The biggest advantage of the two rules to detect the most profitable output level is that these rules tell us that

1. There are always two output levels at which marginal revenue is equal to marginal cost and we need to identify the correct profit-maximizing level of production by using these two rules.
2. When the two rules are satisfied we know that the maximum total profit cannot be negative.
3. In general, marginal revenue equal to marginal cost does not guarantee profit-maximization.
4. For a company with constant marginal cost, profit-maximization is impossible.
5. The maximization of total revenue or sales is what companies should pursue.

The following cost functions apply to X Company's regular production and sales during the year:

  Cost of goods sold:   $6.05 (X) + $131,670

  Selling and administrative expenses:   $1.02 (X) + $81,130

where X is the number of units produced and sold. During the year, X Company sold 66,500 units for $17.00 each. At the end of the year, a company offered to buy 4,620 units but was only willing to pay $12.00 each. X Company had the capacity to produce the additional 4,620 units.

5. If X Company had accepted the special order, firm profits would have increased by

6. Consider the following three changes. Direct material costs on the special order would have increased by $0.86 per unit, direct labor costs on the special order would have decreased by $0.46 per unit, and X Company would have had to rent special equipment for $1,500. Independent of your answer to (5), the effect of these changes would have been to reduce profit on the special order by

7. In order to retain all of X Company's regular customers, it would have had to reduce the regular selling price by $0.43. If the selling price were reduced and next year's unit sales turned out to be the same as this year's sales, firm profits would have fallen by

The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers. Amsterdam Supply uses the net method under a perpetual inventory system. Also note that the company uses a clearing house to take care of all bank as well as non-bank credit cards used by its customers.

Record on page 10 of the journal

Record on page 11 of the journal

Journalize the entries to record the transactions of Amsterdam Supply Co. Refer to the Chart of Accounts for exact wording of account titles.

The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers. Note that the company uses a clearing house to take care of all bank as well as non-bank credit cards used by its customers. Record on page 10 of the journal Mar. 2 Sold merchandise on account to Equinox Co., $18,900, terms FOB destination, 1/10, n/30. The cost of the merchandise sold was $13,300. 3 Sold merchandise for $11,350 plus 6% sales tax to retail cash customers. The cost of merchandise sold was $7,000. 4 Sold merchandise on account to Empire Co., $55,400, terms FOB shipping point, n/eom. The cost of merchandise sold was $33,200. 5 Sold merchandise for $30,000 plus 6% sales tax to retail customers who used MasterCard. The cost of merchandise sold was $19,400. 12 Received check for amount due from Equinox Co. for sale on March 2. 14 Sold merchandise to customers who used American Express cards, $13,700. The cost of merchandise sold was $8,350. 16 Sold merchandise on account to Targhee Co., $27,500, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $16,000. 18 Issued credit memo for $4,800 to Targhee Co. for merchandise returned from sale on March 16. The cost of the merchandise returned was $2,900. Record on page 11 of the journal 19 Sold merchandise on account to Vista Co., $8,250, terms FOB shipping point, 2/10, n/30. Added $75 to the invoice for prepaid freight. The cost of merchandise sold was $5,000. 26 Received check for amount due from Targhee Co. for sale on March 16 less credit memo of March 18. 28 Received check for amount due from Vista Co. for sale of March 19. 31 Received check for amount due from Empire Co. for sale of March 4. 31 Paid Fleetwood Delivery Service $5,600 for delivery of merchandise in March to customers under shipping terms of FOB destination. Apr. 3 Paid City Bank $940 for service fees for handling MasterCard and American Express sales during March. 15 Paid $6,544 to state sales tax division for taxes owed on sales. Journalize the entries to record the transactions of Amsterdam Supply Co. Refer to the Chart of Accounts for exact wording of account titles.

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies.

Health Insurance

Size of Company yes no total

Small 35   15 50

Medium 67 8 75

Large 87 13 100

a.) Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use  = .05. Compute the value of the test statistic (to 2 decimals).

b.) the p-value is _____________

c.) What is your conclusion _________________

d.) The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).

Small _____ %

Medium ______ %

Large ______ %

Based on the percentages above what do you conclude ___________________

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies.

Health Insurance Size of Company Yes No Total Small 32 18 50 Medium 61 14 75 Large 87 13 100

a) Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use = .05. Use Table 12.4.

Compute the value of the 2 test statistic (to 2 decimals). The p value is What is your conclusion?

b) The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).

Small % Medium % Large %

Based on the percentages calculated above, what can you conclude?

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies. Health Insurance Size of Company Yes No Total Small 31 19 50 Medium 68 7 75 Large 90 10 100 Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use = .05. Use Table 12.4. Compute the value of the 2 test statistic (to 2 decimals). The p value is What is your conclusion? The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number). Small % Medium % Large % Based on the percentages calculated above, what can you conclude?

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies.

Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use a = .05.

Compute the value of the x² test statistic (to 2 decimals).

Find the p-value

What is your conclusion?

The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).
Small:

Medium:

Large:

Based on the percentages calculated above, what can you conclude?