Draaksh Corporation sells premium quality wine for $105 per bottle. Its direct materials and direct labour costs are $20 and $11.50 respectively per bottle. It pays its direct labour employees a wage of $23 per hour.

The company performed a regression analysis using the past 12 months’ data and established the following monthly cost equation for manufacturing overhead costs using direct labour hours as the overhead allocation base:

y = $153,700 + $22.00x

Draaksh believes that the above cost estimates will not substantially change for the next fiscal year. Given the stiff competition in the wine market, Draaksh budgeted an amount of $34,200 per month for sales promotions; additionally, it has decided to offer a sales commission of $5.50 per bottle to its sales personnel. Administrative expenses are expected to be $25,100 per month.

Required:

1.	Compute the expected total variable cost per bottle and the expected contribution margin ratio.

     

2.	Compute the annual break-even sales in units and dollars. (Round your intermediate and final answers to the whole number.)

     

3.	Draaksh has budgeted sales of $8.6 million for the next fiscal year. What is the company’s margin of safety in dollars and as a percentage of budgeted sales? (Round your intermediate and final answers to the whole number.)

     

2. Krishna Electronics Pvt. Ltd. is a new venture that manufactures electronic components. The company produced the following income statement results in its first year of operations:

Net Sales	Rs. 10,00,000
Cost of Goods Sold	- Rs. 6,50,000
Gross Profit	Rs. 3,50,000
General and Administrative Expenses	- Rs. 2,40,000
Marketing Expenses	- Rs. 80,000
Depreciation	- Rs. 45,000
EBIT	- Rs. 15,000
Interest Expenses	- Rs. 35,000
Earnings Before Taxes	- Rs. 50,000
Taxes	Rs. 0
Net Earnings (Loss)	- Rs. 50,000

Cost of Goods Sold are expected to vary with sales and are expected to be a constant percentage of sales. The General and Administrative expenses are expected to be a fixed cost. Further Marketing Expenses are also expected to remain fixed because the sales staff are on fixed salaries and no new hiring is planned. The selling price for the electronic component (manufactured by the company) is Rs. 20 per unit. The effective tax rate is expected to be 30% (when the firm is profitable.)

1. Calculate the survival (i.e. EBDAT) breakeven point for Krishna Electronics in terms of survival revenues (Rs.)   
2. Calculate the EBDAT breakeven point in terms of number of units sold.
3. Calculate the NOPAT breakeven point for Krishna Electronics in terms of revenues (in Rupees.)
4. Calculate the NOPAT breakeven point in terms of number of units sold.    

INSTRUCTIONS: THERE ARE TWO SECTIONS IN THIS PAPER; SECTIONS A AND B
ANSWER ALL QUESTIONS IN SECTION A AND ONLY ONE IN SECTION B

SECTION A
QUESTION ONE.
In a given economy, the following hold true.
1.There are only two sectors-household and business sectors operating in the economy.
2. The percentage of every extra income which goes into consumption is 80%.
Given that an initial amount of 1000 currency units is introduced as investment in the economy. Draw up a table which tracks successive expenditure, income consumption and savings in the economy, up to the sixth round assuming the initial injection kicks in a multiplier process.
Using your table, calculate the total amount of income and consumption and deduce the value of the national income multiplier.
QUESTION TWO
Explain the difference between the criteria used to measure absolute and comparative cost advantages in international trade.
Assuming there are only two countries in the world, Oceania and Atlantis each having one resource unit which they use to produce either Cereals or Machine tools and the table below depicts the production possibilities of each country.

Maize (tons)
Machine Tools (Units)

Oceania
6
2

Atlantis
2
1

Determine which country has i. absolute cost advantage ii. Comparative cost advantage.
                                                                                                                                        

Draaksh Corporation sells premium quality wine for $120 per bottle. Its direct materials and direct labour costs are $23 and $13.00 respectively per bottle. It pays its direct labour employees a wage of $26 per hour. The company performed a regression analysis using the past 12 months’ data and established the following monthly cost equation for manufacturing overhead costs using direct labour hours as the overhead allocation base: y = $155,200 + $23.50x Draaksh believes that the above cost estimates will not substantially change for the next fiscal year. Given the stiff competition in the wine market, Draaksh budgeted an amount of $34,800 per month for sales promotions; additionally, it has decided to offer a sales commission of $6.25 per bottle to its sales personnel. Administrative expenses are expected to be $25,400 per month. Required: 1. Compute the expected total variable cost per bottle and the expected contribution margin ratio. 2. Compute the annual break-even sales in units and dollars. (Round your intermediate and final answers to the whole number.) 3. Draaksh has budgeted sales of $8.9 million for the next fiscal year. What is the company’s margin of safety in dollars and as a percentage of budgeted sales? (Round your intermediate and final answers to the whole number.)

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer of 2018, the joint costs of processing the tomatoes were $420,000. There was no beginning inventory for the summer. Production and sales information for the summer is as follows:

Product	Production (# of cases)	Sales (# of cases)	Sales Value at Splitoff Point	Separable Costs	Final Selling Price
Catsup	100,000	80,000	$6 per case	$3.00 per case	Catsup Premium    $23 per case
Juice	150,000	120,000	8 per case	5.00 per case	Juice Premium        $25 per case
Canned	200,000	150,000	5 per case	2.50 per case	Canned Premium    $7.5 per case

a. Determine the amount allocated to each product if the estimated net realizable value (NRV) method is used.

b. Compute the cost per case for each product.

c. Complete the following product-line partial income statement for each product (excel template is provided).

Product-line Income Statement by using NRV method	Catsup	Juice	Canned
Revenues
Cost of goods sold
Joint costs
Separable costs
Production costs
Deduct ending inventory
Cost of goods sold
Gross margin
Gross margin percentage

I would like to get the step by step solution for the below question

Question 11 pts

What is the difference between positive economics and normative economics?

Group of answer choices

Positive economics deals with dynamic systems, while normative economics focuses on static systems.

Normative economics deals with how the world actually works, whereas positive economics focuses on what people ought to do.

Positive economics requires making value judgments, while normative economics relies solely on factual statements.

Normative economics applies in cases that are characterized by typical or normal behaviors and dynamics, while positive economics applies in cases with unusually rapid technological progress.

Normative economics focuses on what people ought to do, whereas positive economics deals with how the world actually works.

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Question 21 pts

Which of the following are true statements about public goods?

Group of answer choices

To find the aggregate marginal willingness to pay (MWTP) for the good you would add together the individual MWTP corresponding to given ``output'' levels

The good is available in the same quantities to everyone

Payment of a fee to a public agency provides access to the good

The total amount consumed is the sum of the amounts consumed by each individual

Public goods are those paid for by taxes and provided and maintained by the government

Overuse by some diminishes the amount available to others

They are rival and non-excludable

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Question 31 pts

Angela is willing to pay $75 now for an item to be delivered in exactly 3 years time. The most she would be willing to pay for the item today is $100. What is Angela's discount rate?

Group of answer choices

7.5% per year

25% per year

15% per year

10% per year

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Question 41 pts

Aubrey consumes 5 units of a certain good. Aubrey would buy one additional unit only if the price per unit were $10 or less. What concept is being illustrated here?

Group of answer choices

Diminishing marginal utility

Marginal willingness to pay

Discounting

Aggregate willingness to pay

Intrinsic value

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Question 51 pts

A local firm makes and sells handcrafted equestrian riding boots. Some of the residual chemicals from the leather tanning process are discharged into a river used for the town's drinking water supply. The social marginal cost curve for the riding boots is ___________________ the firm's riding boot supply curve.

Group of answer choices

lower than

higher than

completely unrelated to

equal to

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Question 61 pts

Last week you paid $20 for a ticket to the opening game of the Cowboy's upcoming football season. Tickets are now sold out, and your acquaintance, Mary, asks to buy your ticket. The lowest price at which you would be willing to sell your ticket to Mary is $50, but she is willing to pay no more than $40. If attending the game and selling your ticket to Mary are your only two options, what is your opportunity cost of going to the game?

Group of answer choices

$50

$20

$40

$30

$0

$10

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Question 71 pts

Which one or more of the following statements is consistent with the economic definition of sustainability for a nonrenewable natural resource?

Group of answer choices

Non-renewable resources cannot be used sustainably because they eventually will run out; only renewable resources can be used sustainably.

Sustainability requires that the rate of extraction must be less than the discount rate in all periods.

Use of a non-renewable resource can be sustainable if investments in other forms of productive capital are made in an amount equal to or exceeding the user cost.

Extraction can be sustainable only if it is matched or exceeded by the rate of discoveries of new deposits.

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Question 81 pts

Which of the following are typically associated with open-access resources?

Group of answer choices

rivalry

over-use relative to the economically efficient level

resource discounting inflation

Under-supply relative to the economically efficient level due to free-riding

Public goods

Private goods

excludability

resource rent dissipation

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Question 91 pts

If the government charges a tax to producers in the amount of $x per unit of output, this has the effect of...

Group of answer choices

Decreasing the market quantity

Shifting the marginal external cost curve down

Shifting the supply curve up

Shifting the marginal external cost curve up

Increasing the market quantity

Decreasing the market price

Shifting the demand curve up

Shifting the supply curve down

Increasing the market price

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Question 101 pts

The table below shows the consumer surplus per visitor that would be generated at different levels of attendance at a local public park that currently charges no fee for entry. Consumer surplus per visitor declines with the number of visitors because of crowding and congestion in the park.

Number of visitors	Consumer surplus per visitor
200	50
300	40
400	20
500	0
600	-10
700	-15
800	-20

What entry fee would need to be charged to limit the number of visitors to the level that maximizes total surplus?

Group of answer choices

$60

$40

$20

$50

$0

$30

$10

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Question 111 pts

A project has been proposed to build an overlook area off the Snowy Range Scenic Byway. To finance the construction of the overlook, a two-tier tax will be assessed on residents of Laramie and several nearby towns. Households below the median income will pay 0.1% of their income in taxes, and those above the median income will pay 0.2%. Differences in households' willingness-to-pay for the overlook have been found to be unrelated to their incomes.

Based on the information provided, which one or more of the following conclusions can we draw about the distribution of the benefits, costs, and net benefits of the proposal relative to household incomes?

Group of answer choices

Net benefits are distributed regressively

Costs are distributed regressively

Benefits are distributed progressively

Net benefits are distributed progressively

Costs are distributed proportionally

Net benefits are distributed proportionally

Benefits are distributed regressively

Benefits are distributed proportionally

Costs are distributed progressively

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Question 121 pts

Which of the following are reasons why voluntary contributions to The Nature Conservancy probably would not correspond to the total value that people place on the wildlife habitat protected by that organization?

Group of answer choices

Travel costs may be prohibitive for some contributors.

Protection of species habitat is a public good.

The protected habitat also may provide consumptive or non-consumptive use values.

The marginal private cost of protecting the habitat will be greater than the marginal social benefits.

Existence values cannot be measured using a contingent valuation approach.

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Question 131 pts

Use the table below to answer the questions that follow.

Time period	Project A benefit	Project A cost	Project B benefit	Project B cost
0	10	25	40	120
1	25	25	40	0
2	40	25	40	0
3	50	25	40	0

Recall that a project's internal rate of return (IRR) is the discount rate for which the project's present value of net benefits equals zero.

(a) The internal rate of return for Project A is                            [ Select ]                       ["equal to", "greater than", "less than"]         0.3 per period.

(b) The internal rate of return for Project B is                            [ Select ]                       ["equal to", "greater than", "less than"]         0.3 per period.

(c) If the discount rate is 0.1 per period and only one project an be adopted, an economist would recommend                            [ Select ]                       ["Project B", "Project A"]         .

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Question 141 pts

PA6-1 (Algo) Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point [LO 6-1, 6-2]

Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows:

Number of bikes produced and sold		500		800		1,000
Total costs
Variable costs	$	118,000	$	?	$	?
Fixed costs per year		?		?		?
Total costs		?		?		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?	$	513.75		?

Required:
1. Complete the table.

2. Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650.

4. Calculate Hermosa’s break-even point in units and sales revenue.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 4

Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.)

	Number of bikes produced and sold 500 Units 800 Units 1000 Units Total costs Variable costs $118,000 Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $513.75

• Required 2

Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650. (Round your percentage answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

	500 Units 800 Units 1000 Units Contribution Margin Ratio % % % Total Contribution Margin

• Required 4

Calculate Hermosa’s break-even point in units and sales revenue. (Round your "Unit" and "Sales Revenue" answers to the nearest whole number.)

	Break-Even Units Bikes Break-Even Sales Revenue

Analyzing Inventories Using LIFO Inventory Footnote
The footnote below is from the 2014 10 -K report of Whole Foods Market, Inc., a Texas-based retail grocery chain.

Inventories
The Company values inventories at the lower of cost or market. Cost was determined using the dollar value retail last-in, first-out ("LIFO") method for approximately 93.5 % and 92.8 % of inventories in fiscal years 2014 and 2013, respectively. Under the LIFO method, the cost assigned to items sold is based on the cost of the most recent items purchased. As a result, the costs of the first items purchased remain in inventory and are used to value ending inventory. The excess of estimated current costs over LIFO carrying value, or LIFO reserve, was approximately $54 million and $47 million at September 28, 2014 and September 29, 2013, respectively. Costs for remaining inventories are determined by the first-in, first-out method. Cost before the LIFO adjustment is principally determined using the item cost method, which is calculated by counting each item in inventory, assigning costs to each of these items based on the actual purchase cost (net of vendor allowances) of each item and recording the actual cost of items sold.

Whole Foods operates the world's largest chain of natural and organic food stores. In 2014, Whole Foods reported sales revenue of $13,988 million and cost of goods sold of $8,755 million. The following information was extracted from the company's 2014 and 2013 balance sheets:

($ millions)				2014	2013
Merchandise inventories				$399	$352

a. Calculate the amount of inventories purchased by Whole Foods in 2014. $Answer million

b. What amount of gross profit would Whole Foods have reported if the FIFO method had been used to value all inventories? $Answer million

c. Calculate the gross profit margin (GPM) as reported and assuming that the FIFO method had been used to value all inventories.

Round to the nearest percentage (i.e., 0.453 = 45 %) Answer%

Analyzing Inventories Using LIFO Inventory Footnote
The footnote below is from the 2014 10 -K report of Whole Foods Market, Inc., a Texas-based retail grocery chain.

Inventories
The Company values inventories at the lower of cost or market. Cost was determined using the dollar value retail last-in, first-out ("LIFO") method for approximately 93.5 % and 92.8 % of inventories in fiscal years 2014 and 2013, respectively. Under the LIFO method, the cost assigned to items sold is based on the cost of the most recent items purchased. As a result, the costs of the first items purchased remain in inventory and are used to value ending inventory. The excess of estimated current costs over LIFO carrying value, or LIFO reserve, was approximately $45 million and $29 million at September 28, 2014 and September 29, 2013, respectively. Costs for remaining inventories are determined by the first-in, first-out method. Cost before the LIFO adjustment is principally determined using the item cost method, which is calculated by counting each item in inventory, assigning costs to each of these items based on the actual purchase cost (net of vendor allowances) of each item and recording the actual cost of items sold.

Whole Foods operates the world's largest chain of natural and organic food stores. In 2014, Whole Foods reported sales revenue of $12,852 million and cost of goods sold of $7,632 million. The following information was extracted from the company's 2014 and 2013 balance sheets:

($ millions)				2014	2013
Merchandise inventories				$432	$399

a. Calculate the amount of inventories purchased by Whole Foods in 2014. $Answer million

b. What amount of gross profit would Whole Foods have reported if the FIFO method had been used to value all inventories? $Answer million

c. Calculate the gross profit margin (GPM) as reported and assuming that the FIFO method had been used to value all inventories.

Round to the nearest percentage (i.e., 0.453 = 45 %) Answer%

1. Target Costing

   Laser Impressions, Inc., manufactures color laser printers. Model J20 presently sells for $375 and has a total product cost of $300, as follows:

   Direct materials	$220
   Direct labor	60
   Factory overhead	20
   Total	$300

   It is estimated that the competitive selling price for color laser printers of this type will drop to $360 next year. Laser Impressions has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas:

   1. Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit.
   2. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $8 per unit.
   3. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead are related to running injection molding machines.

   The direct labor rate is $25 per hour.

   a. Determine the target cost for Model J20 assuming that the historical markup on product cost and selling price are maintained. Round your final answer to two decimal places.
   $

   b. Determine the required cost reduction. Enter as a positive number. Round your final answer to two decimal places.
   $

   c. Evaluate the three engineering improvements together to determine if the required cost reduction (drift) can be achieved. Enter all amounts as positive numbers. Do not round interim calculations but round your final answers to two decimal places.

   1. Direct labor reduction	$
   2. Additional inspection	$
   3. Injection molding productivity improvement	$
   Total savings	$

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