Only labour is used to produce mugs, which sell for $5 each. Labour is hired under perfectly competitive conditions and the market wage is $22.50per hour. Theproductionfunctionfor mugs are given by the following table:

a) Augment the table by calculating the marginal product of labour, total revenue, and marginal revenue product of labour. (Remember to put marginal items in between units.)

b) At the market wage, how many workers will the firm hire in order to maximize profit?

c) Suppose that a shortage of workers causes a competitive wage for workers who can make coffee mugs to rise to $27.50 per hour. Now, how many workers will this firm hire?

d) Suppose that schools that teach pottery skills increase the supply of workers that can make coffee mugs, which lowers the competitive wage for coffee mug workers to $17.50 per hour. Nowhowmanyworkers will the firm hire? Does this represent a shift in the firm’s demand for labour curve or a movement along with the firm’s demand for labour curve?

e) Suppose instead that the demand for coffee mugs rises, pushing up the price of coffee mugs to $10 per mug. If the competitive wage for coffee mug workers remains at $27.50 per hour, how many workers will this firm hire now? Does this represent a shift in the firm’s demand for labour curve or a movement along with the firm’s demand for labour curve?

Suppose two firms, "A" and "B," form a duopoly in the market for a special type of computer chip. Each firm has a constant marginal cost of $2. The daily market demand for this chip is given by the following equation:

P = 8 – 0.005 Q = 8 – 0.005 (qA+qB).

a. Find an expression for firm #A's revenue, as a function of its own quantity and firm B’s quantity: RevA(qA,qB). [Hint: By definition, RevA = P qA. Here, replace P by the equation for the demand curve.]

b. Find an expression for firm A's marginal revenue, as a function of its own quantity and firm B’s quantity: MRA(qA,qB). [Hint: MRA(qA,qB) = d RevA(qA,qB) / dqA., where the derivative is taken holding qB constant.]

c. Find an expression for firm #A's reaction function, showing how much firm A will produce for any given level of quantity set by the other firm: qA* = f(qB). [Hint: Set MRA = MC and solve for qA as a function of qB .]

d. Since both firms have the same cost, you may assume the equilibrium is symmetric (that is, assume qA* = qB*). Compute firm A's equilibrium quantity qA*.

e. Compute total market quantity Q* and the Cournot equilibrium price P*.

f. Assume marginal cost equals average cost and compute the total profit of both firms together.

g. Compute the social deadweight loss. [Hint: Sketch a graph first.]

The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Smitten, a perfectly competitive firm that produces children’s mittens in a competitive market.

Smitten's Production Costs

Instructions: In part a, enter your answer as a whole number. In parts b–d, round your answers to two decimal places.

a. If the market price of children’s mittens is $6.00 per pair, how many pairs of children’s mittens should Smitten produce per week to maximize its profits?

     pairs of mittens

b. What is Smitten’s average total cost at the profit-maximizing quantity of children’s mittens?

   $

c. What are Smitten’s weekly profits if the market price is $6.00 per pair and the firm produces the profit-maximizing quantity of mittens?

   $

d. What are Smitten’s weekly profits if the market price is $5.50 per pair and the firm produces the profit-maximizing quantity of mittens?

     $

e. The price at which Smitten would earn a normal profit is where:

• average cost equals average revenue at the minimum of average cost.

• marginal cost equals average cost.

• marginal cost equals average cost at the minimum of average cost.

• marginal cost equals marginal revenue at the minimum of marginal cost.

The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Smitten, a perfectly competitive firm that produces children’s mittens in a competitive market.

Smitten's Production Costs

Instructions: In part a, enter your answer as a whole number. In parts b–d, round your answers to two decimal places.

a. If the market price of children’s mittens is $6.00 per pair, how many pairs of children’s mittens should Smitten produce per week to maximize its profits?

________ pairs of mittens

b. What is Smitten’s average total cost at the profit-maximizing quantity of children’s mittens?

   $ ________

c. What are Smitten’s weekly profits if the market price is $6.00 per pair and the firm produces the profit-maximizing quantity of mittens?

   $ ________

d. What are Smitten’s weekly profits if the market price is $5.50 per pair and the firm produces the profit-maximizing quantity of mittens?

     $ ________

e. The price at which Smitten would earn a normal profit is where:

• marginal cost equals average cost.

• marginal cost equals marginal revenue at the minimum of marginal cost.

• marginal cost equals average cost at the minimum of average cost.

• average cost equals average revenue at the minimum of average cost.

The unadjusted trial balance of Ayayai Enterprises for the year ending December 31, 2021, follows:

Additional information:

Assume Abbee Industries (AI) starts the current year, 2016, with a deferred tax asset balance of $2,000 and a deferred tax liability balance of $4,000. The current statutory tax rate, which is projected to be in effect when temporary differences reverse, is 30%. The reported pre-tax accounting income is $250,000. Analyze the following items to determine taxable income and income taxes payable, the change in deferred taxes payable (future taxable and deductible amounts), and tax expense for 2016. Assume there is no need for a valuation allowance (provision) for deferred tax assets

1. AI's book income includes an $7,000 deduction for premiums paid on executive life insurance in which the company is named the beneficiary.
2. AI collected $24,000 of rent for a warehouse it leases to a local fabricator. Of this amount, $6,000 is unearned and will be recognized as revenue (for book purposes) in 2017.
3. Bad debts written off in the current period totaled $12,000 and provision (expense) for bad debts (under the allowance method) for book purposes amounted to $9,000. AI uses the direct write-off method for tax and the "allowance method" for book purposes.
4. AI's straight-line depreciation for book purposes is $80,000 in the current year and $150,000 is deductible for tax purposes under the MACRS method.
5. AI accrued $7,000 for estimated future warranty costs in 2016 and paid $4,000 in the current period for warranty defects.
6. AI's book income included $5,000 of interest revenue from municipal bonds.

AI's effective tax rate for 2016 is:

30.5%

45.6%

30.2%

31.0%

37.7%

) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1, 2019. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, if any. 2) Based on a physical count, supplies on hand total $3,600. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any. 3) The equipment is expected to have a 5-year useful life, and be worth about $11,000 at the end of five years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if any. 4) On December 26, the client paid a $12,000 60-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any. 5) Landscape Dreams's employee earns $170 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last paid on Friday, December 26. Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry, if any. 6) In the second week of December, Landscape Dreams agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $5,100. The terms of the initial agreement call for Landscape Dreams to provide services from December 12, 2019, through January 10, 2020, or 30 days of service. The club agrees to pay Landscape Dreams $5,100 on January 10, 2020, when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, if any

Parker Products manufactures a variety of household products. The company is considering introducing a new detergent. The company’s CFO has collected the following information about the proposed product.

 The project has an anticipated economic life of 4 years.  The company will have to purchase a new machine to produce the detergent. The machine has an up-front cost (t = 0) of $2 million. The machine will be depreciated on a straight-line basis over 4 years. The company anticipates that the machine will last for four years, and that after four years, its salvage value will equal zero.  If the company goes ahead with the proposed product, it will have an effect on the company’s net operating working capital. At the outset, t = 0, inventory will increase by $140,000 and accounts payable will increase by $40,000. At t = 4, the net operating working capital will be recovered after the project is completed.  The detergent is expected to generate sales revenue of $1 million the first year (t = 1), $2 million the second year (t = 2), $2 million the third year (t = 3), and $1 million the final year (t = 4). Each year the operating costs (not including depreciation) are expected to equal 50 percent of sales revenue.  The project will not increase fixed costs of the company.  The company’s overall WACC is 10 percent. However, the proposed project is riskier than the average project for Parker; the project’s WACC is estimated to be 12 percent.  The company’s tax rate is 40 percent

Please calculate NPV and IRR of the proposed project and help the company decide whether the company should accept it or not?

Questions 4 through 10 that follow are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year.     Using the attached information, prepare the adjusted trial balance on December 31, 20X6, prepare the income statement for the year ended December 31, 20X6, Prepare the statement of retained earnings for the year ended December 31, 20X6, Prepare the statement of financial position as of December 31, 20X6, Determine the working capital on December 31, 20X6,Determine the current ratio on December 31, 20X6,Determine the acid-test (quick) ratio on December 31, 20X6.

                Cash……………..…………………………….250,000

                Accounts receivable…………………….……..680,000

                Marketable securities…………………………...60,000

                Prepaid insurance……………………………….35,000

                Prepaid rent….………………………………….30,000

                Office equipment…………………………….....620,000

                Accumulated depreciation: equipment………...200,000

                Land……………………………………………750,000

                Accounts payable………………………………306,000

                Dividends payable……………………………… 50,000

                Interest payable…………………………………... 8,750

                Income tax payable……………………………...30,000

                Unearned client service revenue………………..180,000

                Notes payable (long-term).……………………..350,000

                Common stock………………………………….750,000

                Retained earnings….…………………………....315,200

                Dividends…………………………………….......75,000

                Client service revenue………………………...1,200,000

                Travel expense………………………………..…..28,000

                Office supplies expense…………………………..20,000

                Advertising expense………………………………45,000

                Salary expense…………………………………...400,000

                Utility expense………………………………….....40,000

                Depreciation expense: equipment…………………25,000

                Interest expense……………………………….…...17,500

                Insurance expense……………………………….....52,000

                Rent expense……………………………………..175,000

                Income tax expense………………………………..87,450

Berne Company (lessor) enters into a lease with Fox Company to lease equipment to Fox beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $50,000 to be made at the end of each year.

2. The equipment costs $130,000. The equipment has an estimated life of 4 years and an estimated residual value at the end of the lease term of zero.

3. Fox agrees to pay all executory costs.

4. The interest rate implicit in the lease is 12%.

5. The initial direct costs are insignificant and assumed to be zero.

6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Required: 1. Next Level Determine if the lease is a sales-type or direct financing lease from Berne’s point of view (calculate the selling price and assume that this is also the fair value). 2. Prepare a table summarizing the lease receipts and interest revenue earned by the lessor. 3. Prepare journal entries for Berne, the lessor, for the years 2016 and 2017.

Required: