 2020, and earnings are available for local currency dividend payments on December 31, 2021 through 2025. All blocked funds may be exchanged for dollars on December 31, 2025. Foreign exchange rates are expected to be as follows:

December 31, 2018: Z 4.0/$

December 31, 2019: Z 4.5/$

December 31, 2020: Z 5.0/$

December 31, 2021: Z 5.5/$

December 31, 2022: Z 6.0/$

December 31, 2023: Z 6.5/$

Other information includes the following: * Investment outlay will be $40,000,000 for plant and equipment and $4,000,000 for working capital. * Recovery for building and equipment will be depreciated on a straight-line basis over 5 years to a zero salvage value. Working capital will be fully recovered at the end of five years. * Sales are expected to be Z100,000,000 per year. Variable cash costs will be 30% of sales, and fixed cash costs will be Z3,000,000 annually. * Corporate income taxes are 30% in both Zaire and the United States. * Flexible Steel's weighted average cost of capital for projects of this type is 15%. In similar projects would be expected to earn 15%. Calculate the NPV of the project based on cash flows to the parent.

A)$16,285,500 loss

B) $11,673,700 loss
C) $20,349,300 loss

D) $18,432,400 loss

E) $14,196,800 loss

Sarbanes-Oxley Act (SOX) was introduced in 2002 by the United States Congress to fight corporate financial statement fraud. Since its implementation, there have been questions about its effectiveness. After reading the Dutillieux, Francis, and Willekens (2016) article, ”The Spillover of SOX on Earnings Quality in Non-US Jurisdictions (Links to an external site.)” discuss what earnings quality is and how the concern over that quality may have led to the enactment of SOX. How does SOX (a piece of U.S. Legislation) impact companies in other countries?  

From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $14 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $24 per hour and pay ATM fees of $3.25 per transaction. It is estimated that banks would be willing to maintain services for 6 million transactions at $1.00 per transaction, while noncustomers would attempt to conduct 22 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash. Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.00 cap on the fees banks can charge for noncustomer transactions? Instructions:

Enter your responses rounded to the nearest penny (two decimal places). $

What would be the full economic price of this legislation? $