Assuming that each of the following functions are linear, give an economic interpretation of the slope of the function:

a) F(q) is the revenue from producing q units of output;

b) G(x) is the cost of purchasing x units of some commodity;

c) H(p) is the amount of the commodity consumed when its price is p;

d) C(Y) is the total national consumption when national income is Y;

e) S(Y) is the total national savings when national income is Y.

• Identify four methods of assigning a cost to ending inventory and cost of goods sold and briefly explain the difference in the methods.
  
• It’s common in the electronics industry for unit costs of raw materials inventories to decline over time. In this environment, explain the difference between LIFO and FIFO, in terms of the effect on income and financial position. Assume that inventory quantities remain the same for the period.
  
• Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situation would it not provide a better match?

On January 1, 2021, a company acquires $540,000 of another company’s 7% bonds at a price of $410,000. For the investor company, interest is received on January 1 of each year, and the bonds mature on January 1, 2031. The investment will provide the investor a 10% yield (assumed for ease of computation; do not attempt computation beyond the years necessary). The bonds are classified as held-to-maturity. Using the effective interest method, what is the amount the investor company will record for Interest Revenue for the year ended 12/31/2022?

Mitsubishi Corp. signs a contract to sell a fleet of light-rail-transit (LRT) vehicles to the Region of Waterloo for $450 million. Mitsubishi also contracted to maintain the LRT vehicles for $45 million for the 24 ensuing months after the LRT was delivered.

Instructions

Mitsubishi is a public company and adhere to asset-liability approach (or contracts-based approach) as adopted by IFRS 15. Assuming all the LRT vehicles are delivered at the same time, illustrate the five steps in the revenue recognition process for Mitsubishi.

Suppose a state is considering three different types of fiscal limits for local governments in the state--a maximum property tax rate, a limit that property tax revenue may not increase more than population and inflation rate together, or a limit that spending may not increase more than five percent. In each case, the limit may be exceeded by majority vote. Which limit is most restrictive and why? Contrast the three in terms of the sources of allowed increases in taxes or spending and the potential effect on local services.

Question 4                                                                            25 Marks

Jimmy Reynolds is considering investing R12,000 in a project with the following cash revenues and expenses:

   Revenue    Expenses

Year 1    R20,000    R18,000

Year 2    R22,000    R19,000

Year 3    R22,000    R20,000

Year 4    R22,000    R17,000

Year 5 R25,000 R17,000

Jimmy requires a minimum rate of return of 8%.

A. Calculate the net cash inflows in each of the 5 years.

B. What is the payback period?

C. What is the net present value of the investment?

The following information is available for Swifty Corporation for the year ended December 31, 2017: Other revenues and gains $9,400 Sales revenue $596,100 Other expenses and losses 13,100 Operating expenses 245,900 Cost of goods sold 171,500 Sales returns and allowances 40,000 Other comprehensive income 5,900 Prepare a multiple-step income statement for Swifty Corporation and comprehensive income statement. The company has a tax rate of 30%. This rate also applies to the other comprehensive income.

Vaughn Sports sells volleyball kits that it purchases from a sports equipment distributor. The following static budget based on sales of 2,000 kits was prepared for the year. Fixed operating expenses account for 80% of total operating expenses at this level of sales. Sales Revenue $ 100,280 Cost of goods sold (all variable) 60,000 Gross margin 40,280 Operating expenses 35,170 Operating income $ 5,110 Prepare a flexible budget based on sales of 1,467, 2,570, and 3,840 units.

12. Why are all costs really "opportunity costs"?

13. Distinguish the laws of demand and supply. How are the laws of demand and supply illustrated graphically?

14. What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic, unitary elastic or inelastic demand?

15. What happens to total revenue given a price increase and demand is inelastic? Why?

16. What are the characteristics of the product that has an inelastic demand?

Financial information is presented here for two companies.Arts Inc.Cass Inc.Sales $960,000$ (e) Sales returns24,00018,000Sales discounts(a)12,000Net sales 920,000834,000Cost of goods sold 632,000(f) Gross profit 288,000 250,200Operating expenses(b)214,600Income from operations59,600(g)Other revenue(c)4,300Other expenses3,2001,800Income before income tax63,200(h)Income tax(d)7,400Net income50,60030,700Instructions(a) Fill in the missing amounts.SHOWyour work. (b) Calculate the profit margin and the gross profit margin for each company.