1. Suppose the price of chicken rises by 15% and as a result the amount of turkey breast sold rises by 20%. What is the cross elasticity of demand for the products? (Pay close attention to the formula for cross price elasticity. Are they substitutes or complements? How do you know?
2. How would the following changes affect total revenue? Would
total revenue increase, decrease or remain the same? Explain in
each case.
a. Price falls and demand is elastic
b. Price rises and demand is elastic
c. Price rises and demand is inelastic
d. Price falls and demand is inelastic
e. Price rises and demand is unit elastic
In: Economics
The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel’s uses a 4-year planning horizon and a 10 percent per year MARR.
a. What is the present worth of each investment?
b. What is the decision rule for determining the preferred investment based on present worth ranking?
c.Which ERP system should Manuel purchase?
In: Accounting
A new equipment will cost 200,000 to install, 5,000 annually maintenance, and have a life of 5 years. The revenue generated by this equipment is estimated to be 60,000 per year. The MARR is 10% per year compounded monthly. Examine the sensitivity of present worth to variation in individual parameters estimates, while others remain constant
1.Sensitivity to installation cost variation: 150,000 to 250,000
2.Sensitivity to revenue variation: 45,000 to 75,000
3.Sensitivity to life variation: 4 year to 7 year
4.Plot the above result on graphs (each analysis should have its own graph).
Microsoft Excel
In: Finance
On October 1, 2018, Farmer Fabrication issued stock options for
200,000 shares to a division manager. The options have an estimated
fair value of $6 each. To provide additional incentive for
managerial achievement, the options are not exercisable unless
divisional revenue increases by 2% in four years. Suppose that
Farmer initially estimates that it is not probable the
goal will be achieved, but then after one year, Farmer estimates
that it is probable that divisional revenue will increase by 2% by
the end of 2020.
Required:
1. What is the revised estimate of the total
compensation?
2. What action will be taken to account for the
options in 2019?
3. Prepare the journal entries to record
compensation expense in 2019 and 2020.
In: Accounting
Data taken from the accounting records of Sherri’s Designs on December 31 are shown.
| Operating expenses | $1,000 |
| Sales revenue | 5,000 |
| Inventory, Jan. 1, 2019 | 1,600 |
| Purchases | 1,200 |
| Interest revenue | 250 |
| Loss on disposal of a discontinued component of the business (pre-tax) | 400 |
| Inventory, Dec. 31, 2019 | 750 |
| Income tax expense | 660 |
Sherri’s Designs has 2,000 shares of common stock outstanding and net income per share for 2019 was $0.63. The income tax rate is 30%.
Required:
| a. | Prepare a single-step income statement. |
| b. | Prepare a multiple-step income statement. |
In: Accounting
Information related to various financial statement elements is provided for three cases:
Case A Tax expense was $341,400. The deferred tax liability had an opening balance of $92,000 and a closing balance of $103,000. Income tax payable declined by $22,400 during the year.
Case B Interest expense was $174,000. Discount amortization was $10,000 during the year. Interest payable had an opening balance of $11,000 and a closing balance of $13,400.
Case C Interest revenue was $87,000. Interest receivable had an opening balance of $14,400 and a closing balance of $8,200.
Required:
For each case, calculate the cash inflow or outflow related to the revenue or expense.
In: Accounting
The output of a bakery depends on the number of bakers employed. The bakery sells its good in a competitive product market at a price of P = $2. The daily wage of bakers is W = $50.
a) Fill in all of the blanks in the table below. Show all of your work! (Hint: notice that the number of bakers increases by increments of 2.)
|
Bakers |
Output (units per day) |
Marginal Product |
Total Revenue |
Marginal Revenue Product |
Value of Marginal Product |
|
0 |
0 |
||||
|
2 |
60 |
||||
|
4 |
110 |
||||
|
6 |
150 |
||||
|
8 |
180 |
b) How many workers should the bakery employ? Explain your answer.
In: Economics
In: Economics
A dairy farm faces a perfectly competitive market. It sells milk at $6 per liter. Complete the table below to answer the following questions.
|
Quantity of output (liter) |
Total revenue |
Marginal revenue |
Total cost |
Marginal cost |
ATC |
VC |
AVC |
|
0 |
3 |
||||||
|
1 |
5 |
||||||
|
2 |
8 |
||||||
|
3 |
12 |
||||||
|
4 |
17 |
||||||
|
5 |
23 |
||||||
|
6 |
30 |
||||||
|
7 |
38 |
||||||
|
8 |
47 |
a) Find the quantity of output that maximizes the profit for the firm. Also calculate the profit at that level.
b) Find out the break-even quantity for the firm.
c) Find out the shutdown point for the firm.
In: Economics
China is a major producer of grains, such as wheat, corn, and rice. In 2008 the Chinese government, concerned that grain exports were driving up food prices for domestic consumers, imposed a tax on grain exports. a- Draw the graph that describes the market for grain in China. Use this graph as the starting point to answer the following questions. b- How does an export tax affect domestic grain prices in China? c- How does it affect the welfare of Chinese’ consumers, the welfare of Chinese’ producers, and government revenue? d- What happens to total welfare in China, as measured by the sum of consumer surplus, producer surplus, and tax revenue?
In: Economics