7. Price discrimination and welfare

Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve.

First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay.

On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.)

Monopoly OutcomeConsumer SurplusProfitDeadweight Loss0204060801001201401601802001009080706050403020100PRICE (Dollars per pair of Ooh boots)QUANTITY (Pairs of boots)DemandMC = ATCMR

Now, suppose that Barefeet can practice perfect price discrimination—that is, it knows each consumer's willingness to pay for each pair of Ooh boots and is able to charge each consumer that amount.

On the following graph, use the black point (plus symbol) to indicate the profit-maximizing quantity sold and the lowest price at which the firm sells its boots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.)

Monopoly OutcomeProfitConsumer SurplusDeadweight Loss0204060801001201401601802001009080706050403020100PRICE (Dollars per pair of Ooh boots)QUANTITY (Pairs of boots)DemandMC = ATC

Consider the welfare effects when the industry operates under a monopoly and cannot price discriminate versus when it can price discriminate.

Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isn't true for either single-price monopolies or perfect price discrimination, leave the entire row unchecked.) Check all that apply.

A research conducted a study of consumer behavior in wine drinkers. She manipulated several factors between-subjects in a multi-factor design. First, she had participants sample three different wines, ranging in cost from low ($5) to medium ($10) to high ($20). Second, she labeled them as costing $6 or $90. So, for example, a person might receive a cheap wine labeled as costing $6 or a cheap wine labeled as costing $90. Third, she recruited casual wine drinkers and expert wine drinkers. The main dependent variable was how much participants reported liking the wine they had tasted. After conducting a multi-factor ANOVA, she found that people gave significantly more positive ratings to the wine labeled $90 than the wine labeled $6. She found no significant effect of the actual retail price of the wine. She also found no effect of wine-drinking experience: casual drinker vs. expert. However, the effect of labeled price was significantly greater in casual drinkers than in expert wine drinkers.

A) Which main effects were revealed by the ANOVA?

a) actual retail price of the wine

b) None

c) wine-drinking experience (casual vs. expert)

d) Labeled price of the wine & wine-drinking experience (casual vs. expert)

e) Labeled price of the wine & actual retail price of the wine

f) Labeled price of the wine

B) What interaction effect occurred in the wine-drinking study?

a) actual retail price of the wine & wine-drinking experience (casual vs. expert)

b) Labeled price of the wine & wine-drinking experience (casual vs. expert)

c) no interaction occurred

d) Labeled price of the wine & actual retail price of the wine

C) What type of research design was used in the wine-drinking study?

a) 3 X 2 X 2 factorial design

b) Survey

c) 2 X 2 X 2 factorial design

d) correlational study

D) What conclusions can you draw from the wine-drinking study?

a) experts are no better at judging wines than are casual drinkers

b) wines do not taste good

c) better quality wines also taste better

d) People's perception of wine price are simply irrelevant

e) better quality wines are rated more highly, especially by casual wine drinkers

f) People enjoy wines more if they believe the wine is expensive, especially for casual wine drinkers

E) There are ___ degrees of freedom for the "labelled price" factor and ____ degrees of freedom for the "actual retail price" variable.

Program in Java using Inheritence

The purpose of this assignment is to practice OOP programming covering Inheritance.

Core Level Requirements (up to 6 marks)

The scenario for this assignment is to design an online shopping system for a local supermarket (e.g., Europa Foods Supermarket or Wang Long Oriental Supermarket). The assignment is mostly concentrated on the product registration system. Design and draw a UML diagram, and write the code for the following classes: The first product category is a fresh product, it contains the following attributes. - ID: The identification number must start with 1 and follows with 6 numbers, e.g., “1123456”. - Description, e.g. “Banana” - Recommended Price per unit, e.g. 5.54. Note that this is the suggested price, it is not the actual price in the online shopping system. - Unit (by default is 1) - Weight (in gram) - Unit Type, e.g. “Each, Kilogram, Bunch, Box and Pack” - The packing or baking date (it should include the date, month, year and time), this information is not required for some product, hence, it default may be set to 1/1/1900. - The expiry date is (it should include the date, month, year) The purpose of this class is to maintain the general information of fresh or daily product such as meat, seafood, bread, milk and vegetable. The second product category is a packaged product such as can, source, snack, etc. It contains the following attributes. - ID: The identification number must start with 2 and follows with 6 numbers, e.g., “2123456”. - Description, e.g. “Corn cream can” - Recommended Price per unit, e.g. 5.54. - Unit (by default is 1) - Weight (in gram) - The dimension of the package (including height, width, deep). If a product doesn’t provide this information, then it set to (0, 0, 0) as a default value. CSIT121 Spring 2019 - Nutrition Information o Quantity per 100 g or 100 ml o Energy/kilojoules o Protein o Fat o Sugars(mg) o Sodium/salt(mg) - Unit Type for this class is limited to only “Box, Bottle and Pack” - Packing or manufacturing date (it should include the date, month, year and time), this information is not required for some product, hence, it default may be set to 1/1/1900. - Expire date is (it should include the date, month, year), its default may be set to 1/1/3000 for the product that doesn’t have an expiry date. The purpose of this class is to maintain the general information of package product such as can, sauce, instant noodle, flour and snack. Noted that all classes should override and implement the toString methods to transform the information of the object into the string variable. Ensure that your classes are well designed with practical attributes (either primitive type, class object or Enumerated Data type) and have proper methods to handle all tasks (Encapsulation). Students are allowed to add any classes to the design, it is necessary to perfect the design. Task 1: Class design (Code and UML). 1. Design and write the java code for the above two categories. 2. Design 2 subclass with 2 additional attributes for each category. Task 2: Your classes should be able to provide methods allowing one to 1. (verifyUnitType) Check whether the input arguments (a unit type) passed to the method matches with the user type stored in the object or not. 2. (getAttributeDescriptionForSavingTofile) output the description of all attributes to a String format that can be used to save it to a CVS format file directly, e.g. “ID, Description, …. , Expire date”. 3. (getInformationForSavingToFile) Take all attributes in the object and output them to a String format that can be used to save it to a CVS format file directly, e.g. “1222344, Corn Cream,…. , 20/11/2019”. (0.5 marks for each feature) Choose the appropriate input or/and output type for each method. Test Code: write the test code (a separate class/file called “TestCode” with the Main method in it), create the object of each class, and create an ArrayList to keep all the above classes. For each object, call methods in Task 2 to check whether the method works properly. Display the output of the methods to the console. Finally, display information of all the object in the ArrayList to the console. (0.5 marks)

Question 2

Orange Inc. is considering two mutually exclusive projects (i.e., can choose either one but not both), Alpha in Country A, and Beta in Country B. Project Alpha requests an initial investment of $300,000 and has projected annual cash flows of $20,000, $50,000, $50,000 and $350,000 over 4 years. Project Beta requests an initial investment of $88,000 and has projected cash flows of $12,000 for the first year, and then the cash flows are projected to grow at a constant rate of 5 percent per year forever. Based on the project characteristics, the company requires an 15 percent return for Project Alpha but requires an 17 percent for Project Beta.

You require a 15 percent return on your investment and a payback period of 3 years.

1. If the company requires a maximum payback period of 4 years, which investment will you choose according to the payback criterion? Why?
2. If you apply the NPV criterion, which investment will you choose? Why?
3. Name three disadvantages of the payback period
4. Based on your answer in (a) and (b), which project will you finally choose? Why?

Question 3

Parker & Stone, Inc., is considering a new project that requires an initial fixed asset investment of 1.2 million. The project also requires an initial investment in net working capital of $250,000. The project is expected to generate $950,000 in sales and cost $400,000 every year for three years. The fixed asset follows a straight-line depreciation. After three years, the fixed asset has a zero book value but is estimated to have a market value of $200,000, and the net working capital will fully recovery. The corporate tax rate is 35%.

1. What are the operating cash flows in each year?
2. What are the cash flows from net working capital and the net capital spending in year 3?
3. What are the CFFA in each year?
4. If the required return is 10% for a similar risk level of project, should the company implement this project?

Question 4

At year beginning, you observed that the price of stock Apple was $100 and the price of Stock Orange was $900. To understand the relation between risk and return, you keep watching on the performance of the stock and the bond over the next three years. The information you observed is as follows:

1. What is the stock Apple’s dividend yield in year 2? What is the Stock Orange’s capital gains yield in year 3?
2. During the 3-year observation period, what are the average annual total return of Apple and Orange?
3. Based on the lessons learned from the capital market history, discuss your interpretation of “higher risk and higher expected return”.

Question 5

Consider the following stock information about Tencent and HSBC

1. What’re the expected return on each stock?
2. What’re the standard deviation on each stock?
3. The risk free rate is 1.5%. Based on the CAPM, If Tencent’s market beta is 1.5, what’s the beta of HSBC?
4. If you invested 65 percent in Tencent and 35 percent in HSBC, what is your portfolio expected return? The standard deviation? .
5. Given the portfolio information in (d) and beta information in (c), what is the portfolio’s market beta? .

Question 6

SmartCar Corporation has 1 million shares of common stock outstanding, 20,000 shares of preferred stock outstanding, and 40,000 corporate bonds outstanding. The common stocks sell for $25, with a market beta of 1.5. The corporate bonds sell for $950 and the current YTM is 5%. The preferred stock currently sells for $100, with an annual dividend payment of $8 per share. The risk-free rate is 2% and the market expected return is 8%. SmarCar’s corporate tax rate is 35%. What is SmartCar’s cost of capital?

1. Vinnie is looking for an apartment in Dayton, Ohio. In Dayton, 75% of the two bedroom, one bath apartments are $800 a month and 25% are $400. The marginal cost of his search is $15 per search, i.e., the marginal cost of looking at the first apartment is $15, the marginal cost of looking at the second apartment is $30, and so on. Suppose that Vinnie discovers that the distribution of high price - low price apartments is not 75% and 25% but 60% and 40%. He will now be willing to look at a maximum of __________ apartments.

a. 8

b. 6

c. 4

d. 10

2.

Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and the aviarist. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen or aviarist will not suffer any damage. The relevant gains (thousands of dollar) and losses for the three parties are listed below:

With filter Without filter

Erie textiles: 275 400

Fishermen 170 130

Aviarist 130 25

The daily cost (in thousands of dollars) of the filter to Erie Textiles is:

a. 400

b. 100

c. 125

d. 300

3. Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and the aviarist. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen or aviarist will not suffer any damage. The relevant gains (thousands of dollar) and losses for the three parties are listed below:

With filter Without filter

Erie textiles: 275 400

Fishermen 170 130

Aviarist 130 25

The daily benefit (in thousands of dollars) of the filter to the fishermen and aviarist is

a. 400

b. 310

c. 145

d. 200

4.

Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and the aviarist. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen or aviarist will not suffer any damage. The relevant gains (thousands of dollar) and losses for the three parties are listed below:

With filter Without filter

Erie textiles: 275 400

Fishermen 170 130

Aviarist 130 25

What is the minimum amount that needs to be paid to Erie textiles so that he agrees to install a filter?

a. 126

b. 276

c. 100

d. 400

5.

Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and the aviarist. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen or aviarist will not suffer any damage. The relevant gains (thousands of dollar) and losses for the three parties are listed below:

With filter Without filter

Erie textiles: 300 400

Fishermen 170 130

Aviarist 130 25

What is the maximum amount that the fishermen and the aviarist can give to Erie textiles so that he agrees to install a filter?

a. 145

b. 100

c. 125

d. 200

6.

Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and the aviarist. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen or aviarist will not suffer any damage. The relevant gains (thousands of dollar) and losses for the three parties are listed below:

With filter Without filter

Erie textiles: 275 400

Fishermen 170 130

Aviarist 130 25

If Erie Textiles does not install the filter that will cause a net social _____ of _____ (in thousands of dollars).

a. Loss; 25

b. Loss; 40

c. Gain; 100

d. Gain; 35

Explain this python program as if you were going to present it to a class in a power point presentation. How would you explain it? I am having a hard time with this. I have my outputs and code displayed throughout 9 slides.

#Guess My Number Program
# Python Code is modified to discard duplicate guesses by the computer
import random
#function for getting the user input on what they want to do.
def menu():
#print the options
print("\n\n1. You guess the number\n2. You type a number and see if the computer can guess it\n3. Exit")
#Loop until correct choice is entered.
while True:
#using try-except for the choice will handle the non-numbers
#if user enters letters, then except will show the message, Numbers only!
try:
#Taking input and converting to integer.
c=int(input("Enter your choice: "))
# if input is correct, return number.
if(c>=1 and c<=3):
return c
#if input is not correct, print message and ask again.
else:
print("Enter number between 1 and 3 inclusive.")
#For non numeric input, throw exception.
except:
#print exception
print("Numbers Only!")

#This function is the main game for the player.
def guessingGame(): #user guesses the number generated randomly by the computer
#defining minimum and maximum value.
min_number=1
max_number=10
#set number of guesses = 0
numGuesses=0
guessed_numbers = [] #list of guessed numbers
#Generating a random number between min and max which user has to guess.
rand=random.randint(min_number, max_number)
#While loop, comparing the users guessed number with the random number.
#If it matches, it will say you guessed it.
while (True):
#use try-block
try:
#Asking for input from the player.
guess=eval(input("Please try to guess my number between 1 and 10:"))
#Adding guess to list of guesses.
guessed_numbers.append(guess)
#check if the guess is less than 0, then continue to beginning of the loop
if(guess<0):
continue;
#if guess is correct, print results.
elif (guess==rand):
#increment the guess count by 1
numGuesses=numGuesses+1
#Print results
print("You guessed it! It took you {} attempts".format(numGuesses))
# print the guesses numbers list
print('You picked the following numbers: '+str(guessed_numbers))
#break will end the loop once the guess is a match.
#Conditions if the guess is too low or too high to keep guessing
break
#If guess is lower than actual then increasing guess count and print low message.
elif(guess < rand):
#increment the guess count by 1
numGuesses = numGuesses +1
print("Too low")
#if guess is higher than actual then increasing guess count and print low message.
else:
#increment the guess count by 1
numGuesses = numGuesses + 1
print("Too high")
except:
#print exception
print("Numbers only!")
  
# In guessingGameComp function, computer will guess the number entered by the user. I have modified the code so that wherever computer generates same random number again, it will not be taken into account.
# For e.g., if initially computer guessed the number to be 3, and again it tries to guess the number 3.So, this limitation is removed
def guessingGameComp():
countGuess=0 #initially, number of guess attempts 0.
guessed_numbers = [] # list of guessed numbers
  
#taking input number from user
userNumber=int(input("\nPlease enter a number between 1 and 10 for the computer to guess:"))
  
#execute below loop only when number entered by user is between 0 and 11.
while userNumber > 0 and userNumber < 11:
while True:
countGuess+=1 #counting the attempts by computer
compRand = random.randint(1,10) #random number guessed by computer
#if compRand is already guesses, do not count this attempt
if(compRand in guessed_numbers):
#decreasing count by 1 because guess is already guessed.
countGuess = countGuess - 1;
#remove this line of code if you dont want to show already guessed numbers.
print("\n Already guessed number: ", compRand)
continue
#add valid guessed number to guessed_numbers list.
guessed_numbers.append(compRand)
#if number guessed by computer is correct, break out of loop.
if(userNumber==compRand):
#if guess is correct, print list of guesses and count the guesses.
print("\nThe computer guessed it! It took {} attempts".format(countGuess))
print("\nThe computer guessed the following numbers: "+str(guessed_numbers))
break
#if number guesses by computer is higher than user input
elif(compRand   
print("\nThe computer guessed {} which is too low".format(compRand))
#if number gueesed by computer is less than user input
else:
print("\nThe computer guessed {} which is too high".format(compRand))
break
  
def main():
print("Welcome to my Guess the number program!") #Printing welcome message
name = input("What's your name: ") #taking name of user as input
print("Hello ",name,) #greeting user
while True:
#Show menu and take input from user.
userChoice=menu() #If user choice is 1, this means player will play game.
if userChoice==1:
guessingGame()#If user choice is 2, this means computer will play the game.
elif userChoice==2:
guessingGameComp()#If choice is 3, then user will exit the game.
elif userChoice==3:
print("\nThanks", name, "for playing the guess the number game!") #greeting user after the game ended.
break
else: #For invalid choice print error message.
print("Invalid choice!!!")
#call the main function
main()

complete the public T removeRandom(),    public SetADT<T> union(SetADT<T> set), and the incomplete part in the arraysettester

arrayset.java

package arraysetpackage;

import java.util.Iterator;
import java.util.NoSuchElementException;
import java.util.Random;

public class ArraySet<T> implements SetADT<T> {
   private static final int DEFAULT_SIZE = 20;
   private int count;
   private T[] setValues;
   private Random rand;
  
   public ArraySet (){
       this(DEFAULT_SIZE);
   } // end of constructor
  
   public ArraySet (int size){
       count = 0;
       setValues = (T[]) new Object[size];
       rand = new Random();
   } // end of constructor  

  
   public void add(T element) {
       if (contains(element))
           return;
       if (count == setValues.length) {
           T[] temp = (T[]) new Object[setValues.length*2];
           for (int i = 0; i < setValues.length; i++) {
               temp[i] = setValues[i];
           }
           setValues = temp;
       }
       setValues[count] = element;
       count++;
   }

   public void addAll(SetADT<T> set) {
       Iterator<T> iter = set.iterator();
       while (iter.hasNext()){
           System.out.println(iter.next());
       }
       // finish: this method adds all of the input sets elements to this array
      
   }

   public boolean contains(T target) {
       for (int i = 0; i < count; i++ )
           if (setValues[i].equals(target))
               return true;
       return false;
   }
  
   public String toString () {
       String toReturn = "[";
       for (int i = 0; i < count; i++) {
           toReturn += setValues[i] + " ";
       }
       toReturn +="]";
       return toReturn;
   }
  

   public boolean equals(SetADT<T> set) {
       // finish: tests to see if this set and the input set have exactly the same
       // elements
      
      
       return false; // this is just generic, you need to change the return
   }
  
   public boolean isEmpty() {
       return count==0;
   }

   public Iterator<T> iterator() {
       return new ArraySetIterator<T>(setValues,count);
   }

   public T remove(T element) {
       for (int i = 0; i < count; i++ ) {
           if (setValues[i].equals(element)) {
               T toReturn = setValues[i];
               setValues[i] = setValues[count-1];
               count--;
               return toReturn;
           }
       }
       throw new NoSuchElementException("not present");
   }

   public T removeRandom() {
       // finish: remove and return a random element. you will use the
       // local rand object
      
      
       return null; // this is just generic, you need to change the return
   }
     
   public int size() {
       return count;
   }
     
   public SetADT<T> union(SetADT<T> set) {
       // finish: a new set is created and returned. This new set will
       // contain all of elements from this set and the input parameter set
      
      
       return null; // this is just generic, you need to change the return
   }

}
arraysetester.java:

package arraysetpackage;

import java.util.Iterator;

public class ArraySetTester {

   public static void main(String[] args) {
       SetADT <String> mySet = new ArraySet<String>();

       for (int i = 0; i < 12; i++)
           mySet.add(new String("apple"+i));

       System.out.println(mySet);
      
       System.out.println("mysize = "+mySet.size()+ " [expect 12]");
       mySet.add(new String ("apple0"));
       System.out.println("mysize = "+mySet.size()+ " [expect 12]");
       System.out.println("contains 11? = "+mySet.contains(new String("11")));
       System.out.println("contains apple11? = "+mySet.contains(new String("apple11")));      
      
       try {
           String removedItem = mySet.remove("apple7");
           System.out.println(mySet);
           System.out.println(removedItem+ " was removed");
       } catch (Exception e) {
           System.out.println("item not found, can't remove");
       }
      
       try {
           String removedItem = mySet.remove("apple17");
           System.out.println(mySet);
           System.out.println(removedItem+ " was removed");
       } catch (Exception e) {
           System.out.println("item not found, can't remove");
       }
      
       Iterator<String> iter = mySet.iterator();
       while (iter.hasNext()){
           System.out.println(iter.next());
       }

       SetADT <String> mySet2 = new ArraySet<String>();

       for (int i = 0; i < 12; i++)
           mySet2.add(new String("orange"+i));  
       System.out.println(mySet2);
      
       // add code here to test methods you finish in ArraySet
      
      
      
       // after you complete the existing methods, do the Case Study
       // Approach 1 will be here in the main
      
       // Approach 2 will be here in ArraySetTester, but you will
       // create a local static method that you will call from the main
      
       // Approach 3 will start with uncommenting the prototype in SetADT
       // and then creating the method in ArraySet. Finally you will write
       // code here to test the new method
   }

}

arraysetiterator.java

package arraysetpackage;

import java.util.Iterator;
import java.util.NoSuchElementException;

public class ArraySetIterator <T> implements Iterator <T> {
   private int position; //Always points to the next value
   private T [] values;
   private int count;
  
  
   public ArraySetIterator (T [] theValues, int aCount) {
       position = 0;
       values = theValues;
       count = aCount;
   }
  
   public boolean hasNext() {
       return position < count;
   }
  
   public T next() {
       if (position >= count)
           throw new NoSuchElementException("Past " + count + " elements");
       position++;
       return values[position - 1];
}
  
   public void remove() {
       throw new
       UnsupportedOperationException("No remove for ArraySet");
   }

}

setadt.java

package arraysetpackage;

import java.util.Iterator;

public interface SetADT<T> {
   public void add (T element); //Adds one element to this set, ignoring duplicates
   public void addAll (SetADT<T> set); //Adds all elements in the parameter to this set,
   // ignoring duplicates
   public T removeRandom (); //Removes and returns a random element from this set
   public T remove (T element); //Removes and returns the specified element from this set
   public SetADT<T> union (SetADT<T> set); //Returns the union of this set and the
   // parameter
   public boolean contains (T target); //Returns true if this set contains the parameter
   //public boolean contains(SetADT<T> Set); // Returns true if this set contains the parameter
   public boolean equals (SetADT<T> set); //Returns true if this set and the parameter
   //contain exactly same elements
   public boolean isEmpty(); //Returns true if this set contains no elements
   public int size(); //Returns the number of elements in this set   
   public Iterator<T> iterator(); //Returns an iterator for the elements in this set
   public String toString(); //Returns a string representation of this set
}

ABC produces high-tech storage systems. The company is in its fifth year of operations and is preparing to build its master budget for the coming year (2017). The master budget will be based upon the following information:

Fourth quarter sales for 2016 were 50,000 units.

Budget unit sales by quarter (for 2017) are as follows:

First Quarter                      48,000

Second Quarter                                50,000

Third Quarter                     47,000

Fourth Quarter                 51,000

The selling price is $320 per unit. All sales are credit sales. ABC collects 70% of credit sales in the same quarter the sales are made and the remaining 30% is collected in the following quarter.   There are no bad debts.

ABC’s finished goods ending inventory policy is to have 25% of next quarter’s sales on hand at the end of each quarter. This policy was met on January 1, 2017. First quarter sales projections for 2018 are 44,000 units.

Each finished unit uses two pieces of plastic. Each piece of plastic costs $60. At the end of each quarter ABC plans to have 30% of the direct materials needed for the next quarter’s production (production for the first quarter of 2018 is expected to be 48,000 finished units). This policy was met on January 1, 2017. ABC buys direct materials on account. Eighty percent of the purchases are paid for in the quarter of acquisition and the remaining twenty percent are paid for in the following quarter.

Each unit uses two hours of direct labor to finish. Direct laborers are paid $20 per hour and all wages are paid in the same quarter as incurred.

Fixed overhead costs total $1,000,000 each quarter. Of this total, $300,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate (base is units) is computed by dividing the year’s total fixed overhead by the year’s expected actual units produced when computing the cost of a finished unit for ending finished goods inventory. Round the overhead rate to the nearest two decimal points. Remember that depreciation is not paid for.

Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred.

Fixed selling and administration expenses are budgeted at $500,000 per quarter, including $200,000 of depreciation. Remember again that depreciation is not paid for. The fixed selling and administration expenses other than depreciation are paid in the quarter incurred.

Variable selling and administration expenses are budgeted at $7 per unit sold. Also, for each quarter there is a $100 expense in which you entitle “your name expense.” For example, for each quarter I would show a Shadbolt expense of $100 on a line separate from other variable selling and administration expense. All selling and administrative expenses are paid in the quarter incurred.

The balance sheet as of December 31, 2016, is as follows:

                                                                                       Assets

                                                Cash                                                 $2,300,000

                                                Direct Materials Inventory          1,440,000

                                                Accounts Receivable                    2,880,000

                                                Finished Goods Inventory           2,700,000

                                                Plant and Equipment, net          21,500,000

                                                                Total                                 $30,820,000

                                                                                Liabilities

                                                Accounts Payable                       $2,160,000¹

                                                Capital Stock                                 15,400,000

                                                Retained Earnings                        13,260,000

                                                                Total                                $30,820,000

                                ¹For purchase of direct materials only.

ABC will pay quarterly dividends of $200,000. Each quarter ABC will purchase $700,000 of equipment – depreciation on these purchase is already included in the above noted costs.

Required:

Using Excel, prepare the following budgets for ABC for 2017. Prepare the following at the end of the calendar year only:

Ending Finished goods inventory budget (remember that this is the year-end inventory, not each quarter’s ending inventory summed) need to compute cost of goods sold.

Cost of Goods Sold budget (there is no work in process inventory).

Budgeted income statement using absorption costing.

Budgeted Balance Sheet.

Clopack Company manufactures one product that goes through one processing department called Mixing. All raw materials are introduced at the start of work in the Mixing Department. The company uses the weighted-average method of process costing. Its Work in Process T-account for the Mixing Department for June follows (all forthcoming questions pertain to June):

The June 1 work in process inventory consisted of 5,000 units with $16,000 in materials cost and $12,000 in conversion cost. The June 1 work in process inventory was 100% complete with respect to materials and 50% complete with respect to conversion. During June, 37,500 units were started into production. The June 30 work in process inventory consisted of 8,000 units that were 100% complete with respect to materials and 40% complete with respect to conversion.

1 .Prepare the journal entries to record the raw materials used in production and the direct labor cost incurred. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare the journal entry to record the overhead cost applied to production. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. How many units were completed and transferred to finished goods during the period?

4. Compute the equivalent units of production for materials.

5. Compute the equivalent units of production for conversion.
6. What is the cost of beginning work in process inventory plus the cost added during the period for materials?

7. What is the cost of beginning work in process inventory plus the cost added during the period for conversion?

8. What is the cost per equivalent unit for materials? (Round your answer to 2 decimal places.)

9. What is the cost per equivalent unit for conversion? (Round your answer to 2 decimal places.)

10. What is the cost of ending work in process inventory for materials? (Round your intermediate calculations to 2 places.)

11. What is the cost of ending work in process inventory for conversion?

12. What is the cost of materials transferred to finished goods? (Round your intermediate calculations to 2 places.)

13. What is the amount of conversion cost transferred to finished goods?

14. Prepare the journal entry to record the transfer of costs from Work in Process to Finished Goods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

15.

15-a. What is the total cost to be accounted for?

15-b. What is the total cost accounted for?