Questions
Production cost, fixed cost, average variable cost, product output

Use the following data table to answer questions a,b,c,d, and d. Answer the next question(s) on the basis of the following cost data for a purely competitive seller:

 

          

 

a. what are the above data for?

b.How much are average fixed cost, average variable cost, and average total cost at 5 units of output?

c.  How much is the marginal cost of the fifth unit of output?

d. How many products will the firm produce if the product price is $75?

e. Given the $75 product price, how much will the firm be at its optimal output?

In: Economics

Describe the twofold cost of sex, the cost of males, and the cost of recombination. What...

  1. Describe the twofold cost of sex, the cost of males, and the cost of recombination.
  2. What are the differences between sexual and natural selection? Define and explain each (including the basic principles of evolutionary changes and natural selection) with examples from the readings and class.

please explain in about 3-4 paragraph so that I could understand clearer please.

In: Biology

Marginal cost intersects average total cost and average variable cost

Marginal cost intersects average total cost and average variable cost

at a point depending on profit maximizing quantity.

not enough information to answer.

when they are increasing.

at their lowest points.

In: Economics

1. Explicit cost equals A) Opportunity cost minus sunk cost.

1.   Explicit cost equals                                                                                                         

A) Opportunity cost minus sunk cost.

B) Implicit cost minus sunk cost.

C) Economic cost minus opportunity cost.

D) Opportunity cost minus implicit cost.

2. If supply decreases, and at the same time, demand increases, which of the following would also occur?

A) an increase in the equilibrium price

B) a decrease in the equilibrium price of substitutes

C) a decrease in the equilibrium quantity

D) all of the above

3. Which of the following statements about demand elasticity is correct?                           

A) If demand is price-inelastic, an increase in price will reduce total revenue.

B) If demand is price-elastic, an increase in price will increase total revenue.

C) If demand is price-inelastic, an increase in price will increase total revenue.

D) If demand is price-elastic, an increase in price will leave total revenue unchanged.

4. Which of the following correctly characterizes a profit-maximizing monopolist (assuming no price discrimination)?

A) P>MR=MC

B) P>MR>MC

C) P=MR=MC

D) P=MR>MC

5.   Elasticity of demand tends to be greater                                                                         

A) the longer the time period involved.

B) the more complements the good has.

C) the lower the income elasticity of demand.

D) the more widely defined the commodity class.

6. If the energy costs involved in making a product greatly decrease, then we can expect (other things equal)

A) both the equilibrium price and the equilibrium quantity to increase

B) both the equilibrium price and the equilibrium quantity to decrease

C) the equilibrium price to increase and the equilibrium quantity to decrease

D) the equilibrium price to decrease and the equilibrium quantity to increase                      

7.   If a firm doubles its use of all inputs, and output increases by 50 percent, the production function exhibits      

A) increasing returns to scale.

B) decreasing returns to scale.

C) constant returns to scale.

D) increasing marginal returns to a fixed factor of production.

8. Which of the following statements about the relationship between marginal cost and average (total) cost is correct?

A) When MC is falling, AC is falling.

B) AC equals MC at MC's lowest point.

C) When MC exceeds AC, AC must be rising.

D) When AC exceeds MC, MC must be rising.

9. Once diminishing returns have set in, each additional unit of a variable input                  

A) decreases total output.

B) adds less to total output.

C) adds more to total output.

D) does not affect total output.

10. The marginal cost curve intersects the average variable cost curve at 1000 units per day. The rate of output at which average total costs are minimized is

A) 1000 units.

B) more than 1000 units.

C) less than 1000 units.

D) none of the above. More information is needed

11. Increasing returns to scale imply that                                                                 

A) average costs are constant.

B) average costs are falling.

C) average costs are increasing.

D) average costs are negative.

12. Which of the following statements is incorrect?                                                 

A) Average variable cost falls, reaches a minimum and begins to rise.

B) Average total cost falls, reaches a minimum and begins to rise.

C) Average fixed cost falls, reaches a minimum and begins to rise.

D) marginal cost falls, reaches a minimum and begins to rise.

13. In the case of second-degree price discrimination

A) consumers do not get as much consumer surplus as they do under perfect price discrimination

B) the seller produces more than would be the case under perfect competition

C) all of the prices charged are equal to marginal cost

D) none of the above

14. Free entry does not exist when                                                                         

A) there are no differential impediments across firms in the mobility of resources into and out of an industry.

B) a firm experiences economies of scale.

C) an incumbent firm has an exclusive government patent.

D) a firm experiences diseconomies of scale.

15. The demand curve of a perfectly competitive firm is determined by                               

A) the level of the quality of the good the firm produces.

B) the intersection of the market demand and supply curves.

C) the reputation of the firm.

D) the slope of its marginal cost curve

16. The perfectly competitive firm's demand curve is horizontal because                             

A) it is part of the industry's demand curve which is horizontal in competitive industries.

B) its demand is so elastic that the firm behaves as a price-taker.

C) all the firms in the industry have agreed upon the price to charge customers.

D) none of the above.

17. A competitive firm maximizes profit at the output level where                                       

A) price minus average total cost is the largest.

B) average total cost equals marginal cost.

C) marginal revenue exceeds marginal cost by the greatest amount.

D) none of the above

18. In the short-run, if a competitive firm finds itself operating at a loss, it will                  

A) shut down.

B) continue to operate as long as price is greater than average variable cost.

C) raise the price of its product.

D) reduce the size of its plant to lower fixed costs.

19. In a constant-cost competitive industry, if price rises above its long-run equilibrium level, which of the following willnot occur as the industry adjusts to a new long-run equilibrium?

A) New firms will enter the industry.

B) Economic profit will be eliminated.

C) Input prices will rise.

D) Existing firms will increase production, at least for a while

20. The market demand curve and the demand curve faced by a monopoly are                  

A) different in that the market demand curve is less elastic.

B) different in that the market demand curve is more elastic.

C) different, but we can't tell which is more elastic without more information.

D) identical.

In: Economics

In what sense is the cost of capital an opportunity cost? An opportunity cost to whom?...

In what sense is the cost of capital an opportunity cost? An opportunity cost to whom? And, Is it possible that there could be sources of financing that have a zero cost?

In: Finance

The Cost of Capital: Cost of Retained Earnings The cost of common equity is based on...

The Cost of Capital: Cost of Retained Earnings

The cost of common equity is based on the rate of return that investors require on the company's common stock. New common equity is raised in two ways: (1) by retaining some of the current year's earnings and (2) by issuing new common stock. Equity raised by issuing stock has a(n)

cost, re, than equity raised from retained earnings, rs, due to flotation costs required to sell new common stock. Some argue that retained earnings should be "free" because they represent money that is left over after dividends are paid. While it is true that no direct costs are associated with retained earnings, this capital still has a cost, a(n)

cost. The firm's after-tax earnings belong to its stockholders, and these earnings serve to compensate them for the use of their capital. The earnings can either be paid out in the form of dividends to stockholders who could have invested this money in alternative investments or retained for reinvestment in the firm. Therefore, the firm needs to earn at least as much on any earnings retained as the stockholders could earn on alternative investments of comparable risk. If the firm cannot invest retained earnings to earn at least rs, it should pay those funds to its stockholders and let them invest directly in stocks or other assets that will provide that return. There are three procedures that can be used to estimate the cost of retained earnings: the Capital Asset Pricing Model (CAPM), the Bond-Yield-Plus-Risk-Premium approach, and the Discounted Cash Flow (DCF) approach.

CAPM

The firm's cost of retained earnings can be estimated using the CAPM equation as follows:

rs = rRF + (RPM)bi = rRF + (rM - rRF)bi

The CAPM estimate of rs is equal to the risk-free rate, rRF, plus a risk premium that is equal to the risk premium on an average stock, (rM - rRF), scaled up or down to reflect the particular stock's risk as measured by its beta coefficient, bi. This model assumes that a firm's stockholders are

diversified, but if they are diversified, then the firm's true investment risk would not be measured by and the CAPM estimate would

the correct value of rs.

Bond Yield Plus Risk Premium

If reliable inputs for the CAPM are not available as would be true for a closely held company, analysts often use a subjective procedure to estimate the cost of equity. Empirical studies suggest that the risk premium on a firm's stock over its own bonds generally ranges from 3 to 5 percentage points. The equation is shown as: rs = Bond yield + Risk premium. Note that this risk premium is

the risk premium given in the CAPM. This method doesn't produce a precise cost of equity, but does provide a ballpark estimate.

DCF

The DCF approach for estimated the cost of retained earnings, rs, is given as follows:



Investors expect to receive a dividend yield, , plus a capital gain, g, for a total expected return. In

, this expected return is also equal to the required return. It's easy to calculate the dividend yield; but because stock prices fluctuate, the yield varies from day to day, which leads to fluctuations in the DCF cost of equity. Also, it is difficult to determine the proper growth especially if past growth rates are not expected to continue in the future. However, we can use growth rates as projected by security analysts, who regularly forecast growth rates of earnings and dividends.

Which method should be used to estimate rs? If management has confidence in one method, it would probably use that method's estimate. Otherwise, it might use some weighted average of the three methods. Judgment is important and comes into play here, as is true for most decisions in finance.

Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.50 and it expects dividends to grow at a constant rate g = 3.1%. The firm's current common stock price, P0, is $28.00. The current risk-free rate, rRF, = 4%; the market risk premium, RPM, = 5.3%, and the firm's stock has a current beta, b, = 1.2. Assume that the firm's cost of debt, rd, is 6.11%. The firm uses a 3.3% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using each of these three approaches? Round your answers to 2 decimal places.

CAPM cost of equity: %
Bond yield plus risk premium: %
DCF cost of equity: %

What is your best estimate of the firm's cost of equity?

In: Finance

Dec. 1 Issued to John and Patty Driver 27,000 shares of capital stock in exchange for...

Dec. 1 Issued to John and Patty Driver 27,000 shares of capital stock in exchange for a total of $270,000 cash.
Dec. 1 Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $138,000 cash and issued a 1-year note payable for $63,600. The note, plus all 12 months of accrued interest, are due November 30, Year 2.
Dec. 1 Paid $9,300 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It.
Dec. 4 Purchased office supplies on account from Modern Office Co., $1,200. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.)
Dec. 8 Received $8,500 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.)
Dec. 12 Paid salaries for the first two weeks in December, $4,900.
Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,600, of which $12,100 was received in cash.
Dec. 17 Purchased on account from Earth Movers, Inc., $600 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days.
Dec. 23 Collected $2,200 of the accounts receivable recorded on December 15.
Dec. 26 Rented a backhoe to Mission Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.
Dec. 26 Paid biweekly salaries, $4,900.
Dec. 27 Paid the account payable to Earth Movers, Inc., $600.
Dec. 28 Declared a dividend of 10 cents per share, payable on January 15, Year 2.
Dec. 29 Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co-defendant in a $24,000 lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had left the rented backhoe in a fenced construction site owned by Collier Construction. After working hours on December 26, Davenport had climbed the fence to play on parked construction equipment. While playing on the backhoe, he fell and broke his arm. The extent of the company’s legal and financial responsibility for this accident, if any, cannot be determined at this time. (Note: This event does not require a journal entry at this time, but may require disclosure in notes accompanying the statements.)
Dec. 29 Purchased a 12-month public liability insurance policy for $9,120. This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes into effect on January 1, Year 2, and affords no coverage for the injuries sustained by Kevin Davenport on December 26.
Dec. 31 Received a bill from Universal Utilities for the month of December, $680. Payment is due in 30 days.
Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,600, of which $15,900 was received in cash.

Data for Adjusting Entries

The advance payment of rent on December 1 covered a period of three months.

The annual interest rate on the note payable to Rent-It is 6 percent.

The rental equipment is being depreciated by the straight-line method over a period of eight years.

Office supplies on hand at December 31 are estimated at $620.

During December, the company earned $4,600 of the rental fees paid in advance by McNamer Construction Company on December 8.

As of December 31, six days’ rent on the backhoe rented to Mission Landscaping on December 26 has been earned.

Salaries earned by employees since the last payroll date (December 26) amounted to $1,900 at month-end.

It is estimated that the company is subject to a combined federal and state income tax rate of 40 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be payable in Year 2.
Please (Debit and Credit each individual date)

In: Accounting

Setting: Since the preliminary estimate and further investigations indicated that Claire's project is feasible, it is...

Setting:

Since the preliminary estimate and further investigations indicated that Claire's project is feasible, it is now time to move from the initial concept to final design. In order to do so, Claire will need to consult an architect and an engineer. Thankfully, Claire had an old friend, Tony Tect, who owned a local architecture firm and was willing to help. Claire explained her ideas to Tony and he said he would be happy to produce some drawings for Claire within a few weeks.

Meanwhile, Claire asked Bob Builder if he could advise her about the selection of a design engineer. Bob recommended she talk to Angie Neer from Eager Engineers & Partners. The engineering firm was in Charleston, WV, as was Tony’s office. Tony and Angie had completed several projects together before and knew the value of working hand in hand during the design phase.

Two weeks passed before Claire, Tony, and Angie met to discuss Tony's drawings. After Tony presented his design, Claire made some minor suggestions, but in general was very pleased. Angie then commented on the design, which started a discussion that went on for another hour. Claire wasn't initially comfortable, but later she realized that such discussion is necessary in order to increase the constructability of a structure. Thus, it was advantageous to have structural decisions made early in the design phase and not when the building was already under construction.

After the meeting, Tony sat down on his desk and began to incorporate all the changes into the design. Angie returned to her office to get started on the design for the site preparation. Since Tony agreed to arrange the necessary permitting, Claire had the chance to concentrate fully on preparing the marketing information for the project. However, she realized that she needed to know more about construction project delivery. She had no idea what type of Construction Firm she should utilize for this project. She decided to get some advice from the developer, Bob Builder.

Bob replied to her with the following memo:

In construction Claire, you have several options for your delivery strategy, including: Design-Bid-Build (DBB), Design-Build (DB), and Construction Management (CM). DBB is a very common way to deliver a construction project using a traditional organization. DBB calls for a complete design before site work begins and then a single general contractor assumes all the responsibility for constructing the entire project usually on the terms of a lump-sum contract.

This answer did not really help Claire to understand which type of project delivery method would be most appropriate for her situation. Also, the methods of awarding a contract and the type of contract were confusing to Claire, as she has no prior experience being an owner. Before she could consider making a final decision, she needed more information and recommendations. Claire sent Bob an e-mail asking for a more detailed analysis. This is where you come in to help Claire make an informed decision.

Write a professional memo for Claire including the following information:

  • List the pros and cons of each of the three-project delivery methods Bob mentioned, while applying them specifically to Claire's situation.
  • Within the memo, draw a diagram to illustrate the organization of the management and contracting relationships for DBB, DB, and CM.
  • Which project delivery method do you recommend to Claire? Why?
  • Based on the delivery method you recommended, should Claire use a contract that is awarded competitively or a contract that is awarded by negotiation? Why?

In addition to the main contract for the entire project, Bob informs you, the intern, that there will definitely be a sub-contract with a specialty contractor for the site-work on the project.

  • Should the agreement with the site sub-contractor be a lump sum or a unit-price contract? Why?
  • Should this contract with the site sub-contractor be awarded competitively or negotiated?

Keep in mind that you like working for Big Builders and you are considering applying for a job at this company once you have your bachelor's degree. Therefore, you want to impress Bob with a professional report.

In: Civil Engineering

On January 1, 2015, Toby Manufacturing Company began construction of a building to be used as...

On January 1, 2015, Toby Manufacturing Company began construction of a building to be used as its second office. The building is completed on August 31, 2016. Expenditures on the project were as follows:

January 3, 2015 $900,000

March 1, 2015 600,000

June 30, 2015 700,000

November 1, 2015 600,000

January 31, 2016 800,000

April 30, 2016 900,000

August 31, 2016 675,000

In order to finance the project, the company obtained a $2 million loan with a 10% interest on January 1, 2015. The principal of the loan will be paid off at the end of 2016. The company’s other interest-bearing debt includes two long-term notes of $5,000,000 and $7,000,000 with interest rates of 6% and 9%, respectively. Both notes are outstanding during all of 2015 and 2015. The company’s fiscal year-end is December 31.

Required: 1. Calculate the amount of interest that Toby should capitalize in 2015 and 2016 using the specific interest method. 2. Calculate interest expense that will appear in the 2015 and 2016 income statements. 3. What is the total cost of the building?

In: Accounting

Need asap, I'll give a like rating for the solution Case 1; Determine the capitalized cost...

Need asap, I'll give a like rating for the solution

Case 1; Determine the capitalized cost of a research laboratory which requires Php 5,000,000 for original construction Php 100,000 at the end of every year for the first 6 years and then Php 120,000 each year thereafter for operating expenses, and Php 500,000 every 5 years for replacement of equipment with interest at 12% per annum.

Case 2:  A man purchased a foreclosed property for Php 425,000. In the first month that he owned the house, he spent Php 75,000 for repairs and remodelling. Immediately after the house was remodeled, he was offered Php 545,000to sell the house. After some consideration, he decided to keep the property and have it rented for Php 4,500 per month starting two months after the purchase. He collected rent for 15 months and then sold the property for Php 600,000. If the interest rate was 1.5% per month, how much extra earnings did he make or lose by not selling the house immediately after it was remodeled.

In: Finance