1- when demand is inelastic, an increase in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.

c. no change in total revenue but an increase in quantity demanded.

d. no change in total revenue but a decrease in quantity demanded .

2- In competitive markets,

a.firms produce identical products.

b.no individual buyer can influence the market price.

c.no individual seller can influence the market price.

d.All of the above are correct.

3- In the circular-flow digram,

a.firms are buyers in the markets for goods and services.

b.households are sellers in the markets for the factors of production.

c.firms are sellers in the markets for factors of production and in the markets for goods and services.

d.dollars that are spent on goods and services flow directly from firms to households.

4- Factors of production are?

a.the mathematical calculations firms make in determining their optimal production levels.

b. social and political conditions that affect production.

c. the physical relationships between economic inputs and outputs.

d. inputs into the production process.

5- which of the following is not an example of the opportunity cost of going to school?

a.The money a student could have earned by working if he had not gone to college.

b. The nap a student could have enjoyed if he had not attended class.

c. The party a student could have enjoyed if he had not stayed in to study for his exam.

d. The money a student spends on rent for his apartment while attending school.

Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,200 in revenue. Each worker’s equipment costs the worker’s employer $215 per month to rent and each worker toils 40 hours per week for 4 weeks each month.

Instructions: In part a, enter your answer as a whole number. In parts b-e, round your answers to 2 decimal places.

a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month?

b. How much revenue per hour does each worker bring in?

c. If the minimum wage were $7.40, would the revenue per hour in part b exceed the minimum wage?

If so, by how much per hour?

d. Consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $7.40 per hour, what will the firm’s economic profit or loss be per acre?

e. At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?

On January 10, KH sold a mixer it purchased from MU for $80 cash and delivered it to a customer. KH has a 45-day return policy under which a customer can exchange a product for another product of the same type, quality, condition and price. The exchange policy requires that all returned products must be like new. Based on extensive historical experience, KH estimates that 2% of its products will be exchanged by customers for another product of the same price, condition, quality and type. KH estimates the cost of recovering any products will be insignificant. KH does not record any potential volume discounts until they are earned.

Requirements

? Record all initial accounting entries for KH for January 10 based on the current guidance on revenue recognition in ASC 605. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries.

? Prepare a detailed explanation of each of the five steps of revenue recognition. Record all initial accounting entries for MU for January 10 based on the new guidance on revenue recognition in ASC 606. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries.

? What, if anything, is the difference in revenue recognized for the month of January under ASC 605 and ASC 606?

On January 10, KH sold a mixer it purchased from MU for $80 cash and delivered it to a customer. KH has a 45-day return policy under which a customer can exchange a product for another product of the same type, quality, condition and price. The exchange policy requires that all returned products must be like new. Based on extensive historical experience, KH estimates that 2% of its products will be exchanged by customers for another product of the same price, condition, quality and type. KH estimates the cost of recovering any products will be insignificant. KH does not record any potential volume discounts until they are earned.

Requirements

? Record all initial accounting entries for KH for January 10 based on the current guidance on revenue recognition in ASC 605. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries.

? Prepare a detailed explanation of each of the five steps of revenue recognition. Record all initial accounting entries for MU for January 10 based on the new guidance on revenue recognition in ASC 606. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries.

? What, if anything, is the difference in revenue recognized for the month of January under ASC 605 and ASC 606?

Bob Fuji began business on January 1, 2018 with a Balance Sheet that listed $ 300,000 of Cash and $ 300,000 of Shareholders' Equity.  During 2018, the following inventory related transactions took place:

Produced 15,000 units of inventory @ a cost of $ 20 per unit

Delivered 12,000 units of inventory to customers with a selling price of $ 28 per unit

Collected $ 280,000 of cash related to 10,000 units of inventory

The above transactions were the only transactions for the firm, and the "year-end" selling price of inventory is $ 28.

D. (3)    If Bob Fuji recognizes revenue at the Completion of Production, Total Assets on

          Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________

E. (4)    If Bob Fuji recognizes revenue at the Time of Cash Collection, Total Assets on

          Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________

F. (3)   _____    Assume that (other than collecting the amount of money that he was

                        owed at the end of 2018) in 2019, the only activity of Bob Fuji is that he

                        "liquidates" any remaining inventory, receiving cash in the amount of

                       $ 25 per unit.  

G. If Bob recognizes revenue at "Time of Cash Collection", which of the following items will be GREATER than $ 0 on Bob Fuji's 2019 Income Statement?

                        A. Revenue

                        B. Net Income

                        C. Both A and B

                        D. None of the above    

Tazer management now has concluded that the company cannot devote enough money to research and development to undertake all of these projects. Only $1.5 billion is available, which may be not enough for all the projects. The first row of table shows the amount needed (in millions of dollars) for each of these projects. The second row estimates each project’s probability of being successful. If a project is successful, it is estimated that the resulting drug would generate the revenue shown in the third row. Thus, the expected revenue (in the statistical sense) from a potential drug is the product of its numbers in the second and third rows, whereas its expected profit is this expected revenue minus the investment given in the first row. These expected profits are shown in the bottom row of table. The objective is to choose the projects that will maximize the expected profit while satisfying the budget constraint.

a. Formulate algebraic form for this problem. (Please clearly define all the decision variables, clearly write down the objective function and each constraints)

b. Formulate and solve this model on a spreadsheet.

TABLE Data for the Tazer Project Selection Problem

Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash. During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments. Prepare a GAAP-based income statement and balance sheet for Wang Company for 2018, for the below scenario:

a. Wang is a promoter of rock concerts. The $65,000 was paid to provide a rock concert that produced the revenue.

b. Wang is in the car rental business. The $65,000 was paid to purchase automobiles. The automobiles were purchased on January 1, 2018, and have five-year useful lives, with no expected salvage value. Wang uses straight-line depreciation. The revenue was generated by leasing the automobiles.

c. Wang is a manufacturing company. The $65,000 was paid to purchase the following items:

(1) Paid $10,000 cash to purchase materials that were used to make products during the year.

(2) Paid $20,000 cash for wages of factory workers who made products during the year.

(3) Paid $5,000 cash for salaries of sales and administrative employees.

(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.

(5) During 2018, Wang started and completed 2,000 units of product. The revenue was earned when Wang sold 1,500 units of product to its customers.

America Industries has successfully completed production of its “tip calculators” and would like to perform a break-even profit model analysis. The combination of equipment purchase cost and other resource and facility fixed costs total $550,000. Each calculator costs $12 to produce, but will sell for $38.

a.) How many calculators does Kramerica need to sell in order to achieve a volume break-even point? – (30 points)

b.) What is the corresponding revenue break-even point? – (30 points)

c.) How can America use the volume break-even point value calculated in part (a)? NOTE: The Excel spreadsheet can be very useful for this part as it performs many of these calculations.) – (25 points). In other words:

a.) What types of recommendations would you make to America if the expected number of calculator sales is 22,000 over the next year? (i.e., Are they going to be profitable; if so, by how much?

b.) Is there going to be a loss; if so, how much? If there is a loss, what might you recommend?).

d.) Please sketch a plot of the “Revenues and Costs” versus the “Number of Calculators”, and include both the total revenue and total cost lines, and also the volume and revenue break-even points (you can do this manually). Clearly label the x-axis and y-axis, and indicate the points of Fixed Costs, volume break-even point, and revenue break-even point. – (15 points)

avage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expected to wash 8,400 cars in August and to collect an average of $6.10 per car washed.

The actual operating results for August appear below.

Required:

Compute the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)