Sales and Production Budgets

Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for $10. Projected sales of the two models for the coming four quarters are given below.

The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter’s sales for deluxes and 10 percent of next quarter’s sales for standards.

Required:

1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.

2. Prepare a separate production budget for each product for each of the first three quarters of the year.

Production budget for deluxes:

Production budget for standards:

Sales and Production Budgets

Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for $10. Projected sales of the two models for the coming four quarters are given below.

The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter’s sales for deluxes and 10 percent of next quarter’s sales for standards.

Required:

1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.

2. Prepare a separate production budget for each product for each of the first three quarters of the year.

Production budget for deluxes:

Production budget for standards:

Please refer to Individual Problem 20-5 in Chapter 20. If the client pays the cost for Form A for all forms processed, what is the average gain or loss earned across all forms processed? A. Lose $0.10 per form B. Break even C. Gain $0.10 per form D. Gain $0.15 per form

Which of the following actions can be an example of a signal designed to reduce the impact of asymmetric information? A. A money-back guarantee B. Students pursue graduate training C. Students take an unpaid internship D. All of the above

In a situation subject to asymmetric information, which party should use the screening techniques? A. Less informed party B. More informed party C. We do not have enough information to answer this question D. Neither party should use screens

Which of the following statements is NOT true? A. Oral auctions are also second-price auctions B. English auctions are also known as oral auctions C. Common value auctions are subject to the winners curse D. The outcomes from Vickrey auctions are identical to first-price sealed bid auctions

Which type of randomness can be fully described by a probability distribution? A. Risk B. Uncertainty C. Both of the above D. None of the above

Please refer to the two-player simultaneous game in Multiple Choice question 3 in Chapter 16. How many pure strategy Nash equilibria does this game have? A. 0 B. 1 C. 2 D. 3

Please refer to the game associated with Multiple Choice question 8 in Chapter 15. If the low price / low price payoffs for both players are 30 (instead of 0), is this game a prisoners' dilemma? A. No B. Yes

Which of the following statements is true? A. Players take actions that maximize their joint profits under a Nash equilibrium B. There may be no unique Nash equilibrium to a two-player simultaneous game. C. One of the players must have a first-mover advantage in a two-player sequential game D. Nash equilibria are only defined for repeated games Metering is a type of direct price discrimination. True False

Which of the following claims is NOT true? A. Bundling is profitable if the willingness to pay for the bundle is more homogeneous than the willingness to pay for the bundle components B. Volume discounts are not a form of price discrimination C. If arbitrage between customers is possible, the seller should offer uniform prices D. Price discrimination is feasible if the costs of arbitrage exceed the difference in prices charged to the different customers

In general, women's clothing items (e.g., running shoes) have higher prices than comparable products designed for men due to price discrimination. How do the clothing sellers prevent resale in these markets? A. Price discrimination is not possible in clothing markets B. State consumer protection laws prohibit selling goods intended for one group to members of the other group C. The clothing products are differentiated by styling or design features D. The retailers are prohibited from selling products intended for one group to members of the other group

The remaining consumer surplus is zero under a successful first-degree price discrimination scheme. True False

Suppose the marginal cost to produce Apple iPhones is $400 per phone. Initially, the elasticity of demand for the iPhone is -2 when the product has no close substitutes. As other smart phones enter the market place, the elasticity of demand for iPhones changes to -3. If Apple is setting prices to maximize profits, how much should the iPhone price decline in response to the entry by competing phones? A. $200 B. $300 C. $400 D. $600

An 80Ibs dog presents to the clinic with a 4 day history of vomiting and diarrhea. The Dr. wishes to correct his dehydration over the next 12 hours. The Dr. assesses his dehydration at 10%. a. The Dr wants his dehydration corrected in the first 12 hours. Use a maintenance rate of 100 ml/kg/day. What are his requirements for the first 12 hours?

b. What is his rate in ml/hr? What is the drip rate using a 15 gtt/ml drip set for the first 12 hours (gtt/s)?

c. The dog now needs a CRI of metoclopramide at a rate of 2 mg/kg/day. Use your rate from part b. He has 500 ml left in the bag. How much metoclopramide do we need to add to the bag (in mg)? How many ml would this be if the drug concentration is 5mg/ml?

d. You are continuing to monitor him and within the first two hours he continues to vomit and have diarrhea. The estimated loss is 50 mls. What will his hourly rate be with these ongoing losses (ml/hr)? Use the value from b again.

e. What would have been the total volume of fluids needed to correct his dehydration status in a 24 hour period?

f. We have now corrected the dehydration but our patient is still vomiting. What is the hourly rate now? Use from value e.

Peeke Company uses the periodic method of accounting. Peeke Company has the following inventory information summarizing activity during November:

Peeke's recorded 17,000 in Sales Revenue.

1. What cost is assigned to Peeke's ending inventory using Average Cost? Round interim computations to the nearest penny and your final answer to the nearest dollar.

2. What is the cost assignment to Peeke’s COGS (cost of goods sold) using FIFO (First In First Out)?

3. What is Peeke’s cost of ending inventory using LIFO (Last In First Out)?

4. What will Peeke report as gross margin for November assuming they use LIFO (Last In First Out)?

5. What is the COGAS (cost of good available for sale) for November?

HINT: Remember, COGAS is sum of COGS and cost of ending inventory. This is the same regardless of if you are using FIFO, LIFO or Weighted Average, so you pick whichever one you'd like. It is the allocation of COGAS between COGS and EI that varies depending on the method employed.

Suppose you have business of laptops under the same brand “PAPA’s” (i.e) “PAPA’s Computer Store” and following transactions show purchases and sales of laptops during September:

Sep.   1: Balance on hand, 30 laptops having cost $60 each.

Sep.   4: Purchased 20 laptops at a cost $62 each on account.

Sep.   8: Sold 35 laptops at sale price $80 each on cash.

Sep.   9: Purchased 25 laptops at cost $65 each on cash.

Sep. 15: Purchased 40 laptops at cost $65 each   on credit.

Sep. 20: Sold 55 laptops at sale price $90 each on credit.

Sep. 25: Purchased 35 laptops at cost $70 each   on cash

Sep. 28: Sold 15 laptops at sale price $100 each on credit.

Sep. 30: Sold 25 laptops at sale price $115 each on cash.

Instructions:

1. If you are following perpetual inventory system, how will you prepare inventory subsidiary ledger if you have planned to avail financing of $250,000 from Azizi Bank this year?
2. If you don’t have any plan to take financing but have intentions to save taxes then how will you prepare inventory subsidiary ledger.

Suppose you have business of laptops under the same brand “PAPA’s” (i.e) “PAPA’s Computer Store” and following transactions show purchases and sales of laptops during September: Sep. 1: Balance on hand, 30 laptops having cost $60 each. Sep. 4: Purchased 20 laptops at a cost $62 each on account. Sep. 8: Sold 35 laptops at sale price $80 each on cash. Sep. 9: Purchased 25 laptops at cost $65 each on cash. (3) Sep. 15: Purchased 40 laptops at cost $65 each on credit. Sep. 20: Sold 55 laptops at sale price $90 each on credit. Sep. 25: Purchased 35 laptops at cost $70 each on cash Sep. 28: Sold 15 laptops at sale price $100 each on credit. Sep. 30: Sold 25 laptops at sale price $115 each on cash. Instructions: a. If you are following perpetual inventory system, how will you prepare inventory subsidiary ledger if you have planned to avail financing of $250,000 from Azizi Bank this year? b. If you don’t have any plan to take financing but have intentions to save taxes then how will you prepare inventory subsidiary ledger.

suppose that the hotel acts as a monopolist whose manager chooses what quantity q of rooms to offer for rent. We want to determine the hotel’s optimal choice of quantity on game days.

Consider a hotel which can supply an unlimited number of hotel rooms at the constant marginal cost c = 20 per room per night, so that the hotel’s total cost function is given by C(q) = 20q.1 Assume that demand for hotel rooms in Tallahassee takes two possible values: on game days, demand is described by the demand curve q = 100 − p, while on non-game-days demand is described by the demand curve q = 60 − 2p.

Find the hotel’s total revenue on game days as a function of its quantity choice q. (Recall that total revenue equals price times quantity, where in this case price is described by the inverse demand curve.)

(e) Assuming the hotel maximizes profit, show that it will supply quantity q = 40 on game days.

(f) What will be the hotel price on game days? And what will be the hotel’s game-day profits?

(g) Still focusing on game days, graphically illustrate the demand curve, the hotel’s marginal revenue curve, and the hotel’s marginal cost curve. Indicate the hotel’s optimal quantity and price choices on the graph.

With some services, e.g., checking accounts, phone service, or pay TV, a consumer is offered a choice of two or more payment plans. One can either pay a low entry fee and get a high price per unit of service or pay a high entry fee and a low price per unit of service. Suppose you have an income of $1000. There are two plans. Plan A has an entry fee of $20 with a price of $10 per unit. Plan B has an entry fee of $40 with a price of $5 per unit for using the service. Let ?2 be expenditure on other goods (i.e., ?2 is the numeraire) and let ?1 be the consumption of the service. Your utility function is given by ?(?1, ?2) = 100(?1)^(1/2) + ?2.

1. 1) Write down the budget equation that you would have after you paid the entry fee for each of the two plans. (6 points)

2. 2) Find the demand functions. (10 points)

3. 3) How much service would you use in each case? And how much would you

   spend on other goods? Clearly derive your results. (8 points)

4. 4) Which plan would you prefer? Explain. (6 pints)