Some goods are normal goods at lower income levels and inferior goods at higher income levels. One example is the fast food category in the US restaurant industry (e.g., McDonalds). In this case, lower income consumers will purchase more fast food if they earn small increases in income. However, the consumers will substitute other types of food and purchase less fast food as their income rises to much higher levels. Can you think of a second example from some other industry in the US or another country?
Suppose you are the marketing manager for a company that faces this sort of demand response from the customers of its major products. How would you develop an advertising program that adapts to this behavior over the growth (increasing income) and recession (declining income) stages of the macro economy? For example, would you change your pricing policy as the economy grows or declines, or would you change the target audience for your ads? Are there other things your could do in this situation?
In: Economics
Question 1: Preparing a Balance Sheet Convict Australia Wallet Limited is a wholesaler of luxury brand wallets and watches. The company set up an office in Perth in 2022 and have established a strong distribution network throughout the Australia and South-East Asia. The financial year of the company is from April 1 to March 31. Due to an unexpected accident involving the company’s regular accountant, you have been engaged to prepare the 2026/2027 financial year (that is, April 1, 2026 to March 31, 2027) for Convict Australia Wallet Limited. After examining the notes of the company’s regular accountant, you have discovered the following initial list of accounts and trial balance amounts have been registered. Account Name Trial Balance Value Accounts Receivable $41,000,000.00 Accumulated Depreciation $95,000,000.00 Associate Investment $111,000,000.00 Bank Loans $145,000,000.00 Cash $126,500,000.00 Copyright $2,500,000.00 Foreign Currency Reserve $50,000,000.00 Gain on Sale of Land $14,000,000.00 General Reserve $75,000,000.00 Goodwill $10,500,000.00 Income Tax Expense $12,650,000.00 Inventory $111,000,000.00 Investments Available for Sale $25,000,000.00 Land $360,000,000.00 Long-Term Bonds (Due More than 12 Months) $75,000,000.00 Long-Term Investment (Held to Maturity) $25,000,000.00 Long-Term Pension Obligations $14,000,000.00 Notes Payable (Due More than 12 Months) $39,000,000.00 Paid-Up Capital $255,000,000.00 Patents $1,500,000.00 Property, Plant and Equipment $180,000,000.00 Retained Earnings $145,000,000.00 Sales Revenue $256,000,000.00 Short-Term Marketable Securities $22,000,000.00 Wages and Salaries $42,500,000.00 The following key information has already been prepared by the regular accountant. 1. A review of the ‘Goodwill’ account indicated an amount of goodwill to the value of $1,500,000 had been impaired. This impairment had yet to be reduced from the ‘Goodwill’ account balance, or the ‘Retained Earnings’. 2. The value of ‘Property, Plant and Equipment’ is shown in the accounts at the historical value. The annual depreciation of $18,000,000 has yet to be deducted for the 2026/2027 financial year. 3. The value of ‘Inventory’ as shown in the Trial Balance is at cost. The net realizable value of inventory is indicated to be $145,000,000. 4. Expenses (e.g., insurance) for the 2027/2028 financial year to the amount of $2,200,000 were prepaid using cash 2 days prior to the end of the 2026/2027 financial year. This amount has yet to be shown in the trial balance values nor deducted from the cash account. 3 | P a g e 5. During the 2024/2025 financial year the company sold assets for a gain of $45,000,000. This was account for in the corresponding income statement and close to the balance sheet at the time. 6. Half of the value of ‘Notes Payable (Due More than 12 Months)’ shown in the ‘Trial Balance’ is incorrectly recorded and are due to be paid in the 2027/2028 financial year. 7. Records also indicate that $50,000,000 of the ‘Paid-Up Capital’ is yet unpaid and is incorrectly recorded. Cash that should have been supposedly collected should be shown as ‘Other Receivables’. 8. During the 2026/2027 financial year, the company purchased issued capital to the value of $20,000,000. These transactions have yet to be reflected in the ‘Trial Balance’ values. 9. The board of directors have determined that the balance of the ‘Foreign Currency Reserve’ account must be equal to the balance of the ‘General Reserve’ account at year end. This has yet to be accounted for. 10. On March 1, 2027 the company signed a non-binding agreement to sell all the ‘Investments Available for Sale’ that will yield a gain of $12,000,000 for the company. The sale will be completed no earlier than August 1, 2027. Required: Using the scenario information, prepare a balance sheet for Convict Australia Wallet Limited for the 2026/2027 financial year using correct form based on the specifications of International Accounting Reporting Standards IAS 1. 4 | P a g e Question 2: Preparing an Income Statement Ugly Face Surgery Australia Limited is a wholesaler of luxury facial make-up and perfumes. The company also provides consultancy services on facial plastic surgery. The company set up an office in Launceston in 2019 and have established a strong distribution network and consultancy throughout the Tasmania and mainland Australia. The financial year of the company is from July 1 to June 30. You have just been employed as the company chief financial officer, and the first task assigned to you is to prepare the income statement for the company for the 2024/2025 financial year (i.e., July 1, 2024 to June 30, 2025). The following notes have been provided to assist you in preparing the income statement. 1. Number of units sold of each main business line, and the number of consultancies performed during the 2024/2025 financial year are: (a) 1,200,000 (facial make-up); (b) 2,591,000 (perfumes); and (c) 31,580 (consultancy). 2. Average sale price and consultancy fee are: (a) $18.45 (facial make-up); (b) $21.25 (perfumes); and (c) $52.70 (consultancy). 3. Average cost of each unit sold and consultancy provided is: (a) $14.98 (facial make-up); (b) $12.65 (perfumes); and (c) $32.45 (consultancy). 4. The relevant operating expenses are defined in the following table: Operating Expense Cost Entertainment Expenses $1,450,000.00 Vehicle Expenses $2,136,000.00 Administration Salaries $3,678,400.00 Legal Service Expenses $984,000.00 Depreciation Administration Building $5,001,600.00 Insurance Expense $450,000.00 Sales Office Rental Expense $856,000.00 Marketing and Advertising Expenses $1,780,000.00 Sales Management Salaries $981,000.00 5. The company also received $4,500,000 in dividend income during the course of the year from its long-term investments. 6. The total finance interest received from cash and cash equivalent balance held during the year amounted to $11,001,100 whilst the company paid $15,024,800 on interest on interest-bearing debt issued by the company. 7. The share of net profit the company received from its associate and joint venture investments amounted to $2,250,160. 8. The company tax rate is 35%. 9. During the year the company discontinued a line of business. For the 2024/2025 financial year, the discontinued operations contributed a net profit of $2,150,124. 10. The company at the end of the 2024/2025 financial year had a total of 121,450,000 common shares outstanding. Required: Using the scenario information, prepare an income statement for Ugly Face Surgery Australia Limited for the 2024/2025 financial year using correct form based on the specifications of International Accounting Reporting Standards IAS 1. (Include a calculation for basic EPS).
In: Accounting
Unit 5 - Chapter 5 - Cost-Volume-Profit Relationships
Many of you are familiar with Amazon. In its second year of operations, sales increased eightfold. Two years later, sales were $1.6 billion. Although its sales growth was impressive, Amazon's ability to lose money was equally amazing. One analyst nicknamed it Amazon.bomb, while another, predicting its demise, called it Amazon.toast. Why was it losing money? The company used every available dollar to reinvest in itself. It built massive warehouses and bought increasingly sophisticated (and expensive) computers and equipment to improve its distribution system. This desire to grow as fast as possible was captured in a T-shirt. This buying binge was increasing the company's fixed costs at a rate that exceeded its sales growth. At one point, the company predicted its sales would increase by at least 28% in a given quarter, but that its operating profit would decrease by at least 2% and perhaps by as much as 34%. How might this scenario be used in a CVP analysis situation, and how might Amazon have modified its spending to increase profits in conjunction with increasing sales?
In: Accounting
Williams Company sells women’s hats for $12 each. Actual and budgeted sales in units for nine months are as follows: January (actual) ……….. 25,000 June (budget) …………. 50,000 February (actual) ……… 26,000 July (budget) ………….. 30,000 March (actual) ………… 40,000 August (budget) ………. 28,000 April (budget) ………… 65,000 September (budget) …… 25,000 May (budget) …………. 100,000 The company should have sufficient inventory on hand at the end of each month to supply 40% of the hats sold in the following month. Suppliers are paid $4.50 each for a hat. One half of a month’s purchases are paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Monthly operating expenses for the company are given below: Expenses are paid in the month incurred. Variable: Sales commission…………….. 4% of sales Fixed: Advertising…………………… $190,000 Rent…………………………… 22,000 Salaries……………………….. 106,000 Utilities……………………….. 9,000 Insurance……………………… 5,000 Depreciation………………….. 15,000 Additional information: a. In April the company will pay $53,750 for restructuring costs. b. Insurance is paid on an annual basis, in November of each year. c. The company plans to purchase investments for $161,250 cash in May. d. The company will purchase for cash $40,000 in new equipment during June. e. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. f. The company plan to collect $50,000 from common stock issued in May. A listing of the company’s ledger accounts as of March 31, is given below: Assets Cash…………………………………………… $74,000 Accounts Receivable ($31,200 February Sales; $384,000 March sales) ……………………….. 415,200 Inventory ……………………………………… 104,000 Prepaid Insurance …………………………….. 15,800 Property and equipment (net) ………………… 886,000 Total assets……………………………………. $1,495,000 Liabilities and Stockholders’ Equity Accounts payable……………………………… $112,500 Dividends payable…………………………….. 15,000 Common Stock…………………………………. 800,000 Retained earnings……………………………… 567,500 Total liabilities and stockholders’ equity……… $1,495,000 The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1.5% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash. Required: Prepare budgets for the three-month period ending June 30. Include the following detailed budgets: 1. a. A sales budget, by month and for the quarter. b. A schedule of expected cash collections from sales, by month and for the quarter. c. A merchandise purchases budget in units and in dollars. Show the budget by month and for the quarter. d. A schedule of expected cash disbursements for merchandise purchases, by month and for the quarter. 2. A cash budget. Show the budget by month and for the quarter. Determine any borrowings that would be needed to maintain the minimum cash balance of $50,000.
In: Accounting
Fill in answers using key concepts below. Each concept to be used once
1. The ____________________________advises that the costs of government should be allocated in accordance with ability to pay.
2. The ____________________________says that those who benefit from public programs should pay for the provision of services in proportion to the value of benefits received.
3. To be considered a ____________________ in public finance, the amount charged must be proportional, although not necessarily equal, to the benefit received. In addition, the recipient of the service must be able to avoid paying by declining participation.
4. Using fees and charges to finance all services is not fully applicable for services that have _____________________________characteristics, for situations where compensation or redistribution is the goal, or when government provides or subsidizes merit goods.
5. ________________________________ is the only form of government financing that compels payment and is legally enforceable.
6. The fairness goal in taxation has two separable aspects. ______________________ is concerned with the distribution of tax shares across taxpayers so that the higher income pay more tax in dollar terms.
7. ____________________________ considers the economic claim of taxation and avoids imposing an excessive amount of tax on any income group(s) or business sectors and does not target any group for taxation on a basis other than income.
8. The idea that receipts from a tax source should be consistently sufficient to pay for the purposes that the tax is intended to finance is part of the ___________________ goal for high quality tax systems.
9. ___________________________________ are used by the federal government, twenty-five states, New York City, and the District of Columbia to reduce the burden of taxes on the working poor.
10. Some governments’ programs (as described in #9) include _______________________, which means that any credit amount that exceeds taxes due is paid to the taxpayer, thereby supplementing the earnings of the working poor.
11. When two households have a similar ability to pay, under _________________________ tax policies their tax burdens will be similar.
12. ____________________________________ are tax breaks given to qualifying taxpayers that are equivalent to spending because forgoing revenue is the same as acquiring and then spending the revenue.
13. When a household earning $50,000 pays 2% of its income as tax and a household earning $200,000 pays 8% of its income as tax, the rate structure is _______________________.
14. The tax rate structure described in #13 also is ________________________________.
15. A general sales tax on goods and food purchased and cooked at home is __________________________ because low income households spend a higher proportion of the income on goods and food but not much on services, while higher income households spend more on services and food prepared outside the home, and also buy goods. The sum of taxable spending is a smaller share of income for affluent households than for poorer households.
16. The distribution of tax shares across income groups is called _____________________.
17. The percentage of income paid as tax is called the _________________________ of tax.
18. The ____________________________ argues that an equitable distribution of taxes imposes an equivalent sacrifice on taxpayers of various means.
19. The reasoning for using progressive taxation to achieve equal sacrifice is based on the economic theory of ________________________________, which maintains that as income increases, the worth to the recipient of each additional dollar declines.
20. Although some people preferprogressive taxation, because high income taxpayers do in fact pay more tax than lower income taxpayers a ______________________ tax meets the baseline test for fairness under the ability to pay principle.
In: Economics
Why has manufacturing employment decreased as a share of total employment in Canada over the last 50 years?
A-Because manufacturing products have an elastic demand so that lower prices lead to more machines being used and less workers being hired;
B- Because manufacturing products have an inelastic demand so that lower prices lead to more machines being used and less workers being hired;
C-Because China produces most manufacturing products;
D-Because manufacturing products have a demand elasticity equal to one so that lower prices lead to more machines being used and less workers being hired
Question-1 b)
By 2025 what do you think is the likelihood (or probability) that an artificial intelligent (AI) machine be used as a member of a corporate board of directors?
A-0% (like today)
B-25%
C-50%
D-75%
E-100%
What is the probability that umpires/referees and other sport officials be replaced by computers in the next 10-20 years
A-0% (like today)
B-40%
C-80%
D-100%
What is the probability that a psychologist be replaced by a computer in the next 10-25 years?
A-0% (like today)
B-25%
C-50%
D-75%
E-100%
In: Economics
Give the name(s) of the element(s) fitting each of the following descriptions.
Occurring in nature as diatomic molecules
The inert gases
The halogens
The noble gas in Period 4
The element whose +3 cation has the same configuration as neon
The element whose -2 anion has the same configuration as argon
The element from the first 10 elements that would be most similar in properties to radium
The Period 3 element having 4 valence electrons
The Period 3 element with an effective nuclear charge of +4
The Period 3 element with the largest first ionization energy
The Group 3A element with the largest first ionization energy
The Period 3 element with the largest (i.e., most negative) electron affinity value
The Period 3 element with the largest atomic radius
The Group 4A element with the largest electronegativity value
The halogen in Period 5
The element in Period 3 most similar in properties to tin
The element in Period 3 having three valence electrons
The Period 4 element having a half-filled p subshell
The Period 4 element with the largest electronegativity value
The Group 2 element with the largest atomic radius
The Period 4 element with the smallest first ionization energy
The Group 4A element with the smallest first ionization energy
The Period 3 element having a half-filled p subshell in the valence shell
In: Chemistry
Question 8
Which of the following is true of long-term care insurance?
| a. |
The maximum duration of benefits is only one year. |
|
| b. |
There is no waiting period to receive the benefits. |
|
| c. |
Most long-term-care insurance policies are non-renewable in nature. |
|
| d. |
Many policies offer inflation protection riders for an additional premium. |
|
| e. |
Long-term-care policies do not reimburse the insured for the cost of services incurred on a day-to-day basis. |
Question 9
A bear market condition is associated with:
| a. |
high returns. |
|
| b. |
increased tax rate. |
|
| c. |
declining securities prices. |
|
| d. |
investor optimism. |
|
| e. |
economic recovery. |
Question 10
A bull market is characterized by:
| a. |
low returns. |
|
| b. |
investor optimism. |
|
| c. |
falling stock prices. |
|
| d. |
economic slowdown. |
|
| e. |
investor pessimism. |
Question 11
A diversified portfolio of securities is characterized by:
| a. |
unstable earnings for the entire investment horizon. |
|
| b. |
investing on a single security which has the lowest risk and the highest returns. |
|
| c. |
concentration on a single industry which has the highest growth rate. |
|
| d. |
dissimilar risk-return characteristics of the financial instruments. |
|
| e. |
erratic loss potential due to investment in latest financial vehicles. |
Question 12
Clara’s portfolio is worth $200,000 and her portfolio consists of common stocks worth $56,000. Therefore, equity constitutes _____ of Clara’s portfolio.
| a. |
28% |
|
| b. |
61% |
|
| c. |
56% |
|
| d. |
10% |
|
| e. |
33% |
Question 13
Mathew had purchased 100 shares of Blue Corporation for $100 per share. Currently, the stocks of Blue Corporation are trading at $150. Which of the following is the return on Mathew’s investment on one share?
| a. |
40% |
|
| b. |
80% |
|
| c. |
65% |
|
| d. |
75% |
|
| e. |
50% |
Question 14
Mike is in his late 60’s and retired. He wants to maintain a portfolio of investments that will provide him a stable income. Which of the following financial instruments is the most suitable option for Mike?
| a. |
Money market securities |
|
| b. |
Loans |
|
| c. |
Stocks |
|
| d. |
Bonds |
|
| e. |
Mortgages |
Question 15
The first thing you need to determine in order to reach an investment goal after accumulating the capital is the __________.
| a. |
rate of inflation |
|
| b. |
rate of consumption |
|
| c. |
rate of savings |
|
| d. |
rate of return |
Question 16
The most important investment prerequisites are:
| a. |
adequate insurance and liquidity. |
|
| b. |
inconsistency and risk awareness. |
|
| c. |
adequate income and unpublished information. |
|
| d. |
adequate income and debt. |
|
| e. |
an investment plan and a non-monetary goal. |
In: Accounting
The Plastics Division of the United Chemical Co. manufacture s and sells a line of raw materials used by plastic converters in the fabrication of components for durable goods manufacture. The Plastics Division has three manufacturing plants that employ a two-step process using 39 pro-duction lines. They manufacture 4,000 final product s (grade/color combination s) for sale to 3,600 customers. Figure 1 describes the production facilities. There are significant differences among the various production lines. Some grades of products can only be produced on certain lines. There are differences in equipment capacity that dictates the run size that is most efficient in each line (see Figure 2 for run size/cost relationships for the range of equipment sizes). These differences in the production lines require constant monitoring by production scheduling in order to match the mix and volume of sales orders with the production capabilities to achieve the most economic production results. The Plastics Division uses a standard cost system for evaluating the performance of the production facilities. The financial reports being routinely prepared for use by division management currently include: l) Income statement,balance sheet, and cash flow statement for the division as a whole. 2) Standard cost performance reports for manufacturing. Upon special request, individual product-cost estimates are made. These estimates are usually used in pricing considerations. The Current Environment The division has grown rapidly in the past several years. Consequently, the business has become more complex because of the large number of customers, products, and production lines. The marketing department views the market (3,600 customers) as being made up of five major segments and twenty sub segments. The controller, Bill Brown, has observed that the decisions being made by the manufacturing manager are quite different from the decisions required of the marketing manager. Brown concluded that the different decisions require different financial information. He believed that through financial analysis his staff could provide marketing with data that could be used to guide marketing strategy and improve the profitability of the division. Brown observed that the lowest unit selling price of a product was about 30 percent of the division's highest priced product, and that the lowest unit cost was about 25 percent of the highest unit cost. He therefore reasoned that there must be a wide variation in profitability from product to product, customer to customer, and transaction to transaction. He concluded that a system was needed that would clearly define the profitability of each sale in order to provide the basis for marketing emphasis and pricing. However, significant questions remained in his mind.
What are the critical information needs of the marketing manager, the manufacturing manager, and the general manager?
What changes should Brown recommend United consider making? Explain the advantages these changes would bring.
In: Accounting
It wasn’t long ago that products from Apple, perhaps the most
recognizable name in electronics manufacturing around the world,
were made entirely in America. This is not so anymore. Now, almost
all of the approximately 70 million iPhones, 30 million iPads, and
59 million other Apple products sold yearly are manufactured
overseas. This change represents more than 20,000 jobs directly
lost by U.S. workers, not to mention more than 700,000 other jobs
and business given to foreign companies in Asia, Europe, and
elsewhere. The loss is not temporary. As the late Steven P. Jobs,
Apple’s iconic co-founder, told President Obama, “Those jobs aren’t
coming back.”
At first glance, the transfer of jobs from one
workforce to another would seem to hinge on a difference in wages,
but Apple shows this is an oversimplification. In fact, paying U.S.
wages would add only $65 to each iPhone’s expense, while Apple’s
profits average hundreds of dollars per phone. Rather, and of more
concern, Apple’s leaders believe the intrinsic characteristics of
the labor force available to them in China which they identify as
flexibility, diligence, and industrial skills are superior to those
of the U.S. labor force. Apple executives tell stories of shorter
lead times and faster manufacturing processes in China that are
becoming the stuff of company legend. “The speed and flexibility is
breathtaking,” one executive said. “There’s no American plant that
can match that.” Another said, “We shouldn’t be criticized for
using Chinese workers. The U.S. has stopped producing people with
the skills we need.”
Because Apple is one of the most imitated companies in
the world, this perception of an overseas advantage might suggest
that the U.S. workforce needs to be better led, better trained,
more effectively managed, and more motivated to be proactive and
flexible. If U.S. (and Western European) workers are less motivated
and less adaptable, it’s hard to imagine that does not spell
trouble for the future of the American workforce. Perhaps, though,
Apple’s switch from “100% Made in the U.S.A.” to “10% Made in the
U.S.A.” represents the natural growth pattern of a company going
global. At this point, the iPhone is largely designed in the United
States (where Apple has 43,000 employees), parts are made in South
Korea, Taiwan, Singapore, Malaysia, Japan, Europe and elsewhere,
and products are assembled in China. The future of at least 247
suppliers worldwide depends on Apple’s approximately $30.1 billion
in orders per quarter. And we can’t forget that Apple posted $16.1
billion in revenue from the first quarter of 2014, perhaps in part
because its manufacturing in China builds support for the brand
there.
As makers of some of the most cutting-edge, revered
products in the electronics marketplace, perhaps Apple serves not
as a failure of one country to hold onto a company completely, but
as one of the best examples of global ingenuity.
Questions:
What are the pros and cons for local and overseas
labor forces of Apple’s going global? What are the potential
political implications for country relationships?
Do you think Apple is justified in drawing the
observations and conclusions expressed in the case? Why or why not?
Do you think it is good or harmful to the company that its
executives have voiced these opinions?
How could managers use increased worker flexibility
and diligence to increase the competitiveness of their
manufacturing sites? What would you recommend?
In: Operations Management