Suppose in the short run, the firm can adjust the amount of labor L, and the amount of capital, K*, is fixed. The production function is ?(?, ?) = ?1/3? 1/3 . The price of output is p, the rent of capital is r, and the wage of labor is w.

a. Write down the profit of the firm in terms of K*, L, p, r, and w.

b. Suppose now ? ∗ = 125, ? = 27, ? = 2, and ? = 5. Write down the isoprofit equation when the profit is 0. (Hint: the quantity of output q, is a function of labor L)

c. ? ∗ = 125, ? = 27, ? = 2, and ? = 5. The firm is trying to maximize the profit in short run. Write down the first order condition and find how much labor the firm would like to hire.

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On May 27, Let Loose Inc. reacquired 79,000 shares of its common stock at $10 per share. On August 3, Let Loose sold 54,000 of the reacquired shares at $13 per share. On November 14, Let Loose sold the remaining shares at $8 per share.

Journalize the transactions of May 27, August 3, and November 14. If an amount box does not require an entry, leave it blank.

May 27Treasury Stock

Cash

Aug. 3Cash

Treasury Stock

Paid-In Capital from Sale of Treasury Stock

Nov. 14Cash

Paid-In Capital from Sale of Treasury Stock

Treasury Stock

Parker Products manufactures a variety of household products. The company is considering introducing a new detergent. The company’s CFO has collected the following information about the proposed product.

 The project has an anticipated economic life of 4 years.  The company will have to purchase a new machine to produce the detergent. The machine has an up-front cost (t = 0) of $2 million. The machine will be depreciated on a straight-line basis over 4 years. The company anticipates that the machine will last for four years, and that after four years, its salvage value will equal zero.  If the company goes ahead with the proposed product, it will have an effect on the company’s net operating working capital. At the outset, t = 0, inventory will increase by $140,000 and accounts payable will increase by $40,000. At t = 4, the net operating working capital will be recovered after the project is completed.  The detergent is expected to generate sales revenue of $1 million the first year (t = 1), $2 million the second year (t = 2), $2 million the third year (t = 3), and $1 million the final year (t = 4). Each year the operating costs (not including depreciation) are expected to equal 50 percent of sales revenue.  The project will not increase fixed costs of the company.  The company’s overall WACC is 10 percent. However, the proposed project is riskier than the average project for Parker; the project’s WACC is estimated to be 12 percent.  The company’s tax rate is 40 percent

Please calculate NPV and IRR of the proposed project and help the company decide whether the company should accept it or not?

Staub Company began operations when it acquired $135,000 cash from the issue of common stock on January 1, 2013.

The cash acquired was immediately used to purchase equipment for $135,000

that had a $27,000 salvage value and an expected useful life of four years. The equipment was
used to produce the following revenue stream (assume all revenue transactions are for cash). At the

beginning of the fifth year, the equipment was sold for $13,500 cash.
Staub Company uses straight-line depreciation. Asssume depreciation is the only expense to record.

2013 2014 2015 2016 2017 Revenue $ 25,200 $ 27,600 $ 28,800 $ 23,400 0

REQUIRED

Prepare income statements, balance sheets, and statements of cash flows for each of the five years.

A social psychologist is interested in how optimism is related to life satisfaction. A sample of individuals categorized as optimistic were asked about past, present, and projected future satisfaction with their lives. Higher scores on the life satisfaction measure indicate more satisfaction. Below are the data. What can the psychologist conclude with α = 0.05?

a) What is the appropriate test statistic?
(na, one-way ANOVA ,within-subjects ANOVA, two-way ANOVA)  

b) Compute the appropriate test statistic(s) to make a decision about H₀.
critical value =   ; test statistic =   
Decision: ( Reject H0 or Fail to reject H0  )

c) Compute the corresponding effect size(s) and indicate magnitude(s).
η² =   ;  -(na, trivial effect ,small effect, medium effect, large effect)  


e) Conduct Tukey's Post Hoc Test for the following comparisons:
1 vs. 2: difference =   
1 vs. 3: difference =   

f) Conduct Scheffe's Post Hoc Test for the following comparisons:
1 vs. 3: test statistic =    
2 vs. 3: test statistic =   

1.Marginal profit is equal to marginal revenue plus marginal cost.

True or false

Spacely Sprockets' short-run cost curve is C(q,K)=25q2K+15KC(q,K)=25q2K+15K, where q is the number of Sprockets produced and K is the number of robot hours Spacely hires. Currently, Spacely 2.hires 10 robot hours per period. The short-run marginal cost curve is MC(q,K)=50qKMC(q,K)=50qK. If Spacely receives $250 for every sprocket he produces, his profit maximizing output level is 50.

True or False

3.Consider a competitive market in which the market demand for the product is expressed as P = 75 - 1.5Q, and the supply of the product is expressed as P = 25 + 0.5Q. Price, P, is in dollars per unit sold, and Q represents the rate of production and sales in hundreds of units per day. The typical firm in this market has a marginal cost of MC=2.5+10qMC=2.5+10q.

In this case, the typical firm will maximize its profit at the point where MC = P =

True or False

4. Revenue is equal to price times quantity.

True or false

5. The table below lists the short-run costs for One Guy's Pizza. If One Guy's can sell all the output it produces for $12 per unit, One Guy's should produce 58 pizzas to maximize profits.

True or false

6. Producer surplus in a perfectly competitive industry is the difference between revenue and variable cost. True or false

7. he following table contains information for a price-taking competitive firm. The maximum profit is $13.

True or false

8. Average total cost for the firm in the following table is U-shaped.

True or false

9. Consider the following diagram, where a perfectly competitive firm faces a price of $40. At the profit-maximizing level of output, total revenue is $2,400.

True or false

Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

Foundational 12-5

5. Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 30,000 additional Alphas for a price of $160 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 14,000 units.

a. What is the financial advantage (disadvantage) of accepting the new customer’s order?

b. Based on your calculations above should the special order be accepted?

8. Assume that Cane normally produces and sells 80,000 Betas and 100,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 13,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume that Cane expects to produce and sell 100,000 Alphas during the current year. A supplier has offered to manufacture and deliver 100,000 Alphas to Cane for a price of $160 per unit. What is the financial advantage (disadvantage) of buying 100,000 units from the supplier instead of making those units?

10. Assume that Cane expects to produce and sell 75,000 Alphas during the current year. A supplier has offered to manufacture and deliver 75,000 Alphas to Cane for a price of $160 per unit. What is the financial advantage (disadvantage) of buying 75,000 units from the supplier instead of making those units?

Foundational 12-12

What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.)

13. Assume that Cane’s customers would buy a maximum of 100,000 units of Alpha and 80,000 units of Beta. Also assume that the company’s raw material available for production is limited to 261,000 pounds. How many units of each product should Cane produce to maximize its profits?

14. Assume that Cane’s customers would buy a maximum of 100,000 units of Alpha and 80,000 units of Beta. Also assume that the company’s raw material available for production is limited to 261,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials?

15. Assume that Cane’s customers would buy a maximum of 100,000 units of Alpha and 80,000 units of Beta. Also assume that the company’s raw material available for production is limited to 261,000 pounds. If Cane uses its 261,000 pounds of raw materials, up to how much should it be willing to pay per pound for additional raw materials? (Round your answer to 2 decimal places.)

Sweater Co offers its customers the right to return any products purchased up to 30 days after the sale, for any reason. Last Tuesday, Sweater Co sold 100 red sweaters to different customers. Based on historical experience, Sweater Co expects 15 of those sweaters to be returned for a full refund. Each sweater sells for $80 and costs the company $35 to produce. What entries should be made?

1. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000

1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024.

2. It is estimated that the litigation liability will be paid in 2024.

3. Rent revenue will be recognized during the last year of the lease, 2024.

4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024.

(a)   Prepare a schedule of future taxable and (deductible) amounts.

(b)   Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

1. An error in the physical count of goods on hand at the end of the current period resulted in a $2,500 overstatement of the ending inventory. The effect of this error in the current period is to:

a) overstate cost of goods sold

b) understate cost of goods available for sale.

c) understate gross profit.

d) overstate net income.

e) understate ending retained earnings.

2. Under the equity method of accounting for investments in common stock, when a dividend is received from the investee company:

a) the Dividend Revenue account is credited.

b) the Investments account is increased.

c) no entry is necessary.

d) the Dividend Revenue account is debited.

e) the Investments account is decreased.

3. A purchase of common stock of Ajax Corporation for $14,000 was sold three months later for $15,000. The entry to record the sale would include a:

a) debit to Cash of $14,000.

b) credit to Gain on Sale of Investments of $1,000.

c) credit to Investments of $15,000.

d) credit to Interest Revenue of $1,000.

e) debit to Gain on Sale of Investments of $1,000.