1. Total revenue minus total cost is equal to
a. the rate of return
b.marginal revenue
c.profit
d.net cost
2. The Wax Works sells 400 candles at a price of $10 per candle. The Wax Works' total costs for producing 400 candles are $500. The Wax Works' economic profit is ____
3.if diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be
a. negative
b. zero
c. less than 20
d. greater than 20
4. Refer to the table below. Suppose output varies, ceteris paribus, with labor input in the following manner displayed above. After how many units of labor do diminishing returns set in?
|
Labor |
0 |
1 |
2 |
3 |
4 |
5 |
|
Output |
0 |
10 |
20 |
30 |
40 |
50 |
a. 3
b.4
c.5
d.they do not set in
5. You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the
a.price of capital increases
b. price of labor decreases.
c. price of capital decreases.
d. marginal product of labor increases
6. Total cost is calculated as
a.the sum of total fixed cost and total variable cost.
b.the product of average total cost and price.
c. the sum of all the firm's explicit costs.
d. the sum of average fixed cost and average variable cost
7. The formula for the total fixed cost is
a.TFC = TC + TVC.
b.TFC = TVC -TC
c.. TFC = TC/TVC.
d.TFC = TC -TVC
8.The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are _____
9.Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?
10. The formula for average fixed costs is
a.TFC - q.
b.TFC/q
c.q/TFC
d.%q/%TFC.
11.________ are likely a fixed cost of a firm.
a.Wages paid to employees
b.The payments for supplies
c. Lease payments for office space
d. Travel expenses to meet with clients
12. Diminishing marginal returns implies
a.decreasing average variable costs.
b.decreasing marginal costs.
c.increasing marginal costs
d.decreasing the average fixed costs.
13.In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.
a.rises; rises
b. falls; falls
c. rises; falls
d. falls; doesn't change
14.If marginal cost is between average variable cost and average total cost, then
a.both average variable cost and average total cost are increasing.
b. both average variable cost and average total cost are decreasing.
c.average variable cost is increasing and average total cost is decreasing
d.average variable cost is decreasing and average total cost is increasing.
15. The marginal cost curve intersects the average total cost curve at the ________ value of the average total cost curve.
a.maximum
b.minimum
c.zero
d.average
In: Economics
Revenue is recognized when shipped. Based on shipping dates, total revenue for 2018 is $1,372,637. The audit team has set overall materiality at $13,000.
The total dollar volume of AR that was not approved was $13,726.
Would you classify the authorization control deficiency identified above as material weakness, control deficiency or significant deficiency?
In: Accounting
In Enron's bankruptcy, "Revenue Recognition" was one of the major issues. First, summarize the revenue recognition issue in Enron Bankruptcy. Second, as an auditor, what type of evidence would you want to examine to determine whether Enron was inappropriately recording revenue from the Sithe Energies contract?
In: Accounting
The revenue recognition model promises to provide a coherent and consistent revenue recognition framework for all companies to follow. Do you agree? Explain. (hint: you may wish to discuss the advantages and disadvantages of the model)
In: Accounting
Starting with your identified 2019 level of revenue, you expect that revenue will increase by 10% in 2020. You anticipate annual revenue growth will slow by 1% per year to the long-run industry growth rate of 5% by 2025. • You expect EBIT to be 12.5% of sales each year. • You expect any increase in net working capital requirements each year to be 10% of any year-on-year annual increases in revenue. • You expect capital expenditures to equal depreciation expenses in each year. • Nike’s Tax rate is 20%. • Nike’s weighted average cost of capital (WACC) is 9%.
Case 1 - Suppose you believe Nike's initial revenue growth rate in 2020 will be between 8% and 14% (with growth slowing linearly to 5% by year 2025). What range of prices for Nike stock is consistent with these forecasts? Case 2 – Beginning again with your base case assumptions, suppose you believe Nike's initial EBIT margin (as a % of revenue) will be between 9% and 14% of revenue. What range of prices for Nike stock is consistent with these forecasts? Case 3 – Beginning again with your base case assumptions, you observe that similar companies in the apparel industry have WACCs ranging from 7.5% to 10%. What range of prices for Nike stock is consistent with these forecasts? Case 4 - What range of stock prices is consistent if you vary the estimates in cases 1 – 3 simultaneously? Put another way, what is the range of stock prices you might expect if the worst/best case scenarios occur from each of the previous three cases simultaneously.
7) Determine a terminal value for Nike’s FCF from 2026 and beyond (value expressed in millions of 2025 dollars).
The terminal value, in 2025 dollars, of Nike's free cash flows from 2026 onward is:____ million dollars. (please round your answer to ONE decimal point)
8) Determine Nike’s Enterprise Value (as of the end of FY2019)
Nike's Enterprise Value, as of the end of FY2019, is: $____million dollars. (please round your answer to ONE decimal place)
In: Finance
B&N records the rental of a physical textbook as deferred revenue and recognizes revenue over the rental period. Why can’t B&N record the entire rental revenue at the time of the sale? (Review the Revenue Recognition footnote below.)
Revenue Recognition
Revenue from sales of the Company’s products is recognized at the time of sale or shipment, other than those with multiple elements and Free On Board (FOB) destination point shipping terms. The Company accrues for estimated sales returns in the period in which the related revenue is recognized based on historical experience. ECommerce revenue from sales of products ordered through the Company’s websites is recognized upon estimated delivery and receipt of the shipment by its customers. Freight costs are included within the Company’s cost of sales and occupancy. Sales taxes collected from retail customers are excluded from reported revenues. All of the Company’s sales are recognized as revenue on a “net” basis, including sales in connection with any periodic promotions offered to customers. The Company does not treat any promotional offers as expenses In accordance with ASC 605-25, Revenue Recognition, Multiple-Element Arrangements, and Accounting Standards Updates (ASU) 2009-13 and 2009-14, for multiple-element arrangements that involve tangible products that contain software that is essential to the tangible product’s functionality, undelivered software elements that relate to the tangible product’s essential software and other separable elements, the Company allocates revenue to all deliverables using the relative selling-price method. Under this method, revenue is allocated at the time of sale to all deliverables based on their relative selling price using a specific hierarchy. The hierarchy is as follows: vendor specific objective evidence, third-party evidence of selling price, or best estimate of selling price. NOOK® device revenue is recognized at the segment point of sale. The Company includes post-service customer support (PCS) in the form of software updates and potential increased functionality on a when-and-if-available basis with the purchase of a NOOK® from the Company. Using the relative selling-price method described above, the Company allocates revenue based on the best estimate of selling price for the deliverables as no vendor-specific objective evidence or third-party evidence exists for any of the elements. Revenue allocated to NOOK® and the software essential to its functionality is recognized at the time of sale, provided all other conditions for revenue recognition are met. Revenue allocated to the PCS is deferred and recognized on a straight-line basis over the 2-year estimated life of a NOOK® device. The average percentage of a NOOK®’s sales price that is deferred for undelivered items and recognized over its 2-year estimated life ranges between 0% and 5%, depending on the type of device sold. The amount of NOOK®-related deferred revenue as of April 29, 2017 and April 30, 2016 was $226 and $160, respectively. These amounts are classified on the Company’s balance sheet in accrued liabilities for the portion that is subject to deferral for one year or less and other long-term liabilities for the portion that is subject to deferral for more than one year. The Company also pays certain vendors who distributed NOOK® a commission on the content sales sold through that device. The Company accounted for these transactions as a reduction in the sales price of the NOOK® based on historical trends of content sales and a liability was established for the estimated commission expected to be paid over the life of the product. The Company recognizes revenue of the content at the point of sale of the content. The Company records revenue from sales of digital content, sales of third-party extended warranties, service contracts and other products, for which the Company is not obligated to perform, and for which the Company does not meet the criteria for gross revenue recognition under ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent, on a net basis. All other revenue is recognized on a gross basis. The Company rents physical textbooks. Revenue from the rental of physical textbooks is deferred and recognized over the rental period commencing at point of sale. The Company offers a buyout option to allow the purchase of a rented book at the end of the semester. The Company records the buyout purchase when the customer exercises and pays the buyout option price. In these instances, the Company would accelerate any remaining deferred rental revenue at the point of sale. NOOK acquires the rights to distribute digital content from publishers and distributes the content on www.barnesandnoble.com, NOOK® devices and other eBookstore platforms. Certain digital content is distributed under an agency pricing model, in which the publishers set prices for eBooks and NOOK receives a commission on content sold through the eBookstore. The majority of the Company’s eBooks are sold under the agency model. The Barnes & Noble Member Program offers members greater discounts and other benefits for products and services, as well as exclusive offers and promotions via e-mail or direct mail, for an annual fee of $25.00, which is nonrefundable after the first 30 days. Revenue is recognized over the 12-month period based upon historical spending patterns for Barnes & Noble Members.
In: Accounting
In: Finance
a.) The article states that Bird generated $3.65 per ride. This is
b. Categorize the following costs as fixed, variable, or opportunity costs.
Charging costs:
Repair costs:
Regulatory costs:
Customer support staff costs:
Profit that could be made if Bird invested in pedal bikes:
Credit card processing costs:
Office space staff:
Engineers:
c. Bird has lost tens of millions of dollars and has never turned a profit since it entered the scooter rental service market. How and why does Bird continue to operate if it has never generated a profit?
d. There are typically 3-4 scooter rental companies operating in the same city. Would you predict demand for one specific scooter company, say Bird, is elastic or inelastic? Explain.
e. Do you think the scooter-rental industry is perfectly competitive? What characteristics are like a perfectly competitive industry? What characteristics are unlike a perfectly competitive industry
The scooter wars flared up seemingly overnight, driving huge amounts of scorn, hype, and fundraising as traffic-choked tech workers in California fell in love and hate with electric scooters brought to their cities by two now famous startups: Bird and Lime. The scooter space quickly gave birth to unicorns, regulatory spats, lawsuits, and more. It was a wild ride for the companies and the tech industry as a whole. But now some time has passed, and although scooters are very much still in the conversation, the early hype has faded. That brings us to a fun question: Are the scooter companies any good as businesses? As capital-accepting and headline-generating vehicles, they are tremendous. But does that mean they’ll mint profits?Index The Bird Income Statement: Happily, after we spent time scratching about in the dark trying to answer our viability question without too much to work with, we have new data on Bird, one of the two leading American scooter companies, via this excellent report from The Information.The report in question covers the company’s performance metrics: revenue (total money brought in from riders), gross margin (the percent of revenue that Bird has left over to pay for its operating costs, like office space and staff), and its costs of revenue (the money required to provide its basic service to customers).The report’s data helps us understand Bird’s chance of long-term survival. It also helps us understand the scooter sector, as other key players have similar business models.Constructing gently, here’s a partial income statement of sorts for Bird based on what The Information gleaned from a Bird investor digest. Revenue: Bird generated $3.65 per ride, far above our estimate of $2.50. Bird scooters were handling six rides per day in January of this year, a figure that fell to five by May. The number of rides per day matters for Bird and other scooter companies. If they can generate more revenue per day per scooter by increasing utilization, their model makes more sense. Here we see the opposite trend.Those rides grew Bird’s revenue from a run rate of $65 million in May of 2018 to “hundreds of millions of dollars annually” by this October.So the company has growth figured out; however, its profitability is a different matter.Gross Margins: As the above chart indicates, Bird has a diverse set of revenue costs. Let’s explore them.Bird’s gross margin is 19 percent. That’s what left of revenue after charting (47 percent of revenue), repair (14 percent), credit card processing (11 percent), regulatory costs (5 percent), and customer support and insurance (3 percent).Is 19 percent good? Not really. Keep in mind that a company has to pay its operational costs from its gross profit. Gross profit is revenue minus cost of revenue. So if you only have 19 percent gross margins, you’ve spent most of your revenue just generating your top line. At Bird’s old $65 million run rate, for example, the firm would only have $12.4 million left over after costs of revenue to pay for offices and staff with 19 percent gross margins.Software companies sport gross margin percentages in the high 70s to low 80s. That’s why they are worth so much; their revenue is extremely profitable on a per-dollar basis.The figures above tell us margin improvement (getting that gross margin percentage higher) at scooter companies will be paramount. At Bird’s current gross margins, the firm and its cohort will struggle to generate operating profits.The Information goes on to note that “Bird projected much better economics in the ‘near term,’ allowing it to generate a 33% gross profit margin.” I’d wager that’s the golden ticket. Every percent of gross margin that Bird can drive at the moment, holding revenue flat, raises its gross profit by around 5 percent. That’s enormous.Thinking a bit more, Bird and Lime must be consuming mountains of cash (more here and here) for investing purposes; neither, given our math, generate anything like enough cash to finance their employee costs—let alone what they are spending on new hardware. So I’d hazard that while either firm is adding markets to their portfolio, they are working to add capital to their accounts.
In: Economics
Monopoly Discussion Total Revenue and Elasticity:
The total revenue test shows that the monopolist will avoid
the inelastic segment of its demand schedule. As long as demand is
elastic, total revenue will rise when the monopoly lowers its
price, but this will not be true when demand becomes
inelastic.
In: Economics
3. What would be the result on your balance sheet of recording unearned revenue as revenue? a. Overstated income and overstated liabilities b. Understated revenue and understated assets c. Overstated income and understated liabilities d. Understated income and understated liabilities
In: Accounting