Match the following terms with the appropriate definitions A - I:
Question 26 options:
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In: Accounting
A profit-maximizing firm in monopolistic competition should shut down in the short run if:
| a. |
price is more than average total cost. |
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| b. |
price is less than average variable cost. |
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| c. |
marginal revenue is equal to marginal cost. |
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| d. |
marginal revenue is less than price. |
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| e. |
price is less than average fixed cost. |
The term “strategy” in terms of game theory refers to:
| a. |
the tendency for collusive firms to generate normal profits. |
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| b. |
each firm’s decision to charge a higher price than the price charged by the rival firm in an industry. |
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| c. |
the tendency of firms in an oligopoly to exit the market in the long run. |
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| d. |
each firm's game plan for making decisions. |
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| e. |
the tendency of firms to earn zero economic profit in the long run. |
An oligopoly firm that _____ will earn long-run economic profit.
| a. |
incurs a high cost to achieve the minimum efficient scale |
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| b. |
charges a low price for its product |
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| c. |
enjoys huge brand loyalty |
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| d. |
charges a higher price for its product |
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| e. |
spends less on advertisement |
Monopolistically competitive industries consist of:
| a. |
many firms, all selling identical products. |
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| b. |
one firm selling several products. |
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| c. |
one firm selling one product. |
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| d. |
many firms, each selling a slightly different product. |
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| e. |
many firms, each selling a completely different product. |
In: Economics
Kelly Hayes operates a bed and breakfast hotel in a beach resort
area of Noosa. Depreciation on the hotel is $60,000 per year. Kelly
employs a maintenance person at an annual salary of $30,000 per
year and a cleaning person at an annual salary of $24,000 per year.
Rates and taxes are $10,000 per year. The rooms rent at an average
price of $50 per person per night including breakfast. Other costs
are laundry service at $4.00 per person per night and the cost of
food which is $6.00 per person per night.
Instructions:
(a)what are total fixed cost and Variable cost per person per night
?
b)Determine the number of rentals and the sales revenue Kelly needs
to break even using the contribution margin technique.
(c) If the current level of rentals is 4,000, by what percentage
(Margin of Safety) can rentals decrease before Kelly has to worry
about having a net loss?
(d) Kelly is considering upgrading the breakfast service to attract
more business and increase prices. This will cost an additional
$5.00 for food costs per person per night. Kelly feels she can
increase the room rate to $65 per person per night. Determine the
number of rentals and the sales revenue Kelly needs to break even
if the changes are made.
e) Determine the contribution margin per person per night ?
In: Accounting
Part 1- Capital Budgeting Questions
Please use the following information to answer questions 1- 6 (PLEASE SHOW CALCULATIONS)
Bob makes wooden tables and is creating his 2017 capital budget. He expects to sell 40 tables in 2017 at $150 per table.
Additional Information for 2017:
DM per table: 6 board feet (b.f.) per table at $2.00 per b.f.
DL per table: 2 DLH per table at $25 per DLH
O/H is applied at a rate of $4 per DLH (and allocated O/H = actual O/H)
DM Inventory: WIP Inventory FG Inventory
BB = 50 b.f. of wood BB = 0 BB = 5 tables
DEI = 75 b.f. of wood EB = 0 DEI = 15 tables
For simplicity, assume costs and revenue per table are the same for those manufactured in 2017 or in previous years.
Assume variable operating expenses are $6 per unit sold and fixed operating expenses are $80.
1) What is budgeted revenue for 2017 in dollars?
2) How many tables (FG units) should be produced in 2017?
3) What is the budgeted O/H cost per unit?
4) What is budgeted Cost of Goods Sold (in dollars) for 2017?
5) What are budgeted Operating Expenses (period costs) in dollars for 2017?
6) What is estimated operating income for 2017?
In: Accounting
The Jam Factory makes boutique jams that it sells in specialty stores in two different cities. In city 1, the daily inverse demand function is p1 = 12 – 0.5Q1 and the marginal revenue function is MR1 = 12 – Q1. In City 2, the inverse demand and marginal revenue functions are p2 = 20 – Q and MR2 = 20 – 2Q2. The firm’s cost function is C(Q) =10 + 6Q, where Q = Q1 + Q2. Thus, the firm’s marginal cost of production is 6 per unit. a. Create a spreadsheet with columns for Q1, Q2, P1, MR1, MR2 and MC. Put the values 1 to 12 in increments of 1 in the Q1 column and put the same values in the Q2 Column. Fill in the appropriate formulas in the other cells, noting that the MC column has the value 6 for each quantity. The jam factory price discriminates by charging a different price in each city. Find the profit-maximizing quantities and prices. Verify that the marginal revenues are the same in each city at the profit-maximizing quantities. Determine the firm’s profit. b. Add two columns to your spreadsheet showing the price elasticity of demand in each city for each price-quantity combination. Verify that your results are consistent with Equation 10.5. (Hint: The price elasticity of demand for City 1 is E1 = -2p1/Q1 and for City 2 is E2 = -p2/Q2.) Please explain and share the formulas used in each cell of the Spreadsheet.
In: Economics
As an audit supervisor in an international public accounting firm, you are in charge of the audit of several firms with 31 March year-ends. The financial statements of these firms are prepared in compliance with U.S GAAP, and are expected to be authorized for issue in early June 2017. Your audit juniors on the job have approached you for advice on the following case:
Auto Arrow (AA) does not maintain a proper accounting system. A main bulk of its existing source documents were destroyed in a fire. Based on available records and contacts with its customers and also with reference to its 2015/2016 financial statements, it managed to provide the following information for the 2016/2017 financial year:
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Balance at 1 April 2016 |
Balance at 31 March 2017 |
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Accounts Receivable |
$500,000 |
$520,000 |
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Allowance for Doubtful Accounts |
$60,000 |
$80,000 |
A additional information
The accountant is unsure of how to determine the gross sales revenue for the year. Assume all sales are on credit.
Required: Determine the gross sales revenue for the financial year 2016/2017.
In: Accounting
Financial Statement Project
Browning Company has the following ledger accounts and adjusted balances as of December 31, 2017. All accounts have normal balances. Browning’s income tax rate is 40%. Browning has 300,000 shares of Common Stock authorized and 100,000 shares of Common Stock issued and outstanding.
Accounts Payable……………………………. 26,000
Accounts Receivable………………………… 180,000
Accumulated Depreciation-Building………… 50,000
Administrative Expenses……………………. 40,000
Allowance for Doubtful Accounts…………… 20,000
Mortgage Payable …………..………………. 250,000*
Building……………………………………… 500,000
Cash…………………………………………. 26,000
Common Stock……………………………… 300,000
Cost of Goods Sold…………………………. 380,000
Dividends…………………………………… 20,000
Income from Operations of Division X…….. 40,000
(Division X is a component of Browning Company)
Interest Revenue…………………………….. 20,000
Inventory……………………………………...280,000
Land (held for future use)...…………………. 200,000
Loss from Sale of Division X........................... 80,000
(Division X is a component of Browning Company)
Loss on Sale of Investments.……………….. .. 10,000
Paid-In Capital in Excess of Par……………...116,000
Patent………………………………………… 30,000
Prepaid Insurance……………………………. 10,000**
Retained Earnings, January 1, 2017………… 250,000
Sales Discounts………………………………. 20,000
Sales Revenue………………………………..990,000
Selling Expenses……………………………. 130,000
*$25,000 of the principal comes due in 2018.
**Two years insurance paid in advance.
Instructions:
Use this information to prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.
In: Accounting
| Accounts payable | $ 40,000 |
| Accounts receivable | 33,000 |
| Accumulated depreciation—buildings | 25,000 |
| Accumulated depreciation—equipment | 20,000 |
| Advertising Expense | 4,500 |
| Bonds payable, due December 31, 2024 | 260,000 |
| Buildings | 180,000 |
| Capital stock, $1 par value | 220,000 |
| Cash | 92,120 |
| Commission Expense | 8,400 |
| Cost of Goods Sold | 31,480 |
| Depreciation Office | 2,970 |
| Equipment | 75,500 |
| Income Tax Expense | 7,150 |
| Income taxes payable | 3,860 |
| Insurance Expense Sales Auto | 3,200 |
| Interest Expense | 1,550 |
| Interest payable | 890 |
| Interest Revenue | 1,900 |
| Inventory | 74,000 |
| Land | 240,000 |
| Notes payable, due April 15, 2020 | 7,000 |
| Office supplies | 350 |
| Paid-in capital in excess of par value | 100,000 |
| Prepaid expenses | 5,000 |
| Rent Expense - Office | 2,850 |
| Retained earnings | 63,020 |
| Salaries & Wages - Office | 6,980 |
| Salaries & Wages - Sales | 12,580 |
| Salaries payable | 5,200 |
| Sales Revenue | 95,890 |
| Supplies Expense - Office | 990 |
| Trademark | 45,000 |
| 2. Complete Multistep Balance Sheet |
| Assets |
| Current assets: |
| Total current assets |
| Property, plant, and equipment: |
| Total property, plant, and equipment |
| Intangible assets: |
| Total assets |
| Liabilities |
| Current liabilities: |
| Total current liabilities |
| Long-term debt: |
| Total liabilities |
| Stockholders’ Equity |
| Contributed capital: |
| Total contributed capital |
| Total stockholders’ equity |
| Total liabilities and stockholders’ equity |
In: Accounting
SANCHEZ COMPUTER CENTER
Chart of Accounts-
Assets
1000 Cash
1020 Accounts Receivable
1030 Supplies
1080 Computer Shop Equipment
1090 Office Equipment Liabilities
2000 Accounts Payable
Owner's Equity
3000 Freedman, Capital
3010 Freedman, Withdrawls Revenue
4000 Service Revenue Expenses
5010 Advertising Expense
5020 Rent Expense
5030 Utilities Expense
5040 Phone Expense
5050 Supplies Expense
5060 Insurance Expense
5070 Postage Expense
During the month of November the following transactions occurred.
a. Record the following transactions in the general journal and post them to the general ledger. b. Prepare a trial balance as of November 30, 201X.
Assume the following transactions:
Nov. 1 Billed Vita Needle Company $6,800, invoice no. 12675, for services rendered.
Nov. 3 Billed Accu Pac, Inc., $3,900, invoice no. 12676, for services rendered.
Nov. 5 Purchased new shop benches for $1,400 on account from System Design Furniture.
Nov. 9 Received the phone bill, $150.
Nov. 12 Collected $500 of the amount due from Taylor Golf. Nov. 18 Collected $800 of the amount due from Taylor Golf.
Nov. 20 Purchased a fax machine for the office from Multi Systems, Inc., on credit, $450.00.
In: Accounting
At Bradford Bed and Breakfast, the manager is looking to expand the facility. The following facts are known:
Cost of the expansion $2,200,000
The Manager is paid $99,000 per year. Compensation will not change due to the expansion
Property taxes will increase by $33,000 annually
The expansion will add 10 rooms and it is expected all 10 will be occupied by paying guests
The addition of the 10 guests each day is expected to add $800,000 of revenue annually
A garden and patio that was built last summer at a cost of $75,000 will be removed to make way for the expansion.
Additional cost of staff based on 10 occupied rooms is $260,000 annually
Additional cost of supplies and food based on 10 occupied rooms $80,000 annually
All expenses are expected to increase 3% annually. Due to competition revenue is expected to increase only 2% annually.
The useful life of the expansion is 8 years. Bradford uses a 8% discount rate.
Based on this information determine the following:
a. After the building is expanded, what is the incremental fixed cost incurred annually as a result of the expansion?
b. What are the incremental variable expense incurred annually due to the expansion?
c. What are the sunk costs of the expansion, if any?
d. Create an 8 year proforma cash flow statement for the expansion project (assume there are no income taxes)
e. Calculate the projects NPV and IRR. Should the project be accepted or rejected?
In: Accounting