Suppose there are two suppliers of distilled water, labeled firm A and firm B. Distilled water is considered to be a homogenous good (well, all water tastes the same, anyway). Let p denote the price per gallon, qA quantity sold by firm A, and qB the quantity sold by firm B. Firm A is located nearby a spring and therefore bears a production cost of cA = $1 per one gallon of water. Firm B is not located near a spring, and thus bears a cost of cB = $2 per gallon. The inverse demand function for distilled water is given by p = 120 – 0.5 Q = 120 – 0.5 (qA + qB) ; where Q = qA +qB denotes the aggregate industry supply of distilled water.
Solve the following problems:
(i) Formulate the profit-maximization problem of firm A.
(ii) Solve for firm A's best-response function, qA = RA (qB).
(iii) Formulate the profit-maximization problem of firm B.
(iv) Solve for firm B's best-response function, qB = RB(qA).
(v) Draw the two best-response functions. Denote the vertical axis by qA, and the horizontal axis by qB.
(vi) Solve for the Cournot equilibrium output levels ???? ?? and ???? ?? . State which firm sells more water and why.
(vii) Solve for the aggregate industry supply and the equilibrium price of distilled water.
(viii) Solve for the profit level made by each firm, and for the aggregate industry profit. Which firm earns a higher profit and why?
In: Economics
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
||||||
| Cleaning supplies | $ | 0.50 | |||||
| Electricity | $ | 1,300 | $ | 0.06 | |||
| Maintenance | $ | 0.25 | |||||
| Wages and salaries | $ | 4,800 | $ | 0.20 | |||
| Depreciation | $ | 8,100 | |||||
| Rent | $ | 1,900 | |||||
| Administrative expenses | $ | 1,700 | $ | 0.03 | |||
For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.10 per car washed.
The actual operating results for August appear below.
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,300 | |
| Revenue | $ | 52,120 |
| Expenses: | ||
| Cleaning supplies | 4,600 | |
| Electricity | 1,762 | |
| Maintenance | 2,290 | |
| Wages and salaries | 6,800 | |
| Depreciation | 8,100 | |
| Rent | 2,100 | |
| Administrative expenses | 1,846 | |
| Total expense | 27,498 | |
| Net operating income | $ | 24,622 |
Required:
Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August.
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In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
||||||
| Cleaning supplies | $ | 0.60 | |||||
| Electricity | $ | 1,100 | $ | 0.06 | |||
| Maintenance | $ | 0.25 | |||||
| Wages and salaries | $ | 4,800 | $ | 0.20 | |||
| Depreciation | $ | 8,100 | |||||
| Rent | $ | 2,000 | |||||
| Administrative expenses | $ | 1,800 | $ | 0.03 | |||
For example, electricity costs are $1,100 per month plus $0.06 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.60 per car washed.
The actual operating results for August are as follows:
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,400 | |
| Revenue | $ | 56,880 |
| Expenses: | ||
| Cleaning supplies | 5,480 | |
| Electricity | 1,568 | |
| Maintenance | 2,315 | |
| Wages and salaries | 6,820 | |
| Depreciation | 8,100 | |
| Rent | 2,200 | |
| Administrative expenses | 1,949 | |
| Total expense | 28,432 | |
| Net operating income | $ | 28,448 |
Required:
Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
Lavage Rapide Revenue and Spending Variances For the Month Ended August 31
Revenue
Expenses:
Cleaning supplies
Electricity
Maintenance
Wages and salaries
Depreciation
Rent
Administrative expenses
Total expense
Net operating income
In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
||||||
| Cleaning supplies | $ | 0.80 | |||||
| Electricity | $ | 1,200 | $ | 0.09 | |||
| Maintenance | $ | 0.25 | |||||
| Wages and salaries | $ | 4,800 | $ | 0.30 | |||
| Depreciation | $ | 8,100 | |||||
| Rent | $ | 2,000 | |||||
| Administrative expenses | $ | 1,600 | $ | 0.03 | |||
For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $5.90 per car washed.
The actual operating results for August appear below.
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,300 | |
| Revenue | $ | 50,480 |
| Expenses: | ||
| Cleaning supplies | 7,060 | |
| Electricity | 1,908 | |
| Maintenance | 2,290 | |
| Wages and salaries | 7,620 | |
| Depreciation | 8,100 | |
| Rent | 2,200 | |
| Administrative expenses | 1,746 | |
| Total expense | 30,924 | |
| Net operating income | $ | 19,556 |
Required:
Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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In: Accounting
Max Flyer is the founder and sole owner of the Go for broke Company. The company develops oil wells in unproven territories. His company has purchased a tract of land that larger oil companies have spurned as unpromising even though it is near some large oil fields. Max has provided you the following information:
• Drilling for oil on the tract would cost $100,000 (his investment). If the drilling is successful, and the well produces oil, his revenue would be $800,000. If the well turns out to be a dry hole he loses the entire $100,000. The chance of hitting oil on the tract of land is 1 in 4, or 25%.
• Max does have the option of selling the tract of land. Another oil company, after hearing a geologist’s report, would like to purchase the land for an amount that would provide him a profit of $90,000.
• A friend of Max has told him about a company that does seismic studies. The cost of a study is $30,000. If the study is performed there is a 70% chance that the results will be unfavorable. If the study results are unfavorable, and Max decides to drill for oil anyway, there is an 85.7% chance that he will have a dry well. If the results are favorable, and Max decides to drill, there is a 50% chance that he will have a dry well.
• These are the only alternatives Mr. Flyer has. The alternatives are mutually exclusive.
You have been asked to help Mr. Flyer. Since you are familiar with how to use decision trees to solve problems, prepare a report that will help Mr. Flyer make his decision in this situation. Your report should be addressed to Mr. Flyer.
In: Statistics and Probability
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
|
Fixed Cost per Month |
Cost per Car Washed |
||||||
| Cleaning supplies | $ | 0.80 | |||||
| Electricity | $ | 1,200 | $ | 0.15 | |||
| Maintenance | $ | 0.20 | |||||
| Wages and salaries | $ | 5,000 | $ | 0.30 | |||
| Depreciation | $ | 6,000 | |||||
| Rent | $ | 8,000 | |||||
| Administrative expenses | $ | 4,000 | $ | 0.10 | |||
For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 per car washed.
The actual operating results for August appear below.
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,800 | |
| Revenue | $ | 43,080 |
| Expenses: | ||
| Cleaning supplies | 7,560 | |
| Electricity | 2,670 | |
| Maintenance | 2,260 | |
| Wages and salaries | 8,500 | |
| Depreciation | 6,000 | |
| Rent | 8,000 | |
| Administrative expenses | 4,950 | |
| Total expense | 39,940 | |
| Net operating income | $ | 3,140 |
Required:
Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
| Revenue | U | |
| Expenses: | ||
| Cleaning Supplies | U | |
| Electricity | U | |
| Maintenance | U | |
| Wages and Salaries | U | |
| Depreciation | None | |
| Rent | None | |
| Administrative Expenses | U | |
| Total Expenses | U | |
| Net Operating Income | U |
In: Accounting
Stateline Berry Farm harvest early season blueberries for shipment throughout Michigan and Illnois in July. The blueberry farm is maintained by a permanent staff of 10 employees and seasonal workers who pick and pack the blueberries. The blueberries are sold in crates containing 100 individually pack aged one-quart containers. Affixed to each one-quart container is the distinctive Stateline Berry Farm logo inviting buyers to "Enjoy the berry best blueberries in the world!" The selling price is $90 per crate, variable cost is $80 per crate, and fixed cost are $280,000 per year. In the year 2017, Stateline Berry Farm sold 50,000 crates.
Prepare a contribution income statement for the year ended December, 2017
Determine the company’s 2017 operating leverage
Calculate the percentage change in profit if sales decrease by 10 percent.
Management is considering the purchase of several berry-picking machines. This will increase annual fixed cost of $375,000 and reduce variable costs to $77.50 per crate. Calculate the effect of this acquisition on operating leverage and explain any change.
In: Accounting
Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.
Data for the Maintenance Department follow:
| Budget | Actual | ||||
| Variable costs for lubricants | $ | 345,000 | * | $ | 442,500 |
| Fixed costs for salaries and other | $ | 216,000 | $ | 232,600 | |
*Budgeted at $23 per machine-hour.
Data for the Forming and Assembly Departments follow:
| Percentage of Peak-Period Capacity Required |
Machine-Hours | ||
| Budget | Actual | ||
| Forming Department | 75% | 9,800 | 11,800 |
| Assembly Department | 25% | 5,200 | 4,200 |
| Total | 100% | 15,000 | 16,000 |
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required:
1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
2. How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments?
In: Accounting
| Part 2 | ||||||||
| Communications Unlimited provides support services to its clients. | ||||||||
| This company expects to earn an annual return on the assets invested at a rate of: | 20% | |||||||
| The company has the following amount invested in the business: | $8,000,000 | |||||||
| The annual budgeted costs for next year are: | ||||||||
| Variable costs | Fixed costs | |||||||
| Support Services | $600,000 | 1,900,000 | ||||||
| The annual budgeted hours for next year are: | ||||||||
| Consulting services | 60,000 | hours | ||||||
| Required: | You must use cell references for all calculations. | |||||||
| 5. Determine the markup on total costs in percentage terms. | ||||||||
| 6. Determine the total cost per hour. | ||||||||
| 7. Determine the revenue per hour that will be charged if total costs is the basis for markup. | ||||||||
| 8. Explain why answers 2-4 in comparison to 5-7 are the same or different. | ||||||||
| 9. Discuss the advantages and disadvantages of using a cost-based pricing model. | ||||||||
| You need to include an outside reference that supports your discussion on advantages and disadvantages of using a cost-based pricing model. | ||||||||
| Make sure you include the reference in APA style. Enter your response in the textbox below. | ||||||||
In: Accounting
Hair Care Inc. is a wholesaler of hair supplies. Hair Care uses
a perpetual inventory system. The following transactions
(summarized) have been selected for analysis:
| a. | Sold merchandise for cash (cost of merchandise $29,197) | $ | 51,600 | |
| b. | Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $400) | 640 | ||
| c. | Sold merchandise (costing $4,950) to a customer, on account with terms 3/10, n/30 | 10,000 | ||
| d. | Collected half of the balance owed by the customer in (c) within the discount period | 4,850 | ||
| e. | Granted an allowance to the customer in (c) | 180 | ||
1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.
3. Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
4. Hair Care is considering a contract to sell
merchandise to a hair salon chain for $15,400. This merchandise
will cost Hair Care $10,000.
(a) Compute the new gross profit
percentage. (
In: Accounting