1) What is greenfield FDI?

2) What is the non-basic sector?

3.There are three types of industrial structure or organization: monopoly, oligopoly, and perfect competition. Of those three, the Lösch location model is associated with __________. Of those three, the Weber location model is associated with __________.

4.How do the locational requirements/preferences differ between producer services providers and consumer services providers?

5.What are the three components of growth in shift-share analysis?

6.Compare Reilly’s Law of Retail Gravitation to Huff’s Competing Destinations model.

Suppose there are three stocks with the same expected returns of 10% per year and the same risk (standard deviation) of 100%. The correlation between any two of them is 50%.

a. What is the risk of the equal-weighted portfolio of two stocks?

b. What is the risk of the equal-weighted portfolio of three stocks?

c. What is the minimum possible risk of the portfolio of the three stocks?
  
d. If the third stock has a correlation of -50% instead of 50% with the rest, what is the risk of the equal-weighted portfolio of three stocks, and what is the minimum possible risk?

Goal: Please answer the questions below. The main goal of this homework is to see if you can calculate the profit maximization point for this small wedding cake business. I hope that you will be able to merge your knowledge of basic accounting and microeconomic theory in order to calculate the profit maximization point, make comments about efficiency, and make logical recommendations to the firm's management to ensure their future success.

Current Situation:The local wedding cake business was very competitive during 2012. Delicious Deserts was the only wedding cake bakery in the entire county of two million people for several years. They often charged as much as $300 to $500 for each wedding cake. But a new competitor recently came into the market and started selling "discount wedding cakes" for less than $150. The quality and the taste of the discount wedding cakes were acceptable for most of their customers. Both businesses operated in a low-to moderate-income county in California where the average household income was not much higher than $40,000 per year.

The Challenge For Delicious Deserts: At first the news of a low-cost competitor was terrible news for Delicious Deserts. They had no choice. They had to charge from $300 to $500 per wedding cake to cover their high costs. However, because of this new competition, the husband and wife owners of Delicious Deserts decided to make the business more efficient and lower costs. They invested in better ovens and created better tasting cakes using special ingredients. Their customers went crazy over their new and unique 80 proof Italian Rum Wedding cake that actually got people slightly drunk if they ate more than three slices. To boost sales during 2012 they hired part-time telemarketers and social media experts. They also increased their advertising in traditional media such as local wedding magazines. They also displayed eye-catching ads in local churches, entertainment centers and jewelry stores. They also experimented with a new pricing model in which they lowered prices each quarter. Indeed, they found that as they lowered their prices, they sold more cakes. They hired an "A" student who took a microeconomics class with Professor Ed Torres to do an elasticity analysis. The student estimated that the price elasticity for wedding cakes was 1.25 (elastic) and that the income elasticity was 2.10 (a luxury good). The owners of Delicious Deserts were not aware of this information. The student told them that they made a huge pricing strategy error for many years by charging high prices on an elastic good within a low-to moderate-income county. The profit and loss statement below shows that Delicious Deserts made a Total Revenue of $275,000 and sold 1,375 wedding cakes. During 2012, they made three times (3X) more than they did versus 2011. Of course, because they invested in new ovens, made more cakes, and hired new part-time staff, the cost of doing business also rose. The net profit for 2012 was a slim $32,175. The salary for a professional desert baker averaged $70,000 per year in California.

Please examine the profit and loss statement on the next page, then answer the questions on pages 4 through 6.

Delicious Deserts, Incorporated Income Statement For The Year Ending December 31, 2012

Revenues

Gross Sales....................................................................$275,000

Less: Sales Discounts ..................................................$ 2,500

Less: Returns (Cancelled Weddings)...........................$ 2,000

Net Sales...............................................................................................$270,500

Cost of Goods Sold

Beginning Inventory (January 1).................................$ 18,000

Cost Of Ingredients To Bake Cakes............................$109,500

Total Cost of Goods For Sale......................................$127,500

Less: Ending Inventory December 31.........................$ 15,000

Costof Goods Sold..............................................................................$112,500

Gross Profit.....................................................................................................$158,000

Operating Expenses

Selling Expenses

Sales Commissions........................................$ 31,000

Advertising...................................................$ 16,000

Other Selling Expenses (Internet).................$ 18,000

Total Selling Expenses...............................................$ 65,000

General and Administrative Expenses

Professional & Office Salaries.................................$ 20,500

Utilities....................................................................$ 5,000

Office Supplies........................................................$ 1,500

Bank Interest Paid on Loans....................................$ 3,600

Insurance.................................................................$ 2,500

Rent (Fixed Cost)....................................................$ 17,000

Total General & Administrative Expense.............................$ 50,100

Total Operating Expenses..................................................$115,100

Net Profit Before Taxes..............................................................................$ 42,900

Less: Federal/State/Local Taxes................................................................$ 10,725

NET PROFIT.............................................................................................$ 32,175

Question #2: What was the Total Variable Cost of running this business?

Answer: $________________________________________

Clue: Add up Cost of Goods Sold, Total Operating Expenses (less Rent), Income Tax Expense and include the write-off losses from Sales Discounts & Wedding Cancellations.

Question #3:Assuming that Delicious Deserts sold 150 cakes during Q1, 300 cakes during Q2, 450 cakes during Q3, and 475 cakes during Q4, what was the Total Revenue during each quarter assuming the prices were: Q1 - $275 per cake, Q2 - $240 per cake, Q3 - $180 per cake and Q4 - $170 per cake?

Q1 - Total Revenue = $____________________________

Q2 - Total Revenue = $____________________________

Q3 - Total Revenue = $____________________________

Q4 - Total Revenue = $____________________________

Question #5 What is the MC=MR Profit Maximization point? What quantity should Delicious Deserts be producing at 'and' what price should they be charging to maximize their profits?

Question #6 Why isn't it a good idea for them to produce and sell as many cakes as they can? Is it more profitable to sell less cakes at this current stage of their business?

Question #7 Do you have any other recommendations for Delicious Deserts to increase their revenues, profits, market share, and client retention?

QUESTION 1

1. Which of the following is not a transaction category?

4 points   

QUESTION 2

1. Which report summarizes what a company has earned and the expenses incurred to earn the income?

QUESTION 3

1. What is the primary objective of accounting?

24 points   

QUESTION 5

1. What does the Sales Tax Center enable you to do?

4 points   

QUESTION 6

1. Which screen provides information about vendor transactions?

4 points   

QUESTION 7

1. How are these accounts added to the Chart of Accounts (COA)?

4 points   

QUESTION 8

1. Financial statements include:

4 points   

QUESTION 9

1. Which report summarizes what a company owes and owns on a particular date?

4 points   

QUESTION 10

1. On the Dashboard, what does the Profit and Loss graph display?

4 points   

QUESTION 11

1. Which option appears on the Create (+) screen?

4 points   

QUESTION 12

1. Which of the following statements is true regarding QuickBooks Online?

4 points   

QUESTION 13

1. What does the My Accountant enable you to do?

4 points   

QUESTION 14

1. Which tab displays credit card balances?

4 points   

QUESTION 15

1. Which screen provides information about customer transactions?

4 points   

QUESTION 16

1. The Banking screen provides the following information except:

4 points   

QUESTION 17

1. What is the purpose of using subaccounts?

4 points   

QUESTION 18

1. Accounts Receivable is:

4 points   

QUESTION 19

1. Usually account numbers are

4 points   

QUESTION 20

1. On the Dashboard, what does the Invoices graph display?

1. In a shopping mall an average of 3 out of every 5 customers use visa credit cards. A sample of 10 customers is selected.
   1. Find the probability that exactly 6 customers use visa credit card.
   2. Find the probability that less than 9 customers use visa credit card.
   3. Now assume that a sample of 50 customers are selected. Find the smallest value of n such that P(X<n) ≥ 0.9, where the random variable X represents the number of customers who uses visa credit card.

An online apparel retailer groups its customers into two segments: premier and regular. There are 1000 customers of each type. The contribution margins of the two segments are $100 and $50, respectively. Each period, 30% of premier customers become regular customers and 10% are lost forever. Also, 10% of regular customers become premier customers and 40% are lost forever. Assuming a discount rate of 4%, what is the CLV or a single Premier and a single regular customer? Based on CLV, what are the net forecasted sales over a five year period?

On December 31, 2012, Lunes Company collected $174,000 in unearned subscription revenue which is to be earned equally over the next three (3) years. Pretax financial income in 2012 amounted to $595,000. Lunes’ applicable tax rate is 34% in 2012. Recently enacted tax laws have indicated that Lunes’ tax rate will increase to 37% in 2013. There is no evidence to suggest any future tax rate changes beyond what is currently known.  

The Sisyphean Corporation is considering investing in a new machine that has an estimated life of three years. The cost of the machine is $50,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The machine will result in sales of 3,000 widgets in year 1. Sales are estimated to grow by 10% per year each year through year three. The price per widget that Sisyphean will charge its customers is $15 and is to remain constant. The widgets have a cost per unit to manufacture of $9 each. Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts. It is estimated that the Sisyphean Corporation needs to hold 4% of its annual revenues in cash, 9% of its annual revenues in accounts receivable, 11% of its annual revenues in inventory, and 8% of its annual revenues in accounts payable. The firm is in the 23% tax bracket, and has a cost of capital of 6%. What is the required investment in net working capital in the second year of operations?

Allowance Method The Huntington Company, which has been in business for three years, makes all of its sales on account and does not offer cash discounts. The firm's credit sales, collections from customers, and write-offs of uncollectible accounts for the three-year period are summarized below:

Required
If the Huntington Company had used the allowance method of recognizing credit losses and had provided for such losses at the rate of 1.2 percent of credit sales, what amounts in Accounts Receivable and the Allowance for Doubtful Accounts would appear on the firm's balance sheet at the end of 2014? What total amount of bad debts expense would have appeared on the firm's income statement during the three year period?

Your friend, Brian, works as an Electrician working on several Commercial Buildings. He has recently finished his apprenticeship and is starting to get paying customers. He has contacted you as he knows you have been undertaking some accounting studies as part of your qualifications as he has decided to start his own Electrical Business. He wants some advice regarding his options for the structure of his new business venture, which are either a sole trader or a company. He anticipates that initially he will work alone but in the future, he may grow the business and have employees.

1. What three factors would you consider as important in deciding which business structure to advise, i.e. whether to operate as a sole trader or a company? (100 words max).

2. Explain three advantages and three disadvantages of each of these business structures (sole trader and a company)? .

3. Which one of the two of the structures would you advise and why?