A small biotech company develops a new treatment for a rare disease. The new treatment is patented and the company is the sole monopolist in its market. The company can sell the treatment to private pharmacies and public hospitals. Pharmacies’ demand for the treatment is QPD = 84 – 0.4PP while public hospitals’ demand for the treatment is QHD = 116 – 0.6PH. The marginal cost of the new treatment is MC = 20 +2Q.

The legislature passes a new Health Costs Relief Act (HCRA) that allows biotech companies to price discriminate.

a) Once the law is enacted, does the biotech company charge the same price to pharmacies and to hospitals? Why?

b) How many doses does the company sell to hospitals? How many does it sell to pharmacies?

c) What price do hospitals pay for a dose of the new treatment? What price do pharmacies pay for a dose of the new treatment?

d) Who gains and who looses from the enactment of the HCRA?

The following are questions for discussion assignment. Could you please assist me with these questions? Thank you.

Rite Aid Corporation; NYSE: RAD

Income Statement: Listed as Consolidated of Operations, page 76

Balance Sheet: Listed as Consolidated Balance Sheets, page 75

Statement of Stockholder's Equity: Listed as Consolidated Statements of Stockholders' Equity, page 78

Statement of Cash Flows: Listed as Consolidated Statements of Cash Flows, page 79

https://www.sec.gov/Archives/edgar/data/84129/000104746918003207/a2235393z10-k.htm

Answer following Question: Individual student needs to analyze financial statements of selected 3 companies within one specific industry using methods covered in this course. The assessment must, at minimum, covers companies’ strategy, profitability, liquidity and risk based on individual company and comparison with industry. A report and presentation must be made for the management to facilitate their investment decision.

The answer must cover the depreciation of capital lease contracts, present value and Profitability index, return on assets, profit margin, Return on lacquer painting, net return Profit on Sales

3-3

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items athrough h that require adjusting entries on December 31, 2017, follow.

1. An analysis of WTI's insurance policies shows that $3,996 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,464 are available at year-end 2017.
3. Annual depreciation on the equipment is $15,986.
4. Annual depreciation on the professional library is $7,993.
5. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $3,000, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,861 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
7. WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee.
8. The balance in the Prepaid Rent account represents rent for December.

2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
2-b. Prepare an adjusted trial balance.

Post the balance from the unadjusted trial balance and the adjusting entries in to the T-account

-a. Prepare Wells Technical Institute's income statement for the year 2017.
3-b. Prepare Wells Technical Institute's statement of owner's equity for the year 2017.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31, 2017.
  

Office Works has an order to manufacture several specialty products. The beginning cash and equity balances were $105,000. All other beginning balances were $0. Use your T-Account worksheet to record the following transactions:

1. Purchased $50,000 of direct materials on account.
2. Used $45,000 direct materials in production during the month.
3. Manufacturing employees worked 6,400 hours and were paid at a rate of $8 per hour. Paid cash for the direct labor expense.

4. The company applies OH based on direct labor cost. This year's annual overhead is estimated to be $500,000. The actual direct   labor cost last year was $1,250,000. The company estimates it will spend $625,000 in labor cost this year.
5. Compute and record the OH applied to the job.
6. Completed units costing $50,000 during the month.
7. Sold 6,000 units costing $6.50 during the month. The selling price is 30% above cost. Received cash.
8. This year, the company paid $40,000 cash for actual OH expenses incurred. Last year the company paid $65,000 cash for OH expenses. Record the actual OH costs.
9. The company considers OH differences less than $4,000 to be immaterial. By how much was OH over applied or under applied? Record the difference.

Now, CHOOSE 6 CORRECT STATEMENTS from the choices below. You should have 6 check marks indicating your answer choices. Each answer choice is worth 4 points:

1. The predetermined overhead rate is?
2. The direct labor that is debited to labor expense is?
3. How much are the total current manufacturing costs?
4. How much revenue did the company earn?
5. By how much was MOH over/under applied?
6. How much are the costs of goods manufactured?

Group of answer choices

The cost of goods manufactured is $39,000

The amount of sales revenue earned was $50,700

The direct labor that will be debited to direct labor expense is $0

The predetermined MOH rate is $..75

The total current manufacturing costs are $137,160

The predetermined MOH rate is $.80

The cost of goods manufactured is $40,000

The direct labor that will be debited to direct labor expense is $40,960

The amount of over/under applied MOH is $1,000

The direct labor that will be debited to direct labor expense is $51,200

The amount of over/under applied MOH is $0

The direct labor that will be debited to direct labor expense is $160,137

The amount of sales revenue earned was $50,000

The direct labor that will be debited to direct labor expense is $160,200

The amount of over/under applied MOH is $960

The cost of goods manufactured is $50,000

The predetermined MOH rate is $1.25

The amount of sales revenue earned was $39,000

Office Works has an order to manufacture several specialty products. The beginning cash and equity balances were $105,000. All other beginning balances were $0. Use your T-Account worksheet to record the following transactions:

1. Purchased $50,000 of direct materials on account.
2. Used $45,000 direct materials in production during the month.
3. Manufacturing employees worked 6,400 hours and were paid at a rate of $8 per hour. Paid cash for the direct labor expense.

4. The company applies OH based on direct labor cost. This year's annual overhead is estimated to be $500,000. The actual direct   labor cost last year was $1,250,000. The company estimates it will spend $625,000 in labor cost this year.
5. Compute and record the OH applied to the job.
6. Completed units costing $50,000 during the month.
7. Sold 6,000 units costing $6.50 during the month. The selling price is 30% above cost. Received cash.
8. This year, the company paid $40,000 cash for actual OH expenses incurred. Last year the company paid $65,000 cash for OH expenses. Record the actual OH costs.
9. The company considers OH differences less than $4,000 to be immaterial. By how much was OH over applied or under applied? Record the difference.

Now, CHOOSE 6 CORRECT STATEMENTS from the choices below. You should have 6 check marks indicating your answer choices. Each answer choice is worth 4 points:

1. The predetermined overhead rate is?
2. The direct labor that is debited to labor expense is?
3. How much are the total current manufacturing costs?
4. How much revenue did the company earn?
5. By how much was MOH over/under applied?
6. How much are the costs of goods manufactured?

Group of answer choices

The cost of goods manufactured is $40,000

The amount of sales revenue earned was $50,000

The amount of over/under applied MOH is $0

The predetermined MOH rate is $1.25

The amount of sales revenue earned was $50,700

The direct labor that will be debited to direct labor expense is $160,137

The direct labor that will be debited to direct labor expense is $40,960

The predetermined MOH rate is $.80

The amount of over/under applied MOH is $960

The direct labor that will be debited to direct labor expense is $0

The cost of goods manufactured is $50,000

The total current manufacturing costs are $137,160

The direct labor that will be debited to direct labor expense is $160,200

The cost of goods manufactured is $39,000

The direct labor that will be debited to direct labor expense is $51,200

The predetermined MOH rate is $..75

The amount of over/under applied MOH is $1,000

The amount of sales revenue earned was $39,000

Columbia Construction Company earned $497,000 during the year ended June 30, 2013. After paying out $225,794 in dividends, the balance went into retained earnings. If the firm's total retained earnings were $847,434, what were the retained earnings on its balance sheet on July 1, 2012?

Balance of retained earnings, July 1, 2012: $

Calculating EVA

Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $191,000 after income taxes. Capital employed equaled $2.6 million. Brewster is 40 percent equity and 60 percent 10-year bonds paying 7 percent interest. Brewster’s marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 12-point premium above the 5 percent rate on long-term Treasury bonds.

Jonathan Brewster’s aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering.

Required:

Use a spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount.

1. No changes are made; calculate EVA using the original data.

$

2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assessment of Brewster Company, bringing the premium above long-term Treasury bills to 10 percent the first year and 7 percent the second year. Calculate revised EVA for both years.

3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering selling more common stock, which would increase equity to 80 percent of total financing. Total capital employed would be $3,500,000. The new after-tax operating income would be $390,000. Using the original data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New after-tax income will be $390,000, and in Year 1, the premium will be 10 percent above the long-term Treasury rate. In Year 2, it will be 7 percent above the long-term Treasury rate. (Hint: You will calculate three EVAs for this requirement.)

Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $195,000 after income taxes. Capital employed equaled $2.9 million. Brewster is 45 percent equity and 55 percent 10-year bonds paying 6 percent interest. Brewster’s marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 13-point premium above the 5 percent rate on long-term Treasury bonds.

Jonathan Brewster’s aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering.

Required:

Use a spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount.

1. No changes are made; calculate EVA using the original data.

$

2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assessment of Brewster Company, bringing the premium above long-term Treasury bills to 11 percent the first year and 8 percent the second year. Calculate revised EVA for both years.

3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering selling more common stock, which would increase equity to 80 percent of total financing. Total capital employed would be $3,700,000. The new after-tax operating income would be $395,000. Using the original data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New after-tax income will be $395,000, and in Year 1, the premium will be 11 percent above the long-term Treasury rate. In Year 2, it will be 8 percent above the long-term Treasury rate. (Hint: You will calculate three EVAs for this requirement.)

Calculating EVA

Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $195,000 after income taxes. Capital employed equaled $2.2 million. Brewster is 40 percent equity and 60 percent 10-year bonds paying 6 percent interest. Brewster’s marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 13-point premium above the 5 percent rate on long-term Treasury bonds.

Jonathan Brewster’s aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering.

Required:

Use a spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount.

1. No changes are made; calculate EVA using the original data.

$

2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assessment of Brewster Company, bringing the premium above long-term Treasury bills to 11 percent the first year and 8 percent the second year. Calculate revised EVA for both years.

3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering selling more common stock, which would increase equity to 80 percent of total financing. Total capital employed would be $3,900,000. The new after-tax operating income would be $395,000. Using the original data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New after-tax income will be $395,000, and in Year 1, the premium will be 11 percent above the long-term Treasury rate. In Year 2, it will be 8 percent above the long-term Treasury rate. (Hint: You will calculate three EVAs for this requirement.)