Marginal Incorporated (MI) has determined that its before-tax cost of debt is 10.0%. Its cost of preferred stock is 11.0%. Its cost of internal equity is 14.0%, and its cost of external equity is 18.0%. Currently, the firm's capital structure has $470 million of debt, $150 million of preferred stock, and $380 million of common equity. The firm's marginal tax rate is 25%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $92 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $358 million?

The firm I Love Cost Accounting, Co. provides cost accounting tutoring as well as CMA test prep classes. Cost accounting tutoring brings in $1,200,000 in revenue. CMA test prep classes bring in $4,000,000 in revenue.

Cost accounting tutoring costs the firm $2,100,000, and CMA test prep classes cost the firm $2,750,000.

If the firm drops cost accounting tutoring, then revenue for CMA test prep classes will decrease by 20%. And if the firm drops cost accounting tutoring, it cannot avoid $70,000 of the cost of providing cost accounting tutoring.

14.
Consider a monopoly facing the following demand, marginal revenue, total cost, and marginal cost curves:

Demand curve: P = 12 – 0.002 Q

Marginal revenue curve: MR = 12 – 0.004 Q

• Total cost curve: TC = 3Q +0.0005Q²

Marginal cost curve: MC = 3 + 0.001 Q

a. Calculate the profit maximizing output of this monopoly. Briefly explain your answer.

b. What is the socially efficient output level? Briefly explain your answer.

c. Suppose the government wants to adopt a price ceiling to induce this monopoly to produce at the socially efficient output level. Briefly explain what the level of this price ceiling should be and what will be the economic profit of this monopoly under this price ceiling.

Income Statement

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cost

On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Cairle’s selling and administrative expenses for August were $1,300. Assume that Cairle prices its jobs at cost plus 25 percent.

Required:

Prepare an income statement for Cairle Company for August.

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The following equations describe a firm’s demand, marginal revenue, total cost, & marginal cost:

Demand: P = 1,000 – 10Q

Total Cost: TC = 500 + 10Q + Q^2

Marginal Revenue: MR = 1,000 – 20Q

Marginal Cost: MC = 10 + 2Q

a. What level of output should be produced to maximize profits?

b. What is the market price?

c. How much profit will be earned?

d. The firm sells cereal and competes with other firms selling slightly differentiated cereal products. What type of market is this firm operating in?

The following equations describe a firm’s total cost and marginal cost:

Total Cost: TC = 500 + 10Q + Q^2

Marginal Cost: MC = 10 + 2Q

e. If the firm is a price taker and other firms in the industry sell output at a price of $100, what price should the manager of this firm put on the product?

f. What level of output should be produced to maximize profits?

g. How much profit will be earned?

h. The firm sells orange juice, which is a perfect substitute, at a farmers market. What type of market is this firm operating in?

What are the four purposes of cost allocation?

Why should budgeted cost rates, rather than actual cost rates, be used for allocating the variable costs of service departments?

In April 2016 a pound of apples cost $1.54, while oranges cost $1.18. Three years earlier the price of apples was only $1.33 a pound and that of oranges was $1.04 a pound. a. What was the annual compound rate of growth in the price of apples? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

a. What was the annual compound rate of growth in the price of apples? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Compound annual growth rate___________% per year

b. What was the annual compound rate of growth in the price of oranges? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Compound annual growth rate___________% per year

c. If the same rates of growth persist in the future, what will be the price of apples in 2030? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price____________

d. What about the price of oranges? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price __________

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