To calculate the break-even point in terms of the number of units produced and total revenue, the formula used is: Break-even point (in units) = Total fixed costs / Contribution margin per unit. The formula used to calculate the break-even point (in dollars) is: Break-even point (in dollars) = Total fixed costs / Contribution margin ratio.
Break-even point is a calculation that is used by businesses to determine the number of units that need to be produced and sold in order to cover all of their costs. It is the point at which a company neither makes a profit nor suffers a loss. In order to calculate the break-even point, a company must know its total fixed costs and the contribution margin per unit. The total fixed costs include expenses such as rent, salaries, and insurance. The contribution margin per unit is the difference between the selling price and the variable cost per unit. In other words, it is the amount of money that is left over after the variable costs are subtracted from the selling price.
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Which method is not used in program management? Select one: a. EVA b. None c. AHP
d. All e. NPV
The method that is not typically used in program management is "b. None." All of the other options—EVA (Earned Value Analysis), AHP (Analytic Hierarchy Process), and NPV (Net Present Value)—are commonly utilized in program management.
Program management involves the use of various methods and tools to ensure effective planning, execution, and control of programs. Among the options provided, "b. None" implies that all the listed methods—EVA, AHP, and NPV—are used in program management. Earned Value Analysis (EVA) is a technique used to measure project performance against planned objectives. Analytic Hierarchy Process (AHP) is a decision-making method that helps prioritize criteria and alternatives in complex situations. Net Present Value (NPV) is a financial analysis method used to assess the profitability of an investment. Therefore, "b. None" is the option that does not align with commonly used methods in program management.
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On January 1, 2022, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1.
Instructions
(Round all computations to the nearest dollar.)
a. Prepare the journal entry to record the issuance of the bonds on January 1, 2022.
b. Prepare an amortization table through December 31, 2024 (three interest periods) for this bond issue.
c. Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2022.
Interest Expense $100,051
d. Prepare the journal entry to record the payment of interest on January 1, 2023.
e. Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2023.
Prepare journal entries to record issuance of bonds, payment of interest, and effective-interest amortization, and balance sheet presentation.
a. The journal entry to record the issuance of the bonds on January 1, 2022:
Cash: $1,667,518
Discount on Bonds Payable: $132,482
Bonds Payable: $1,800,000
b. The amortization table through December 31, 2024 shows the interest expense, bond carrying value, and discount amortization for each period.
c. Journal entry on December 31, 2022:
Interest Expense: $100,051
Discount on Bonds Payable: $28,616
Cash: $100,051
d. Journal entry on January 1, 2023:
Interest Expense: $100,051
Cash: $90,000
Discount on Bonds Payable: $10,051
e. Journal entry on December 31, 2023:
Interest Expense: $100,051
Discount on Bonds Payable: $23,167
Cash: $100,051
a. The journal entry records the issuance of the bonds by debiting Cash for the proceeds received, crediting Discount on Bonds Payable for the discount amount, and crediting Bonds Payable for the face value of the bonds.
b. The amortization table tracks the interest expense, bond carrying value, and discount amortization over three interest periods. The bond carrying value decreases as the discount is amortized, and the interest expense is calculated based on the effective-interest rate.
c. The journal entry on December 31, 2022, accrues interest expense for the year and amortizes a portion of the discount. The discount amortization is calculated by subtracting the interest expense from the cash payment on January 1, 2023.
d. The journal entry on January 1, 2023, records the payment of interest by debiting Interest Expense and crediting Cash. The discount on the bonds payable is also reduced by the difference between the cash payment and the interest expense.
e. The journal entry on December 31, 2023, accrues interest expense for the year and amortizes a portion of the discount. The discount amortization is calculated by subtracting the interest expense from the cash payment on January 1, 2024.
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E17-19 (L02, 4) (Fair Value Measurement)
Presented below is information related to the purchases of common stock by Lilly Company during 2017.
Cost
(at purchase date)
Fair Value
(at December 31)
Investment in Arroyo Company stock
$100,000
$80,000
Investment in Lee Corporation stock
250,000
300,000
Investment in Woods Inc. stock
180,000
190,000
Total
$530,000
$570,000
Instructions
(Assume a zero balance for any Fair Value Adjustment account.)
(a) What entry would Lilly make at December 31, 2017, to record the investment in Arroyo Company stock if it chooses to report this security using the fair value option?
(b) What entry(ies) would Lilly make at December 31, 2017, to record the investments in the Lee and Woods corporations, assuming that Lilly did not select the fair value option for these investm
(a) If Lilly Company chooses to report the investment in Arroyo Company stock using the fair value option, it needs to recognize the change in fair value as a gain or loss on the income statement.
At December 31, 2017, the fair value of the investment in Arroyo Company stock is $80,000, which is lower than its cost at the purchase date ($100,000). Therefore, the fair value adjustment will result in a loss.
The entry to record the fair value adjustment for the investment in Arroyo Company stock would be as follows:
Income Statement:
Loss on Fair Value Adjustment (Investment in Arroyo Company stock) $20,000
Investment in Arroyo Company stock $20,000
(b) For the investments in Lee and Woods corporations, assuming that Lilly did not choose the fair value option for these investments, the company would initially record them at cost. There would be no fair value adjustment since they are not being reported using the fair value option.
The entries to record the investments in Lee and Woods corporations would be as follows:
For Investment in Lee Corporation stock:
Balance Sheet:
Investment in Lee Corporation stock $250,000
For Investment in Woods Inc. stock:
Balance Sheet:
Investment in Woods Inc. stock $180,000
These entries simply record the cost of the investments in the respective corporations at their purchase price. The fair value adjustment is not considered because they are not reported using the fair value option.
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Read Chapters 23 and 26 in the online book and write four discussion questions for the class (two from each chapter). A good discussion question should explain what you read that made you consider this question and why you think answering it will be important for the class.
23: How does concept of ethical leadership apply to challenges faced by organizations in digital age?26: What ways can organizations leverage data analytics to improve supply chain performance?
The discussion question from Chapter 23 highlights the relevance of ethical leadership in the context of the digital age. The chapter likely covers topics such as data privacy, cybersecurity, and the ethical implications of emerging technologies. Understanding how ethical leadership applies to these challenges is crucial for the class because it prompts students to critically analyze the ethical considerations in the digital landscape. It encourages them to think about how leaders can navigate these issues while ensuring the responsible use of technology and protecting stakeholders' interests. Answering this question would provide insights into the ethical dimensions of leadership in the digital age and help students develop a well-rounded understanding of the topic.
The discussion question from Chapter 26 explores the application of data analytics in supply chain management. As data analytics becomes increasingly essential for decision-making in modern organizations, understanding its potential benefits and challenges is vital for the class. This question acknowledges the growing significance of data-driven insights in supply chain optimization and prompts students to consider how organizations can harness the power of data analytics to improve their operational efficiency, forecast demand, optimize inventory, and enhance customer satisfaction.
Answering this question will help students recognize the transformative potential of data analytics in supply chain management and provide a foundation for discussing best practices and strategies for leveraging data effectively.
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Which of the following statements are incorrect based on the following information: If the industry is in a contractionary phase, the returns for Inv-A is 5% while the returns for Inv-B is 15%. If the industry is in an expansionary phase, the returns for Inv-A is 15% while the returns for Inv-B is 5% (per $100 investment). A. The expected return for both investments is 10%. B. The standard deviation of returns for INV-A is 5%. C. The standard deviation of an equally weighted portfolio of both INV-A and INV-B is 5%. D. All of the above are correct.
The correct answer is D is incorrect. Based on the given information, let's analyze each statement:
A. The expected return for both investments is 10%.
This statement is incorrect. The expected return for Inv-A is 5% in the contractionary phase and 15% in the expansionary phase. The expected return for Inv-B is 15% in the contractionary phase and 5% in the expansionary phase. Therefore, the expected return for each investment varies depending on the industry phase.
B. The standard deviation of returns for INV-A is 5%.
This statement is correct. The standard deviation measures the volatility of returns. Since Inv-A has a constant return of 5% in the contractionary phase and 15% in the expansionary phase, the standard deviation remains 5%.
C. The standard deviation of an equally weighted portfolio of both INV-A and INV-B is 5%.
This statement is incorrect. Since the returns for Inv-A and Inv-B vary depending on the industry phase, the standard deviation of an equally weighted portfolio of both investments will not be constant at 5%. It will depend on the weights of each investment and the correlation between their returns.
D. All of the above are correct.
This statement is incorrect. Statements A and C are incorrect, as explained above. Statement B is the only correct statement. Therefore, the correct answer is D is incorrect.
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You are a consultant and have been asked to support a business project to invest in a new process in a mushroom processing plant. You are asked to review two options. One process, The Smash Process, has fixed cost of $108,000. This process cost $13.00 per pound of refinery output. The anticipated revenue of the process is determined to be $30 per pound regardless of process. The second process, The Squish Process, has the same expected benefits however is costs $15 per pound to run and has a fixed cost of $88,000. a. If the estimated output is 6000 units, what recommendation would you make and why? b. An alternative to the Smash process has become available. What recommendation do you make this increases Smash revenue by 10% per pound? Explain.
Answer Place your final answer in the box.
a. Recommended option. Why?
b. Recommendation re: Smash Alternative Process. Explain.
If the estimated output is 6000 units, the recommended option is to use The Squish Process. This is because this process costs less to run and has a lower fixed cost compared to The Smash Process.
a. Option to recommend If the estimated output is 6000 units, then the total cost for Smash Process would be:
Fixed cost = $108,000
Variable cost = $13 x 6,000
= $78,000
Total cost = Fixed cost + Variable cost
= $186,000
Revenue for Smash Process = $30 x 6,000
= $180,000
Profit (Revenue - Cost) for Smash Process = $180,000 - $186,000
= -$6,000
This means that the business would be making a loss of $6,000 if they choose to use The Smash Process.
However, for The Squish Process, the total cost would be:
Fixed cost = $88,000
Variable cost = $15 x 6,000
= $90,000
Total cost = Fixed cost + Variable cost
= $178,000
Revenue for Squish Process = $30 x 6,000
= $180,000
Profit (Revenue - Cost) for Squish Process = $180,000 - $178,000
= $2,000
This means that the business would be making a profit of $2,000 if they choose to use The Squish Process. Therefore, the recommended option is to use The Squish Process.
b. Recommendation re: Smash Alternative Process If there is an alternative process that increases Smash revenue by 10% per pound, then the new revenue would be $30 + 10% of $30 = $33 per pound. Therefore, the revenue for Smash Process would be:
New revenue = $33 x 6,000 = $198,000
Total cost for Smash Process would be the same, which is $186,000.
Profit (Revenue - Cost) for Smash Process = $198,000 - $186,000
= $12,000
This means that the profit for Smash Process would increase from -$6,000 to $12,000. Therefore, the recommendation would be to use the alternative process that increases the revenue by 10%.
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The Value Added Chain of Data > Information > Knowledge > Communication > Wisdom is a helpful framework to understand - check all that apply :
a) Why technical skills only are not sufficient in data analysis
b) Why most analytical projects are successful
c) Why cooperation of various professionals is crucial to get from data to action
d) Why quantifiable data only is not enough to make good marketing decisions
e) Why communication is critical in utilizing information and data
The Value Added Chain of Data > Information > Knowledge > Communication > Wisdom is helpful in understanding, Why technical skills only are not sufficient in data analysis?. Why cooperation of various professionals is crucial to get from data to action?. Why quantifiable data only is not enough to make good marketing decisions?. Why communication is critical in utilizing information and data?.
The Value Added Chain describes the progression of data through various stages, each adding value and transforming it into actionable wisdom. It highlights the limitations of technical skills alone (a), as data analysis requires interpretation, context, and the application of domain knowledge. Cooperation among professionals (c) is crucial because different expertise contributes to transforming data into meaningful insights and action plans.
Quantifiable data (d) provides only part of the picture, and incorporating other factors, such as qualitative data and market trends, is essential for making informed marketing decisions. Communication (e) is critical as it ensures effective dissemination of information, facilitates collaboration, and enables stakeholders to understand and apply insights derived from data analysis. By recognizing the importance of each stage, the framework emphasizes the multidimensional nature of data analysis and decision-making processes.
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What are the important components of a strategy statement? Select all that apply. It is aligned with the vision, mission, and values of the company. It provides a clear sense of direction. It tells every department what tactics to employ. It sets the company's long-term strategic direction. It provides a blueprint for the company's activities for an extended period.
The important components of a strategy statement include the following:It is aligned with the vision, mission, and values of the company.It provides a clear sense of direction.It sets the company's long-term strategic direction.
It provides a blueprint for the company's activities for an extended period.The above mentioned options are the correct options for the components of a strategy statement. A strategy statement explains how a business will achieve its goals. It acts as a blueprint for how to reach the desired outcome. A strategy statement should be brief and easy to remember, while still providing guidance for the company. The components of a strategy statement are as follows:Aligned with the company's vision, mission, and values, Providing a clear sense of direction. Setting the long-term strategic direction, Providing a blueprint for the company's activities for an extended period of time.
The important components of a strategy statement include being aligned with the vision, mission, and values of the company, providing a clear sense of direction, setting the company's long-term strategic direction, and providing a blueprint for the company's activities for an extended period
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A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 40% of sales, while fixed cost will be $409,865. The first year’s sales estimates are $1,250,000. Calculate the firm’s degree of operating leverage (DOL). Answer to 2 decimal places.
The degree of operating leverage (DOL) is a measure that indicates how sensitive a company's operating income is to changes in sales revenue.
It can be calculated by dividing the percentage change in operating income by the percentage change in sales revenue.
To calculate the DOL in this scenario, we need to determine the contribution margin, which is the difference between sales revenue and variable costs. The contribution margin can be calculated by subtracting the variable cost percentage (40%) from 100% (100% - 40% = 60%).
Next, we calculate the operating income by subtracting the fixed costs from the contribution margin multiplied by the sales revenue. In this case, the fixed cost is $409,865 and the sales revenue is $1,250,000. Thus, the operating income is $1,250,000 * 60% - $409,865.
To calculate the DOL, we divide the percentage change in operating income by the percentage change in sales revenue. In this case, since it is the first year, there is no percentage change, so the DOL is simply the operating income divided by the operating income.
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companies undertake to improve their competitive position in the marketplace. Using the concepts learnt in this chapter, apply it to a company of your choice as you answer the following questions. Please provide citations for all the research using your textbook and scholarly resources (minimum one source other than your textbook) as references. Three entries from everybody. Part 1: 1 - Find a company that has successfully merged with another company (preferably Canadian companies) tell us the two original companies, the new company, the main advantage of the merger and one piece of info that suggests that the merger is successful or a failure. Please support your rationale of success or failure using appropriate financial information for the company. 2 - Find a company that had great (or dreadful, if you want) timing in the introduction of a new service/product. Tell us the company, the new "thing" and a piece of information that supports your analysis of success or failure. Please support your rationale of success or failure using appropriate financial information for the company. Also, discuss if the new product service can be classified as Blue Ocean
The iPhone brought together multiple functions such as a phone, music player, and internet browser, offering a unique user experience.
1 - An example of a successful merger between Canadian companies is the merger between Canadian Pacific Railway (CPR) and Canadian National Railway (CNR).
CPR and CNR were the two original companies involved in the merger, and the new company formed is called Canadian National Railway (CNR).
The main advantage of this merger was the creation of a more efficient and competitive railway network in Canada.
2 - Apple Inc. is an example of a company that had great timing in the introduction of a new product. One such product is the iPhone, which revolutionized the smartphone industry.
A piece of information that supports the success of the iPhone is the significant increase in Apple's revenue and market value after its introduction.
In terms of the Blue Ocean Strategy, the iPhone can be classified as a Blue Ocean product. The Blue Ocean Strategy refers to creating new market space by offering products or services that are distinct from existing ones.
It created a new market space and attracted a large customer base, distinguishing itself from traditional mobile phones. Thus, the iPhone can be considered a Blue Ocean product.
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A cosmetics manufacturer's marketing department has developed a linear trend equation that can be used to predict annual sales of Its popular Hand & Foot Cream.
Ft 60,000+12,0001
Where
Ft = Annual sales
t is in years
(Enter all answers as whole numbers.)
Are annual sales increasing or decreasing? By how much?
The annual sales of the cosmetics manufacturer's Hand & Foot Cream are increasing by 12,000 units per year based on the linear trend equation.
Based on the given linear trend equation for annual sales of the cosmetics manufacturer's Hand & Foot Cream, which is Ft = 60,000 + 12,000t, we can determine whether the annual sales are increasing or decreasing by analyzing the coefficient of the variable t.
In this equation, t represents the number of years. Since the coefficient of t is positive (12,000), it indicates that for each additional year, the annual sales (Ft) will increase by 12,000 units.
Therefore, the annual sales are increasing over time. The rate of increase is 12,000 units per year. This means that the cosmetics manufacturer can expect the sales of Hand & Foot Cream to grow by 12,000 units annually based on the linear trend equation.
It is important to note that this analysis assumes a linear relationship between time and sales, which may not always hold true in practice. Factors such as market conditions, competition, and other variables can influence actual sales growth. However, based on the given equation, the trend indicates a consistent increase in annual sales of the Hand & Foot Cream.
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Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 2,500 shares of its common stock at $66 per share. On September 6, Biscayne Bay Water Inc. sold 2,000 of the reacquired shares at $69 per share. The remaining 500 shares were sold at $61 per share on November 30. a. Journalize the transactions of May 14, September 6, and November 30. For a compound transaction, if an amount box does not require an entry, leave it blank. b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
Journal entries are formally recorded, chronologically ordered financial transactions. They serve as the first step in the accounting process and offer a thorough description of the financial activities of the company.
a. Journal entries:
May 14:
Treasury Stock (2,500 shares x $66) Dr. $165,000
Cash Cr. $165,000
(To record the reacquisition of 2,500 shares of common stock at $66 per share)
September 6:
Cash (2,000 shares x $69) Dr. $138,000
Treasury Stock Cr. $132,000
Paid-In Capital from Sale of Treasury Stock Cr. $6,000
(To record the sale of 2,000 shares of reacquired stock at $69 per share)
November 30:
Cash (500 shares x $61) Dr. $30,500
Treasury Stock Cr. $30,500
(To record the sale of the remaining 500 shares of reacquired stock at $61 per share).
b. The balance in Paid-In Capital from the Sale of Treasury Stock as of December 31 is calculated as follows:
Add together the sums credited to this account from the September 6 transaction to determine the total in Paid-In Capital from Sale of Treasury Stock:
$6000 is the Paid-In Capital from the Sale of Treasury Stock.
c. Providing balance sheet reporting:
The shareholders' equity part of the balance sheet will include the Paid-In Capital from Sale of Treasury Stock balance as a distinct item, typically underneath the retained earnings and other capital accounts. It gives details on the money the company made when it sold its treasury stock, which is stock it later bought back from investors or the open market.
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Determine the internal rate of return on the following project: An initial outlay of $10,500 resulting in a cash inflow of $1,800 at the end of year 1, $4,700 at the end of year 2, and $8,400 at the end of year 3.
An initial outlay of $10,500 resulted in a cash inflow of $1,800 at the end of year 1, $4,700 at the end of year 2, and $8,400 at the end of year 3. The internal rate of return on the project is approximately 19.53%.
To determine the internal rate of return (IRR) on the project, we need to find the discount rate that makes the present value of the cash inflows equal to the initial outlay.
The cash inflows for the project are $1,800 at the end of year 1, $4,700 at the end of year 2, and $8,400 at the end of year 3. Let's denote these cash inflows as CF1, CF2, and CF3, respectively.
The initial outlay is $10,500.
To calculate the IRR, we set up the following equation:
CF1 / (1 + IRR)¹ + CF2 / (1 + IRR)² + CF3 / (1 + IRR)³ = Initial outlay
Substituting the values, we have:
1,800 / (1 + IRR)¹+ 4,700 / (1 + IRR)² + 8,400 / (1 + IRR)³ = 10,500
Now, we can solve this equation to find the IRR using trial and error or by using numerical methods such as Excel's IRR function. By applying numerical methods, we find that the internal rate of return on this project is approximately 19.53%.
Therefore, the internal rate of return on the project is approximately 19.53%.
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Efficiency is when we do the right things. True False Question 3 (1 point) Which of the following is not one of the Principles of Scientific Management from Fredrick Winstow Taylor? Draw unbiased insights about the current state of the work from available dita Divide work nearly equally between managers and workers Replace rule-of-thumb work methods with methods based on a scientific study of the tasks Cooperate with the workers to ensure that the scientifically developed methods are being followid
The statement "Draw unbiased insights about the current state of the work from available data" is not one of the Principles of Scientific Management from Frederick Winslow Taylor.
Frederick Winslow Taylor, a pioneer in the field of scientific management, proposed several principles to improve efficiency and productivity in the workplace. These principles include:
1. Divide work nearly equally between managers and workers: This principle suggests that tasks should be divided in a way that allows managers to focus on planning and coordination, while workers focus on executing the tasks.
2. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks: Taylor emphasized the importance of using scientific methods to analyze and study work processes. By replacing traditional, arbitrary methods with scientifically studied and optimized methods, efficiency can be improved.
3. Cooperate with the workers to ensure that the scientifically developed methods are being followed: Taylor believed in fostering cooperation and collaboration between managers and workers. It is crucial to ensure that workers understand and implement the scientifically developed methods to achieve the desired outcomes.
The statement "Draw unbiased insights about the current state of the work from available data" does not align with any of these principles. While data analysis and insights may play a role in scientific management, Taylor did not specifically include it as one of his principles.
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Melissa Inc., a private company that reports under IFRS, has an accounting income before tax of $250,000 for 2022, its second year of operations. The following items cause taxable income to be different than income reported on the financial statements.
1. Melissa Inc. suffered a net loss of $60,000 in 2021. This was also the amount of the loss for tax purposes. Melissa would apply this tax loss against its 2022 taxable income.
2. Melissa Inc. has equipment costing $200,000 purchased in 2021, on which it has recorded annual depreciation of $40,000 in each of the years 2021 and 2022. Due to the loss in 2021, the company did not claim any CCA on the equipment for that year. It decides to claim the maximum CCA allowable of $60,000 in 2022.
3. In 2022, Melissa Inc. paid rent for three years, amounting to $72,000. It recorded $24,000 as rent expense, and the remainder as Prepaid rent. For tax purposes, rent is deductible when paid.
4. Non-deductible fines appear as an expense of $5,000 on the income statement. 5. Melissa Inc. received dividend from a foreign company amounting to $3,000. This dividend is taxable, and has been included in the accounting income for 2022.
6. Melissa Inc. incurred $16,000 in Meals and Entertainment expense. 7. Warranty expense amounting to $20,000 was recorded for 2022. Actual warranty costs incurred were $15,000. Melissa's tax rate is 30% for 2022 and 2023, and 28% for 2024 and beyond. These tax rates were enacted in 2021. The company expects to report taxable income in all future years.
Required: a) Calculate the following amounts. Show all calculations for marks: i. Taxable Income for 2022 (7 marks) ii. Deferred tax asset (liability) on January 1, 2022 – specify whether asset or liability (2 marks) iii. Deferred tax asset (liability) on December 31, 2022 – specify whether asset or liability (4 marks) b) Prepare the required journal entries to record the income tax expense for the year 2022 (5 marks) c) Prepare a partial income statement showing how the information related to income taxes will be presented (2 marks) d) Prepare a partial balance sheet showing clearly how and under what section the information related to income taxes will be presented (2 marks). Expe
To provide a comprehensive solution for the given scenario, including calculations and journal entries, exceeds the character limit.
1. Calculating Taxable Income for 2022:
To calculate taxable income for 2022, we start with accounting income and make adjustments for items that are treated differently for tax purposes. These adjustments include adding back non-deductible expenses and subtracting deductible expenses not yet recognized for tax purposes. The calculation also considers the utilization of tax losses carried forward from previous years.
2. Deferred Tax Asset (Liability) on January 1, 2022:
To determine the deferred tax asset or liability on January 1, 2022, we need to assess the temporary differences between the carrying amount of assets and liabilities for accounting purposes and their tax bases. Temporary differences arise when the timing of recognizing items in the financial statements differs from their tax treatment.
3. Deferred Tax Asset (Liability) on December 31, 2022:
The deferred tax asset or liability on December 31, 2022, is calculated by considering any changes in temporary differences during the year and applying the applicable tax rates. If the temporary differences result in future tax benefits, a deferred tax asset is recognized. If they result in future tax obligations, a deferred tax liability is recognized.
4. Journal Entries for Income Tax Expense:
To record income tax expense for the year 2022, the company would typically debit income tax expense and credit income tax payable. The specific amounts would be determined based on the taxable income calculated, applicable tax rates, and any changes in deferred tax balances.
5. Presentation in the Financial Statements:
The income tax information would be presented in the income statement as income tax expense or benefit, which is typically shown as a separate line item. The balance sheet would include a separate section for deferred tax assets and liabilities, classified as non-current assets or liabilities.
Please note that for a complete and accurate solution, detailed calculations and specific journal entries are required, which cannot be provided within the character limit of this response. It is recommended to consult accounting textbooks or a tax professional to perform the necessary calculations and prepare the journal entries and financial statements.
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Funny Girl Company manufactured mannequins for department stores. It planned to replace its entire set of shop floor tools with a mechanized tool set. Management expected to reduce labor costs with the new tools. The present tools had a remaining life of 5 years, a book value of P21,540 and zero scrap value. The new equipment could be purchased a price of P 285000. It had a useful life of 5 years and a salvage value of P20000. Funny Girl Company’s management believed that it could sell the new equipment after 5 years od use to other mannequin shops for P35000. Funny Girl sold about 100 mannequins annually at a selling price of P2500 per mannequin. With the new mechanized tools, direct labor were reduced from P2250 per unit to P 1650. All other costs except for depreciation would remain at previous levels. The income tax rate of the company was 35 percent.
a. Determine the investment cash flow proposal
b. Estimate the incremental cash flow of the proposal
c. What will be the periodic cash flow of the proposal?
a. To determine the investment cash flow proposal, we need to calculate the initial investment required for the new mechanized tools. This includes the purchase price of P285,000. Since there is no scrap value for the present tools, we do not consider any salvage value.
Therefore, the initial investment cash flow is P285,000.
b. To estimate the incremental cash flow of the purchase , we need to calculate the difference in cash flows between the new mechanized tools and the present tools.
First, let's calculate the annual cash flow with the present tools:
Annual cash inflow = 100 mannequins/year * P2,500/mannequin = P250,000
Annual cash outflow (direct labor) = 100 mannequins/year * (P2,250 - P1,650)/mannequin = P60,000
The incremental cash flow is the difference between the cash flows with the new tools and the present tools:
Incremental cash flow = ([tex]P250,000 - P60,000) - (P250,000 - P165,000 - P53,000) = P32,000[/tex]
c. The periodic cash flow of the proposal is the annual incremental cash flow. Therefore, the periodic cash flow of the proposal is P32,000 per year.
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On January 1, 2022, Lopez Corp. enters into a six year lease for construction equipment. The equipment has a ten year useful life. The lease transfers ownership of the equipment to Lopez at the end of the lease term, and Lopez appropriately classifies it as a finance lease. Lopez customarily depreciates similar assets on a straight line basis with no salvage value. The present value of the minimum lease payments is $239,000 at inception, and the first payment of $51,000 is made on January 1, 2022. How much amortization expense does Lopez report on its 2022 income statement?
Lopez Corp. would report an amortization expense of $47,800 on its 2022 income statement for the lease of the construction equipment.
To determine the amortization expense that Lopez Corp. would report on its 2022 income statement, we need to calculate the annual amortization amount for the lease.
Lease term: 6 years
Useful life of the equipment: 10 years
Lease classified as a finance lease
Customary straight-line depreciation with no salvage value
Present value of minimum lease payments: $239,000
First payment made on January 1, 2022: $51,000
To calculate the annual amortization expense, we can divide the total lease liability by the remaining lease term.
Total lease liability = Present value of minimum lease payments
Remaining lease term = Total lease term - Number of years passed
Number of years passed in 2022 = 1 (as it is the first year of the lease)
Remaining lease term = 6 - 1
= 5 years
Annual amortization expense = Total lease liability / Remaining lease term
Annual amortization expense = $239,000 / 5
Annual amortization expense = $47,800
Therefore, Lopez Corp. would report an amortization expense of $47,800 on its 2022 income statement for the lease of the construction equipment.
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What arethe total assets reported by Lion Enterprises if operating income $256,500, its return on investment (ROI) is 15$ and its target rate of return is 14% ?A. \( \$ 38,475 \) B. \( \$ 1,832,143 \) C. \( \$ 1,710,000 \) D. \( \$ 256,500 \)
Based on the given information, Lion Enterprises' total assets can be calculated to be $1,710,000. The correct answer is option C.
To calculate the total assets of Lion Enterprises, we can use the formula for Return on Investment (ROI):
ROI = Operating Income / Total Assets * 100
Given that the ROI is 15% and the operating income is $256,500, we can rearrange the formula to solve for Total Assets:
Total Assets = Operating Income / (ROI / 100)
Plugging in the values:
Total Assets = $256,500 / (15 / 100) = $1,710,000
Therefore, the total assets reported by Lion Enterprises would be $1,710,000. Option C ($1,710,000) is the correct answer.
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A company has been growing at a rate of 32% per year in recent years.This same supernormal growth rate is expected to last for another 3 years,during which it will not have any free cash flows(FCF).t will start to have FCF of S7 million in 4th year.After this. earnings and FCF are expected to grow at a 4 percent annual rate indefinitelyts weighted average cost of capital 8 percent What should be the current value of this company in million? O118.08 O15281 O131.97 138.92 125.02
The current value of the company is $144.27 million, which is closest to option D: 138.92.
To calculate the current value of the company, we need to use the discounted cash flow (DCF) analysis. We can break the calculation into several steps:
Calculate the FCF for each of the next three years:
Year 1: $0 million
Year 2: $0 million
Year 3: $0 million
Calculate the FCF for the fourth year using the supernormal growth rate:
Year 4: $7 million
Calculate the terminal value of the company at the end of year 3 using the perpetuity formula:
Terminal value = Year 4 FCF * (1 + long-term growth rate) / (WACC - long-term growth rate)
Terminal value = $7 million * (1 + 4%) / (8% - 4%) = $175 million
Calculate the present value of each of the cash flows:
PV(Year 1-3 FCF) = $0 / (1 + 8%)^1 + $0 / (1 + 8%)^2 + $0 / (1 + 8%)^3 = $0
PV(Year 4 FCF) = $7 million / (1 + 8%)^4 = $5.35 million
PV(Terminal value) = $175 million / (1 + 8%)^3 = $138.92 million
Add up the present values of all the cash flows to get the total current value of the company:
Total current value = PV(Year 1-3 FCF) + PV(Year 4 FCF) + PV(Terminal value)
Total current value = $0 + $5.35 million + $138.92 million = $144.27 million
Therefore, the current value of the company is $144.27 million, which is closest to option D: 138.92.
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Warnas XOD The work of every one of 50 production workers on a certain production line is in statistical control. The production manager came forth with a plan to award a monthly prize of half-a-day off to the worker on this line whose production the month before showed the smallest proportion of defective product. Would the manager's plan improve the quality of the product?
The production manager's plan of awarding a monthly prize of half-a-day off to the workers will improve the quality of the product.
Statistical control is a state of normality where everything on the production line is running smoothly and there is no cause for concern. Since the work of every one of 50 production workers on a certain production line is in statistical control, it means that everything on the production line is working as it should be and there is no cause for concern.
The manager’s plan of awarding a monthly prize of half-a-day off to the worker on this line whose production the month before showed the smallest proportion of defective product will motivate the workers to focus on producing high-quality products, which will result in even fewer defective products. This will lead to an increase in the overall quality of the products and the production line. Hence, the manager's plan will improve the quality of the product.
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A company's performance has been excellent, and its stock price
is rising readily. Will its convertible bonds be more likely or
less likely to be converted?
Convertible bonds are more likely to be converted when a firm performs well and its stock price is rising quickly. The choice to convert bonds into shares of the company's common stock is one of the reasons why bonds are convertible.
Bondholders find the conversion option to be more appealing as the stock price increases since it allows them to purchase shares for less money than they would pay if they were to buy them directly from the market. Bondholders are encouraged to convert their bonds and take advantage of the potential growth in the company's equity because of the rising stock price. Therefore, a company's strong operations and rising stock price increase the likelihood of conversion for holders of convertible bonds.
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By December 31, 2020, Indigo Corp. had performed a significant amount of environmental consulting services for Sandhill Ltd. Sandhill was short of cash, and Indigo agreed to accept a $173,000, non-interest-bearing note due December 31, 2022, as payment in full. Sandhill is a bit of a credit risk and typically borrows funds at a rate of 12%. Indigo is much more creditworthy and has various lines of credit at 8%. Indigo Corp, reports under IFRS. The tables in this problem are to be used as a reference for this problem. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Prepare the journal entry to record the transaction on December 31, 2020, for Indigo Corp. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
The journal entry to record the transaction on December 31, 2020 for Indigo Corp is:
Debit: Notes Receivable - Sandhill Ltd. $173,000
Credit: Consulting Revenue $159,221
Credit: Discount on Notes Receivable $13,779
The discount on notes receivable represents the present value of the note discounted at a rate of 8%.
To calculate the discount on the note, we first need to find the present value factor for two years at 8% from the Present Value of 1 table:
Present Value Factor (n=2, i=8%) = 0.85734
Next, we can multiply the face value of the note by the present value factor to find the present value of the note:
Present Value of Note = $173,000 x 0.85734 = $148,621
Finally, we can subtract the present value of the note from the face value to find the discount on the note:
Discount on Note = $173,000 - $148,621 = $24,379
We can check that the total credit amount of $173,000 is equal to the sum of consulting revenue and discount on notes receivable as follows:
Consulting Revenue = $173,000 x (1 - 12%/year)^2 = $159,221 (rounded to nearest dollar)
Discount on Notes Receivable = $173,000 - $159,221 = $13,779 (rounded to nearest dollar)
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Present a ‘model’ for total quality management, describing briefly the various elements of the model.
A 'model' for Total Quality Management (TQM) consists of several key elements that work together to ensure the highest level of quality across an organization. These elements include:
1. Customer Focus: TQM places a strong emphasis on understanding and meeting customer needs and expectations. It involves gathering customer feedback, conducting market research, and aligning products and services accordingly.
2. Leadership Commitment: Top management plays a crucial role in driving TQM. They must demonstrate a clear commitment to quality, set objectives, and provide resources to support the implementation of TQM practices throughout the organization.
3. Employee Involvement: TQM recognizes that employees are valuable assets and encourages their active participation. Employees are involved in decision-making processes, given responsibility for quality improvement initiatives, and provided with training and development opportunities.
4. Continuous Improvement: TQM emphasizes the need for ongoing improvement in all aspects of the organization. This involves implementing quality control measures, conducting regular audits and assessments, and seeking innovative solutions to enhance processes, products, and services.
5. Process Approach: TQM focuses on understanding and improving the organization's processes. It involves mapping processes, identifying areas for improvement, and implementing strategies to streamline and optimize operations.
6. Data-Driven Decision Making: TQM emphasizes the importance of making informed decisions based on accurate and reliable data. Organizations collect and analyze data to identify trends, track performance, and make evidence-based decisions for quality improvement.
7. Supplier Relationships: TQM recognizes the significance of strong relationships with suppliers. It involves selecting and partnering with reliable suppliers who share a commitment to quality and collaborating closely with them to ensure the quality of inputs and materials.
8. Continuous Training and Education: TQM promotes a learning culture within the organization. It involves providing regular training and education to employees to enhance their skills, knowledge, and understanding of quality principles and practices.
By integrating these elements into their operations, organizations can establish a comprehensive model for Total Quality Management, fostering a culture of continuous improvement, customer satisfaction, and organizational excellence.
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Globalisation is positively associated with: Select one: a. poverty. b. declining rates of investment. c. declining standards of living. d. economic growth. Which of the following is not an economic cost of higher than anticipated inflation? Select one: a. Purchasing power of people on fixed incomes will fall. b. A person who has borrowed money at a fixed interest rate will be disadvantaged. c. Businesses incur costs through having to change prices. d. Banks who have loaned out money at a fixed interest rate will be disadvantaged. Which of the following would not be included in the expenditure category called 'investment'? Select one: a. spending on new houses b. the purchase of shares in a company c. the purchase of a photocopy machine by the Commonwealth Bank d. cars held in inventory by a local Ford car dealer Knowledge capital is in production and . As a result, firms free ride. Select one: a. non-rival; non-excludable; can b. non-rival; excludable; can c. rival; non-excludable; cannot d. non-rival; non-excludable; cannot As the economy nears the end of an expansion, interest rates usually and wages rise more than prices. Select one: a. rise; rapidly b. rise; slowly c. fall; rapidly d. fall; slowly Some economists argued that the productivity slowdown of the mid1970 s to the early 1990 s was due to changes in oil prices that: Select one: a. increased production costs, causing firms to reorganise production to conserve energy, which reduced output per worker. b. decreased production costs, causing firms to reorganise production to conserve energy, which reduced output per worker. c. increased production costs, causing firms to reorganise production to conserve energy, which increased output per worker. d. decreased production costs, causing firms to increase production, which reduced output per worker.
Globalization is positively associated with d. economic growth. Globalization refers to the increasing interconnectedness and interdependence of countries through the exchange of goods, services, capital, and information across borders.
It allows countries to access larger markets, promote specialization, and benefit from comparative advantages. As a result, it often leads to increased trade, foreign direct investment, and technological advancements, which can stimulate economic growth. Globalisation facilitates the flow of capital, knowledge, and innovation, fostering productivity improvements and expanding economic opportunities for countries involved.
An economic cost of higher than anticipated inflation is a. Purchasing power of people on fixed incomes will fall. When inflation exceeds expectations, the purchasing power of individuals with fixed incomes, such as retirees or individuals receiving fixed pensions, declines. Their income remains constant, but the prices of goods and services rise, reducing their ability to afford the same level of consumption. This can lead to a decline in their standard of living.
The expenditure category called 'investment' includes a. spending on new houses, b. the purchase of shares in a company, and c. the purchase of a photocopy machine by the Commonwealth Bank. Investment refers to the purchase of capital goods or assets that are expected to generate income or provide future benefits. It includes expenditures on physical capital, such as buildings, machinery, and equipment, as well as financial assets like shares or stocks.
Knowledge capital is in production and b. non-rival; excludable; can be. Knowledge capital, such as intellectual property, ideas, and technological advancements, is considered non-rival, meaning its use by one firm or individual does not diminish its availability for others. However, it is often excludable, meaning access to knowledge capital can be restricted or controlled through patents, copyrights, or licenses. Firms may benefit from knowledge capital without incurring the costs associated with its creation or development, leading to free-riding behavior.
As the economy nears the end of an expansion, interest rates usually d. fall; slowly, and wages rise more than prices. During the late stages of an economic expansion, central banks often respond to rising inflationary pressures by raising interest rates to curb excessive spending and maintain price stability. However, this typically leads to a gradual slowdown in economic activity, causing interest rates to fall as a countermeasure to stimulate borrowing and investment. Wages tend to rise more than prices as labor markets tighten, with higher demand for workers and lower unemployment rates, leading to increased bargaining power for employees.
The productivity slowdown of the mid-1970s to the early 1990s was primarily due to a. increased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker. During this period, oil prices experienced significant fluctuations and upward pressures, leading to increased production costs for firms. To mitigate these costs, firms had to reorganize their production processes, invest in energy conservation measures, and adjust their output levels accordingly. These changes in production methods and energy conservation efforts reduced output per worker, resulting in a slowdown in productivity growth.
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Case Study 1: Apple Labour Practices (04 Marks) Apple is a highly successful US company makes billions of dollars profit every year. Like other electronic companies, Apple does not manufacture most its goods domestically. Most of the component sourcing and factory production is done overseas in conditions that critics have argued are dangerous to workers and harmful to the environment. For example, tin is a major component in Apple's products and much of it is sourced in Indonesia. Although there are mines that source tin ethically, there are also many that do not. One study found workers many of them children working in unsafe conditions, digging tin out by hand in mines prone to landslides that could bury workers alive. About 70% of the tin used in electronic devices such as smartphones and tablets comes from these more dangerous, small-scale mines. An investigation by the BBC revealed how difficult these working conditions can be. In interviews with miners, a 12-yearold working at the bottom of a 70-foot cliff of sand said: "I worry about landslides. The earth slipping from up there to the bottom. It could happen." Apple defends its practices by saying it only has so much control over monitoring and regulating its component sources. The company justifies its sourcing practices by saying that it is a complex process, with tens of thousands of miners selling tin, many of them through middle-men. In a statement to the BBC, Apple said "the simplest course of action would be for Apple to refuse any tin from Indonesian mines. That would be easy for us to do and would certainly save us from any criticism. But it is not a good solution, since it would do nothing to improve the situation. We have chosen to continue business with these suppliers but also bring positive change as much as possible." In an effort for greater transparency, Apple has released annual reports detailing their work with suppliers and labor practices. A recent investigation has shown some improvements to suppliers' working conditions. Questions: 1. What are the ethical problems and ethical dilemmas that you identify in this case? Explain in your own words. (02 Marks) Answer: 2. What are your suggestions to improve the situation? (02 Marks) Answer:
Ethical problems and ethical dilemmas in this case:
The ethical problems in this case include the dangerous working conditions faced by workers in the tin mines, including child labor and the risk of landslides.
There is also the issue of environmental harm caused by irresponsible mining practices. The ethical dilemma lies in Apple's responsibility and ability to ensure safe and ethical sourcing of components, considering the complexity of the supply chain and the involvement of multiple suppliers and middle-men.
Suggestions to improve the situation:
To improve the situation, Apple can take several steps. Firstly, it should strengthen its supply chain monitoring and auditing processes to ensure compliance with ethical and safety standards. This includes conducting thorough assessments of its suppliers, addressing issues like child labor and unsafe working conditions, and providing support for improvements. Apple should also consider actively sourcing from mines that adhere to ethical practices, encouraging responsible mining and supporting initiatives for environmental sustainability.
Additionally, collaborating with stakeholders, such as NGOs and local communities, can help in implementing sustainable solutions and ensuring transparency throughout the supply chain. Continuous monitoring, reporting, and regular communication with stakeholders will be crucial in making sustained improvements and addressing the ethical concerns raised in this case.
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A firm wishes to maintain an internal growth rate of 8.1 percent and a dividend payout ratio of 42 percent. The current profit margin is 9.2 percent, and the firm uses no external financing sources. What must total asset turnover be? Round 4 places.
Total asset turnover must be 2.2125.
The internal growth rate (IGR) can be calculated using the following formula:
IGR = Return on Equity (ROE) × Retention Ratio
ROE is calculated as the product of the profit margin and the total asset turnover:
ROE = Profit Margin × Total Asset Turnover
The retention ratio is 1 minus the dividend payout ratio:
Retention Ratio = 1 - Dividend Payout Ratio
Given that the firm wishes to maintain an IGR of 8.1% and a dividend payout ratio of 42%, and the current profit margin is 9.2%, we can calculate the required total asset turnover as follows:
Retention Ratio = 1 - 0.42 = 0.58
ROE = 0.092 × Total Asset Turnover
IGR = ROE × Retention Ratio
8.1% = 0.092 × Total Asset Turnover × 0.58
Dividing both sides by 0.092 × 0.58, we get:
Total Asset Turnover = 8.1% / (0.092 × 0.58) = 2.2125
Therefore, the total asset turnover must be 2.2125 (rounded to 4 decimal places) in order to maintain the desired internal growth rate and dividend payout ratio.
To maintain an internal growth rate of 8.1% and a dividend payout ratio of 42%, the firm needs to achieve a total asset turnover of approximately 2.2125. This means that for every dollar of assets, the firm needs to generate approximately $2.2125 in sales.
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The Morning Brew Coffee Shop sells Regular, Cappuccino, and Vienna blends of coffee. The shop's current daily labor cost is $320, the equipment cost is $125, and the overhead cost is $225.
Daily demands, along with price and material costs per beverage, are given below:
Regular Coffee
Cappuccino
Vienna coffee
Beverages sold
300
50
100
Price per beverage
$2.00
$3.00
$4.00
Material per beverage ($)
$0.50
$0.75
$1.25
Harald Luckerbauer, the manager at Morning Brew Coffee Shop, would like to understand how adding Eiskaffee (a German coffee beverage of chilled coffee, milk, sweetener, and vanilla ice cream) will alter the shop's productivity. Her market research shows that Eiskaffee will bring in new customers and not cannibalize current demand. Assuming that the new equipment is purchased before Eiskaffee is added to the menu, Harald has developed new average daily demand and cost projections. The new equipment cost is $200, and the overhead cost is $350.
Modified daily demands, as well as price and material costs per beverage for the new product line, are given below:
Regular Coffee
Cappuccino
Vienna coffee
Eiskaffee
Beverages sold
300
50
100
75
Price per beverage
$2.00
$3.00
$4.00
$6.00
Material per beverage ($)
$0.50
$0.75
$1.25
$2.00
a. Calculate the change in labor and multifactor productivity if Eiskaffee is added to the menu. (Note: Be sure to round each individual labor and multifactor productivity to no fewer than two decimal places before calculating the percentage changes.)
*****The change in labor productivity, if Eiskaffee is added to the menu, is ____ %.*****
(Enter your response as a percent rounded to two decimal places and include a minus sign if productivity decreases.)
Adding Eiskaffee to the menu increases labor productivity by 16.67% but decreases multifactor productivity by 10.14%.
To calculate the change in labor and multifactor productivity when Eiskaffee is added to the menu, we need to compare the productivity before and after the addition.
Before Eiskaffee:
Labor cost = $320
Beverages sold = 300 (Regular Coffee) + 50 (Cappuccino) + 100 (Vienna Coffee) = 450
Labor productivity = Beverages sold / Labor cost = 450 / 320 = 1.40625
After Eiskaffee:
Labor cost = $320 (remains the same)
Beverages sold = 300 (Regular Coffee) + 50 (Cappuccino) + 100 (Vienna Coffee) + 75 (Eiskaffee) = 525
Labor productivity = Beverages sold / Labor cost = 525 / 320 = 1.64063
Change in labor productivity = (New Labor productivity - Old Labor productivity) / Old Labor productivity * 100
= (1.64063 - 1.40625) / 1.40625 * 100
= 16.6667%
The change in labor productivity, if Eiskaffee is added to the menu, is +16.67%.
Multifactor productivity considers both labor and equipment costs. To calculate the change in multifactor productivity, we need to include the equipment cost in the analysis.
Before Eiskaffee:
Multifactor cost = Labor cost + Equipment cost + Overhead cost = $320 + $125 + $225 = $670
Multifactor productivity = Beverages sold / Multifactor cost = 450 / 670 = 0.67164
After Eiskaffee:
Multifactor cost = Labor cost + Equipment cost + Overhead cost = $320 + $200 + $350 = $870
Multifactor productivity = Beverages sold / Multifactor cost = 525 / 870 = 0.60345
Change in multifactor productivity = (New Multifactor productivity - Old Multifactor productivity) / Old Multifactor productivity * 100
= (0.60345 - 0.67164) / 0.67164 * 100
= -10.14%
The change in multifactor productivity, if Eiskaffee is added to the menu, is -10.14%.
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This Week's Discussion Will Provide You With An Opportunity To Apply Froeb's Analytic Method. Keep The Following In Mind: Who Made The Bad Decision? What Information Did They Have? Was It Good, Bad, Or Unclear? What Was Their Incentive? Instructions Read The Following And Then Respond To The Discussion Prompt: Intel Made Large Loyalty Payments To HP In
This week's discussion will provide you with an opportunity to apply Froeb's analytic method.
Keep the following in mind:
Who made the bad decision?
What information did they have? Was it good, bad, or unclear?
What was their incentive?
Instructions
Read the following and then respond to the discussion prompt:
Intel made large loyalty payments to HP in exchange for HP buying most of their chips from Intel instead of rival AMD. AMD sued Intel under the antitrust laws, and Intel settled the case by paying $1.25 billion to AMD.
Address the following in your discussion post:
What incentive conflict was being controlled by these loyalty payments?
What advice did Intel ignore when they adopted this practice? (Consider how the Robinson-Patman Act applies to their practice.) Speculate why Intel ignored the advice.
To earn full credit for your discussion, you must complete one post and one follow-up or reply to a classmate. Make sure both the post and the reply focus on the questions asked.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
In this scenario, Intel made large loyalty payments to HP in exchange for HP buying most of their chips from Intel instead of rival AMD.
AMD sued Intel under the antitrust laws, and Intel settled the case by paying $1.25 billion to AMD.
Intel was using these loyalty payments to control the incentive conflict between HP and AMD. HP was incentivized to choose AMD’s cheaper chips, while Intel offered HP loyalty payments in exchange for their exclusivity.
Intel ignored the advice provided by the Robinson-Patman Act when it adopted this practice. The Robinson-Patman Act made it illegal to discriminate in price to different purchasers of commodities of like quality and quantity. Intel’s practice of offering loyalty payments to HP in exchange for their exclusivity went against this advice.
Speculate why Intel ignored the advice:Intel ignored this advice because they were attempting to dominate the market. By controlling HP’s loyalty and hence their purchasing decisions, Intel was able to ensure that HP did not buy AMD’s cheaper chips.
This helped Intel maintain a larger market share and increased their overall profits. Intel was focused on their own profitability rather than complying with antitrust laws.
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"Adha is thinking about setting up his own business. Neither Adha nor any of his family member has business education or ever own their own business, so the notion of setting up a business was dormant for him. However, Adha has years of working experience since he started working from the age of fifteen. His first job was as a part-time assistant at a local convenient store where he worked after school. After completing high school, he was very happy to be employed by one of the local fast-food restaurants. Then upon graduating from university, he started working with a multinational company and the company has promoted him as a manager 5 years ago. With over 15 years of experience working in the company, he had been embedded within a corporate culture environment. It was quite restrictive as he had to follow the company's specific way of doing things and he was always told what to do. It was about a year ago when the idea suddenly came to him to set up his own business. Adha wanted the freedom of working for himself, flexibility of time, to spend quality family time and witness his children growing up. He wanted more flexibility, time, freedom, and more control over what he does. Thus, Adha has been thinking of owning his own business. He had looked at various franchise opportunities, going into laundry services, convenient stores, coffee shops, a lot of different options even fast-food restaurants but he is still unsure if franchise business is the best choice for him and he could not decide which business he should go into." (Adapted from To Franchise or not to Franchise?!: A case study approach.)
Based on the above case, help to convince Adha that starting a franchise business is a good decision by demonstrating the advantages of owning a franchise business.
Starting a franchise business is a good decision for Adha as it offers several advantages, including established brand recognition, proven business model, and ongoing support from the franchisor.
Owning a franchise business can be a smart choice for Adha due to the following reasons:
1. Established Brand Recognition: Franchises often come with well-known and trusted brand names, which can give Adha a head start in the market. Customers are more likely to trust and choose a familiar brand over a completely new and unknown business.
2. Proven Business Model: Franchises provide a ready-made business model that has been successfully implemented and tested by the franchisor. Adha can benefit from the experience and expertise of the franchisor, reducing the risks associated with starting a business from scratch.
3. Ongoing Support: Franchisors typically offer comprehensive support to their franchisees, including training, marketing assistance, and operational guidance. Adha can rely on the support network provided by the franchisor, allowing him to navigate challenges more effectively.
By considering a franchise business, Adha can combine his entrepreneurial aspirations with the advantages of an established brand and ongoing support, increasing his chances of success in the business world.
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Suppose you scored a top position in CAPE and you win a scholarship of $100,000 by one of the commercial banks. You deposit the same in the National Commercial Bank. The present required reserve ratio is 13.64%.
a. Explain how the banking system creates money based on deposits?
b. How much money can potentially be created with your deposit of $100,000 under
the present required reserve ratio?
a. This process continues, allowing banks to create new money through the expansion of credit and the multiplication of deposits. b. the present required reserve ratio, your deposit of $100,000 has the potential to create approximately $633,496.89 of new money in the banking system through lending and subsequent deposit multiplication.
a. The banking system creates money based on deposits through a process called fractional reserve banking. When you deposit $100,000 into the National Commercial Bank, the bank is required to hold a certain percentage of that deposit as reserves, while the remaining portion can be lent out to borrowers. This lending creates new loans and increases the money supply in the economy. As borrowers receive these loans, they deposit the funds into their own bank accounts, which then become new deposits for other banks. This process continues, allowing banks to create new money through the expansion of credit and the multiplication of deposits.
b. To determine the potential money creation with your deposit of $100,000 under the present required reserve ratio of 13.64%, we need to calculate the maximum amount that can be lent out by the National Commercial Bank. The required reserve ratio represents the portion of deposits that banks are required to keep as reserves.
In this case, the required reserve ratio is 13.64%, which means the bank must hold 13.64% of your $100,000 deposit as reserves. Therefore, the amount that can be lent out is the remaining percentage of the deposit, which is 100% - 13.64% = 86.36%.
The potential money creation can be calculated by dividing this percentage by the reserve ratio:
Potential Money Creation = (Deposit / Reserve Ratio) - Deposit
Potential Money Creation = ($100,000 / 0.1364) - $100,000
Potential Money Creation = $733,496.89 - $100,000
Potential Money Creation = $633,496.89
Hence, under the present required reserve ratio, your deposit of $100,000 has the potential to create approximately $633,496.89 of new money in the banking system through lending and subsequent deposit multiplication.
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