As a recently hired MBA intern, you are working in a consulting capacity to provide an analysis for Al Dente's Italian Restaurant. A financial income Statement is presented below: Sales $2,698,000 Cost of sales (all variable) $1,557,563 Gross Margin $1,140,438 Operating expenses: Variable $277,975 Fixed $213,675 Total operating expenses: $491,650 Administative expenses (all fixed) $564,375 Net operating income $84,413 This income statement presents the sales, expenses and pre-tax operating income for a local eating facility. At Al Dente, the average meal cost for lunches and dinners are $20 and $40 respectively. Al Dente serves both lunch and dinner 300 days per year and serves twice as many lunches as dinners.

4. The owner of the restaurant is thinking of increasing sales through additional advertising, which she will incur as an administrative expense. The proposed additional advertising campaign will cost $25,000. She anticipates that the additional advertising expense will result in an additional 6 lunches and 3 dinners on average, per day. Illustrate the impact on NOI assuming the changes above (hint: show a revised CM statement). Hint: for this type of ‘whatif’, compare the additional contribution margin impact on NOI given the change in units and change in fixed costs.

As a recently hired MBA intern, you are working in a consulting capacity to provide an analysis for Al Dente's Italian Restaurant. A financial income Statement is presented below: Sales $2,698,000 Cost of sales (all variable) $1,557,563 Gross Margin $1,140,438 Operating expenses: Variable $277,975 Fixed $213,675 Total operating expenses: $491,650 Administative expenses (all fixed) $564,375 Net operating income $84,413 This income statement presents the sales, expenses and pre-tax operating income for a local eating facility. At Al Dente, the average meal cost for lunches and dinners are $20 and $40 respectively. Al Dente serves both lunch and dinner 300 days per year and serves twice as many lunches as dinners.

5. In order to increase NOI, the owner of the restaurant is considering adjustments to the quality of food ingredients currently used. Rather than using premium ingredients, use of average quality ingredients would reduce the cost of food by 15%. The owner proposes to not change the current meal pricing. As the consultant, prepare a memo to the owner that presents the pros and cons of this change in operations. What are the potential impacts on revenue, costs, and net operating income may result from this change? The owner does not want to see a decrease in net operating income. Could the owner make this change and absorb a decrease in customers, and how would you demonstrate numerically to support your analysis? What other factors or consequences of this decision should the owner consider besides the financial impact of the change?

As a recently hired MBA intern, you are working in a consulting capacity to provide an analysis for Al Dente's Italian Restaurant. A financial income Statement is presented below: Sales $2,698,000 Cost of sales (all variable) $1,557,563 Gross Margin $1,140,438 Operating expenses: Variable $277,975 Fixed $213,675 Total operating expenses: $491,650 Administative expenses (all fixed) $564,375 Net operating income $84,413 This income statement presents the sales, expenses and pre-tax operating income for a local eating facility. At Al Dente, the average meal cost for lunches and dinners are $20 and $40 respectively. Al Dente serves both lunch and dinner 300 days per year and serves twice as many lunches as dinners. As the MBA intern you are to prepare a managerial accounting focused report to the owners of Al Dente's Italian Restaurant, to include the following:

2. Compute the break-even volume of the number of lunches and dinners. Assume that the CM% for each meal category is the same as the average CM% as calculated in #1. Hint: To solve a break even sales mix, use the horizontal formula:

Net operating income = ($Sales – $Variable costs) – $fixed costs

Net operating income = $CM – $fixed costs

At Breakeven, NOI = $0

Therefore, $CM = $ Fixed costs

Now solve for the unit $CM for each item. Let X be the number of dinners, 2X the number of lunches. $CM is the combined total of the $CM for dinners, and the $CM for lunches.

Assume that the world consists of two countries – US and Germany. Both the countries produce two goods – Automobiles and Corn. There are three factors of production, Capital, Land and Labour. The specific factor in Automobiles is Capital while in Corn it is Land. Labour is used in the production of both the goods. Germany is assumed to be relatively more well- endowed in Capital than the US, while US is relatively more well-endowed in Land than Germany.

Answer the following:

1. German farmers /landowners have been opposing free trade with the US. Why is that the case? Explain in detail using appropriate figure(s).                                                                              (10)                               
2. How would consumers in the US gain from trade with Germany? Explain using an appropriate figure.                                                                                                                                                (10)

In 2009, US foreign assets was 129 percent of GDP and its liabilities was 148 percent. Suppose that 70 percent of U.S. foreign assets are denominated in foreign currencies, but that all U.S. liabilities to foreigners are denominated in dollars (these are approximately the correct numbers). In 2009, U.S. GDP was around $14.4 trillion.

1. Compute the effect of a 10% USD depreciation on US foreign assets, US foreign liabilities and US net foreign wealth position (in USD).
2. Compute the effect of a 10% USD depreciation on the foreign assets, the foreign liabilities and the net foreign wealth position of the Rest of the World (ROW) measured in USD. Note: from ROW's point of view, the US is defined as Foreign and ROW is defined as Home.

Part A) Both signaling and screening:

Multiple Choice

• reduce efficiency in the market.

• are effective ways to increase information available to both parties.

• benefit the sellers but harm the buyers.

• benefit the buyers but harm the sellers.

Part B) Rational people having preferences for immediate benefits and delayed costs is another way of saying that:

Multiple Choice

• money is worth less to us now than in the future.

• money is worth more to us now than in the future.

• the value of money does not change over time.

• rational people have insatiable wants.

Part C) The present value of $300,000 in 12 years at 4 percent interest is approximately:

Multiple Choice

• $312,451.

• $187,379.

• $427,126.

• None of these statements is true.

Part D) John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. The expected value of John's earnings if he chooses to expand is:

Multiple Choice

• $320,000

• $230,000

• $900,000

• $140,000

Part E) When risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual, it is called:

Multiple Choice

• diversification.

• indemnification.

• risk aversion.

• risk analysis.

Part F)

Because of the problem of adverse selection,

Multiple Choice

• low-risk individuals may have a hard time finding insurance worth buying.

• high-risk individuals may have a hard time finding insurance worth buying.

• everyone is typically charged a lower premium.

• individuals who buy insurance act more recklessly.

John is looking at several options to fund his son’s 4-year university degree.

The university fees of $45,000 a year will have be paid starting 11 years from today. He is analysing an insurance plan that pays out $45,000 a year for 4 years with the first payout 11 years from today. The insurance plan has several payment options:

Option 1 Pay $60,000 today.

Option 2 Beginning 1 year from today, pay $12,000 a year for the next 8 years.

Option 3 Beginning 1 year from today, make payments each year for the next 8 years. The first payment is $11,000 and the amount increases by 5% each year.

Answer the following questions regarding the options above:

(a) Calculate the present value of each option. Use a 10% discount rate.

(b) Analyse which option John should choose.

(c) If the discount rate is not given to you, what would be an appropriate discount rate to use?

John is looking at several options to fund his son’s 4-year university degree. The university fees of $45,000 a year will have be paid starting 11 years from today. He is analysing an insurance plan that pays out $45,000 a year for 4 years with the first payout 11 years from today. The insurance plan has several payment options:

Option 1 Pay $60,000 today.

Option 2 Beginning 1 year from today, pay $12,000 a year for the next 8 years.

Option 3 Beginning 1 year from today, make payments each year for the next 8 years. The first payment is $11,000 and the amount increases by 5% each year. Answer the following questions regarding the options above:

(a) Calculate the present value of each option. Use a 10% discount rate.

(b) Analyse which option John should choose.

(c) If the discount rate is not given to you, what would be an appropriate discount rate to use?

Your client, Jacob, turned 66 years old this year. Jacob has decided that he would like to sell a life insurance policy to fund a trip to Africa that he has wanted to take. He has no heirs.

Jacob knows that he could surrender the policy (a whole-life policy) back to the insurance company, but a friend told him he could get more for the policy if he sold it to a life settlement company. A life settlement company buys life insurance policies from policyholders who are not ill and who generally have a life expectancy of between 2 and 15 years. In return, the seller of the policy receives a lump-sum payment. The life settlement company either holds the policy to maturity or resells the policy to an investor.

The lump sum received depends on factors such as age, health, and the terms and conditions of the policy, but in general, the amount is more than the policy’s cash surrender value, which is the amount received from the life insurance company upon surrender of the policy.

In November 2019, Jacob (who was not terminally or chronically ill) sold his policy to a life settlement company for $160,000. During the time that he owned the policy, Jacob did not borrow against the policy or receive any distributions. Premiums paid on the policy by Jacob totaled $122,000 (of which $32,000 pertained to the provision of insurance before the sale of the policy).

What are the tax consequences to Jacob on the sale of his life insurance policy?

What are the Internal Revenue Codes and possible current cases that pertain to the problem?