Two independent ice cream vendors own stands at either end of a 2 mile long beach. Everyday there are 200 beach-goers who come to the beach and distribute themselves uniformly along the water. Every beach-goer one wants exactly one ice cream during the day, and values the ice cream from both stands at $5. All of the beach-goers would rather be sunbathing or in the water, so they have a disutility to walking on the beach of $1 per mile.

Early’s Ice Cream, the firm at location 0, is an early riser and always posts his price first. Cali Creamery, at location 2, is more laid back and posts her price just before the beach opens (the beach requires all prices be posted by the time the beach opens). Both firms have a marginal cost of zero.

1. Each individual is also referenced by a location x on the beach between 0 and 2. What are the utilities of purchasing from Early’s and Cali for the person at location .75, given that Early’s names price pe and Cali names price pc? What are the utilities for each individual as a function of their location on the beach, x?

2. What is the demand for Early’s Ice Cream and Cali Creamery given the firms name prices pe and pc?

3. What is Cali Creamery’s best response function when Early’s posts a price of pe?

4. What is the Stackleberg equilibrium outcome for this market? Report prices, quantities, and profits for each firm.

5. Early’s owner feels that his hard work is not paying off, he hires you as a business consultant. He’s annoyed that Cali is always undercutting his price and is considering waiting to post so that Cali will not learn his price before naming her own. He wants you to predict how waiting to post his price will affect his profits. What will Early’s profits be under this new regime? What advice do you give him?

Hyperion​ Inc., currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $363. Its cost of goods sold for the Hyper 500 is $207 per​ unit, and this​ year's sales​ (at the current price of $363​) are expected to be 25,000 units. Hyperion plans to lower the price of the Hyper 500 to $311 one year from now

.a. Suppose Hyperion considers dropping the price to $311 immediately, (rather than waiting one​ year). By doing so it expects to increase this​ year's sales by 26% to 31,500

units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?

b. Suppose that for each printer​ sold, Hyperion expects additional sales of $84 per year on ink cartridges for the​ three-year life of the​ printer, and Hyperion has a gross profit margin of 61%

on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately​ (rather than waiting one​ year)?

a. Suppose Hyperion considers dropping the price to $311 immediately, (rather than waiting one​ year). By doing so it expects to increase this​ year's sales by 26% to 31,500

units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?The change in EBIT will be $$$$$???(Round to the nearest​ dollar.)

b. Suppose that for each printer​ sold, Hyperion expects additional sales of $84 per year on ink cartridges for the​ three-year life of the​ printer, and Hyperion has a gross profit margin of 61%

on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately​ (rather than waiting one​ year)? The change in EBIT from ink cartridge sales will be $??? (Round to the nearest​ dollar.)The incremental change in EBIT for the first year is $$$$$?(Round to the nearest​ dollar.)The incremental change in EBIT for the second year is $$$$$????(Round to the nearest​ dollar.)The incremental change in EBIT for the third year is $$$$$???? . (Round to the nearest​ dollar.)

Hyperion​ Inc., currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $ 362. Its cost of goods sold for the Hyper 500 is $ 207 per​ unit, and this​ year's sales​ (at the current price of $ 362​) are expected to be 25 comma 000 units. Hyperion plans to lower the price of the Hyper 500 to $ 310 one year from now.

a. Suppose Hyperion considers dropping the price to $ 310 ​immediately, (rather than waiting one​ year). By doing so it expects to increase this​ year's sales by 22 % to 30,500 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?

b. Suppose that for each printer​ sold, Hyperion expects additional sales of $ 69 per year on ink cartridges for the​ three-year life of the​ printer, and Hyperion has a gross profit margin of 77 % on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately​ (rather than waiting one​ year)?

. Suppose Hyperion considers dropping the price to $310 ​immediately, (rather than waiting one​ year). By doing so it expects to increase this​ year's sales by 22% to 30,500 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?

The change in EBIT will be ​$____ ​(Round to the nearest​ dollar.)

b. Suppose that for each printer​ sold, Hyperion expects additional sales of $69 per year on ink cartridges for the​ three-year life of the​ printer, and Hyperion has a gross profit margin of 77% on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately​ (rather than waiting one​ year)?

The change in EBIT from ink cartridge sales will be $___. ​(Round to the nearest​dollar.)

The incremental change in EBIT for the first year is ​$___.​(Round to the nearest​dollar.)

The incremental change in EBIT for the second year is $__.​(Round to the nearest​dollar.)

The incremental change in EBIT for the third year is $___.​(Round to the nearest​dollar.)

1) If a price that a perfectly competitive firm is able to get is above its average variable cost but below its average total cost then

a. The firm will suffer economic losses and should shut down immediately

b. The firm will be able to earn economic profit as soon as it can increase the size of its factory

c. The firm will suffer economic losses but should continue to operate

d. None of the above

2) In the short run, if price falls, the firm will respond by

a. Shutting down regardless of how high its variable costs are

b. Equating average variable cost to marginal revenue

c. Reducing output along its marginal cost curve as long as marginal cost curve as long as marginal revenue exceeds average variable cost

d. None of the above

3) Suppose a competitive firm is in equilibrium then the price of one of its inputs falls. What will happen?

a. The firm will hire more of the lower priced input

b. The firm will produce more output

c.The firm cost curves will downward

d. All of the above

4. A competitive industry will be in a long run equilibrium when

a. Each firm in the industry is earning zero economic profit

b. No entry or exit occurs

c.The total quantity produced at the prevailing price equals the total quantity consumers want to purchase

d. All of the above

5. In an increasing cost competitive industry, if prices rises above its long run equilibrium level which of the following will occur as the industry adjusts to a new long equilibrium ?

a. Firms will exit the industry

b. Economic profits will exits

c. Input prices will rise only when firms leave the industry

d. Price will return to its original level

6.The marginal revenue curve of a monopolist lies below the demand curve ( in the absence of price discrimination) becaus

a. The demand curve is unit elastic

b. The monopolist must lower price on all units sold in order to sell additional units

c. The monopolist is a price taker

d. The marginal revenue curve coincides with the average revenue curve

7. The demand curve for a monopolist's slopes downward because

a. Profit per unit declines

b. Demand elasticity is greater than one in the portion of the demand curve where the monopolist operates

c.It price discriminates

d. It faces the market demand curve

8. If a monopolist's is operating in the elastic portion of its demand curve then

a. An increase in price will increase total revenue

b. An increase in price will decrease total revenue

c. Marginal revenue is negative

d. An increase in price will leave total revenue unchanged

9. Marginal revenue is negative when

a. The demand curve is downward sloping

b. Demand curve is elastic

c. Demand curve is inelastic

d. Demand is unit elastic

10. The lerner index

a. Measures the monopoly power as the markup of price over average cost

b. Measures the monopoly power as the markup of price over marginal cost

c. Measures the market share of a firm

d. Measures the market capitalization of a firm

11. Compared to a competitive industry, ceteris paribus a standard monopoly firm

a. Sells more units and charges a higher price

b. Sells the same amount of units but at a higher price

c. Does not try to maximize profits as do firms in competitive industry

d. Restricts output and charges a higher price

12. 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 regulates and average cost pricing is enforced

13. Which of the following types of mergers directly reduces the number of competitors in an industry?

a. Congolomerate

b. Horizontal

c. Vertical

d. Bivariate

14. Why do gas stations near airport often charge more for gasoline ?

a. They have higher costs

b. They are inconvenient

c. They face a smaller elasticity of demand

d. They must pay the airport agency for space

15. The deadweight loss due to monopoly restriction of output occurs over units of output

a. For which the willingness to pay would be greater than MC but don't get produces

b. For which the willingness to pay is greater than MC and do not get produced

c. Up until the profit maximizing level of output

d. For which the willingness to pay is less than MC but don't get produced

16. First degree discrimination

a. Is perfect because consumers benefit the most

b. Is called first degree because it does not apply to resale of products

c. Is also known as perfect price discrimination

d. Is the easiest form of price discrimination

Taxes and welfare

Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes.

First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.

Before TaxEquilibriumConsumer SurplusProducer Surplus05010015020025030035040045050050454035302520151050PRICE (Dollars per fan)QUANTITY (Fans)DemandSupplyArea: 0

Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $20 per fan.

First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.

After TaxTax RevenueConsumer SurplusProducer SurplusDeadweight Loss05010015020025030035040045050050454035302520151050PRICE (Dollars per fan)QUANTITY (Fans)DemandSupplyTax WedgeArea: 0

Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax.

Note: You can determine the areas of different portions of the graph by selecting the relevant area.

Nash Company sells on credits goods that cost $310,000 to Ricard Company for $409,500 on January 2, 2020. The sales price includes an installation fee, which has a standalone selling price of $42,500. The standalone selling price of the goods is $367,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete.

(a) Prepare the journal entries (if any) to record the sale on January 2, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

(b) Nash prepares an income statement for the first quarter of 2020, ending on March 31, 2020 (installation was completed on June 18, 2020). How much revenue should Nash recognize related to its sale to Ricard?

show work and explain

Question (1): As a financial manager of the Alpha investment group, you are required to rank the bonds presented on the basis of YTM/YTC. Information on the bonds are provided below. Prepare your list from the best to worse and explain your reason for that.

Seiko’s bond has 20 year maturity, 9% coupon that is paying semiannually and callable in 4 years at a call price of $1070. A bond sells at a yield to maturity of 8% currently. (Calculate YTC)

Wilson’s bonds have 12 years remaining to maturity and pay the interest annually. The Par value of the bond is $1000 and the coupon rate is 8% and the market price of the bond is $900.

Government zero-coupon bonds with face value of $1000 and maturity of 7 years and currently the price is $532.12.

Jackson rentals have a bond that matures in 6 years and 8% annual coupon. The current yield of the bond is 8.21%.

Question (2): Below are three different bonds with different information. As the financial manager of the company, you are required to choose the best bond based on its Holding Period Return (HPR)

(HPR=?1−?0+?). You are expecting YTM to increase by 0.5% for the first bond, 1.5% for the ?0

second bond, and 1% for the third bond at the beginning of first-year (you should consider these changes while calculating P1). Please show all required calculations.

1. 1- 10-year maturity bond with face value of $1000 and pay coupon $70 once per year. Currently yield to maturity of the bond is 7%.

2. 2- Zero-coupon bond with a 15-year maturity and the face value of $1000 and currently yield to maturity is 7.5%

3. 3- 15-year bond with an annual coupon payment of 9% and $1000 face value. The bond currently sells at a yield to maturity of 7%.

Munoz Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow:

Production of 860 sets of cutting shears, one of the company’s 20 products, took 250 labor hours and 9 setups and consumed 20 percent of the product-sustaining activities.

Required

1. Had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears?

2. How much overhead is allocated to the cutting shears using activity-based costing?

3. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 860 units are produced. If direct product costs are $120 and the product is priced at 30 percent above cost for what price would the product sell under each allocation system?

Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 860 units are produced. If direct product costs are $120 and the product is priced at 30 percent above cost for what price would the product sell under each allocation system? (Round intermediate calculations and final answers to 2 decimal places.)

Show less

Comm Devices (CD) is a division of Worldwide Communications, Inc. CD produces restaurant pagers and other personal communication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD was recently approached by the manager of the Personal Communications Division regarding a request to make a special emergency-response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that CD produce 9,900 units of this special pager. The following facts are available regarding the Comm Devices Division.

For each of the following independent situations, calculate the minimum transfer price, and determine whether the Personal Communications Division should accept or reject the offer.

(a)

The Personal Communications Division has offered to pay the CD Division $112 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 7,920 pagers to existing customers in order to meet the request of the Personal Communications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.) (Round answer to 2 decimal places, e.g. 125.36.)

(b)

The Personal Communications Division has offered to pay the CD Division $150 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 13,200 pagers to existing customers in order to meet the request of the Personal Communications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.)

(c)

The Personal Communications Division has offered to pay the CD Division $107 per pager. The CD Division has available capacity.

Mini-Case

After graduating from college last spring with a major in accounting and finance, Jim Hale took a job as an analyst trainee for an investment company in Chicago. His first few weeks were filled with a series of rotations throughout the firm’s various operating units, but this week he was assigned to one of the firm’s traders as an analyst. On his first day, Jim’s boss called him in and told him that he wanted to do some rudimentary analysis of the investment returns of a semiconductor manufacturer called Advanced Micro Devices, Inc. (AMD). Specifically, Jim was given the following month-end closing prices for the company spanning the period of November 1, 2011, through November 1, 2012:

He was then instructed by his boss to complete the following tasks using the AMD price data (note that AMD paid no dividend during the period being analyzed).

Questions

1. Compute AMD’s monthly realized rates of return for the entire year.

2. Calculate the average monthly rate of return for AMD using both the arithmetic and the geometric averages.

3. Calculate the year-end price for AMD, computing the compound value of the beginning-of-year price of $5.69 per share for 12 months at the monthly geometric average rate of return calculated earlier:

   End-of-YearStockPrice=Beginning-of-YearStockPrice(1+GeometricAverageMonthlyRateofReturn)12End-of-Year  Stock Price=Beginning-of-Year         Stock  Price(1+Geometric  AverageMonthly  Rate of Return)12

4. Compute the annual rate of return for AMD using the beginning and ending stock prices for the period (i.e., $5.69 and $1.88).

5. Now calculate the compound annual rate of return using the geometric average monthly rate of return:

   CompoundAnnualRateofReturn=(1+GeometricAverageMonthlyRateofReturn)12−1Compound Annual   Rate  of Return=(1+Geometric AverageMonthly Rate of Return)12−1

6. If you were given annual rate of return data for AMD’s or any other company’s stock and you were asked to estimate the average annual rate of return an investor would have earned over the sample period by holding the stock, would you use an arithmetic or a geometric average of the historical rates of return? Explain your response as if you were talking to a client who has had no formal training in finance or investments.