A large transportation company must buy 100,000 gallons of gas each quarter. The company is concerned about the possibility of conflict with Iran. The company believes that there is 70% chance of a conflict, in which case it believes that the spot price (i.e. the current price) of gasoline will rise to $3.50 per gallon. If there is no conflict, the company believes that the price will fall to $2.50 per gallon. A large transportation company must buy 100,000 gallons of gas each quarter. The company is concerned about the possibility of conflict with Iran. The company believes that there is 70% chance of a conflict, in which case it believes that the spot price (i.e. the current price) of gasoline will rise to $3.50 per gallon. If there is no conflict, the company believes that the price will fall to $2.50 per gallon.

If the company buys gas futures, which lock in the price of gasoline at $3.25 per gallon, what will be the expected cost of buying 100,000 gallons of gas? (Enter an integer) (Note: there is no cost to entering into a gas futures contract except that the company will be obligated to buy 100,000 gallons at $3.25 per gallon if it enters into the contract.)

Suppose Professor Stahnke has a second job working as a consultant trying to forecast the political situation in the Middle East. Assume that based on his research, Professor Stahnke will predict whether or not there will be a conflict with Iran with 100% accuracy. Professor Stahnke is offering his forecasting services for the modest price of $15,000. If the transportation company bought Professor Stahnke's forecast, what will be the expected cost of buying 100,000 gallons of oil next quarter (including the cost of the forecast)?

What is the most the company would be willing to pay Professor Stahnke? (Enter an integer)

Question 2: Input price and input efficiency variances

The budgeted and actual data for direct materials and labor are as follows:

Actual sales volume is 100 units. Budgeted sales volume is 80 units.

a) Without computations, characterize the following variances as favorable or unfavorable:
input price variance for DM F U

input efficiency variance for DM F U

input price variance for DL F U

input efficiency variance for DL F U


b) Compute the input price and input efficiency variances for DM and DL.
As a preliminary step, compute actual input quantity (total pounds or hours we actually used) and flexible budget input quantity (total pounds or hours we should have used for actual output):
    actual input quantity for DM =  pounds
    flexible budget input quantity for DM =  pounds
    actual input quantity for DL =  hours
    flexible budget input quantity for DL =  hours
Next, compute the variances. Enter favorable variances as a positive number and unfavorable variances as a negative number. Do NOT enter F or U.
    input price variance for DM = $
    input efficiency variance for DM = $
    input price variance for DL = $
    input efficiency variance for DL = $

First Cup Ltd., a Canadian coffee retailer and roaster which operates more than 1,000 cafes in Canada, reported the following balances as at December 31, 2020:

7% Par $100 convertible bonds, issued at par $250,000

      3,000 call options, each entitled to purchase 1 common shar

Cumulative Preferred shares, 36,000 convertible shares outstanding    $960,000

Common shares, 112,500 shares issued and outstanding $2,880,000

Contributed surplus on repurchase of common shares $31,200

Retained earnings $1,032,000

First Cup Ltd. applies IFRS. The company also informed you details related to the following transactions during 2020:

a]   On February 1, the company declared and distributed a 20% stock dividend for its common shareholders. The shares were being traded in the market at $30.

b]   On March 1, it acquired 18,000 of its own common shares in the market at $30.00 per share and retired them on the same day.

c]   On April 1, the company issued 17,500 common shares in exchange for plant and equipment assessed at $336,000.

d]   On May 1, 40% of the call option holders exercised their options when the market price of the common share was $31. As these options were issued before stock dividends, options holders receive an increased number of shares considering a 20% stock dividends (i.e. adjust for stock dividend).

e]   On May 15, the company declared a 3:1 stock split on common shares. The common shares were being traded at the adjusted market price of $32.00 per share

f]   On August 1, the company issued share certificates for 3,708 common shares to subscribers who had applied to an earlier share subscription issue. These subscribers had paid for the shares they had subscribed at $34 per share.

g]   On October 1, 20% of the bond holders submitted their bonds to the company for conversion into common shares. As the bonds were issued before stock dividends and stock split, the number of shares given to reward conversion need to be adjusted consequently.

h]   No Dividends have been declared in the previous two years. Dividends for the current year were also not declared.

Additional Information

i]    The cumulative preferred shares had been issued several years ago when the company was incorporated. Cumulative preferred shares carried a dividend rate of $2.10 per share and as at January 1, 2020, one preferred share could be converted into two common shares.

ii] The company reported earnings from operations of $1,847,790 for 2020. There were no discontinued items to report in 2020.

iii] The bonds had been issued at par in 2017. Assume No premium was charged for the conversion rights and debt was credited for the full amount received. Each $100 bond was convertible into 8 common shares.

Required:

Determine the weighted average number of shares for determining the basic earnings per share for 2020 using this template

John Ranton, president and founder of Running Mate, could hardly contain his excitement over the operating results for his company's second year of operations. Running Mate is an online retailer of a GPS running watch that records distance, time, speed, heart rate, and a number of other statistics. Ranton's company does not manufacture the watches, but instead purchases them directly from the manufacturer based in China and resells them through its online shopping site.

During the first two years of operation, Ranton decided to hold the selling price of the watch constant at $100 per unit in an effort to attract business. He was also able to negotiate a deal with the supplier to hold Running Mates cost per watch constant at $80 per unit for the two years.

Operating expenses for each of the first two years of operation consist only of advertising expenses and the salaries paid to the website designer/administrator and the company's book keeper. Because Ranton is busy with his numerous other business ventures, the bookkeeper also looks after the day-to-day operations of Running Mate and has sole signing authority to make expenditures on the company's behalf. To motivate his website designer to create a web site that is easy to use and appealing to customers, Ranton decided to pay her a commission equal to 1% of annual sales in both 2015 and 2016. The salaries paid to the website administra tor and the bookkeeper were the same in both years and totalled $92,000. Annual advertising expenses of $8,000 were also the same in both years.

After reviewing the operating results for 2015 (shown below). Ranton roughly calculated the expected sales and expenses for 2016 based on anticipated sales of 10.000 watches at a price of $100 per unit and a cost of $80 per unit. He calculated expected operating expenses in 2016 based on the 2015 cost per unit of $13.75 ($ 1100008000 Based on his calculations (shown below). Ranton expected a 25% improvement in 2016 operating income, in keeping with the increase in unit sales. So, when Running Mate's bookkeeper provided Ranton with the actual results shown below for 2016, he was thrilled. Operating income had improved 50% compared to 2015 on sales growth of 25%.

Sales (units)..

Sales.....

Cost of goods sold.......

Gross margin.

Operating expenses............

Operating income..................................................

2015

8,000 $800.000 640,000

160000 $

50.000

2016

Expected

10,000 $1,000.000 800.000 200.000 137,500 $ 62,500

Actual

10.000 $1.000.000 800.000 125,000 $ 75,000

Ranton has always been an entrepreneur at heart but has no formal training in financial accounting or management accounting. He has always had the bookkeeper prepare annual financial statements.

Required:

1.

2.

Explain the nature of the error made by Ranton when calculating expected operating income for 2016.

Based on the information provided in the case, recalculate the expected results for 2016.

For Ranton's benefit. provide details on the specific items included in operating expenses (advertising, salaries, and commissions). Based on your calculations of the expected results for 2016, are the actual results for 2016 as good as Ranton originally thought? Explain.

As the Apple Watch team planned for their US launch for the first quarter of 2015, an estimated monthly demand function for the US market was derived as shown in Figure 1:

Q_AW =-150,000 -2400P_AW +1520P_GearS +1200P_Pebble -1200P_iPhone6 +44A

Where Q_AW is the quantity demanded of the Apple Watch per month, P_AWis the price of the Apple Watch (dollars per unit), P_GearS is the price of the Samsung Gear S watch (dollars per unit), P_Pebble is the price of the Pebble Steel (dollars per unit), P_iPhone6 is the price of the mid-range iPhone 6 smartphone (dollars per unit), A is the quarterly targeted advertising budget for the Apple Watch (in thousands of Dollars per quarter). The estimated values are:P_AW = $349, P_GearS = $380, P_Pebble = $220, P_iPhone6 = $299, A = $15,500 . Calculate the following.

1. Calculate the Monthly estimated Quantity demanded for Apple Watch Q_AW
2. Use the relevant information from the estimated monthly demand function to calculate the elasticity values for each of the explanatory variables and interpret what the numbers mean.
3. Construct the Demand equation, Inverse Demand Equation
4. If the Marginal cost is assumed to be constant at $178, calculate and compare the Profit Maximizing Price and Quantity with the Revenue Maximizing Price and Quantity. Comment on your findings.

Products that are distributed in as many places as possible are most likely:

Group of answer choices

convenience offerings

shopping offerings

specialty offerings

expensive offerings

2.

If a service business is stuggling to reduce the delivery gap, two good strategies are empowering employees and __________.

Group of answer choices

variability analysis

path analysis

using technology

zone of tolerance analysis

public relations

3.

A popular department store wants customers to think they are getting a good deal. They set an artificially high "regular price" to make the "sale price" appear low. They are unethically attempting to influence consumers' __________ perceptions.

Group of answer choices

leader price

fixed price

cost-based price

reference price

4.

When a company introduces a new product, they want to first target innovators and early adopters because they tend to be:

Group of answer choices

scattered across all demographics.

outside their target market.

opinion leaders.

fond of prototypes.

alpha testing enthusiasts.

5.

Chevrolet (a brand known for cars and trucks) might decide to start making Chevrolet ventilators as a new product line. This would be considered:

Group of answer choices

a brand extension

a line extension

a depth addition

a no-risk strategy

3. Suppose you are the manager of an airline company. As a recent MBA graduate, you decided to use all the knowledge you have acquired to improve the firm’s pricing decisions. To begin with, you search for a market survey company to find out the demand curve for flights. The market survey company sent you back a report stating that there are two distinct segments of consumers - tourists and business travelers – and that their demand curves are given by the following equations:

Market Demand for Tourists: Q = 500 – 2P + 2I

Market Demand for Business Travelers: Q = 1000 – P + I

Where Q is the quantity demanded (in thousands of tickets), P is the price for a ticket, and I is the median income of each segment of consumers.

Currently, the price for tourists is $200 and the price for business travelers is $500. Moreover, the median income of tourists is $50 and the median income of business travelers is $100.

a) Using the point slope elasticity formula, what is the price elasticity of demand for airline tickets at the current price and income level for each group of consumer? Hint: to answer this question you will need to accurately determine the slope of the two demand curves given the level of income for each group and find the quantity each group demands at the current price for the group given the income that each group has.

b) Based on your result in (a), do you think you should raise or lower the price paid by tourists? What about the price paid by business travelers?

c) To verify your answer in (b), set a new price for tourists that is $50 higher or lower than the original price of $200 and a new price for business travelers that is $50 higher or lower than the original price of $500. Make your determination of whether to raise or lower the price based on your answers in (b). Relative to the revenue accrued in each market segment with the original prices, what happens to the revenue accrued by the airline in each market segment with the new prices? Hint: If the revenue does not increase then you need to redo this problem by moving the price in the opposite direction!

d) Using the two-point elasticity formula (the arc elasticity formula), what is the price elasticity of demand when you go from the original price to the new price? In doing this problem hold income constant.

Suppose that two concurrent changes occur in each of the following markets. In each case, indicate what will happen to the price and quantity traded as a result.

Changes affecting demand

1. Incomes decrease.

2. The price of a substitute product increases.

3. The price of a complementary product increases.

4. Population increases.

5. Buyers expect the price to fall in the future.

Changes affecting supply

A. The price of inputs (resources) falls.

B. The price of a substitution in production increases.

C. Technological improvement occurs.

D. The number of suppliers decreases.

E. Sellers expect the price to fall in the future.

a) Assume that changes 1 and E occur, and the market is for an inferior product.

Equilibrium price:  (Click to select)  indeterminate  increase  decrease  no change

Equilibrium quantity:  (Click to select)  increase  decrease  indeterminate  no change

b) Assume that changes 2 and B occur, and the market is for a normal product.

Equilibrium price:  (Click to select)  decrease  increase  indeterminate  no change

Equilibrium quantity:  (Click to select)  increase  indeterminate  decrease  no change

c) Assume that changes 3 and E occur, and the market is for a normal product.

Equilibrium price:  (Click to select)  increase  indeterminate  decrease  no change

Equilibrium quantity:  (Click to select)  increase  indeterminate  decrease  no change

d) Assume that changes 5 and C occur, and the market is for a normal product.

Equilibrium price:  (Click to select)  decrease  increase  indeterminate  no change

Equilibrium quantity:  (Click to select)  increase  decrease  indeterminate  no change

Question 2:

a. If price elasticity of demand is -0.5 and price decreases by 2 percent, quantity demanded will   (Click to select)  decreases  increases  by  (Click to select)  > 2 percent  −2 percent  < 2 percent  .

b. If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded will  (Click to select)  increases  decreases  by  (Click to select)  −2 percent  > 2 percent  < 2 percent  .

Question 3.

Refer to the demand schedule below:

Price increases from $30 to $40.

Demand is  (Click to select)  unit-elastic  elastic  inelastic  , and total revenue  (Click to select)  increases  stays the same  decreases  .

Give the Circular 230 position for three of the following situations that are sometimes encountered in the tax profession: Taking an aggressive pro-taxpayer position on a tax return. Not having a quality review process for a return completed by a partner of the tax firm. Purposely delaying compliance with a document request received from the IRS. Not keeping up with changes in the tax law. Charging $1,500 to complete a Form 1040-EZ. When representing a taxpayer in a Federal income tax audit, charging a fee equal to one-third of the reduction of the tax proposed by the IRS agent. Representing both the husband and wife as to tax matters when negotiating their divorce. Advertising on the Web for new tax clients and including Se habla español in the text of the ads. Respond to at least two of your classmates’ posts. Be sure to include a comparison of the conclusions reached in your analysis versus those reached in your initial response (to the extent that the topics chosen by your classmate were similar).