After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you.

If the company has 530,000 shares outstanding and the stock currently sells for $35, how much will it cost you to buy a seat if the company uses straight voting? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Total cost            $

Assume that the company uses cumulative voting and there are three seats in the current election; how much will it cost you to buy a seat now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Total cost            $

Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,700 units and 12,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below.

The cost formula that expresses the behavior of Shum’s total cost is:

Multiple Choice

• Y = $0 + $16X.

• Y = $21,600 + $18X.

• Y = $48,600 + $7X.

• Y = $37,800 + $4X.

• Y = $54,000 + $6X.

Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,000 units and 15,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below.

The cost formula that expresses the behavior of Shum’s total cost is:

Multiple Choice

• Y = $0 + $20X.

• Y = $20,000 + $17X.

• Y = $48,000 + $8X.

• Y = $32,000 + $5X.

• Y = $56,000 + $6X.

A company examines its inventory policy and considers using an economic order quantity (EOQ) approach. They have the following information about their bestselling model of televisions:

Annual demand - 4000 sets

Current order quantity - 80 sets

Carrying cost - $80.00/set/year

Order cost - $200

Lead time - 6 days

Operating days per year - 300 days

a. What is the current total annual cost (TC) at the current order quantity?

b. What is the economic order quantity (EOQ)?

c. What is the total annual cost at the economic order quantity (EOQ)?

d. What is the reorder point at the economic order quantity (EOQ)?

e. How much money will be saved by ordering the EOQ?

A distribution company is considering two locations for the construction of a new automated warehouse: Chicago and Dallas. Two types of automation are also being considered: bar coding and RF/ID (radio-frequency identification). The annual operating costs for each type of automation at the two locations are:

For what range of annual product volume handled would each location and type of automation be preferred?

Notes:

The point of indifference between two alternatives is the point at which the total costs are equal: TC _A = TC _B. The total cost of each alternative is: TC = FC +( VC * Q), where FC are the fixed costs, VC are the variable costs, and Q is some volume/quantity/units. Then the point of indifference would be:

FC _A + (VC _A * Q) = FC _B + (VC _B * Q). Plug the appropriate fixed and variable costs into the formula and solve for Q.

At Q, you are truly indifferent to the two options, so other information must be used to make the decision and that information is typically expected demand. For volume or demand between zero and Q, the option with the lowest fixed cost typically yield the lowest total costs (see Figure 4.10). For volume or demand that is greater than Q, then the option with the lowest variable cost typically yields the lowest total cost (the investment begins to payoff).

For Figure 4.10, comparing Processes A and C, we are indifferent at 15,000 units. For the preferred ranges of volume, we would prefer Process C from 0 to 15,000 units; we would prefer Process A for volume of 15,000 or more.

EcoBrite Labs performs tests on water samples supplied by outside companies to ensure that their waste water meets environmental standards. Customers deliver water samples to the lab and receive the lab reports via the Internet. The EcoBrite Labs facility is built and staffed to handle the processing of 100,000 tests per year. The lab facility cost $150,000 to build and is expected to last 10 years and will have no salvage value. Processing equipment cost $210,000 and has a life expectancy of five years and will have no salvage value. Both facility and equipment are depreciated on a straight-line basis. EcoBrite Labs has six salaried laboratory technicians, each of whom is paid $32,000. In addition to the salaries, facility, and equipment, EcoBrite Labs expects to spend $48,000 for chemicals and other supplies (assuming 100,000 tests are performed). Last year, 88,000 tests were performed.

Required:

1. Classify the resources associated with the water testing activity into one of the following types: (1) committed resources and (2) flexible resources.

Committed resources: Lab facility, equipment and technician salaries
Flexible resources:      Chemicals and supplies

2. Calculate the total annual activity rate for the water testing activity. Break the activity rate into fixed and variable components. (Round your answers to three significant digits.)

3. Compute the total activity availability, and break this into activity output and unused activity.

4. Calculate the total cost of resources supplied, and break this into the cost of activity used and the cost of unused activity.

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:

Required:

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

2. Prepare On Company's statement of cost of goods manufactured for December.

Note: If an amount should be subtracted, begin entry with a minus (-) sign.

3. Prepare On Company's income statement for December.

Note: If an amount should be subtracted, begin entry with a minus (-) sign.

Problem 2-16 (Algo) Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3]

Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates:

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Required:

1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

(Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar.)

1. Which of the following is a command-and-control based pollution control policy?

• a subsidy provided by the city for keeping land undeveloped.
• a state emissions tax on coal power plants.
• a federal government requirement that all vehicle fleets average a set level of emissions by 2030.
• a county selling permits for toxic waste dumping.

2. A natural monopoly firm will produce where the _____ curve intersects the downward-sloping part of the _____ curve.

• marginal revenue; fixed cost
• marginal cost; total profit
• supply; long run total cost
• demand; long run average cost

3. If a firm is a monopolistic competitor, then the firm faces

• many competitors selling slightly differentiated products.
• no competitors, and is the only seller of its product.
• only a handful of other competitors due to numerous barriers to entry.
• many competitors selling the exact same product.

4. The following table shows the demand curve and cost information for a firm that is a monopoly.

If they maximize their profits, what will their profits equal?

$1,300

$700

$1,350

$1,050

5. The following table shows the demand curve and cost information for a firm that is a monopoly.

What quantity should they produce to maximize their profits?

500 units

850 units

1,000 units

600 units

6. Comparing a monopoly firm and a monopolistic competitor, the price elasticity of demand will be

higher for the monopolistic competitor.

higher for the monopoly firm.

equal for both.

indeterminate between the two.

7. Monopolistic competitors in the certified used vehicles industry will often include a warranty as a means to

• be environmentally responsible.
• be perceived less favorably.
• differentiate their product.
• be socially responsible.