Case 3 VietJet is an international low-cost airline from Vietnam. As a low-cost carrier, VietJet offers the different fares based on seasonal demands in order to maximize their profit and hence the fares vary as per the demand during peak and off-peak season. The airline’s total demand is given by; Q = 1200 – 8P, where Q is the number of passengers (in thousands) per year and P is the fare in US dollars. The demand in the peak season is given by; Q = 640 – 3P and this demand function is different in offpeak season which is given by; Q = 560 – 5P. Assume that the fixed cost is $12 million per year with a constant marginal cost of $120 per passenger. Based on this information, discuss the below parts:
a) Calculate the maximum profit, price and number of passengers given that the airline charges only one prices irrespective of the season.
b) Calculate the maximum profit, price and number of passengers given that the airline charges different prices based on the season.
c) Calculate and comment on the demand elasticities at the price where they get maximum profit based on your answer in part (b) above.
d) Why do you think the airline would like to charge the different prices in different seasons? What benefits can it bring to the VietJet by doing so? Explain.
In: Economics
1. Modeling Questions – Cost Functions and Profit Maximization
A perfect competitive firm’s short-run cost function is estimated to be
Cy=10+18 y-4y2+0.6y3 ,
where y is the output, C(y) is the total cost.
a.(2’) What is the firm’s short-run fixed cost?
b.(2’) What is the firm’s short-run variable cost function?
c.(12’) Derive the functions of MC, AVC, AFC, and AC.
d Carefully graph your functions in the following combinations:
TC, FC, and VC vs. y on a single graph.
AC, AFC, AVC, and MC vs. y on a single graph.
(4’) On the graph (ii) at the bottom, label clearly the minimum AVC point and explain why MC curve crosses AVC curve at its minimum.
(20’) Given the output price is p, set up the output-side profit-maximization problem and find the product supply function.
In: Economics
| Review Problem: Variance Analysis Using a Flexible Budget | |||||||
| Data | Fixed Cost | Revenue & Cost Per Door | Revenue & Cost Per Window | ||||
| Revenue | $864.00 | $562.00 | |||||
| Cost of inventory | $568.00 | $218.75 | |||||
| Wages and salaries | $27,555 | $75.00 | $63.00 | ||||
| Utilities | $2,875 | $2.05 | $1.30 | ||||
| Rent | $6,500 | ||||||
| Insurance | $3,575 | $1.50 | $3.65 | ||||
| Miscellaneous | $1,650 | $45.00 | $37.00 | ||||
| Actual results: | |||||||
| Revenue | $288,499 | ||||||
| Cost of inventory | $152,045 | ||||||
| Wages and salaries | $65,198 | ||||||
| Utilities | $2,077 | ||||||
| Rent | $6,500 | ||||||
| Insurance | $4,500 | ||||||
| Miscellaneous | $17,328 | ||||||
| Doors Sold | Windows Sold | ||||||
| Actual unit activity | 152 | 280 | |||||
| Planning budget unit activity | 150 | 301 | |||||
| Enter a formula into each of the cells marked with a ? below | |||||||
| Must enter an IF Statement for the U/F selection; can be different between revenue and expenses but same IF statement must be used for entire column of expenses. | |||||||
| Construct a flexible budget performance report | |||||||
| Revenue | |||||||
| and | |||||||
| Planning | Activity | Flexible | Spending | Actual | |||
| Budget | Variances | U/F | Budget | Variances | U/F | Results | |
| Doors Sold | ? | ? | ? | ||||
| Windows Sold | ? | ? | ? | ||||
| Revenue | ? | ? | U/F | ? | ? | U/F | ? |
| Expenses: | |||||||
| Cost of inventory | ? | ? | U/F | ? | ? | U/F | ? |
| Wages and salaries | ? | ? | U/F | ? | ? | U/F | ? |
| Utilities | ? | ? | U/F | ? | ? | U/F | ? |
| Rent | ? | ? | U/F | ? | ? | U/F | ? |
| Insurance | ? | ? | U/F | ? | ? | U/F | ? |
| Miscellaneous | ? | ? | U/F | ? | ? | U/F | ? |
| Total expenses | ? | ? | U/F | ? | ? | U/F | ? |
| Net operating income | ? | ? | U/F | ? | ? | U/F | ? |
In: Accounting
A company, Megah Setia, has the following cost structure:
|
Output (quantity) |
Total fixed cost (RM) |
Total variable cost (RM) |
Average fixed cost |
Average total cost |
Marginal cost |
|
0 |
2000 |
0 |
|||
|
2 |
2000 |
4000 |
|||
|
4 |
2000 |
10000 |
|||
|
6 |
2000 |
12000 |
|||
|
8 |
2000 |
13000 |
|||
|
10 |
2000 |
14000 |
In: Economics
| P2-3A Prepare entries for a job order cost system and cost of goods manufactured schedule | |||||||||
| Case Inc. is a construction company specializing in custom patios. The patios are constructed of | |||||||||
| concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2020, | |||||||||
| the general ledger for Case Inc. contains the following data. | |||||||||
| Raw Materials Inventory | $4,200 | Manufacturing Overhead Applied | $32,640 | ||||||
| Work in Process Inventory | $5,540 | Manufacturing Overhead Incurred | $31,650 | ||||||
| Subsidiary data for Work in Process Inventory on June 1 are as follows. | |||||||||
| Job Cost Sheets | |||||||||
| Customer Job | |||||||||
| Cost Element | Rodgers | Stevens | Linton | ||||||
| Direct materials | $600 | $800 | $900 | ||||||
| Direct labor | 320 | 540 | 580 | ||||||
| Manufacturing overhead | 400 | 675 | 725 | ||||||
| $1,320 | $2,015 | $2,205 | |||||||
| During June, raw materials purchased on account were $4,900, and all wages were paid. Additional | |||||||||
| overhead costs consisted of depreciation on equipment $900 and miscellaneous costs of $400 incurred | |||||||||
| on account. | |||||||||
| A summary of materials requisition slips and time tickets for June show the following. | |||||||||
| Customer Job | Materials Requisition slips | Time tickets | |||||||
| Rodgers | $800 | $850 | |||||||
| Koss | 2000 | 800 | |||||||
| Stevens | 500 | 360 | |||||||
| Linton | 1300 | 1,200 | |||||||
| Rodgers | 300 | 390 | |||||||
| 4900 | 3,600 | ||||||||
| General use | 1500 | 1,200 | |||||||
| $6,400 | $4,800 | ||||||||
| Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for | |||||||||
| customers Rodgers, Stevens, and Linton were completed during June and sold for a total of $18,900. | |||||||||
| Each customer paid in full. | |||||||||
| Instructions | |||||||||
| (a) | Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred, | ||||||||
| and manufacturing overhead costs incurred; (2) assignment of direct materials, labor, and overhead to | |||||||||
| production; and (3) completion of jobs and sale of goods. | |||||||||
| (b) | Post the entries to Work in Process Inventory. | ||||||||
| (c ) | Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs. | ||||||||
| (d) | Prepare a cost of goods manufactured schedule for June. | ||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||
In: Accounting
Wildhorse Company began operations in 2019 and determined its
ending inventory at cost and at lower-of-LIFO-cost-or-market at
December 31, 2019, 2020 and 2021. This information is presented
below.
|
Cost |
Lower-of-Cost-or-Market |
||||
|---|---|---|---|---|---|
| December 31, 2019 | $81,780 | $66,740 | |||
| December 31, 2020 | 94,000 | 92,120 | |||
| December 31, 2021 | 91,180 | 91,180 | |||
Prepare the journal entries assuming that the inventory is
recorded at market, and a perpetual inventory system
(cost-of-goods-sold method) is used. (Credit account
titles are automatically indented when amount is entered. Do not
indent manually.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
12/31/19 |
enter an account title for the journal entry on December 31, 2016 | enter a debit amount | enter a credit amount |
| enter an account title for the journal entry on December 31, 2016 | enter a debit amount | enter a credit amount | |
|
12/31/20 |
enter an account title for the journal entry on December 31, 2017 | enter a debit amount | enter a credit amount |
| enter an account title for the journal entry on December 31, 2017 | enter a debit amount | enter a credit amount | |
|
12/31/21 |
enter an account title for the journal entry on December 31, 2018 | enter a debit amount | enter a credit amount |
| enter an account title for the journal entry on December 31, 2018 | enter a debit amount | enter a credit amount |
In: Accounting
Oranges cost $1/kg and apples also cost $1/kg. Niki has $12 to spend on apples or oranges. He chooses to buy 5 kg of apples.
Draw (on a diagram measuring quantity of oranges on the horizontal axis) Niki’s budget line and show the optimal consumption point. Do not forget to draw the relevant indifference curve(s).
The government subsidizes consumption of apples so that apples now cost $0.5/kg). How does Niki’s budget line change? Show graphically (on the same diagram you used to answer question 3!) his optimal choice. Can you say whether he will buy more or less apples? Would Niki be better off, or worse off than in question 3?
In addition to the subsidy from question 4, the government has decided to introduce a head tax that would just allow him to continue purchasing the basket from question 3. How large should this tax rebate be? Show (on the same diagram you drew for question 3!) the new budget line and the new optimal basket. Can you say whether he will buy more or less apples? Would Niki be better off, or worse off than in question 3?
In: Economics
Exercise 3-3 (Algo) Schedules of Cost of Goods Manufactured and Cost of Goods Sold [LO3-3]
Primare Corporation has provided the following data concerning last month’s manufacturing operations.
| Purchases of raw materials | $ | 32,000 |
| Indirect materials used in production | $ | 4,930 |
| Direct labor | $ | 58,300 |
| Manufacturing overhead applied to work in process | $ | 88,200 |
| Underapplied overhead | $ | 4,160 |
| Inventories | Beginning | Ending | ||
| Raw materials | $ | 10,100 | $ | 19,700 |
| Work in process | $ | 55,100 | $ | 68,300 |
| Finished goods | $ | 33,200 | $ | 42,900 |
Required:
1. Prepare a schedule of cost of goods manufactured for the month.
2. Prepare a schedule of cost of goods sold for the month. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.
In: Accounting
1. Do we focus on after-tax cost of debt or before-tax cost of debt? Do we focus on new costs of debt or historical costs of debt? Why?
2. How to adjust component cost of debt, preferred stock, common stock for flotation costs?
3. When we calculate WACC, do we consider such current liabilities as accounts payable, accruals, and deferred taxes as sources of funding? Why?
In: Finance
P16-2 Cost of giving up early payment discounts Determine the cost of giving up the discount under each of the following terms of sale. (Note: Assume a 365-day year.)
2/10 net 30.
1/10 net 30.
1/10 net 45.
3/10 net 90.
1/10 net 60.
3/10 net 30.
4/10 net 180.
In: Finance