5. Eastern Engineering Company is trying to decide which of 6 projects to perform during the next quarter. The net present value, the estimated cost, and the number of engineers and staff personnel required for each project are given in the following table.

Eastern has a $550,000 budget and 30 engineers and 15 staff available. Which projects should Eastern perform during the quarter?

25. The "monopolistic" element of monopolistic competition is due to the fact that

A) the firm has no rivals that produce close substitutes.

B) the firm is large relative to the market.

C) the firm produces on the inelastic portion of its demand curve.

D) the firm, facing a downward sloping demand curve, has some control over price.

26. In the long run, an industry under monopolistic competition is characterized by excess capacity because         

A) each firm tries to take customers away from other firms by offering discounts to sell more units.

B) firms are spending money on advertising and the extra costs must be recovered.

C) each firm overestimates the capacity it needs when it fails to take into consideration how other firms will respond to the output decisions it makes.

D) entry occurs until zero profits are made, which implies that each firm is producing to the left of the minimum point of its average cost curve.

27. A duopoly is an industry                                                                                                 

A) with two types of customers.

B) with two sellers.

C) with multiple product lines.

D) a homogeneous product.

28. “Deadweight” loss occurs if

A) consumers really want a product, but production costs turn out to be higher than expected, and profits turn out to be lower than expected

B) a monopolist charges a price that is equal to marginal cost

C) a monopolist engages in first degree price discrimination

D) none of the above

29. Economic efficiency involves

A) whatever will maximize profits for sellers

B) continuing production as long as consumers value the product at least much as the marginal cost of producing more units

C) stopping production if the demand curve becomes steeper than average fixed costs

D) none of the above

30. Under two-part pricing (but with no price discrimination) with customers who have demands of varying strength, a firm that wishes to maximize profits is advised to

A) establish a cover charge based on the consumer surplus otherwise available to the highest demanders

B) ignore the Golden Rule of cost minimization, but just in this particular case

C) impose a user charge that is somewhat higher than the level of marginal cost

D) none of the above

31. A monopoly will produce the efficient rate of output if it                        

A) engages in perfect price discrimination.

B) engages in no price discrimination

C) engages in third-degree price discrimination.

D) is regulated and average-cost pricing is enforced.

32. Third degree price discrimination                                                                      

A) causes consumer surplus to be eliminated

B) is called third-degree because it works best for firms if products can be resold later on

C) will maximize profits if a firm charges a price in each market segment that equals its marginal cost multiplied by the price elasticity of demand

D) is the most difficult form of price discrimination to implement.

33. Long-run supply is typically more elastic than short-run supply because

A) the law of diminishing returns does not apply to the short run

B) firms can enter or exit the market in the long run

C) capital is fixed in the long run

D) none of the above

34. According to the “Golden Rule” of cost minimization;

A) if one input has a lower marginal product than another, it should not be employed

B) if one input costs more per hour than another, it should not be employed

C) inputs should be employed such that the ratio of their respective prices equals the ratio of their respective marginal products

D) none of the above

35. Under two-part pricing

A) profits are maximized by setting a user charge at a monopoly level

B) profits are maximized by establishing a set-up charge to capture consumer surplus that would have otherwise remained

C) profits are maximized by having the sum of the user charge and the set-up charge be as high as possible

D) none of the above

36. Some consumer surplus remains under each of the following EXCEPT                       

A) two-part pricing with multiple consumers

B) third-degree price discrimination

C) first-degree price discrimination

D) block pricing

37. In the case of an increasing cost industry in which consumer demand has decreased

A) the final, long run price will be higher than the price at the very beginning

B) the final, long run price will be lower than the price that first emerges in the short run after the decrease in demand, but in the short-run the price will become higher than the price at the very beginning

C) cost curves shift downward in the long run as firms exit the industry

D) none of the above

38. Which of the following would contribute to the emergence of an industry characterized by oligopoly?

A) the level of production consistent with minimum efficient scale is very small in comparison to the size of the overall market

B) barriers to entry that most firms would have difficulty overcoming

C) anti-trust laws that prevent most mergers

D) none of the above

39. When a profit-maximizing monopolist sells output in two distinct markets, which of the following is true?

A) Price will be higher in the market in which demand is unit-elastic.

B) Price will be lower in the market with the more elastic demand

C) Price will be equal in each market, as long as there is a constant marginal cost.

D) Price will be lower in the market for which there are fewer substitute goods.

40. With intertemporal price discrimination                                                               

A) each consumer is charged his/her full willingness to pay.

B) groups are charged different prices in accordance with the principles of third-degree price discrimination

C) monopolists capture all the consumer surplus.

D) Both A and C are true.

Question 3 (October 2018)

Dyson Company Malaysia manufactures the cyclonic vacuum cleaner which us to be sold in Asia for RM2,000 per vacuum. The following information is in relation to the budgeted production and sales of cyclonic vacuum cleaners for the last quarter of 2017.

1. Budgeted sales in units:

July 10,000

August 12,000

September 14,000

October 13,500

November 13,800

December 14,500

60% of the sales will be collected one month after sales.

30% of the sales will be collected two months after sales.

10% of the sales will be collected three months after sales.

2. Variable production cost per vacuum:

RM

Direct materials 30.00

Direct labour 21.00

Overhead 16.00

3. Budgeted production in units:

August 12,000

September 14,000

October 13,500

November 13,800

December 14,500

4. It is the company policy to pay creditors for material two months after purchases are made.

5. Wages and variable overhead are paid within the month they are incurred.

6. Sales commission are 8% on sales and are to be paid one month after sales are made.

7. Fixed overhead is RM210,000 per month, which includes depreciation of RM65,000.

8.Fixed selling and administration is RM72,000 per month which is payable in the month

it is incurred.

9. One of the old machines will be sold for RM12,000 in the month of November and a new machine will be replace it in the same month at a cost of RM78,000.

10. The company will pay dividends which was declared at RM100,000 at the end of December.

11. It is expected that the cash balance on 30th September will be RM80,000.

Required:

(a) Prepare a schedule of expected cash collections from customer for the last quarter of 2017.

(b) Prepare schedule for payment of materials for the last quarter of 2017.

(c) Prepare a cash budget for the last quarter of 2017.

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $360,000, and March sales totaled $390,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $360,000, and March sales totaled $390,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

Schedule of Expected Cash

April May June Total

February sales

March sales

April sales

May sales

June sales

Total cash collections

Question 3 (October 2018)

Dyson Company Malaysia manufactures the cyclonic vacuum cleaner which us to be sold in Asia for RM2,000 per vacuum. The following information is in relation to the budgeted production and sales of cyclonic vacuum cleaners for the last quarter of 2017.

1. Budgeted sales in units:

July 10,000
August 12,000
September 14,000
October 13,500
November 13,800
December 14,500

60% of the sales will be collected one month after sales.
30% of the sales will be collected two months after sales.
10% of the sales will be collected three months after sales.

2. Variable production cost per vacuum:
RM
Direct materials 30.00
Direct labour 21.00
Overhead 16.00

3. Budgeted production in units:

August 12,000
September 14,000
October 13,500
November 13,800
December 14,500

4. It is the company policy to pay creditors for material two months after purchases are made.

5. Wages and variable overhead are paid within the month they are incurred.

6. Sales commission are 8% on sales and are to be paid one month after sales are made.

7. Fixed overhead is RM210,000 per month, which includes depreciation of RM65,000.

8. Fixed selling and administration is RM72,000 per month which is payable in the month it is incurred.

9. One of the old machines will be sold for RM12,000 in the month of November and a new machine will be replace it in the same month at a cost of RM78,000.

10. The company will pay dividends which was declared at RM100,000 at the end of December.

11. It is expected that the cash balance on 30th September will be RM80,000.



Required:
a) Prepare a schedule of expected cash collections from customer for the last quarter of 2017.                                                                                                         

b) Prepare schedule for payment of materials for the last quarter of 2017.            

c) Prepare a cash budget for the last quarter of 2017.                                        
(Total: 30 Marks)

A food company has recently introduced a new line of fruit pies in 6 US cities: Atlanta, Baltimore, Chicago, Denver, St. Louis, and Fort Lauderdale. Based on the pie’s apparent success, the company is considering a nationwide launch. Before doing so, it has decided to use data collected during a two-year market test to guide it in setting prices and forecasting future demand.

            For each of the 6 markets, the firm has collected eight quarters of data for a total of 48 observations. Each observation consists of data on quantity demanded (number f pies purchased per week), price per pie, a competitor’s average price per pie, income, and population. The company has also included a time-trend variable. A value of 1 denotes the 1^st quarter observation, 2 the 2^nd quarter, and so on, up to 8 for the 8^th and last quarter.

            A company forecaster has run a regression on the data, obtaining the results displayed in the accompanying table.

C.) Other things equal, how much do we expect sales to grow (or fall) over the next year?

D.) How much accurate is the regression equation in predicting sales new quarter? Two years from now? Why might these answers differ?

E.) How confident are you about applying these test-market results to decisions concerning national pricing strategies for pies?

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?

Financial disadvantage per quarter or financial advantage per quarter?

Should the production and sale of racing bikes be discontinued? Yes or no

Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

FASB Codification Project Value:

Read the case below and answer the 3 questions.

Jordan Corp is a US manufacturer of auto parts with branch operations in France. On December 31, 2016 wishes to use a foreign currency option to hedge a 10,000,000 euro denominated accounts receivable that is due in two years. Jordan plans to use fair value hedge accounting. Over the subsequent 4 quarters the following are the changes in the fair value of the receivable and the foreign currency option hedge.

Quarter ended March 31, 2017:

Euro receivable increases by $ 400,000

Option hedge declines by $350,000

Quarter ended June 30, 2017:

Euro receivable decreases by $500,000

Option hedge increases by $ 400,000

Quarter ended Sept. 30, 2017:

Euro receivable decreases by $800,000

Option hedge increases by $700,000

Quarter ended Dec. 31, 2017:

Euro receivable increases by $ 200,000

Option hedge decreases by $ 100,000

Answer the following questions:

1 . Structure the appropriate fair value hedge using an FX option. Your answer must state whether Jordan is purchasing or selling a call option or a put option, what is the maturity date of the option as well as whether it is an option to purchase euros and sell US dollars or an option to purchase US dollars and sell euros. (1 point).

2 . Identify by codification reference, e.g., xxx-xx-xx-xx, and attach AND HIGHLIGHT the appropriate section(s) of the FASB codification that describe the alternate criteria that can be used to determine at December 31, 2017 whether or not this has been an effective fair value hedge (2 points ).

3. Using one of the alternate criteria in your answer to #2 above, state your conclusion as to whether this is an effective hedge, meeting the FASB criteria. You must include a computation to support your conclusion. (2 points ).

The data contained in <professional> are the number of males employed full time in a professional occupation in Australia from August quarter 1996 to August quarter 2008.

a) Plot the series of data.

b) Calculate linear trend equation and plot the trend line.

c) What are your forecasts of male full-time professional employment in November quarter 2008 and February quarter 2009?

d) Do you think it is reasonable to try to forecast employment in this way? Explain.

Case Study 5–5 All in a Day’s Work

Sarah Goodman, senior manager of network development for Holy Managed Care Company, looked over her calendar for the day and sighed deeply. It seemed as if there would be no time at all to work on the project she’d been putting off for most of the week. Circumstances seemed to be such that she simply didn’t have any control over her own time anymore.

Well, first things first, she determined. At 9:00 she was due at a meeting of senior managers who were involved in trying to devise a strategy for counteracting a threatened unionization drive by the company’s nonexempt employees. As Sarah thought about the people working for her, she began to wonder exactly what they wanted. They had a pleasant working space, good benefits package, and secure employment. She heard the laughter and chatter drifting into her office as people came into work and thought what a pleasant and congenial group they were. What more could they want?

Then at 10:30 there was another meeting. This one could be very exciting! In six months Sarah’s office was scheduled to be moved to a new industrial park on the west side of town. The plans she’d seen so far had all kinds of great perks for employees: on-site day-care center, fitness center, ample parking, great facilities for training. The company was certainly spending a lot of money on this new site. Sarah certainly hoped it would help increase productivity; it certainly would make the employees happier
and make recruitment easier.

She’d have to hurry to her lunch meeting with the adviser for the MHA program at Saint Thomas University. Sarah had decided as a part of her New Year’s resolution that she was finally going to begin her graduate degree. She felt she was simply stagnating in her job and, after looking around at positions in her company that looked interesting, she realized she needed a graduate degree if she were going to progress. The only problem was that she wasn’t sure how enthusiastic Richard, her husband, would be about the whole idea. And her mother certainly wouldn’t be happy! The hints about grandchildren had become an outright discussion over the holidays.

Discuss the various motivation theories reflected in this case study.

These include:

Maslow's Hierarchy of Needs Theory

Alderfer's ERG Theory

Herzberg's Two-Factor Theory

Hackman and Oldham's Job Design Theory

McClelland's Three-Needs Theory