The following cost functions apply to X Company's regular production and sales during the year:

  Cost of goods sold:   $6.57 (X) + $127,397

  Selling and administrative expenses:   $1.29 (X) + $84,709

where X is the number of units produced and sold. During the year, X Company sold 66,700 units for $18.00 each. At the end of the year, a company offered to buy 4,750 units but was only willing to pay $12.00 each. X Company had the capacity to produce the additional 4,750 units.

5. If X Company had accepted the special order, firm profits would have increased by ?

6. Consider the following three changes. Direct material costs on the special order would have increased by $0.74 per unit, direct labor costs on the special order would have decreased by $0.32 per unit, and X Company would have had to rent special equipment for $1,500. Independent of your answer to (5), the effect of these changes would have been to reduce profit on the special order by ?

7. In order to retain all of X Company's regular customers, it would have had to reduce the regular selling price by $0.39. If the selling price were reduced and next year's unit sales turned out to be the same as this year's sales, firm profits would have fallen by ?

The following cost functions apply to X Company's regular production and sales during the year:

  Cost of goods sold:   $6.05 (X) + $132,153

  Selling and administrative expenses:   $1.05 (X) + $76,167

where X is the number of units produced and sold. During the year, X Company sold 65,100 units for $19.00 each. At the end of the year, a company offered to buy 4,980 units but was only willing to pay $12.00 each. X Company had the capacity to produce the additional 4,980 units.

1. If X Company had accepted the special order, firm profits would have increased by?

2. Consider the following three changes. Direct material costs on the special order would have increased by $0.76 per unit, direct labor costs on the special order would have decreased by $0.49 per unit, and X Company would have had to rent special equipment for $1,500. Independent of your answer to (1), the effect of these changes would have been to reduce profit on the special order by?

3. In order to retain all of X Company's regular customers, it would have had to reduce the regular selling price by $0.59. If the selling price were reduced and next year's unit sales turned out to be the same as this year's sales, firm profits would have fallen by?

Answer the following by True(T) or False (F)

1. The short-run relationship between labor supply and real wage is more likely to be represented by an upward-sloping labor supply curve than by a downward-sloping one.

2. The long-run relationship between labor supply and real wage is more likely to be represented by an upward-sloping labor supply curve than by a downward-sloping one.

3. According to the data on the long-run trend of the average number of hours worked, the substitution effect appears to dominate the income effect.

4. For long term changes in the real wage, the income effect is likely to be stronger than the substitution effect.

5. For short term changes in the real wage, the income effect is likely to be stronger than the substitution effect.

6. Suppose that the government imposes a lump-sum tax of 20,000 dollars on every adult (i.e., every adult pays 20,000 dollars irrespective of their income). According to the income effect, this will likely increase labor supply.

7 .Suppose that the government gives out a lump-sum transfer of 20,000 dollars to every adult (i.e., every adult receives 20,000 dollars irrespective of their income). According to the income effect, this will likely increase labor supply.

8. According to the income effect, an increase in wealth is likely to shift the labor supply curve to the left (upward).

The Great Depression was ended in the United States by:

1)the government running budget surpluses throughout the 1930s.
2)the government increasing the money supply throughout the 1930s.
3)central planning of the economy by the government.
4)the huge amounts of government spending required to fight WWII during the early 1940s.

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____.

1)money is neutral in the long run; do not consider money to be neutral in the long run.
2)the adjustment of prices takes some time; expect changes in the money supply to be instantaneous.
3)did not consider money to be neutral in the long run; consider money neutral in the long run.
4)the adjustment of prices to changes in the money supply is instantaneous; argue that this adjustment process takes some time.

The main idea behind monetarism is that:

1)the aggregate output will be even greater than potential output if the money supply grows at a constant rate.
2)the aggregate price level will increase proportionally if the money supply grows at a constant rate.
3)the government budget will have a deficit if the government spending grows at a constant rate.
4)the aggregate output will grow steadily at a constant rate if the money supply also grows at a constant rate.

Suppose r_RF = 7%, r_M = 9%, and b_i = 2.2.

2. Now suppose r_RF decreases to 6%. The slope of the SML remains constant. How would this affect r_M and r_i?

-Select-IIIIIIIVVItem 3

1. What is r_i, the required rate of return on Stock i? Round your answer to two decimal places.
     %

2. 1. Now suppose r_RF increases to 8%. The slope of the SML remains constant. How would this affect r_M and r_i?

   1. r_M will increase by 1% and r_i will remain the same.
   2. Both r_M and r_i will decrease by 1%.
   3. Both r_M and r_i will remain the same.
   4. Both r_M and r_i will increase by 1%.
   5. r_M will remain the same and r_i will increase by 1%.
   
   -Select-IIIIIIIVVItem 2
   1. r_M will decrease by 1% and r_i will remain the same.
   2. r_M will remain the same and r_i will decrease by 1%.
   3. Both r_M and r_i will increase by 1%.
   4. Both r_M and r_i will remain the same.
   5. Both r_M and r_i will decrease by 1%.

3. 1. Now assume that r_RF remains at 7%, but r_M increases to 10%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.

   The new r_i will be   %.

   2. Now assume that r_RF remains at 7%, but r_M falls to 8%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.

   The new r_i will be   %.

We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,000 units per year. Price per unit is $40, variable cost per unit is $21, and fixed costs are $800,000 per year. The tax rate is 21 percent, and we require a return of 10 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places, e.g., 32.16.) b-2. What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b-3. Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

The Ace and Deuce partnership has been created to operate a law firm. The partners are attempting to devise a fair system to allocate profits and losses. Ace plans to work more billable hours each year than Deuce. However, Deuce has more experience and can charge a higher hourly rate. Ace expects to invest more money in the business than Deuce.

REQUIRED Build a spreadsheet that can be used to allocate profits and losses to these two partners each year. The spreadsheet should be constructed so that the following variables can be entered:

Net income for the year.

Number of billable hours for each partner.

Hourly rate for each partner.

Capital investment by each partner.

Interest rate on capital investment.

Profit and loss ratio.

Use this spreadsheet to determine the allocation if partnership net income for the current year is $200,000, the number of billable hours is 2,000 for Ace and 1,500 for Deuce, the hourly rate for Ace is $20 and for Deuce is $30, and investment by Ace is $80,000 and by Deuce is $50,000. Interest on capital will be accrued each year at 10 percent of the beginning balance. Any remaining income amount will be split 50-50.

Use the spreadsheet a second time but make these changes: Deuce reports 1,700 billable hours, Ace invests $100,000, and interest will be recognized at a 12 percent annual rate. How do these three changes impact the allocation of the $200,000?

Scenario:

A family practice that serves over 4,500 patients is owned by three brothers, all general practitioner medical doctors who have been closely watching how the new Patient Protection and Affordable Care Act (ACA or “Obamacare”) is developing, especially with the ongoing changes to the eligibilities of coverage for patients and reimbursements that now require their facility to change its systems and processes for compliance.

As a healthcare consultant, you have been retained by the family practice to perform a thorough audit and analysis of the facility, including its systems, processes, and procedures, with an emphasis on record keeping and coding/billing practices.

You have also spent some time with the owners of the family practice discussing what the future holds regarding the types of treatments, demographics of patients, and the effect of technology on the methodologies of patient treatment. Within this context, the client asks you to provide the following:

Questions:

When comparing the overall health care system in America, how does it compare to just 40

years ago?

Provide some examples of what specifically is critical for the healthcare organization to consider regarding how treatments are performed on patients.

What technological advancements do you predict in health care in the next 15 years, especially those that can be opportunities for a family medical clinic scenario?

What are the regulatory agency changes coming in the near future?

What are your predictions for the success of the ACA, especially in the next 5 years?

REQUIRED RATE OF RETURN

Suppose rRF = 6%, rM = 13%, and bi = 1.7.

2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rMand ri?

What is ri, the required rate of return on Stock i? Round your answer to two decimal places.
%

1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rMand ri?

Both rM and ri will increase by 1%.

rM will remain the same and ri will increase by 1%.

rM will increase by 1% and ri will remain the same.

Both rM and ri will decrease by 1%.

Both rM and ri will remain the same.

-Select-IIIIIIIVVItem 2  

rM will remain the same and ri will decrease by 1%.

Both rM and ri will increase by 1%.

Both rM and ri will remain the same.

Both rM and ri will decrease by 1%.

rM will decrease by 1% and ri will remain the same.

-Select-IIIIIIIVVItem 3  

1. Now assume that rRF remains at 6%, but rM increases to 14%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.

The new ri will be  %.

2. Now assume that rRF remains at 6%, but rM falls to 12%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.

The new ri will be  %.

Biscayne’s Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows:

Biscayne’s total fixed cost is $14,525 per month.

Required:
1. Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne’s offers. (Round your "Unit Contribution Margin" answers to 2 decimal places.)



2. Which model would Biscayne’s prefer to rent?

3. Calculate Biscayne’s break-even point if the product mix is 50/50. (Do not round intermediate calculations. Round your final answer to the nearest whole number.)



4. Calculate the break-even point if Biscayne’s product mix changes so that the standard model is rented 75 percent of the time and the deluxe model is rented for only 25 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.)



5. Calculate the break-even point if Biscayne’s product mix changes so that the standard model is rented 25 percent of the time and the deluxe model is rented for 75 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.)