Cancico Communications has supplied the following data for use in its ABC system:

Cancico Communications has supplied the following data for use in its ABC system:

During the year, Cancico Communications completed an order for special telephone equipment for a new customer, HurnTel. This customer did not order any other products during the year. Data concerning that order follow:

Required:

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3. Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.)

4. Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)

Unit Cost, Ending Work-in-Process Inventory, Journal Entries

During August, Skyler Company worked on three jobs. Data relating to these three jobs follow:

Overhead is assigned on the basis of direct labor hours at a rate of $2.30 per direct labor hour. During August, Jobs 39 and 40 were completed and transferred to Finished Goods Inventory. Job 40 was sold by the end of the month. Job 41 was the only unfinished job at the end of the month.

Required:

1. Calculate the per-unit cost of Jobs 39 and 40. Round unit costs to nearest cent.

2. Compute the ending balance in the work-in-process inventory account.
$

Feedback

1. Manufacturing cost comes from totaling direct materials, direct labor, and overhead on each job. The grand total can be divided by the number of units to determine per-unit cost.

2. Determine which jobs are still in work-in-process and compute the balance.

3. Prepare the journal entries reflecting (a.) the completion of Jobs 39 and 40 and (b.) the sale of Job 40. Make the entry to record the cost of Job 40 first, followed by the entry to record the revenue from its sale. The selling price is 140 percent of cost.

An economy has full-employment output of 1500. Suppose desired consumption and desired investment are ? ? = 125 + 0.75(? − ?) − 400? ? ? = 200 − 100?

G is the level of government purchases, and T=100 1.

Goods market and the IS curve section.

a) Derive desired saving with respect to Y and r if the government spending, G, is 150.

b) Find the goods market clearing real interest rate if the full-employment output is 1500 and the government spending, G, is 150.

c) Derive the IS curve based on part (a) and (b).

d) Now, the government decided to use the expansionary fiscal policy. The government increases the government spending by 50 (so, G=200) but did not change the taxes, T (T=100). The full employment output is still 1500. Find the goods market clearing real interest rate, the amount of desired saving and investment.

e) Based on the part d), Find the IS curve. f) Draw the desired saving curves and the desired investment curve from part (b) and (d). Show the real interest rate and the amount of desired saving (or the investment) at each equilibrium of the goods market.

g) Graph IS curve from part (c) and part (e). (Mark the label of the IS curve with IS1(G=150) and IS2(G=200)

2 - Money demand is ?? ? = 0.8? − 2000(? + ? ? ) where the expected rate of inflation, ? ? , is 0.05. The nominal supply of money M = 2000.

2. Asset market equilibrium and the LM curve.

h) Find the price level that clears the asset market if the real interest rate, r, is equal to the goods market equilibrium real interest rate in part (1-a) [Hint: Use the answer in part (1-a) for r]

i) Derive the LM curve when the price level is equal to the solution in part (h) [Hint: Use the price level from the part (2-h) to get the real money supply]

j) When the government use the expansionary fiscal policy with G=200, the goods market equilibrium real interest rate was changed (in the part (1-d).

If the money market also have this real interest rate at new equilibrium, how does the price change? Show the price level to get the real interest rate from the part 1-d) as the new money market equilibrium. [Hint: use the part (1-d) real interest rate to get the new price level.]

k) Graph the money market equilibrium from the part (2-h) and (2-j) with the real money demand curve and the real money supply curve.

l) In the part (2-j), the price is changed so it causes a change in LM curve. Derive the LM curve with the new price level from (2-j)

3. General equilibrium with the change in the government spending.

g) Draw the IS curves, LM curves and FE curve when the full employment output of 1500 on the Y-r

You need to draw two IS curves (from the part (1-c) when G=150 and the part (1-e) when G=200), two LM curves (from the part (2-i) with the price level if G=150 and the part (2-l) with the new price level) and one FE curve with the full employment level.

section A and B

Section A: Boeing & JAL - Initial Analysis
Japanese Airlines (JAL) wants to add one Boeing 787 to its fleet in January 2021. The current purchase price as provided by BA is $100M. JAL has the option to either purchase the aircraft or lease it. JAL is evaluating both the options, and needs your help
1. If JAL were to purchase the aircraft, it can borrow up to 70% of the value at Libor + 3%. Please calculate first year interest payment, assuming Libor is 2% -- 5pts
2. What will be JAL’s initial cash outlay? – 5pts
3. Since, the borrowing is planned for January 2021, what are some of the instruments, which JAL can use to fix its borrowing rate today? – 10 pts
4. BA is also offering a monthly lease option at a lease rate factor (LRF) of 0.7%, and a tenor of 12 years. Please calculate the monthly lease payments (Lease payments = LRF*Purchase Price) – 5pts

Section B: Boeing & JAL - Rate Locks
For the purchase option, an Investment Bank offered JAL the following rate lock strategy. JAL can enter into a forward contract with the bank,
where if Libor in January 2021 ends up higher than 2%, then the bank pays JAL the difference on $100M notional. The case will be reversed if
Libor ends up lower than 2%.
1. If Libor is 2.5% in January 2021, how much does JAL receive or pay to the investment bank in the first year? – 5pts
2. Continuing with 1 above, how much interest will JAL pay on its loan in the first year? – 10 pts
3. What kind of an instrument is this? – 5pts
For the lease option, the investment bank has offered to pay $80/bp for each basis point change in 7-year swap in January 2021 vs. now. From
Part A, remember that BA’s lease offer has $100/bp sensitivity to the 7-year swap…this $20/bp difference can be understood as risk
compensation…
4. If the 7-year swap in January 2021 is 3%, how much does JAL receive or pay to the investment bank? – 10 pts
5. Continuing with 4 above, what will be the monthly lease payments made to BA? – 10 pts
6. What is JAL’s net loss/gain on this deal? – 5 pts
7. What kind of an instrument is this? -- 5 pts

Deriving the Market Supply Curve from

Individual Supply Schedules (Student Survey)

Discussion: Post and Reply

PART I.

This is the first step of several steps of our economics project. In this first step, we will assess the market for frozen yogurt. You will read about the economic setting and you will post the quantity you would supply to the market at specific hypothetical prices. (Hint: you will want to think on the margin for this one!)

After Thursday, when everyone's posts become visible, we will observe the market supply. I will inform you what the market demand looks like and we will establish the equilibrium price.  

You have moved to a new community and as someone who is always on the look out for a good opportunity, you observe that the new town you live in has no frozen yogurt venues. You have reason to believe that there will be solid demand for your service and you decide to open up a small shop that sells cups of frozen yogurt in this city. The market is big enough to accommodate you.

You have already paid for 1 month's rent ($3000) and your commercial property landlord is allowing you to lease the space on a month- to- month basis. There are 30 days this month.

You own three frozen yogurt machines already and a commercial-grade refrigerator/freezer (they were gifts from your rich uncle who just wants you to succeed).

You observe that the cost of the yogurt mix, cones, cups and sprinkles and the imputed cost of utilities cost you $0.50/cup.

Also, labor can generate the following output(s):

POST (1) The name of your business AND more importantly (2) state the quantities of frozen yogurt you would willingly supply to the market at each of the following (specific) prices given that you can only hire labor for the entire day (ie, 8 hours/day shifts and the daily salary is $80/worker). You have already paid the first month's lease. Today is the start of the month.

Cleveland Enterprises is considering the addition of a new product line.  The firm would not need additional factory space, but it would require the purchase of $2.45 million of equipment installed.  The equipment would be depreciated using a 7-year accelerated depreciation schedule.  Additional inventory of 13% of the projected increase in next year’s sales would be necessary prior to each year of operation, but the entire value will be recovered at the end of the project.  The firm expects to sell 340,000 units during the first year of the project, increasing to 355,000 units during the next three years before decreasing to 100,000 during the fifth and final year of the project.  The product is expected to be obsolete at that point.  The expected sales price is $13 per unit with a variable cost of $6 per unit during the first year of operations.  Variable costs will increase by 5% per year, but the sales price remains fixed.  Fixed costs are estimated at $610,000 during the first year, but will increase by 6% per year.  The firm’s tax rate is 21%.  The equipment has an estimated salvage value of $500,000.

What is the estimated net present value of the project assuming a required return of 18%?

Management of the firm is predicting the possibility of an economic boom during the upcoming years.  If so, the projected sales would be 380,000 units per year with a price of $14.  However, it would also increase labor costs giving the firm a variable cost per unit of $8 in the first year, with subsequent increases as discussed above.  

What is the estimated net present value of the project assuming an economic boom?

Based on your calculations, what recommendations would you make to the management of Cleveland Enterprises?

How is the equilibrium price​ determined? What happens if the price is above the equlibrium​ price? What happens if the price is below the equilibrium​ price?