Total has discovered a potential 1 billion barrels of “wet” gas off the coast of South Africa. The gas could be used as petrol or perhaps even converted into electricity, according to one expert. The Brulpadda gas find should mean more tax revenue and a stronger rand. How Will It Affect South Africans Firstly, government will earn more tax. Total and its partners will pay the regular 28% corporate tax on all taxable income from Brulpadda. According to the most optimistic estimates, the Brulpadda find could yield $1 trillion (R14.4 trillion) for Total and its partners, which would mean a massive tax windfall for South Africa. Certain Businesses and Skills Will Be in Demand The Brulpadda find could have a massive boost to all kinds of businesses in South Africa. Companies providing helicopters, marine services, catering supplies and transport to get supplies to the site would be required. Adapted from “Everything You Need to Know about South Africa’s Massive Gas Find” by Helena Wasserman, Business Insider SA
4.1 Assuming that government budget is at zero balance discuss the implication of the gas find in terms of government’s fiscal policy for the following economic factors:
4.1.1 Collection of revenue through taxation on personal income
4.1.2 Government spending on the provision of goods and services
4.2 Explain, with the aid of a diagram, the economic impact on cost-push inflation and aggregate output.
4.3 Discuss the main type of unemployment that would be reduced.
In: Economics
5. A perfectly competitive firm is trying to adjust to a recent decrease in consumer demand by adjusting their levels of production. The firm has more than enough existing capital to meet any reasonable production levels, so must only consider how much labour to hire. Assume the cost of using this capital is zero. The price of a unit of labour (the wage rate) is z, the quantity of labour used is O, and the price of a unit of output is s. Labour use is transformed into output at a rate of { = ln(O), where { is the quantity of output.
(a) What are the firm’s total cost, total revenue, marginal cost, and marginal revenue functions?
(b) What is the profit maximising level of labour use? How do we know for sure this is the profit maximising level?
(c) How does the profit maximising level of labour use change with wages and prices?
(d) Write down the indirect profit function of the firm, and investigate the eect of increases in s and z upon the value of optimal profits. Are the signs of those eects what you would expect?
(e) Is the indirect profit function concave, convex or linear in price? Is it concave, convex or linear in the wage rate? From your answers to these questions, can you conclude whether the indirect profit function is concave or convex in the vector (s> z)? (f) Assuming that the indirect profit function is convex in the vector (s> z), sketch a contour of the indirect profit function in the space of the output price and the wage rate, and indicate the corresponding better set.
In: Economics
The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment:
|
Quantity |
Willingness to Pay |
|---|---|
|
(Dollars) |
|
| First bottle | 5 |
| Second bottle | 4 |
| Third bottle | 3 |
| Fourth bottle | 2 |
| Fifth bottle | 1 |
| Further bottles | 0 |
The cost of producing a bottle of Zlurp is $1.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.)
Each Whovillian will consume_____bottles and receive a consumer surplus of_____
.
Producing Zlurp creates pollution. Each bottle has an external cost of $1.
Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to________
.
Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle.
Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now______. Her decision______increases total surplus in Whoville by_____
.
Mayor Grinch imposes a $1 tax on each bottle of Zlurp.
Consumption per person is now_____bottles. This yields a per-person consumer surplus of_____not including the cost of pollution, a per-person external cost of_____, and government revenue of_____m per person. Total surplus per person is now_____as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.)
Based on your calculations, you would or wouldn't support the mayor's policy because it decreases or increased welfare compared to before the tax.
In: Economics
In: Finance
The concepts of gross margin and contribution margins are two important measures companies can use to determine how well they are faring in terms of profit-making. While gross margin is simply revenue less the total cost of the goods sold, contribution margin is revenue, less variable costs. According to Datar and Rajan (2018),
“the gross margin measures how much a company can charge for its products over and above the cost of acquiring or producing them. Companies, such as brand-name pharmaceuticals producers, have high gross margins because their products are often patented and provide unique and distinctive benefits to consumers. In contrast, manufacturers of generic medicines and basic chemicals have low gross margins because the market for these products is highly competitive. Contribution margin indicates how much of a company's revenues are available to cover fixed costs. It helps in assessing the risk of losses. For example, the risk of loss is low if the contribution margin exceeds a company’s fixed costs even when sales are low. Gross margin and contribution margin are related but gives different insights. For example, a company operating in a competitive market with a low gross margin will have a low risk of loss if its fixed costs are small.”
What other insights or observations do you have with regard to gross margin and contribution margin? Do those insights change depending on the industry sector being considered; if so, why?
Your initial posting should be 250-500
In: Accounting
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 63 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:
| Fixed Cost per Month | Cost per Course | Cost per Student |
|||||
| Instructor wages | $ | 2,930 | |||||
| Classroom supplies | $ | 280 | |||||
| Utilities | $ | 1,240 | $ | 75 | |||
| Campus rent | $ | 4,700 | |||||
| Insurance | $ | 2,400 | |||||
| Administrative expenses | $ | 3,800 | $ | 44 | $ | 3 | |
For example, administrative expenses should be $3,800 per month plus $44 per course plus $3 per student. The company’s sales should average $860 per student.
The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 57 students. The actual operating results for September appear below:
| Actual | ||
| Revenue | $ | 51,280 |
| Instructor wages | $ | 11,000 |
| Classroom supplies | $ | 17,490 |
| Utilities | $ | 1,950 |
| Campus rent | $ | 4,700 |
| Insurance | $ | 2,540 |
| Administrative expenses | $ | 3,591 |
Required:
Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
In: Accounting
The Michael Scott Paper company has two retail outlets not far from each other (let us denote them by A and B). Assume that they sell one kind of plain paper. Weekly demand in each store is identical and is given by the following forecast — demand is either 3 units or 5 units with equal likelihood. Further, assume that the demands across the two outlets are independent. The cost structure for plain paper is as follows — revenue per unit of sale is $4. The cost of purchasing is $1.6 per unit (do not worry what units we are dealing with, the costs and demand have been scaled suitably). Ignore all other costs including the holding cost of inventory and the goodwill cost of a lost sale, which for the purposes of this computation, we assume to be zero. Consider a weekly time horizon. Also assume zero salvage costs.
1) If each store makes independent stocking decisions, how much should each store stock in anticipation of demand?
2) Jim Halpert, the inventory manager of the paper company, decides to come up with a different operational structure. He realizes there is an empty warehouse close to both stores. He decides to buy and store inventory in this central warehouse and replenish instantaneously when stores have demand. What is the new optimal stocking quantity in this central warehouse? What operational strategy is Jim Halpert attempting to leverage? Given the same cost and revenue structure, will he save any costs or will the costs increase? Justify your results with computation.
In: Operations Management
Horizontal Analysis of Income Statement
For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement:
| McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 |
|||
| 20Y2 | 20Y1 | ||
| Sales | $649,636 | $589,000 | |
| Cost of goods sold | 451,400 | 370,000 | |
| Gross profit | $198,236 | $219,000 | |
| Selling expenses | $63,750 | $50,000 | |
| Administrative expenses | 37,140 | 31,000 | |
| Total operating expenses | $100,890 | $81,000 | |
| Income from operations | $97,346 | $138,000 | |
| Other revenue | 3,110 | 2,500 | |
| Income before income tax | $100,456 | $140,500 | |
| Income tax expense | 28,100 | 42,200 | |
| Net income | $72,356 | $98,300 | |
Required:
1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Round percentages to one decimal place. Use the minus sign to indicate a decrease in the "Increase (Decrease)" columns.
| McDade Company | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 20Y2 and 20Y1 | ||||
| 20Y2 | 20Y1 | Difference - Amount | Difference - Percent | |
| Sales | $649,636 | $589,000 | $ | % |
| Cost of goods sold | 451,400 | 370,000 | % | |
| Gross profit | $198,236 | $219,000 | $ | % |
| Selling expenses | $63,750 | $50,000 | $ | % |
| Administrative expenses | 37,140 | 31,000 | % | |
| Total operating expenses | $100,890 | $81,000 | $ | % |
| Income from operations | $97,346 | $138,000 | $ | % |
| Other revenue | 3,110 | 2,500 | % | |
| Income before income tax | $100,456 | $140,500 | $ | % |
| Income tax expense | 28,100 | 42,200 | % | |
| Net income | $72,356 | $98,300 | $ | % |
.
In: Accounting
The company is considering the introduction of a new product that is expected to reach sales of $10 million in its first full year and $13 million of sales in the second and third years. Thereafter, annual sales are expected to decline to two-thirds of peak annual sales in the fourth year and one-third of peak sales in the fifth year. No more sales are expected after the fifth year. The CGS is about 60% of the sales revenues in each year. The GS&A expenses are about 23.5% of the sales revenue. Tax on profits is to be paid at a 40% rate. A capital investment of $0.5 million is needed to acquire production equipment. No salvage value is expected at the end of its five-year useful life. This investment is to be fully depreciated on a straight-line basis over five years. In addition, working capital is needed to support the expected sales in an amount equal to 27% of the sales revenue. This working capital investment must be made at the beginning of each year to build up the needed inventory and implement the planned sales program. Furthermore, during the first year of sales activity, a one-time product introductory expense of $200,000 is incurred. Approximately $1.0 million has already been spent promoting and test marketing the new product.
a. Formulate a multiyear income statement to estimate the cash flows throughout its five-year life cycle.
b. Assuming a 20% discount rate, what is the new product’s NPV?
c. Should the company introduce the new product?
In: Finance
40. What is a typical Day of Arrival (DOA) and pattern for Special Corp customers?
41. What is the typical BMF that management companies get?
a. 3%
b. 5%
c. 2%
d. within 30 days they start getting 3%
42. On the STR report, if the development funnel/ pipeline is strong showing a lot of rooms are being developed what might it indicate?
a. Your brand is has strong preference
b. Owners Priority is being made occasional across the portfolio
c. Owners Priority is being made more quickly than other hotel’s mgt. companies’ brands
d. a and c
42. When driving sales, revenue management in a group hotel should shrink the hotel by adding great groups, as far out as reasonably possible, know based on history what the cross over goal should be, as long as the groups have what?
a. The right number of customers
b. The right average rate
c. The largest total spend possible
d. The use the banquet and outlet space occasionally
43. If a hotel has a lot of great group room nights on the books in years out, it also allows revenue management to do what important strategy?
a. Open discounts
b. Close out discounts
c. Close out all corporate, association, and other group.
d. focus on driving transient higher rates
In: Operations Management