The Shoe King

You are the owner and manager of in the beautiful Horizon Mall, just outside of Schaumburg, Illinois. You purchased it from Mr. Bundy on December 31, 2018, for $805,000.

For the year 2019, the average price of a pair of shoes that you sold was $80 and over the year, you averaged selling 1,800 pairs per month.

For the shoes that you sold, you paid your suppliers $950,400.

As part of the sales deal, and so you can continue to use the valuable Al Bundy name, you pay Mr. Bundy a royalty of five percent of all sales.

You pay yourself $65,000 per year. You have 10 employees who average $40,000 per year in salary

The payroll taxes and benefits total 15 percent of all salaries.

The rent and other mall services provided (e.g., security) cost $5,000 per month. Electric costs are $2,100 per month, while your phone and internet access cost $900 per month (total for both).

Advertising efforts were distributed over three media. The store has a billboard near the mall that costs $1,000 per month. Sales announcements and coupons were delivered via direct mail at a cost of $2,000 per month. You spent that same amount ($2,000 per month) for radio advertising.

Other costs include:

Insurance $500 per month

Accounting/legal $1,000 per month

Office supplies $1,250 per month

During the year, you became concerned about your profitability. Hence, you hired a consultant to evaluate your operations. She was paid $10,000.

1) Construct the income statement for 2019. Make sure to include a column showing percentage of sales.

2) What is the gross profit in dollars and on a percentage basis?

            -$777,600 -45%

3) What is the operating profit?

4) What was the breakeven sales level for 2019?

5) What was the ROI in 2019?

6) For one pair of Johnston & Murphy Oxford shoes, you pay the supplier $80. Your retail on that pair of shoes is $155. What is your gross profit in dollars on that pair of shoes? What is your markup in dollars? What is your gross profit percentage? What is your markup percentage?

7) Suppose your cost of goods sold in dollars was reduced by 10 percent. What would your gross and operating profits be?

8) In 2020, you project a 20 percent increase in sales. You also plan to give a 6 percent wage increase to your employees, although you intend to pay yourself the same amount as in 2019. The other operating costs remain the same, except that you do not expect to hire the consultant again. The royalty rate remains the same. The cost of goods sold is projected to be 49.50%. What is the projected gross profit in dollars for 2020? What is the projected operating profit in dollars?

Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 66,000 to 106,000 units is given below:

Required:

1. Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below.

2. Assume that the company produces and sells 96,000 units during the year at a selling price of $8.55 per unit. Prepare a contribution format income statement for the year.

Required: Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below. (Round the per unit variable cost and fixed cost to 2 decimal places.)

Below is an example of supply and demand for healthcare services in the U.S.

1) If patient copays average to 20%, and their Insurance pays the other 80% of the cost of their visit, what quantity will be exchanged in this market? Remember, the assumption here is that the consumers' willingness to pay is based on their out-of-pocket cost, rather than the total cost of a visit.

2) What is the total amount spent on Healthcare when patients only pay 20% of the total cost.

3) Healthcare costs continue to rise faster than GDP, taking up an increasing share of total U.S. expenditures. What is one way that we might reduce total healthcare expenditures? Use the values on the table (estimates are totally fine) to illustrate how your proposal would reduce the total cost of healthcare.

A cost estimator for a construction company has collected the data found in the source file Estimation.xlsx describing the total cost (Y) of 97 difference projects and the following 3 independent variables thought to exert relevant influence on the total cost: total units of work required (X1), contracted units of work per day (X2), and city/location of work (X3). The cost estimator would like to develop a regression model to predict the total cost of a project as a function of these 3 independent variables.

b. Suppose the estimator wants to use the total units of work required (X1), contracted units of work per day (X2), and city/location of work (X3) as the independent variables to predict total cost. What should be the regression function between Y and X1, X2, and X3? What is the adjusted R-squared value of this model? What conclusions can you make? (Note that X3 is a dummy variable. You should process it into different categories as I showed you in the class lecture. You should expand X3 into Location1, Location 2, …. Location 5 to differentiate the six locations.)

Traditional Product Costing versus Activity-Based Costing
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $636,400 consisting of the following activity cost pools for the current month:

Total direct labor hours used during the month were 14,800. Panasonic produces many different electronic products, including the following two products produced during the current month:

Required
a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.
Round answers for unit cost to two decimal places, if applicable.

b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.
Round answers for unit cost to two decimal places, if applicable.

Traditional Product Costing versus Activity-Based Costing
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $636,400 consisting of the following activity cost pools for the current month:

Total direct labor hours used during the month were 14,800. Panasonic produces many different electronic products, including the following two products produced during the current month:

Required
a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.
Round answers for unit cost to two decimal places, if applicable.

b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.
Round answers for unit cost to two decimal places, if applicable.

Since the end of the Great Recession, interest rates have been at historic lows—in some cases, close to zero. How is expansionary monetary policy, or more specifically a open market purchase, supposed to work? How do near-zero interest rates limit the ability of expansionary monetary policy to work?

Dodd Frank has become an important issue of public debate and there are new developments in the House of Representatives that could result in legislative challenges to Dodd Frank in the near future.

Outline some at least one criticism of Dodd Frank. Try to be as specific as you can. And if you have an opinion on the issue please express it.

38. In the first edition of An Essay on Population, Malthus based his description of the potential growth of the population on data (however tenuous) from ________.

a. New England

b. the region near the University where he taught in England

c. the parts of Africa he visited as an employee of the Royal African Company

d. China

Ethico-Legal Considerations in the Care of Older Adults

1. What is the republic act of senior citizen in the Philippines? Explain in detailed.

2. What are the rights of senior citizen in the Philippines set-up?

3. How can you help the older adult to alleviate depression?

4. What are the signs that death is near?

5. Explain why Marginal Cost will initially decline and then increases as the number of products produced increases.

6. Explain why Average Total Cost will initially decline and then increases as the number of products produced increases.

7. Explain why Average Fixed Cost only declines as the number of products increases.

8. Explain how Long-Run Average Total Cost is determined

9. Provide reasons why Long-Run Average Total Cost would decline, stay constant, and increase.

10. Give at least 2 reason why a firm would achieve Economy to Scale.