1. Felicia Álvarez, a bakery manager, faces the total product curve shown, which gives the relationship between the number of workers she hires each day and the number of loaves of bread she produces, assuming all other factors of production are given.

Assume that bakery workers in the area receive a wage of $100 per day and that the price of bread is $1.00 per loaf.

1. Fill in the columns above for Marginal Product and Marginal Revenue Product. (one should have dollar signs and one does not!)
2. Plot the bakery’s marginal revenue product curve on a graph.
3. Plot the bakery’s marginal factor cost curve on the same graph (see examples of what the graph should look like in section 14.1).

4. How many workers will Ms. Álvarez employ per day? 4
5. Suppose that the price of bread falls to $.75 per loaf. How will this affect the marginal revenue product curve for workers at the firm? Plot the new curve, label it MRP₂.

6. How will the shift in MRP affect the number of workers Ms. Álvarez hires?

7. Suppose the price of bread rises to $1.50 per loaf. How will this affect the marginal revenue product curve for workers? Plot the new curve, label it MRP₃.

8. How will the shift in MRP affect the number of workers that Ms. Álvarez hires?

The following data show the brand, price ($), and the overall score for six stereo headphones that were tested by a certain magazine. The overall score is based on sound quality and effectiveness of ambient noise reduction. Scores range from 0 (lowest) to 100 (highest). The estimated regression equation for these data is

ŷ = 23.462 + 0.315x,

where x = price ($) and y = overall score.

(a)

Compute SST, SSR, and SSE. (Round your answers to three decimal places.)

SST=

SSR=

SSE=

(b)

Compute the coefficient of determination r².

(Round your answer to three decimal places.)

r²

=

Comment on the goodness of fit. (For purposes of this exercise, consider a proportion large if it is at least 0.55.)

The least squares line provided a good fit as a small proportion of the variability in y has been explained by the least squares line.

The least squares line provided a good fit as a large proportion of the variability in y has been explained by the least squares line.    

The least squares line did not provide a good fit as a large proportion of the variability in y has been explained by the least squares line.

The least squares line did not provide a good fit as a small proportion of the variability in y has been explained by the least squares line.

(c)

What is the value of the sample correlation coefficient? (Round your answer to three decimal places.)

1. In 1995, the Food and Drug Administration (FDA) published new labeling standards for bottled water. (The full text of the final rule can be found at http://cfr.vlex.com/vid/165-110-bottled-water-19705533.) Prior to that time, bottlers could sell regular tap water under a bottled water label. In fact, the FDA estimated that approximately 25 percent of the supply of bottled water was nothing more than ordinary tap water.

(a) Consider how these tougher standards eliminated 25 percent of the supply of bottled water. If market demand is unaffected, what qualitative impact would this labeling change have on equilibrium price and quantity for bottled water? Support your answer with a graphical model.

(b) Let the market demand and market supply equations are QD = −100P+ 1, 150 and QS = 400P − 100. How much of bottled water would be supplied in a static efficient allocation and at what price?

Now, suppose the change in standards results in a new market supply of QS new = 400P − 350 with no change in market demand.

(c) Determine the new static efficient allocation for bottled water and new market price. Do your results agree with your intuitive answer to part (a)? (d) Graphically illustrate the market for bottled water before and after the change in labeling standards. Be sure to label all relevant points.

(e) Compare the values of consumer surplus and producer surplus before and after the change in labeling standards. Is this result expected? Why or why not?

Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:

1. If Wiper's stock had a price/earnings ratio of 12 at the end of 2020, what was the market price of the stock?
2. Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.
3. Calculate the dividend payout ratio for 2020.
4. Assume that accounts receivable at December 31, 2020, totaled $325 million. Calculate the number of days' sales in receivables at that date.
5. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.
6. Calculate the times interest earned ratio for 2020 and 2019.

The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2015, is as follows:

Calvin Machinery Company manufactures heavy-duty equipment used in foundries, mining operations, and similar operations. The company is very decentralized, with various division managers having control over capital investments and most production decisions. The Cylinder Division fabricates a component which is used by the Press Division in its production of metal presses. The Cylinder Division has been selling to the Press Division at a price of $3,000 per unit. Because of a cost increase, the Cylinder Division wants to increase its price to $3,200, even though the Press Division can still purchase an equivalent component externally for $3,000. The following information has been gathered regarding this issue:

Required:

a. If the Press Division buys its units externally, the Cylinder Division will have idle capacity for which there are no alternative uses. Will the company as whole benefit if the Press Division purchases its units externally for $3,000 per unit?
b. If the Press Division buys its units externally, the Cylinder Division will have idle capacity which can be used to generate a positive cash flow of $40,000. Will the company as whole benefit if the Press Division purchases its units externally for $3,000 per unit?
c. Refer to (b). Will your answer change if the price at which the Press Division can buy externally decreases to $2,700 per unit? Support your answer.

1. General Foods is forecasted to have a beta (measure of market risk) of 1 next year. The risk free rate over the next year is expected to be 1%. The return on the market is expected to be 8%. What is the required return of General Foods based on the firms market risk, calculate the return using the capital asset pricing model? (Similar to part c in the case and this material is covered in chapter 8 on pages 282-287). Write your answer as a decimal.

2. What price would you expect to pay for a stock with a 17.4% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.5 which will be paid next year?

3. What is the dividend next year for a stock that currently pays a $2 dividend which is growing at 6%?

4. Suppose General Foods has decided to enter the soda business and they will require additional capital. Management will finance the project by borrowing $100 million and by halting dividend payments. Management forecasts that free cash flow for the next two years will be -$50, and $35 million. After year 2 the cash flows will grow at a rate of 4%. The current WACC for General foods is 6%. What is the firms price per share given there are 50 Million Shares outstanding?

5. What is the expected rate of return for a stock that is expected to pay $1 dividend next year and is currently selling for $10.  The price of the stock next year is expected to be $10.6. Write your answer as a decimal (i.e. do not change to a percent). So if the answer is 5.2% write the decimal equivalent of 0.052).

1. Explain the meaning of independent and dependent variable.

2. What is the difference between correlation and regression analysis?

3. An auto manufacturing company wanted to investigate how the price of one of its car models depreciates with age. The research department at the company took a sample of eight cars of this model and collected the following information on the ages (in years) and prices (in RM thousands) of these cars.

Age, x 8 3 6 9 2 5 6 3
Price, y 45 210 100 33 267 134 109 235


a. Construct a scatter plot for the data.                   
b. Comment on the relationship between age and price of cars base on the above scatter plot of the data.              
c. Calculate the correlation coefficient, R. Interpret the calculated value of R.
d. Calculate the correlation of determination. Interpret the value of R2.
e. Briefly comment on the relationship between the two variables based on the correlation coefficient, R.                 
f. Calculate the slope, b.
g. Calculate the intercept, a.
h. Write the regression equation.


Key Formulas
Coefficient of Correlation
R =∑( )(Y −Y ) Standard deviation, x Standard deviation, y Slope of the regression line X − X
(n−1)s sx y 2 ∑ y−y)2                 =Rb Sy
(x−x) (
s =x ∑n−1 s =y n−1 Sx
Intercept of the regression line    Linear Regression Equation            a = Y bX -            Y a= +   bX

        

: Sarah operates a concession stand at a downtown location throughout the year. One of her most popular items is circus peanuts, selling about 200 bags per month. Sarah pays $1 per bag. Sarah purchases the circus peanuts from Peter's Peanut Shop. She has been purchasing 100 bags at a time. To encourage larger purchases, Peter now is offering her discounts for larger orders according to the following price schedule. Discount Category Order Quantity Price per Bag 1 1 to 199 $1.00 2 200 to 499 $0.95 3 500 or more $0.90 Sara estimates an annual holding rate of 17% of the value of the peanuts. She also estimates an ordering cost of $4 for placing each order. Questions: 1-1 Sarah wants to decide which discounted price to adopt (if at all) and how much she should order. a. 200 b. 345 c. 354 d. 500 1-2 Only for the order-size that you answered in question 1, show how the total cost is calculated. (Show the values you substitute in the cost formulae; ordering cost, holding cost, purchasing cost). 1-3 Sarah knows she cannot stock more than 400 bags because of limited storage space. What would be her optimal ordering policy now? Use the template results. 200 b. 345 c. 354 d. 400

The Chromosome Manufacturing Company produces two products, X and Y. The company president, Jean Mutation, is concerned about the fierce competition in the market for product X. She notes that competitors are selling X for a price well below Chromosome's price of $13.50. At the same time, she notes that competitors are pricing product Y almost twice as high as Chromosome's price of $12.50.

Ms. Mutation has obtained the following data for a recent time period:

                                                                                    Product X              Product Y

            Number of units 11,000 3,000

            Direct materials cost per unit $3.23 $3.09

            Direct labor cost per unit $2.22 $2.10

            Direct labor hours 10,000 3,500

            Machine hours 2,100 1,800

            Inspection hours 80                        100

            Purchase orders 10 30

Ms. Mutation has learned that overhead costs are assigned to products on the basis of direct labor hours. The overhead costs for this time period consisted of the following items:

            Overhead Cost Item                                         Amount

            Inspection costs                                              $16,200

            Purchasing costs                                                8,000

            Machine costs                                                   49,000

                Total $73,200

Using Direct labor Hours to allocate overhead costs determine the gross margin per unit for Product X. Choose the best answer from the list below.

Using activity-based costing for overhead allocation, determine the gross margin per unit for Product Y. Choose best answer from list below.

a. $10.07

b. ($2.27)

c. ($5.23)

d. ($7.02)

e. $7.02