Exercise 5-13 Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO5-1, LO5-4]

Miller Company’s contribution format income statement for the most recent month is shown below:

Required:

(Consider each case independently):

1. What is the revised net operating income if unit sales increase by 15%?

2. What is the revised net operating income if the selling price decreases by $1.30 per unit and the number of units sold increases by 20%?

3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $9,000, and the number of units sold decreases by 8%?

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 12%?

Problem 5-25 Prepare and Interpret Income Statements; Changes in Both Sales and Production; Lean Production [LO5-1, LO5-2, LO5-3]

Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Operating results for the first three years of activity were as follows (absorption costing basis):

In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax’s Sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 50,000 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that inventory was excessive and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below:

Additional information about the company follows:

1. The company’s plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $4.00 per unit, and fixed manufacturing overhead expenses total $540,000 per year.  
2. Fixed manufacturing overhead costs are applied to units of product on the basis of each year’s production. That is, a new fixed manufacturing overhead rate is computed each year.
3. Variable selling and administrative expenses were $3 per unit sold in each year. Fixed selling and administrative expenses totaled $70,000 per year.
4. The company uses a FIFO inventory flow assumption.

Starfax’s management can’t understand why profits more than doubled during Year 2 when sales dropped by 20%, and why a loss was incurred during Year 3 when sales recovered to previous levels.

Required:

1. Prepare a contribution format variable costing income statement for each year.

2a. Compute the unit product cost in each year under absorption costing. (Round your answers to 2 decimal places.)

2b. Reconcile the variable costing and absorption costing net operating income (loss) figures for each year.

5b. If Lean Production had been used during Year 2 and Year 3 and the predetermined overhead rate is based on 50,000 units per year, what would the company's net operating income (loss) have been in each year under absorption costing? (Losses should be indicated by a minus sign.)

Problem 6-25 Prepare and Interpret Income Statements; Changes in Both Sales and Production; Lean Production [LO6-1, LO6-2, LO6-3]

Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basis):

In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax’s sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 50,000 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below:

Additional information about the company follows:

1. The company’s plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $6.00 per unit, and fixed manufacturing overhead expenses total $450,000 per year.

2. A new fixed manufacturing overhead rate is computed each year based that year's actual fixed manufacturing overhead costs divided by the actual number of units produced.

3. Variable selling and administrative expenses were $3 per unit sold in each year. Fixed selling and administrative expenses totaled $80,000 per year.

4. The company uses a FIFO inventory flow assumption. (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first.)

Starfax’s management can’t understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels.

Required:

1. Prepare a contribution format variable costing income statement for each year.

2. Refer to the absorption costing income statements above.

a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed.

b. Reconcile the variable costing and absorption costing net operating income figures for each year.

5b. If Lean Production had been used during Year 2 and Year 3, what would the company’s net operating income (or loss) have been in each year under absorption costing?

QUESTION 15

Which line coding technique represents logical “1s” as alternating voltage changes (e.g., 1,1 represented as +v, -v).

QUESTION 16

1. 4B5B differs from line coding techniques in that is ensures that strings of consecutive “1s” and “0s” do not exist prior to being line coded. Select the correct statement(s) regarding 4B5B.

   		a. since 4B5B eliminates long string of logical “1s” and “0s”, simpler line coding techniques such as NRZ can be used.
   		b. since one bit out of every five bits sent is not real information, the data link suffers from a 1/5 or 20% overhead cost (i.e., reduction in data throughput)
   		c. only 80% of the data sent using 4B5B is real information
   		d. all of the above are correct statements

QUESTION 17

1. Analog-to-digital conversion (ADC) describes converting an analog signal into digital data. How is this accomplished?

   		a. analog signals are continuous and therefore can never be converted into a digital signal
   		b. analog signals must undergo a line coding process
   		c. analog signals mush be sampled and quantized
   		d. analog signals are modulated onto digital carriers

QUESTION 18

1. You want to capture a live music concert and covert it into digital format for transmission. The human ear has a frequency bandwidth of approximately 20,000 Hz. Select the best sampling rate and bit depth.  (hint: use Nyquist and a bit-depth of 16)

   		a. fs=40,000 samples/s, Bit depth = 1 bit per sample
   		b. fs=40,000 samples/s, Bit depth = 16 bit per sample
   		c. fs=10,000 samples/s, Bit depth = 16 bit per sample
   		d. fs=20,000 samples/s, Bit depth = 1 bit per sample

QUESTION 19

When digitizing an analog signal, quantization errors will always be present regardless of bit-depth used.

True

False

QUESTION 20

What happens during an analog-to-digital conversion process, if you fail to follow the Nyquist formula?

QUESTION 21

You digitize an analog signal that has a frequency bandwidth of 8kHz, using a bit depth of 4. What data rate must be supported?

Problem 6-07

The following are monthly percentage price changes for four market indexes.

Compute the following.

1. Average monthly rate of return for each index. Round your answers to five decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

2. Standard deviation for each index. Do not round intermediate calculations. Round your answers to four decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

3. Covariance between the rates of return for the following indexes. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to six decimal places.

   Covariance (DJIA, S&P 500):

   Covariance (S&P 500, Russell 2000):

   Covariance (S&P 500, Nikkei):

   Covariance (Russell 2000, Nikkei):

4. The correlation coefficients for the same four combinations. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to four decimal places.

   Correlation (DJIA, S&P 500):

   Correlation (S&P 500, Russell 2000):

   Correlation (S&P 500, Nikkei):

   Correlation (Russell 2000, Nikkei):

5. Using the unrounded answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Do not round intermediate calculations. Round your answers to five decimal places.

   Expected return (S&P 500 and Russell 2000):

   Standard deviation (S&P 500 and Russell 2000):

   Expected return (S&P 500 and Nikkei):

   Standard deviation (S&P 500 and Nikkei):

   Since S&P 500 and Russell 2000 have a strong (Select-negative, positive) correlation, meaningful reduction in risk (Select-is not observed, is observed) if they are combined.

   Since S&P 500 and Nikkei have a strong (Select-negative, positive) correlation, meaningful reduction in risk (Select-is not observed, is observed) if they are combined.

For which type(s) of retirement plans is the yearly pension expense affected by expected market value changes of the assets of the plan?

Select one:

a. Both Defined Benefit and Defined Contribution

b. Neither Defined Benefit nor Defined Contribution

c. Defined Benefit, but not Defined Contribution

d. Defined Contribution, but not Defined Benefit

Suppose the that the Central Bank decides to buy back more assets through open market operations. Would this policy aim to stimulate or contract the economy? In addition, would interest rates be affected? Make sure to include in your answer a description of how changes in interest rates affects the supply and demand of interest-earning assets.

Topic: Choice of Exchange Rate Regimes for Developing Countries: Better Be Fixed or Floating? Countries: Russia and Kazakhstan

What does the greatest impact towards economic changes in most of countries this year? And what is possible impact? Describe it.

(Please, have in mind that not only pandemics make impact on various

countries economics year 2020.)

1. a. Discuss briefly the supply schedule and the various factors affecting the supply in the market.

b. Assume the demand being perfectly inelastic and supply suddenly doubles due to innovative technique of production. Explain the changes in the equilibrium price, and quantity, and also is it advisable to do so from supplier point of view.

Please explain briefly.