Record companies prioritise their new releases of music each by the senior management deciding on which new releases should receive priority in marketing to radio stations and music stores. Here the musician might be considered a ‘principal’ who uses the services of the record company, the ‘agent’, to produce and market their sound recording. Does the description of the prioritising of new releases suggest that an incentive problem may arise between the principal and agent? Evaluate and comment upon the following types of contracts from the musician’s perspective. The record company receives a fixed amount of total revenue. The record company receives a fixed amount of total revenue plus payment for the costs of advertising. The record company receives a proportion of the total profits.

The market demand for a particular good in city A is given by QA = 32 − 0.5PA (for PA ≤ 64). This market is served by a single firm (monopoly) whose marginal cost of production is 4 dollars per unit (so total cost of producing Q units is 4Q). (a) Find the equation for the firm’s marginal revenue function. Graph the demand, marginal cost, and marginal revenue curves on one graph. (b) What are the profit-maximizing price and quantity for the monopolist? What is the profit margin (price minus marginal cost, divided by the price) of the monopoly? (c) Calculate the total monopoly profit in city A. (d) What is consumer surplus in this market? How large is the deadweight loss resulting from monopoly pricing?

Excluding the case when the government decides to create a legally-enforced monopoly, which answer below describes the condition under which a monopoly is likely to emerge through the growth of a single firm outcompeting its smaller rivals?
a. When the market demand curve intersects with a downward sloping region of a single firm’s average total cost curve.
b. When the market demand curve intersects with an upward sloping region of a single firm’s average total cost curve.
c. When a single firm’s marginal revenue curve intersects with that firm’s marginal cost curve.
d. When a single firm’s marginal revenue curve intersects with that firm’s average cost curve.

Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of $165,500 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $75,000, with associated expenses of $25,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience’s tax rate is 40 percent. (Hint: The $165,500 advertising cost is an expense.)

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

1. Compute the payback period for the advertising program.

2. Calculate the advertising program’s net present value, assuming an after-tax hurdle rate of 10 percent.

The following equations represent a firm in a monopolistically competitive market.

Demand: Qd= 32 - P

Marginal revenue: MR = 32 -2Q

Total Cost: TC = 100 + Q^2

Marginal Cost: MC=2Q

1. Will this firm in a monopolistically competitive market continue to earn these profits in the long run? Briefly explain why or why not.

2. Sketch (no need for the sketch to be to scale) a graph that includes that includes the following curves in the appropriate relation to each other: - the firms demand curve - the firms marginal revenue curve - the firms marginal cost curve - the firms average total cost curve (Label the profit maximizing price, quantity produced, and area of profits if non-zero.)

Excluding the case when the government decides to create a legally-enforced monopoly, which answer below describes the condition under which a monopoly is likely to emerge through the growth of a single firm outcompeting its smaller rivals? a. When the market demand curve intersects with a downward sloping region of a single firm’s average total cost curve. b. When the market demand curve intersects with an upward sloping region of a single firm’s average total cost curve. c. When a single firm’s marginal revenue curve intersects with that firm’s marginal cost curve. d. When a single firm’s marginal revenue curve intersects with that firm’s average cost curve.

The following is a partial trial balance for General Lighting Corporation as of December 31, 2021: Account Title Debits Credits Sales revenue 3,100,000 Interest revenue 95,000 Loss on sale of investments 30,000 Cost of goods sold 1,340,000 Loss on inventory write-down (obsolescence) 350,000 Selling expense 450,000 General and administrative expense 225,000 Interest expense 94,000 There were 300,000 shares of common stock outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25%. Required: Prepare a single-step income statement for 2021, including EPS disclosures. Prepare a multiple-step income statement for 2021, including EPS disclosures.

Use the information below to answer the following questions.

The demand and supply curves facing a company producing a brand of coconut juice, orange Juice, are respectively given as follows:Qd =50-5PQs=2+3P.The company is contemplating to increase the price of the orange juice as a measure to raise more revenue to support a planned expansion programme.

Questions
i.What is the equilibrium price and quantity for the orange Juice?
ii. What is the price elasticity of
demand for the orange Juice?
iii. As the marketing director of the company do you consider the intended increase in price of orange Juice advisable? Explain your choice.
iv. How best can the company achieve its objective of raising more revenue?

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Question 1

1. An increase in a liability is done by a………….                                             (2.5 marks)
2. An increase in an asset account is done by a……                                        (2.5 marks)
3. A decrease in liability is done by a………                                                      (2 .5marks)
4. A decrease in an asset is done by a………                                                   (2.5 marks)
5. An increase in revenue is done by a……                                                      (2 .5marks)
6. If you receive a telephone bill, is your expense increasing or decreasing?   (2.5 marks)
7. If you pay salaries, is your expense increasing or decreasing?                        (2.5 marks)
8. If you purchase a motor vehicle, is your asset value increasing or decreasing? (2.5 marks)
9. If you take out a bank loan is your liability increasing or decreasing?                (2.5marks)
10. If you refund fees paid by a customer is your revenue increasing or decreasing? (2.5 marks)

(Total 25 marks)

The adjusted trial balance of CHO company appears below. Using the information from the adjusted trial balance, you are to prepare for the month ending December 31, a statement of financial position.

CHO company

Adjusted Trial Balance

December 31, 2018

                                                                                                                    Debit         Credit

Cash .................................................................................................. SAR 4,400

Accounts Receivable.........................................................................          2,200

Office Supplies..................................................................................          1,800

Office Equipment..............................................................................        15,000

Accumulated Depreciation—Office Equipment...............................                        SAR 4,000

Accounts Payable..............................................................................                       3,800

Unearned Revenue............................................................................                       5,000

Share Capital–Ordinary.....................................................................                     10,000

Retained Earnings..............................................................................                       4,400

Dividends .........................................................................................          2,500

Service Revenue................................................................................                       3,700

Office Supplies Expense...................................................................             600

Depreciation Expense........................................................................          2,500

Rent Expense.....................................................................................          1,900 ______

                                                                                                                      30,900             30,900