The statement "A principle offers broad goals while leaving human beings in charge" is True.Savings refers to a fund which is kept aside by an individual for later use. An example of saving is putting money into a savings account.The government sector is the most stable sector in the economy.
A principle is a broad, and general statement that offers a direction for an organization or an individual, it leaves the individual or an organization to determine the exact way to achieve the principle by themselves. Thus, it is true that a principle offers broad goals while leaving human beings in charge. Savings are typically funds that are kept aside for future use, rather than immediate use. Putting money into a savings account is an example of saving.
This is because the government has the power to raise taxes or borrow money in order to pay for its expenses, unlike individuals and businesses. In addition, government employees are typically paid a fixed salary, regardless of the state of the economy. Austrian economists believe that it is impossible to eliminate the business cycle. This is a false statement.
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For each of the following, identify the primary GAAP that has been violated and explain why. 1. Delta Company prepared its first set of financial statements for the three years ended July 31, 2020. 2.
The primary GAAP that has been violated by the Delta company is the consistency principle
How to determine the primary GAAPAccording to this rule, businesses should maintain consistency in their accounting techniques and processes over time, unless there is a valid justification for altering them.
Delta Company is currently in the process of creating its initial financial records and has yet to establish a track record of employing specific accounting approaches. After adopting a specific technique, it is necessary to stick to it unless a valid justification for alteration arises.
If Delta Company fails to follow the consistency principle, it will pose a challenge for individuals reviewing its financial documents to assess its financial progress over the years. The lack of adequate information may pose a challenge for investors, creditors, and other parties interested in the company to make well-informed decisions.
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A semi-annual government bond selling for R975, with a coupon of 10.3% has a YTM of 9.1%. The bond matures in 12 years, but can be called in 6 years at a call price of R1070. What value do you need to input into your calculator for "N" to calculate Yield to Call? Provide your answer, in years, as a whole number (no decimal places needed).
The value to input into your calculator for "N" to calculate the Yield to Call is 10 (as a whole number representing years).
To calculate the Yield to Call (YTC), we need to determine the number of periods (N) until the bond can be called. In this case, the bond can be called in 6 years.
Given the information provided:
Market Price (P) = R975
Coupon Rate (C) = 10.3%
YTM (Yield to Maturity) = 9.1%
Maturity (M) = 12 years
Call Price (CP) = R1070
Time to Call (N) = ?
Using the financial calculator, we can solve for N to find the number of periods until the bond can be called:
PV (Present Value) = -975
FV (Future Value) = 1070
PMT (Payment) = (10.3% of 975)/2 (since it is a semi-annual coupon)
YTM (Yield to Maturity) = 9.1%
N = ?
Using the formula:
PV = (PMT * (1 - (1 + YTM)^(-N))) / YTM + (FV / (1 + YTM)^N)
Substituting the known values:
-975 = ((PMT * (1 - (1 + 0.091)^(-N))) / 0.091) + (1070 / (1 + 0.091)^N)
To solve this equation, we can use trial and error or financial software to find the value of N that satisfies the equation. After calculations, the value of N is approximately 10 years.
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question 19 Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? a-The gain or loss on disposal should be reported as an other income item. b-Results of operations of a discontinued component should be disclosed immediately below income from operations. c-Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. d-The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations. Question 37 Where should goods in transit that were recently purchased f.o.b. destination be included on the statement of financial position? O Accounts payable. O Inventory. O Equipment. Not on the statement of financial position.
Goods in transit that were recently purchased f.o.b. destination should be included in the inventory section of the statement of financial position.
Option B is correct
When reporting the disposal of a component of the business, the required disclosure in the income statement is that (d) The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations. Explanation: Disposal of a component of the business is generally classified as a discontinued operation. Companies are required to report the results of operations of discontinued components separately from continuing operations. However, the gain or loss on disposal should not be segregated but should be reported together with the results of continuing operations.
Goods in transit that were recently purchased f.o.b. destination should be included in the inventory section of the statement of financial position. The inventory section of the statement of financial position records the value of all unsold goods, including goods in transit. In general, the value of inventory should include all costs necessary to get the item to the current location and condition, which can include transportation and other expenses.
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What do you see as the future of Electra? (Do you have any advice/direction?)
Electra is a cryptocurrency that was introduced in 2017. It is built on blockchain technology that has been improved and optimized over time. Electra's future looks promising with many advancements and collaborations taking place in the space. Electra has made it clear that it wants to be a global payment system for everyone, not just those who understand blockchain technology.
Electra is a strong and adaptable coin with a highly secure network that allows for transactions to be processed quickly and efficiently. The team behind Electra has an ambitious roadmap that includes multiple partnerships, integrations, and developments in the works. This approach will likely lead to Electra being used more frequently, making it a popular cryptocurrency in the future. Some of the advancements and collaborations taking place in Electra include the Electra Pay payment gateway, Electra DEX Decentralized Exchange, Electra Web Wallet, and much more. Electra Pay payment gateway is a payment processor that aims to make transactions with Electra and other cryptocurrencies faster and easier. Electra DEX is a decentralized exchange that allows users to trade Electra with other cryptocurrencies directly.
Electra Web Wallet is a multi-currency wallet that stores Electra and other cryptocurrencies securely and safely. These advancements show that Electra is aiming for mass adoption and is on its way to becoming a widely-used cryptocurrency in the future.In conclusion, it's clear that Electra has a bright future in the world of cryptocurrencies. With its strong technology and roadmap, it's only a matter of time before Electra becomes a widely-used cryptocurrency globally. As a piece of advice, people who want to invest in Electra must conduct proper research before investing. They must stay updated with the latest news and updates about Electra. It is recommended to start with small investments and gradually increase their investments. This way, they can mitigate any risks and losses that may arise.
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andler and Torres are forming a partnership, Organic Leather Goods, to import merchandise from Europe. Sandler is especially artistic and will travel to Europe to buy the merchandise. Torres is a super salesman and has already lined up several department stores to sell the leather goods. Read the requirements. Requirement 1. What is the purpose of the partnership agreement? The purpose of the partnership agreement is to Requirement 2. If the partnership agreement does not state the profit-and-loss-sharing ratios, how will profits or losses be shared?
Requirement 1: The purpose of the partnership agreement is to establish the legal relationship between partners, including the distribution of gains, the management of the partnership, and the responsibilities of each partner.
Requirement 2: If the partnership agreement does not state the profit-and-loss-sharing ratios, the Uniform Partnership Act states that the profits and losses of the business will be shared equally between the partners.
Requirement 1
The purpose of the partnership agreement is to establish the legal relationship between partners, including the distribution of gains, the management of the partnership, and the responsibilities of each partner.
It is essential to have a partnership agreement because it outlines the partnership's expectations and allows the partners to work collaboratively without fear of disagreements. It is the foundation of the partnership and sets the stage for the relationship's success.
Requirement 2
If the partnership agreement does not state the profit-and-loss-sharing ratios, the Uniform Partnership Act states that the profits and losses of the business will be shared equally between the partners.
The sharing of the profits and losses is determined by the capital that each partner contributes to the partnership, as a general rule.
In summary, the partnership agreement is essential to establish the legal relationship between partners, including the distribution of gains, the management of the partnership, and the responsibilities of each partner. If the partnership agreement does not mention the profit-and-loss-sharing ratios, the profits and losses of the partnership will be shared equally between the partners.
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A. Comment on THREE (3) perils associated with ocean transportation. (6 marks)
B. Highlight FIVE (5) responsibilities of a carrier under the carrier’s liability of ocean transportation to ensure that cargo reaches its destination on time and in the original condition when it was loaded onto a vessel. (10 marks)
C. Explain the following terms and give an example of each as it relates to the carrier’s
liability in land transportation.
i. Act of God
ii. Public enemy
iii. Inherent nature of goods
iv. Acts of negligence by shipper
Perils associated with ocean transportation Three perils that are associated with ocean transportation are:1. Piracy: This is a danger that can put the lives of the ship's crew, and the cargo being transported in danger. They are exposed to the threat of pirates in the water.
This is another significant danger that ships that operate in the ocean face. Ships can be damaged or destroyed by storms, which can also cause a delay in the delivery of goods.3. Accidents: Accidents can also occur during the transportation of goods. Some of these accidents may be the fault of the crew, while others may be due to unforeseen circumstances, such as bad weather or equipment failure.B. Responsibilities of a carrier under the carrier’s liability of ocean transportationThe carrier is responsible for ensuring that cargo reaches its destination on time and in its original condition. To do this, the carrier has five responsibilities:1. Care of the cargo: The carrier must take reasonable care of the cargo that is in their possession.2.
A public enemy refers to an entity or group that is hostile to the country or government. An example of a public enemy is a terrorist group that hijacks a shipment of goods.iii. Inherent nature of goods: Inherent nature of goods refers to the inherent qualities or characteristics of a good that make it susceptible to damage. An example of inherent nature of goods is that perishable goods, such as fruits and vegetables, are subject to spoilage during transportation.iv. Acts of negligence by the shipper: Acts of negligence by the shipper refer to any actions or omissions by the shipper that result in damage to the cargo. An example of an act of negligence by the shipper is improper packaging of goods, which can result in damage during transport.
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A Cold Inc is a frozen food distributor with... Use Table 14.1 Answer is complete but not entirely correct. ACold Inc is a frozen food distributor with 10 warehouses across the country. Ivan Tory, one of the warehouse managers, wants to make sure that the inventory policies used by the warehouse are minimizing inventory while still maintaining quick delivery to ACold's customers. Since the warehouse carries hundreds of different products, Ivan decided to study one.
A Cold Inc is a frozen food distributor with 10 warehouses across the country. Ivan Tory, one of the warehouse managers, wants to ensure that the inventory policies used by the warehouse are minimizing inventory while still maintaining quick delivery to ACold's customers.
A Cold Inc can minimize its inventory while still maintaining rapid delivery to its customers by implementing some useful inventory management policies. One of these policies is the safety stock policy, which ensures that there is always enough inventory on hand to meet demand while minimizing stockouts. Safety stock can be determined by utilizing a mathematical formula that considers the average lead time, the average demand rate, and the desired service level.A Cold Inc should also utilize the Economic Order Quantity (EOQ) policy, which ensures that orders are placed for the optimal quantity of inventory. EOQ can be calculated by considering the carrying cost, ordering cost, and the annual demand.A Cold Inc can use the reorder point policy to determine when inventory needs to be reordered. This policy specifies the level of inventory that triggers a new order. The reorder point can be determined using the demand rate and lead time in conjunction with the safety stock.A Cold Inc can utilize the ABC analysis to classify inventory based on its importance. Classifying inventory into different categories can assist in making decisions about how much inventory should be ordered and when it should be ordered.Table 14.1 provides more information about these inventory management policies. By implementing these policies, A Cold Inc can minimize its inventory while still providing quick delivery to customers.
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Each state has perhaps as many as several hundred state courts that are run by the state or by local governments (counties, cities, towns, etc.) in that state. For example, there are hundreds of New York state courts, which are known as Supreme Courts (a mere, lower trial court in NY as it turns out, not a high court), County Courts, City Courts, Village Courts, Town Courts, etc., etc. (we have a needlessly complex system of state courts here in NY). Separate and apart from the system of state courts in each of the 50 states, we have a national system of federal courts that are run, not by any state, but by the federal/U.S. gov't. The federal court system includes the single U.S. Supreme Court in D.C. with 13 mid level U.S. Courts of Appeal (often referred to as "Circuit Courts," including the U.S. Court of Appeals for the 1st Circuit, the U.S. Court of Appeals for the 2nd Circuit, and so on) and more than 100 lower federal "District Courts that are located in major cities throughout the U.S. QUESTION FOR THIS THREAD: Since a large number of all legal claims can be filed in either a state court or a federal court, as the plaintiff in a lawsuit, assuming that you can with absolute certainty file a particular lawsuit in either state court or federal court-your choice, either court will accept and hear the lawsuit-how do you think a company decides in which court to file its case? Does the company file the lawsuit in the appropriate local state court or in the nearest federal court? What would you guess might be some of the advantages or disadvantages of bringing/filing the suit (meaning lawsuit/case) in state or federal court if it's your option?
When deciding whether to file a lawsuit in state court or federal court, a company will consider various factors to determine the most advantageous option. One consideration is the nature of the legal claim and the specific laws applicable to the case.
If the claim involves a violation of federal law or if there are federal issues involved, such as constitutional or statutory interpretations, filing in federal court may be preferable.
Another factor to consider is the potential jury pool. State courts often have juries comprised of local residents, which may be advantageous if the company believes that the local community will have a favorable perception or understanding of its case. On the other hand, federal courts may offer more diverse and experienced juries, particularly in cases with complex legal or technical issues.
Procedural differences also come into play. State courts may have specific rules and procedures that differ from federal courts, which could impact the efficiency and timeline of the case. Additionally, the company may consider the track record and expertise of judges in the respective courts, as well as the potential for appeal options.
Ultimately, the decision on whether to file in state or federal court will depend on a careful evaluation of the specific circumstances of the case, the legal issues involved, and the strategic considerations of the company.
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Give suggestion how to overcome the limitations on wage differentials and industrial disputes in Nigerian hospitals.
Wage differentials are limitations that occur within the health sector in Nigeria. Below are some suggestions to overcome limitations on wage differentials and industrial disputes in Nigerian hospitals:Firstly, it is crucial to implement a new wage policy that will eliminate wage differentials among health workers.
This would result in increased wages for lower-paid workers and reduced wages for higher-paid workers. In addition, the introduction of a comprehensive healthcare plan for health workers would help to cover their medical needs.
Secondly, the government should implement measures to address disputes arising in Nigerian hospitals. This could involve setting up an independent commission to handle disputes or establishing a process for resolving disputes amicably.
Finally, creating a positive work environment can improve the working conditions of health workers, which would make them feel more valued and reduce their desire to strike. This can be achieved by providing additional benefits such as housing, transportation, and medical coverage.
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May): Summarize the main principles of the neoliberal economy policies supported by Washington Consensus/post Washington Consensus (liberal world order) and state capitalism supported by Beijing Consensus (post- liberal world order) and list the external and domestic dynamics of Turkey's shift from neoliberal capitalism to state capitalism over time. - main principles of the neoliberal economy>> Washington Consensus/post Washington Consensus (liberal world order) - state capitalism>> Beijing Consensus (post-liberal world order) --external and domestic dynamics of Turkey's shift from neoliberal capitalism to state capitalism over time.
The main principles of neoliberal economy policies supported by the Washington Consensus/post Washington Consensus (liberal world order) are focused on free markets, deregulation, privatization, and fiscal discipline. On the other hand, state capitalism supported by the Beijing Consensus (post-liberal world order) emphasizes state intervention, strategic planning, and a strong role for state-owned enterprises.
Turkey has experienced a shift from neoliberal capitalism to state capitalism over time due to both external and domestic dynamics. Externally, the global financial crisis of 2008 and its aftermath exposed the vulnerabilities of neoliberal policies, leading countries like Turkey to explore alternative economic models. Additionally, the rise of China as an economic power and its success with state capitalism has influenced Turkey's shift.
Domestically, Turkey's growing desire for economic independence, the pursuit of national development goals, and the need to address income inequality have contributed to the adoption of state capitalism. The government has implemented policies to strengthen state-owned enterprises, increase state control over strategic sectors, and promote industrialization and innovation through state-led initiatives.
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Which one of the following will be used in the computation of the worst-case analysis of a proposed project? a The lowest variable cost per unit that can reasonably be expected
b The lowest level of fixed costs that is actually anticipated c The lowest anticipated sales price per unit Maximum number of units that are expected to be produced and sold d The highest expected salvage value that can be obtained for a project's fixed assets
In the computation of worst-case analysis for a proposed project, the relevant factor would be the lowest anticipated sales price per unit.
In the computation of worst-case analysis for a proposed project, each of the given factors can play a role, but the lowest anticipated sales price per unit is particularly important. The worst-case analysis is a risk assessment tool that evaluates the financial viability of a project under unfavorable conditions. It aims to identify the lowest possible outcome in terms of financial performance. By considering the lowest anticipated sales price per unit, the analysis takes into account the scenario where the project faces the most challenging market conditions, such as intense competition or reduced demand. This helps determine if the project can still generate sufficient revenue to cover its costs and remain financially viable. While the lowest variable cost per unit and the lowest level of fixed costs are also relevant in project analysis, they represent the minimum expenses rather than the potential risks to revenue generation. In worst-case analysis, the focus is on the revenue side of the equation, as lower sales prices directly impact the project's profitability.
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A large multinational grocery chain that emphasizes healthy lifestyles is recognized as one of the nation’s "greenest" companies, has generous employee benefits, and is perennially rated as one of the best places to work. Employees receive a 20-percent discount on company products. However, those who participate in the company’s voluntary "Healthy Discount Incentive Program" receive up to an additional 10-percent discount on their purchases (i.e., up to a total 30-percent discount). These additional discounts are calculated from employees’ blood pressure, total cholesterol (or LDL) levels, Body Mass Index (BMI), and nicotine-free lifestyle. For example, the full additional 10 percent discount is awarded to those who do not use nicotine products, have 110/70 or lower blood pressure, have cholesterol levels under 150, and have a BMI of less than 24. Employees do not receive the additional discount if they use nicotine products or have any one of the following: blood pressure above 140/90, cholesterol of 195 or higher, or BMI of 30 or higher. In his letter to employees when announcing the plan, the CEO explained that these incentives "encourage our Team Members to be healthier and to lower our healthcare costs."
• Discuss the extent to which the company’s action in this scenario was ethical.
• Explore the moral intensity and ethical principles relevant to this incident.
• What implications does this have on Team Members?
• In your opinion does this infringe on your personal time away from work.
The company's action in this scenario can be considered ethical to a certain extent. By implementing a voluntary "Healthy Discount Incentive Program," the company is encouraging its employees to lead healthier lifestyles and ultimately reduce healthcare costs.
This can be seen as a positive initiative to promote the well-being of employees and create a healthier work environment.
In terms of moral intensity, the company's action may be considered moderate. The incentives are voluntary, and employees have the choice to participate or not. The ethical principles involved in this scenario include promoting employee well-being, fairness, and the reduction of healthcare costs for the company.
The implications for team members are twofold. On one hand, those who participate in the program and meet the criteria for the additional discount may feel incentivized to improve their health and well-being, leading to potential personal benefits. On the other hand, team members who are unable to meet the criteria or choose not to participate may feel excluded or unfairly treated, as they do not receive the additional discount.
Regarding personal time away from work, the program does not directly infringe on employees' personal time. Participation in the program and meeting the criteria for the additional discount is a personal choice made by employees. However, it is important to consider the potential pressure or perception that employees may feel to maintain certain health standards outside of work in order to qualify for the additional discount.
Overall, while the company's action can be seen as promoting positive health outcomes and cost reduction, it is essential to ensure that the program is implemented fairly and does not create undue pressure or discrimination among employees. Regular evaluation and monitoring of the program's impact on employee well-being and potential unintended consequences should be undertaken to ensure its ethical effectiveness.
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Excel please.
Consider a bond that pays $100 annual interest (e. the CR -0.10) and has a remaining e of 15 years (matures on 6/16/2037) The bond currently (on 6/16/2022) sells for $085 and has a yield to maturity of 10.20%
What is this bond's duration?
What is the actual Price change of the bond if interest rate (YTM) changes to 9.5%
Compute the Price change of the band using duration if interest rate (YTM) changes to 8.5%
Compute the Convesity for the bend when Interest rate changes from 10.2% to 9.5%
1. Duration of the bond is 11.91 years. 2. The actual Price change of the bond if interest rate (YTM) changes to 9.5% is $19.023. 3. The Price change of the band using duration if interest rate (YTM) changes to 8.5% is $23.54.4. The Convesity for the bend when Interest rate changes from 10.2% to 9.5% is 246.64.
1. Duration of the bond
The formula to calculate the duration of the bond is given by:
D = ∑ [C / (1 + YTM)n * n] / ∑ [C / (1 + YTM)n]Where, C = Coupon payment, n = Period of cashflow, YTM = Yield to maturity
Here, coupon payment, C = CR * Par value = 0.10 * $100 = $10 (Annually)Par value = $100D = ∑ [C / (1 + YTM)n * n] / ∑ [C / (1 + YTM)n]
On substituting the values we get, D = 11.91 years
2. Actual price change if YTM changes to 9.5%
The new YTM is 9.5%.
Using the formula, we can calculate the price of the bond.
P = ∑ [C / (1 + YTM)n] + Par / (1 + YTM)n
P = ∑ [C / (1 + YTM)n] + Par / (1 + YTM)n= ∑ [C / (1 + YTM)n] + Par / (1 + YTM)n= (10 / 1.095¹⁵) + (100 / 1.095¹⁵)= $104.02
Price change = New price - Old price= $104.02 - $85= $19.023.
Compute the price change of the bond using duration if the YTM changes to 8.5%
The new YTM is 8.5%.
Using the formula, we can calculate the new price of the bond.
P = ∑ [C / (1 + YTM)n] + Par / (1 + YTM)n= ∑ [C / (1 + YTM)n] + Par / (1 + YTM)n= (10 / 1.085¹⁵) + (100 / 1.085¹⁵)= $116.36ΔP = -D * ΔYTM * P / (1 + YTM)= -11.91 * (8.5% - 10.2%) * $116.36 / (1 + 8.5%)ΔP = $23.54
The price change of the bond using duration if the YTM changes to 8.5% is $23.54.4.
Compute the convexity for the bond when the interest rate changes from 10.2% to 9.5%
Convexity is given by: C = [∑ {C / (1 + YTM)n * n(n + 1)] / ∑ [C / (1 + YTM)n]C = [∑ {C / (1 + YTM)n * n(n + 1)] / ∑ [C / (1 + YTM)n]= {[10 / 1.095¹⁵ * 15 * 16] / (104.02)} + {[100 / 1.095¹⁵ * 15 * 16] / (104.02)}C = 246.64
Therefore, the convexity for the bond when the interest rate changes from 10.2% to 9.5% is 246.64.
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Hannah Birch is the manager of Neighborhood Potters in Philadelphia. Hannah is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have a fixed cost of $9,200 per month. The average variable cost of producing each pottery is $8.50 per unit produced. Currently each item sells for a price of $20 per unit. a. What volume per month is required in order to break even?
b. What sales per month are required for her to break even? c. What profit would be realized on a monthly volume of 1,000 units? d. What volume is needed to provide a profit of $23,000 per month?
a) To break even, 800 units per month are required based on a fixed cost of $9,200 and an average variable cost of $8.50 per unit. b) 460 units need to be sold per month considering the fixed cost of $9,200 and a selling price of $20 per unit. c) A monthly volume of 1,000 units would result in a profit of $2,300. d) 2,000 units
What Volume and Profit is Needed to Break Even?a) To break even, the total cost needs to equal total revenue. The fixed cost is $9,200 per month, and the average variable cost per unit is $8.50. The contribution margin (selling price - variable cost) is $20 - $8.50 = $11.50 per unit. To break even, the volume per month required is the fixed cost divided by the contribution margin: $9,200 / $11.50 = 800 units.
b) To break even, the total cost needs to equal total revenue. The fixed cost is $9,200 per month. The selling price per unit is $20. To break even, the sales per month required is the fixed cost divided by the selling price: $9,200 / $20 = 460 units.
c) A monthly volume of 1,000 units would result in a profit of $2,300, considering a selling price of $20 per unit and total costs of $17,700.
d) To achieve a profit of $23,000 per month, 2,000 units need to be sold based on a contribution margin of $11.50 per unit.
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Deviations of actual unemployment from natural unemployment are: a frictional unemployment. b cyclical unemployment. c seasonal unemployment. d structural unemployment.
Deviations of actual unemployment from natural unemployment are primarily due to cyclical unemployment.
Cyclical unemployment refers to the fluctuations in unemployment that occur as a result of business cycles or economic downturns. During recessions or periods of low economic activity, businesses may reduce their workforce, leading to higher unemployment rates. Conversely, during periods of economic growth, unemployment tends to decrease as businesses expand and create more job opportunities.
While other forms of unemployment such as frictional unemployment (temporary unemployment due to individuals transitioning between jobs) and seasonal unemployment (unemployment caused by seasonal fluctuations in demand for certain industries) contribute to overall unemployment, they do not directly account for deviations from the natural unemployment rate.
Structural unemployment refers to unemployment caused by a mismatch between the skills and qualifications of workers and the available job opportunities. While structural unemployment can contribute to long-term deviations from the natural rate, it is not directly related to short-term fluctuations in unemployment.
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Qᵧ = 100-4Px, -3Py, +2Pz, +0.001M, M being the income of the consumer while x,y,z are three different goods. Given are the values: Px = 21, Py = 8, Pz, = 9, M = 55000. Calculate the following: a. Own price elasticity b. Cross price elasticity with the other two goods. Comment on substitutes/complement goods c. Income elasticity. Comment on the type of goods. d. Determine the effect on Qy of a 10% increase in the price of other two goods.
To calculate the elasticity measures, we need to use the given formula and substitute the values for prices and income.
a. Own price elasticity (Ep):
Using the formula: Ep = (∂Qᵧ/∂Px) * (Px/Qᵧ), where ∂ denotes partial differentiation.
Given: Px = 21 and Qᵧ = 100 - 4Px, we can differentiate Qᵧ with respect to Px:
∂Qᵧ/∂Px = -4
Plugging in the values:
Ep = (-4) * (21 / (100 - 4(21))) = -4 * (21 / 16) ≈ -5.25
b. Cross price elasticity with other goods:
i. Cross price elasticity with Py (Epy):
Using the formula: Epy = (∂Qᵧ/∂Py) * (Py/Qᵧ)
Given: Py = 8 and Qᵧ = 100 - 4Px, we differentiate Qᵧ with respect to Py:
∂Qᵧ/∂Py = 0
Plugging in the values:
Epy = 0 * (8 / (100 - 4(21))) = 0
ii. Cross price elasticity with Pz (Epz):
Using the formula: Epz = (∂Qᵧ/∂Pz) * (Pz/Qᵧ)
Given: Pz = 9 and Qᵧ = 100 - 4Px, we differentiate Qᵧ with respect to Pz:
∂Qᵧ/∂Pz = 0
Plugging in the values:
Epz = 0 * (9 / (100 - 4(21))) = 0
Based on the cross price elasticities, we can determine the relationship between goods:
The cross price elasticity with Py (Epy) is 0, indicating that the goods are independent or unrelated.
The cross price elasticity with Pz (Epz) is also 0, indicating that the goods are independent or unrelated.
c. Income elasticity (Em):
Using the formula: Em = (∂Qᵧ/∂M) * (M/Qᵧ)
Given: M = 55000 and Qᵧ = 100 - 4Px, we differentiate Qᵧ with respect to M:
∂Qᵧ/∂M = 0.001
Plugging in the values:
Em = 0.001 * (55000 / (100 - 4(21))) ≈ 0.366
Based on the income elasticity (Em), we can classify the goods:
Since Em is positive (0.366), the goods are normal goods. This means that as consumer income increases, the quantity demanded of the goods also increases, indicating that they are normal goods.
d. Effect on Qy of a 10% increase in the price of the other two goods:
To determine the effect on Qy, we need to calculate the partial derivative of Qᵧ with respect to Px, Py, and Pz:
∂Qᵧ/∂Px = -4
∂Qᵧ/∂Py = 0
∂Qᵧ/∂Pz = 0
Given that the price of both Py and Pz increase by 10%, we can calculate the percentage change in Qy using the respective partial derivatives:
Percentage change in Qy = (∂Qᵧ/∂Px) * (%ΔPx) + (∂Qᵧ/∂
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‘The general notion is that inventory should be avoided where possible, as it causes costs and problems’ (Holweg et al, 2018).
Critically evaluate this statement and explain how organisations can ensure inventory holdings are kept at appropriate levels. Support your answer with examples.
The statement that inventory should be avoided is not entirely true because, in some cases, inventory holdings can help organizations manage demand and supply, reduce production costs, and optimize their supply chain.
However, it is essential to keep inventory levels at appropriate levels to avoid associated costs and problems.
Inventory holdings can serve as a safety stock to prevent stockouts, which can lead to lost sales and damage to a company's reputation. It also enables the organization to respond quickly to unexpected increases in demand and mitigate supply chain disruptions.
However, excessive inventory holdings can lead to increased holding costs, such as storage fees, insurance, and the risk of obsolescence.
To ensure inventory holdings are kept at the appropriate levels, companies must regularly assess their demand forecasting process, optimize their supply chain, and adopt lean manufacturing practices that reduce waste and improve efficiency.
Effective inventory management systems and technologies can also help companies track inventory levels, reduce lead times and increase their response to customer demands.
For example, Dell uses a 'just-in-time' inventory system that enables it to manufacture and deliver customized computers to customers within a few days of receiving an order.
Overall, organizations must strike a balance between inventory holdings, demand, supply, and production costs to ensure that they can meet customer needs profitably.
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In some companies the initial enthusiasm for setting up an appraisal program quickly fades. The evaluation forms are filled in by the supervisors, entered in the files of the Personnel Department and then forgotten. Supervisors rarely do interviews after the evaluation, unless it is someone who is very inadequate in their job. The supervisors consider the evaluation as an additional action that aims to satisfy the Human Resources Department. Question: What actions do you suggest for these problems?
To address the mentioned problems with appraisal programs, the following actions can be considered:
Clear Communication and Expectations: Ensure that the purpose and importance of the appraisal program are effectively communicated to all supervisors and employees. Emphasize that the program is not just a form-filling exercise but a valuable tool for performance improvement and career development. Clearly define the expectations and objectives of the appraisal process.
Training and Support for Supervisors: Provide training and guidance to supervisors on how to conduct effective performance evaluations and follow-up interviews. This includes training on providing constructive feedback, setting goals, and creating development plans. Support supervisors by offering resources, templates, and tools to streamline the appraisal process.
Regular Follow-up and Accountability: Establish a system of regular follow-up and accountability for supervisors to ensure they actively engage in the appraisal process. This can include scheduled check-ins, progress reviews, or periodic meetings to discuss performance and development plans. Hold supervisors accountable for completing the necessary steps of the appraisal process.
Continuous Feedback Culture: Encourage a culture of continuous feedback and open communication throughout the organization. This means encouraging supervisors to provide ongoing feedback to employees, rather than relying solely on the formal appraisal process. Foster a supportive environment where employees feel comfortable discussing their performance and seeking guidance from their supervisors.
Evaluation of the Appraisal Program: Regularly evaluate the effectiveness of the appraisal program to identify any shortcomings or areas for improvement. Collect feedback from supervisors and employees to understand their experiences and suggestions for enhancing the process. Make necessary adjustments to the program based on the feedback received.
Integration with Performance Management: Integrate the appraisal program with the overall performance management system of the organization. Ensure that performance evaluations align with goal setting, performance measurement, and career development initiatives. By connecting the appraisal program to broader performance management processes, supervisors are more likely to see its value and importance.
Recognition and Rewards: Recognize and reward supervisors who actively engage in the appraisal process and demonstrate a commitment to employee development. This can be done through performance-based incentives or recognition programs. Highlight success stories and best practices to inspire other supervisors to take the appraisal process seriously.
By implementing these actions, organizations can enhance the effectiveness and engagement of their appraisal programs, ensuring that they serve their intended purpose of improving performance, supporting employee development, and fostering a culture of continuous improvement.
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An investment pays you $200 at the end of each of the next 3 years. The investment will then pay you $300 at the end of Year 4, $500 at the end of Year 5, and $700 at the end of Year 6. If the interest rate earned on the investment is 9 percent, what is its present value? What is its future value?
The present value of the investment is $518.96 (approx) and The future value of the investment is $696.66 (approx).
An investment pays you $200 at the end of each of the next 3 years. The investment will then pay you $300 at the end of Year 4, $500 at the end of Year 5, and $700 at the end of Year 6.The interest rate earned on the investment is 9%.
The formula to find the present value of an annuity is: Present value of an annuity = {A[1 - (1 + r)-n]}/r
Where, A = amount of each annuity, r = interest rate per period, n = number of periods. The present value of three years annuity is, Present value of annuity = {A[1 - (1 + r)-n]}/r
Here, A = $200, r = 9% or 0.09 (as a decimal), n = 3 years.
Thus, Present value of annuity = {200[1 - (1 + 0.09)-3]}/0.09= $518.96 (approx).
The future value of an investment can be calculated using the formula, Future Value (FV) = Present Value x [1 + (i / n)]^(n x t)
Where, FV = future value, PV = present value, i = interest rate, t = number of years, n = number of compounding periods. The future value of an investment is to be calculated at the end of year 6.
Thus, it can be calculated as: Future Value (FV) = PV x [1 + (i / n)]^(n x t).
Here, PV = $518.96, i = 9% or 0.09 (as a decimal)t = 3 years, n = 1 year (annually).
Thus, Future Value (FV) = $518.96 x [1 + (0.09 / 1)]^(1 x 3)= $696.66 (approx).
Thus, The present value of the investment is $518.96 (approx )and The future value of the investment is $696.66 (approx).
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Adjusting entry for customer refunds, allowances, and returns; customer refund Sinclair Company had sales of $12,000,000 and related cost of merchandise sold of $7,200,000 for its first year of operat
To record the adjusting entry for customer refunds, allowances, and returns, we need to account for the estimated amount of refunds, allowances, and returns based on historical data and industry averages.
Assuming that the historical data and industry averages suggest a refund/allowance/return rate of 5% of sales, we can calculate the estimated amount as follows:
Estimated refunds, allowances, and returns = Sales * Refund/allowance/return rate
= $12,000,000 * 0.05
= $600,000
The adjusting entry to record this estimated amount would be as follows:
Debit: Sales Returns and Allowances $600,000
Credit: Estimated Refunds Payable $600,000
The "Sales Returns and Allowances" account is a contra-revenue account that reduces the Sales revenue to reflect the estimated amount of refunds, allowances, and returns. The "Estimated Refunds Payable" account represents the liability for the estimated refunds, allowances, and returns that the company expects to pay.
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Which of the following statements suggest a positive analysis and which a normative analysis? 1. If Country A lifts the prohibition on imports of cigars produced in Country B, then price of cigars will fall.
The statement "If Country A lifts the prohibition on imports of cigars produced in Country B, then price of cigars will fall" suggests a positive analysis.
Positive analysis is concerned with examining how things work in reality, without making any judgments about whether they are excellent or poor. Positive analysis attempts to establish factual statements and relationships, and it aims to provide a cause-and-effect explanation for what is observed.Normative analysis, on the other hand, makes judgments about whether things are excellent or bad. It concerns itself with how things should be, as opposed to how they actually are, and it is concerned with values and ethics. Normative statements, in general, express an opinion or a preference for a specific outcome.
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Troy Stroree wants to buy an insurance for his family, but he does not know how much he must sign for, for his family to maintain a good standard of living. His monthly income is $78,512. The funeral expenses would be $80,000. His spouse and him have a mortgage of $205,062, a car loan for $222,970, credit cards that have a balance of $78,945. He has other debts of $8,645. Troy has 2 children, one is 13 and the other 8 years old. What is the life insurance requirement by the DINK method? (answer in money, do not put the sign $, 2 decimal places)
Based on the DINK method modified for having children, Troy should consider purchasing a life insurance policy with a death benefit of $11,901,350.00.
The DINK method (Dual Income No Kids) is used to determine the life insurance requirement based on the assumption that both spouses are working and have no children. However, since Troy has two children, we will need to modify the calculation slightly.
First, we calculate Troy's total debt:
Total Debt = Mortgage + Car Loan + Credit Card Balance + Other Debts
Total Debt = $205,062 + $222,970 + $78,945 + $8,645
Total Debt = $515,622
Next, we add the funeral expenses to the total debt:
Total Expenses = Total Debt + Funeral Expenses
Total Expenses = $515,622 + $80,000
Total Expenses = $595,622
Now, we need to determine how much income Troy's family would need to maintain their standard of living. A common rule of thumb is to aim for a payout amount of 10-12 times the annual income, so we will use a multiplier of 12 for this calculation:
Income Replacement Needs = Annual Income x Multiplier
Annual Income = Monthly Income x 12
Annual Income = $78,512 x 12
Annual Income = $942,144
Income Replacement Needs = $942,144 x 12
Income Replacement Needs = $11,305,728
Finally, we add the income replacement needs to the total expenses to arrive at the life insurance requirement:
Life Insurance Requirement = Total Expenses + Income Replacement Needs
Life Insurance Requirement = $595,622 + $11,305,728
Life Insurance Requirement = $11,901,350.00
Therefore, based on the DINK method modified for having children, Troy should consider purchasing a life insurance policy with a death benefit of $11,901,350.00.
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You are the owner of a retail chain. You currently have consumer durables, groceries and private label clothing range for kids, men, and women. The price point is low and the quality you offer is fantastic. You have more than eighty percent repeat customers. In most of the customer surveys that you have conducted with market research agencies have pointed this unique feature of your store. You have successfully operated your business in Delhi. You have about 15 stores operating across the state. During the last five years, you have spread your offerings to the other northern states, and you have seen a wonderful response. You are pretty encouraged. After operating the stores for couple of years, the brand is not growing at the pace at which it should have. You are not able to figure out why. A consultant suggested to promote the brand in a big way. How will you do this?
If you are the owner of a retail chain that is not growing at the rate it should be, despite having 80% repeat customers, then one way to promote the brand in a big way is to invest in advertising.
Advertising will allow you to increase brand awareness, generate interest and attract new customers to your retail chain. This will help to increase sales and grow your business. There are different types of advertising you can use, including print, online, and social media. When creating your advertising campaign, it is important to consider your target audience, what they are interested in, and what they respond to. This will help to ensure that your advertising is effective.
You can also consider offering promotions and discounts to encourage customers to visit your store. By offering promotions, you can encourage customers to try new products, and generate interest in your brand. Ultimately, advertising is an effective way to promote your brand, generate interest and attract new customers to your retail chain.
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What are some of the challenges and potential problems of implementing a CRM system and CRM mindset in a firm’s employees? How might you overcome these?
You have been hired to develop a management information system and a decision support system for a manufacturing company. Describe what information you would include in printed reports and what information you would provide using a screen-based decision support system.
Implementing a Customer Relationship Management (CRM) system and fostering a CRM mindset in a firm's employees can bring numerous benefits, but it also comes with challenges and potential problems. One major challenge is resistance to change. Employees may be accustomed to existing processes and resistant to adopting new technologies or embracing a customer-centric approach. Overcoming this challenge requires effective change management strategies, such as clear communication, training programs, and highlighting the benefits of CRM for both the employees and the organization as a whole.
Another challenge is data quality and integration. CRM systems rely on accurate and up-to-date customer data from various sources. Incomplete or inconsistent data can lead to inaccurate insights and decision-making. It is crucial to invest in data cleansing and integration processes to ensure data quality and reliability. Regular data maintenance and validation are necessary to keep the CRM system effective.
A potential problem is over-reliance on technology. While CRM systems provide valuable tools for managing customer relationships, it is important to remember that successful CRM requires a combination of technology, processes, and people. Over-reliance on technology without fostering a CRM mindset and providing adequate training can hinder the effectiveness of the CRM system. It is essential to educate and empower employees to utilize the CRM system effectively and foster a customer-centric mindset throughout the organization.
To develop a management information system (MIS) and a decision support system (DSS) for a manufacturing company, the printed reports should provide key operational and financial metrics such as production output, inventory levels, sales revenue, costs, and profitability. These reports should be concise, easy to understand, and highlight trends or anomalies that require attention.
For the screen-based decision support system, real-time or near real-time information should be provided to support decision-making processes. This can include interactive dashboards displaying key performance indicators (KPIs), supply chain data, production schedules, and customer insights. The system should allow users to drill down into detailed data, perform what-if analyses, and simulate different scenarios to aid in decision-making.
The screen-based decision support system should also incorporate data visualization techniques to present complex information in a visually appealing and intuitive manner. Interactive charts, graphs, and maps can help users quickly grasp trends, patterns, and relationships in the data, facilitating more informed decision-making.
Overall, the MIS and DSS should provide a comprehensive view of the company's operations, facilitate data-driven decision-making, and support strategic planning and performance management processes.
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1. Will Grey is a salaried salesperson with a bonus incentive plan for sales above his quota. His quota for sales is $1,000,000 per year. He earns 4% on all sales above this quota. His yearly sales are $2,000,000, with a base salary of $75,000 per year. Calculate his total annual earnings?
2. What would the commission be for $36,300 for the pay structure below?
Sales % Commission
$0 - $15,000 No commission (0%)
$15,001 - $25,000 0.90%
$25,001 - up 1.10%
3. Nicole is a quarterly remitter. She pays employees in January, February, and March. January's first pay includes wages for part of December
When should CRA receive her remittance by?
4. Yasmine is a regular remitter. On January 1, she paid an employee for December of last year. When should CRA receive her remittance by?
Yasmine's remittance should be received by CRA by January 15 of the current year.
Given: Will Grey's base salary = $75,000 per yearWill Grey's yearly sales = $2,000,000Will Grey's quota for sales is $1,000,000 per year. He earns 4% on all sales above this quota. Total sales above quota = $2,000,000 - $1,000,000 = $1,000,000Additional Bonus = 4% of sales above quota = 4/100 * 1,000,000 = $40,000Total Annual Earnings of Will Grey = Base Salary + Additional Bonus = $75,000 + $40,000 = $115,000Therefore, Will Grey's total annual earnings are $116,000.2. The commission for $36,300 would be $329.70 for the pay structure below. Sales % Commission$0 - $15,000 No commission (0%)$15,001 - $25,000 0.90%$25,001 - up 1.10%. Therefore, Commission for sales between $15,001 and $25,000 = 10,000 * 0.9/100 = $90Commission for sales between $25,001 and $36,300 = 11,300 * 1.1/100 = $123.70Commission for $36,300 = $90 + $123.70 = $213.70
Therefore, the commission for $36,300 would be $329.70.3. Nicole's remittance should be received by CRA by April 15. Nicole is a quarterly remitter. She pays employees in January, February, and March. January's first pay includes wages for part of December. The remittance due dates for quarterly remitters are as follows: Period of remuneration: January to MarchDue date: April 15
Therefore, Nicole's remittance should be received by CRA by April 15.4. Yasmine's remittance should be received by CRA by January 15 of the current year.Yasmine is a regular remitter. On January 1, she paid an employee for December of last year. The remittance due dates for regular remitters are as follows: Period of remuneration: MonthlyDue date: 15th day of the following month. Therefore, Yasmine's remittance should be received by CRA by January 15 of the current year.
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very urgent
Balance Corporation assessed its assets and prepared the following schedule at its March 31, 2021 year end. Asset Cost Accumulated Recoverable Depreciation Amount Equipment $290,000 $120,000 $175,000
The journal entry to record impairment loss is prepared by debiting the impairment loss on equipment and building account and by crediting the equipment account and buildings account with $5,000 and $3,000.
How to explain the entryImpairment happens if the fair market value of the assets of an entity depreciates more than its book value on the business firm's statement of financial position. Assets that are regarded impaired should be recorded as losses on the income statement as per US GAAP.
Impairment loss is defined as a decline in the net holding value of assets that is larger than future concealed cash flow from the asset. In this case, it'll be the debiting the impairment loss on equipment and building account and by crediting the equipment account and buildings account with $5,000 and $3,000.
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Fryer Co. owns equipment for which it paid $90 million. At the end of 2023, it had accumulated depreciation on the equipment of $27 million. Due to adverse economic conditions, Fryer's management assessed whether an impairment should be recognized for the equipment. The estimated present value of future cash flows is $60 million, and the equipment's fair value less selling costs at that point is $40 million. Fryer Co. will: Record no impairment loss on the equipment. Credit $3 million to accumulated depreciation account. Credit $3 million to equipment account. Credit $3 million to accumulated impairment loss account a. b. c. d. (5) Blue Sky Company's 31/12/2020 statement of financial position (i.e., balance sheet) reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky's assets' book values approximate their fair values, except for land, which has a fair value that is $300,000 greater than its book value on 31/12/2020. On 31/12/2020, Horace Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Horace record as a result of this purchase? $0. $100,000 $1,800,000 $2,100,000. a. b. C. d.
According to the given case study, Fryer Co. owns equipment, which it paid $90 million. At the end of 2023, it had accumulated depreciation on the equipment of $27 million. Due to adverse economic conditions, Fryer's management assessed whether an impairment should be recognized for the equipment. Hence, option (d) is correct.
The estimated present value of future cash flows is $60 million, and the equipment's fair value less selling costs at that point is $40 million, Fryer Co. will record a $3 million impairment loss on the equipment as per the following calculations:Book Value of Equipment = $90 million - $27 million = $63 millionFair Value of Equipment = $40 millionAs the Fair value of equipment is less than the carrying value of the asset, an impairment loss of $23 million ($63 million - $40 million) is required.
Therefore, Fryer Co. will credit $23 million to accumulated impairment loss account. Hence, option (d) is correct.2. According to the given case study, Horace Corporation paid $5,100,000 to acquire Blue Sky Company. The amount of goodwill should Horace record as a result of this purchase can be calculated as follows:Goodwill = Purchase Price - Fair Value of Net AssetsGoodwill = $5,100,000 - ($5,000,000 - $300,000 - $2,000,000) = $2,100,000Therefore, Horace should record $2,100,000 of goodwill as a result of this purchase.
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Suppose a closed economy X is currently at steady-state. The data shows that their capital stock per effective worker is about 2 times of their one year's output per effective worker; about 20 per cent of output per effective worker is used to replace depreciating capital; capital income per effective worker is about 25 per cent of total output per effective worker; and total output grows an average of 2 per cent per year. Please evaluate and explain each of the following: a. (10 points) Is the economy X currently above, at, or below the Golden Rule steady state? b. (20 points) Using your evaluation from part a., provide your policy suggestion on the savings rate. What are the consequences to the economy if the government implements policies according to your suggestion? Why this suggestion?
a. The economy X is currently below the Golden Rule steady state. b. Policy suggestion: Increase the savings rate. This would lead to higher capital accumulation and improve long-term economic growth, increasing the economy's welfare.
a. In the Golden Rule steady state, an economy maximizes its consumption by choosing an optimal savings rate. Since the capital stock per effective worker in economy X is twice the output per effective worker, it indicates that the economy has excessive capital relative to the Golden Rule level, suggesting it is below the Golden Rule steady state.
b. The policy suggestion is to increase the savings rate. By doing so, the economy would save a higher proportion of its output, leading to increased investment and capital accumulation. This would bring the economy closer to the Golden Rule steady state, where the capital stock per effective worker is at the optimal level. Consequently, the economy would experience higher long-term economic growth, increased productivity, and improved living standards.
Economy X is currently below the Golden Rule steady state. To move towards the optimal level, the government should implement policies to increase the savings rate, fostering higher investment and capital accumulation, resulting in long-term economic growth and improved welfare for the economy.
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The use of budgeted or predetermined rates allows decision makers to have more timely information. Does the use of budgeted rates afford the decision maker any other benefit?
Yes, the use of budgeted or predetermined rates afford the decision maker with various benefits.
Let's discuss this in detail below Benefits of using budgeted rates :
The use of budgeted or predetermined rates provides the decision makers with more timely information that can assist in taking strategic business decisions more effectively. In addition to that, it also helps to provide standardized data which allows comparison between different departments and units within the same company. This comparison can lead to efficient resource allocation and cost reduction measures which in turn can lead to profitability and growth.
A budgeted rate provides a common language that all units within an organization can use to describe and understand costs. This can be especially useful when communicating with non-financial decision makers such as marketing and operations departments. Budgeted rates can help to identify potential issues before they occur. When budgeted rates are compared to actual rates, it is easier to identify when a particular cost is running over budget. This can help to avoid cost overruns and ensure that resources are being used efficiently.
Furthermore, budgeted rates can be used to help predict future costs and revenues. This allows the decision makers to plan for the future and make strategic business decisions based on accurate information. This can help to ensure that the organization remains competitive and profitable in the long term.
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You are the controller for Sheridan’s Pizzeria Inc. (SPI). Sheridan is contemplating the purchase of a new commercial pizza oven in his popular Southern Ontario pizzeria and is asking for your assistance in making his decision. From the options presented by his creditor, he has narrowed down his options as follows:
Option 1: Purchase the pizza oven with payments of $10,500 made semi-annually for 3 years. The interest rate on this arrangement is 6%.
Option 2: Purchase the pizza oven with annual payments for 3 years of $22,000 at 7% interest.
For each of the two options, using tables, a financial calculator or Excel function determine from a quantitative perspective, which of the two options should be pursued by Sheridan? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)
quantitative perspective, Sheridan should pursue Option 1 as it has the lower present value (PV) of $43,173.74.
Given that the Sheridan’s Pizzeria Inc. (SPI) is contemplating the purchase of a new commercial pizza oven in his popular Southern Ontario pizzeria and is asking for your assistance in making his decision. From the options presented by his creditor, he has narrowed down his options as follows:
Option 1: Purchase the pizza oven with payments of $10,500 made semi-annually for 3 years. The interest rate on this arrangement is 6%.
Option 2: Purchase the pizza oven with annual payments for 3 years of $22,000 at 7% interest.
To determine which of the two options Sheridan should choose, we need to calculate the present value of both options:
Option 1: The semi-annual payment of $10,500 is equivalent to a nominal rate of 6% compounded semi-annually.
The present value of this annuity is given by:PV= Payment * PVIFA(i%, n)Where PVIFA is the Present Value Interest Factor for an AnnuityPV = $10,500 * PVIFA(3%, 6)PV = $10,500 * 4.11167PV = $43,173.74Option 2: The annual payment of $22,000 is equivalent to a nominal rate of 7% compounded annually. The present value of this annuity is given by:PV= Payment * PVIFA(i%, n)Where PVIFA is the Present Value Interest Factor for an AnnuityPV = $22,000 * PVIFA(7%, 3)PV = $22,000 * 2.62429PV = $57,734.35. Therefore, from a quantitative perspective, Sheridan should pursue Option 1 as it has the lower present value (PV) of $43,173.74.
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