(a) The pizzeria's fixed cost is $300.
(b) The relationship between the marginal cost per dozen pizzas calculated using total cost and variable cost is that they are the same since fixed costs do not change with the level of production.
(a) To determine the fixed cost, we look at the total cost when the quantity of pizzas is 0 dozen. In this case, the total cost is $300, which represents the fixed cost component.
(b) To calculate the marginal cost per dozen pizzas, we find the difference in total cost or variable cost between consecutive quantities and divide it by the change in quantity.
Using the information on total cost:
Marginal Cost = (Total Cost[i] - Total Cost[i-1]) / (Quantity[i] - Quantity[i-1])
Using the information on variable cost:
Marginal Cost = (Variable Cost[i] - Variable Cost[i-1]) / (Quantity[i] - Quantity[i-1])
Constructing a table with the given information, we find that both sets of marginal cost per dozen pizzas are equal at every quantity level. This occurs because fixed costs do not change with the quantity of pizzas produced. Therefore, the relationship between the marginal cost per dozen pizzas calculated using total cost and variable cost is one of equivalence, reflecting the fact that changes in quantity only affect the variable cost component while fixed costs remain constant.
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The pizzeria's fixed cost is $300. The marginal cost per dozen pizzas, calculated using either total cost or variable cost, is $50, $40, $30, $30, $40, $50, evidencing that these calculations yield the same results.
Explanation:a. The pizzeria's fixed cost can be determined by subtracting the variable cost from the total cost when no pizzas are made. This gives us: $300 - $0 = $300, so the fixed cost for the pizzeria is $300.
b. To calculate the marginal cost per dozen pizzas, we need to know how the total cost changes with the production of one more dozen pizzas. Here're the calculations based on total cost and variable cost:
When increasing from 0 to 1 dozen, the total cost increases by $50. Therefore, the marginal cost per dozen pizzas is $50. The same principle is applied for the changes from 1 to 2 to 3 to 4 to 5 to 6 dozens. The marginal costs per dozen using total cost are: $40, $30, $30, $40, $50. The same calculations can be done using variable costs with the results being: $50, $40, $30, $30, $40, $50.
The relationship between these sets of numbers is that they're identical, which means that marginal cost per dozen pizzas is the same whether we calculate it using total cost or variable cost.
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Which of the following statement is CORRECT? O Total Fixed costs change inversely with the level of production. Costs are fixed or variable for a specific activity and/or for an indefinite time period. O Variable costs change, in per unit, in proportion to changes in the related level of activity or volume of output produced Product costs are treated as expenses of the accounting period in which the product is sold. Moving to another question will save this response. hp
The correct answer is: Variable costs change, in per unit, in proportion to changes in the related level of activity or volume of output produced.
Variable costs are costs that change in direct proportion to the level of activity or volume of output produced. As the activity or production volume increases, variable costs increase, and as the activity or production volume decreases, variable costs decrease. The relationship between variable costs and activity is often expressed as a per-unit basis, meaning that the variable cost per unit remains constant regardless of the level of activity.
This statement is correct because it accurately describes the behavior of variable costs. Variable costs are incurred for a specific activity or production process and vary based on the level of output or activity. Examples of variable costs include direct materials, direct labor, and variable overhead costs.
On the other hand, fixed costs remain unchanged in total regardless of the level of production or activity. Fixed costs are incurred for a specific time period or activity level and do not change based on the volume of output produced.
The other statements are incorrect:
Total fixed costs do not change inversely with the level of production. Fixed costs remain the same in total regardless of the level of production.
Costs can be fixed or variable for a specific activity or for an indefinite time period. This statement is ambiguous and does not provide a clear understanding of cost behavior.
Product costs are not treated as expenses of the accounting period in which the product is sold. Product costs, which include direct materials, direct labor, and manufacturing overhead, are capitalized as inventory costs until the product is sold. They are then recognized as expenses in the period in which the product is sold, typically as cost of goods sold.
Therefore, the correct answer is: Variable costs change, in per unit, in proportion to changes in the related level of activity or volume of output produced.
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If the Astros want to invest in a new player and they expect that signing that player would increase revenues by $10 million per year at a salary of $7 million per year over 3 years, the total profit would be O-$9 million O-$3 million O $3 million $9 million O $30 million Question 3 4 pt Complete vertical integration of a sport firm is advantageous because it outsources many of its operations to companies with core competencies in different areas. True False Question 4 4 pts Opportunity cost is not relevant to finance, it is only theoretical. True Falve
The Astros want to invest in a new player and they expect that signing that player would increase revenues by $10 million per year at a salary of $7 million per year over 3 years, the total profit would be $9 million. Therefore, the answer to the first question is O-$9 million.
Total Revenue over three years = 3 * $10 million = $30 millionTotal Salary over three years = 3 * $7 million = $21 millionTotal Profit over three years = Total Revenue over three years – Total Salary over three years= $30 million - $21 million = $9 millionHence, the total profit of signing that player would be $9 million. Complete vertical integration of a sports firm is advantageous because it outsources many of its operations to companies with core competencies in different areas. False.
Vertical integration is a process in which several steps in the production and distribution of a product or service are owned and managed by a single company or entity. This means that the company is not outsourcing many of its operations to companies with core competencies in different areas, instead it is managing them in-house. Therefore, the correct answer is False. Opportunity cost is not relevant to finance, it is only theoretical. False.
Opportunity cost is relevant to finance as it is the cost of the next best alternative foregone. In other words, the value of the opportunity is lost when a decision is made to pursue a certain course of action. Therefore, the correct answer is False.
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Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 103,200 units per year is: Direct materials $ 1.70 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 5.4.15 Variable selling and administrative expense $ 2.00 Fixed selling and administrative expense $ 3.00 The normal selling price is $20.00 per unit. The company's capacity is 133,200 units per year. An order has been received from a mall- order house for 2500 units at a special price of $17.00 per unit. This order would not affect regular sales or the company's total fixed costs 54.00 $ 0.80 Required: 1. What is the financial advantage (disadvantage) of accepting the special order? 2. As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any affect on the sales of its current model What unit cost is relevant for establishing a minimum selling price for the inferior units? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order? Red Required 2 >
The task involves determining the financial advantage or disadvantage of accepting a special order and identifying the relevant unit cost for establishing a minimum selling price for inferior units.
To calculate the financial advantage or disadvantage of accepting the special order, we need to compare the incremental revenue from the order with the incremental costs. The special order is for 2,500 units at a price of $17.00 per unit. The normal selling price is $20.00 per unit.
Incremental revenue = (Special order quantity * Special order price) - (Normal selling price * Special order quantity)
= (2,500 * $17.00) - (2,500 * $20.00)
= $42,500 - $50,000
= -$7,500 (disadvantage)
Therefore, accepting the special order would result in a financial disadvantage of $7,500.
For establishing a minimum selling price for the inferior units, the relevant unit cost would be the variable cost per unit. The fixed costs are not relevant in this case as the selling of inferior units will not affect the sales of the current model. The relevant unit cost includes direct materials, direct labor, variable manufacturing overhead, variable selling and administrative expense.
Unit cost = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative expense
= $1.70 + $5.40 + $4.15 + $2.00
= $13.25
Therefore, the relevant unit cost for establishing a minimum selling price for the inferior units is $13.25.
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When price goes down, the quantity demanded goes up. Price elasticity measures:
Group of answer choices
how responsive the quantity change is in relation to the price change.
how much the price goes down.
how responsive the price change is in relation to the quantity change.
how much the quantity goes up.
The price elasticity measures how responsive the quantity change is in relation to the price change. It's true that when the price goes down, the quantity demanded goes up.
Hence, the price elasticity of demand measures how sensitive the quantity demanded is to a change in price.Price elasticity of demand (PED) is the responsiveness of the quantity demanded for a product to a change in price. In other words, PED examines how much the demand of a commodity changes when there is a change in the price of that commodity.Therefore, if the demand for a commodity is relatively unaffected by changes in its price, it is said to be inelastic. However, if a small change in the price of a commodity leads to a significant change in the quantity demanded, the demand for that commodity is said to be elastic.
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When the price goes down, the quantity demanded goes up. The price elasticity measures how responsive the quantity change is in relation to the price change. It measures the extent to which changes in demand are influenced by changes in price, or how sensitive the demand for a good is to changes in its price.
Price elasticity of demand is a measure of how responsive the quantity demanded is to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. If the demand for a good is highly elastic, a small change in price will result in a large change in the quantity demanded. Conversely, if the demand for a good is inelastic, a change in price will have little effect on the quantity demanded.
Quantity demanded refers to the amount of a particular good or service that consumers are willing and able to purchase at a given price during a specific period of time. It represents the quantity of a product or service that individuals or markets desire to buy at a specific price point.
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Topic: Economics of Illicit Drugs
Please discuss the different views of price elasticity of demand
with regard to addictive consumption.
The views on price elasticity of demand in relation to addictive consumption can be categorized into two perspectives: the traditional perspective and the addiction-based perspective.
1. Traditional Perspective:
In the traditional perspective, it is believed that addictive substances have a relatively inelastic demand, meaning that changes in price have a limited impact on consumption. This is because addiction creates a strong physiological and psychological dependency, leading individuals to prioritize obtaining the substance over price considerations. Therefore, even if the price increases, addicts may continue to consume the drug, albeit possibly at a reduced quantity.
2. Addiction-Based Perspective:
The addiction-based perspective argues that addictive consumption exhibits a certain level of price elasticity of demand. While addicts may initially exhibit inelastic demand due to their dependency, there is evidence that as prices rise, some individuals may reduce their consumption or seek alternatives. This elasticity is often observed among less severe addicts or those with limited financial resources.
In conclusion, the views on price elasticity of demand in addictive consumption differ. The traditional perspective suggests that addictive substances have relatively inelastic demand, while the addiction-based perspective acknowledges the presence of some elasticity. The specific elasticity calculations can vary depending on the substance, population, and context, making it difficult to provide precise numerical calculations. Nonetheless, it is clear that price does have some impact on addictive consumption, although the extent of this impact can vary significantly.
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Required information The following information applies to the questions displayed below.) Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in US dollars as follows: Accounts receivable, current Accounts receivable, 15 ng term Land Patents Stated at Current Historical Rates Rates $ 230,000 $ 250,000 136,000 144,000 68,000 70,000 98,000 103,000 $ 532,000 $ 567,000 This subsidiary's functional currency is a foreign currency. What total should Orchid's balance sheet include for the preceding items? The following information applies to the questions displayed below) Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in US dollars as follows: Accounts receivable, current Accounts receivable, long term Land Patento stated at Current Ristorten Rates Rates $ 230,000 $ 250,000 136,000 144,000 68,000 70,000 98,000 10,000 $ 532,000 5 567,000 This subsidiary's functional currency is the U.S. dollar. What total should Orchid's balance sheet include for the preceding items?
The first step to answering this question is to understand the meaning of functional currency. The functional currency refers to the primary currency used by a company or subsidiary for transactions and record-keeping. It is the currency of the country where the subsidiary is located or operates.
The next step is to separate the items based on whether they are in the subsidiary's functional currency or US dollars. For the first question, the items are stated in US dollars, but the functional currency is foreign currency.
Therefore, the current and long-term accounts receivable, land, and patents should be translated at the exchange rate on the balance sheet date to the functional currency. The sum of these translated balances is the amount that should be included on Orchid's balance sheet for the preceding items.
Total for the preceding items: Current Accounts Receivable = $230,000 + $136,000 + $68,000 + $98,000 = $532,000 Long-term Accounts Receivable = $250,000 + $144,000 + $70,000 + $10,000 = $474,000 Land = $532,000 Patents = $103,000
Total for the preceding items = $1,109,000 For the second question, the items are stated in US dollars, and the functional currency is also the US dollar. Therefore, the items should be reported on Orchid's balance sheet at their historical rates.
Total for the preceding items: Current Accounts Receivable = $230,000 + $136,000 + $68,000 + $98,000 = $532,000 Long-term Accounts Receivable = $250,000 + $144,000 + $70,000 + $10,000 = $474,000 Land = $532,000 Patents = $5,000 Total for the preceding items = $1,013,000
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D Question 7 12 pts CWB Corp. makes hats and has the following inventory policy: CWB maintains an ending inventory of materials equal to 4 percent of the next quarter's production needs. The ending inventory for Quarter 4 (for the year) is assumed to be 50 yards. Each hat requires a total of 0.5 yard of material at a cost of $1.50 per yard. Below is the budgeted production units: Q1 Q2 Q3 Q4 Yearly Production units 1500 2000 2000 2000 7500 Use information from above for the three questions listed below. Calculate the beginning direct materials inventory for Quarter 2 (in yards). Calculate the budgeted cost of direct materials purchase for Quarter 2. Calculate the budgeted cost of direct materials purchase for the year.
The beginning inventory for Quarter 2 would be: Beginning inventory for Q2 = 1233.33 x 4% = 49.33 (approx.) yards.
Given: CWB Corp. makes hats and has the following inventory policy: CWB maintains an ending inventory of materials equal to 4 percent of the next quarter's production needs. The ending inventory for Quarter 4 (for the year) is assumed to be 50 yards.
Each hat requires a total of 0.5 yard of material at a cost of $1.50 per yard. Below is the budgeted production units: Q1 Q2 Q3 Q4 Yearly Production units 1500 2000 2000 2000 7500. We need to find the following: Calculate the beginning direct materials inventory for Quarter 2 (in yards).
Calculate the budgeted cost of direct materials purchase for Quarter 2. Calculate the budgeted cost of direct materials purchase for the year.
We know that each hat requires 0.5 yard of material, then the total material required for the year would be: Material Required per unit = 0.5 yards Total Production units for the year = 7500So, Total Material Required = Material Required per unit x Total Production units for the year = 0.5 x 7500 = 3750 yards For Quarter 4, the ending inventory for the year is assumed to be 50 yards.
Using the above statement, we can calculate the total Material Required for Quarters 1, 2, and 3.3750 – 50 (for Quarter 4) = 3700 yards For Quarters 1, 2, and 3 = 3700/3 = 1233.33 (approx.) yards. The ending inventory for Quarter 1 would be the beginning inventory for Quarter 2.
Hence, the beginning inventory for Quarter 2 would be: Beginning inventory for Q2 = 1233.33 x 4% = 49.33 (approx.) yards.
Calculate the budgeted cost of direct materials purchase for Quarter 2:Material Required for Quarter 2 = Material Required per unit x Production units for Quarter 2 = 0.5 x 2000 = 1000 yards .
Budgeted cost of direct materials purchase for Quarter 2 = Material Required for Quarter 2 x Cost per yard = 1000 x 1.5 = $1500Calculate the budgeted cost of direct materials purchase for the year: Budgeted cost of direct materials purchase for the year = Total Material Required x Cost per yard= 3750 x 1.5 = $5625
Beginning direct materials inventory for Quarter 2 (in yards) = 49.33 (approx.) yards. Budgeted cost of direct materials purchase for Quarter 2 = $1500. Budgeted cost of direct materials purchase for the year = $5625.
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perform online research and choose a career in the financial services industry. determine the education you will need to prepare for this career.
To pursue a career in the financial services industry, you will typically need a bachelor's degree in finance, accounting, economics, or a related field, and certifications such as CFA, CFP, or CPA can provide additional advantages.
To pursue a career in the financial services industry, you will need a relevant educational background and qualifications. Acquiring a bachelor's degree in finance, accounting, economics, or a related field is a common requirement for entry-level positions. Additionally, obtaining certifications such as the Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), or Certified Public Accountant (CPA) can greatly enhance your career prospects in the financial services industry. Continuous learning and staying updated with industry trends and regulations will also be crucial for long-term success.
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.Which one of the following is not a characteristic of a bureaucratic organization?
A) Authority B) Regulations
C) Command structure D) Change
The answer is option D: Change.What is a bureaucratic organization?A bureaucratic organization is a hierarchical organization that is typically characterized by a rigid organizational structure, defined procedures, formalized policies, and a clear chain of command. The following are some of the characteristics of a bureaucratic organization:
Authority - Bureaucratic organizations have a hierarchical structure with a clear chain of command. Regulations - Bureaucratic organizations have strict rules and regulations that all members of the organization must follow. Command structure - Bureaucratic organizations have a clear chain of command that is defined by job titles and responsibilities.Change, on the other hand, is not a characteristic of a bureaucratic organization. This is because bureaucratic organizations are typically resistant to change. Bureaucracies are characterized by a rigid organizational structure, defined procedures, formalized policies, and a clear chain of command. As a result, any significant change requires a great deal of time and effort to implement. This is why many bureaucratic organizations are slow to respond to changing circumstances. In conclusion, the correct answer is D: Change.
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Problem 4 USE INPUT VALUES AS GIVEN IN THE APPENDIX Consider a retailer selling a seasonable good. Based on the past experience, the management estimates the price response function, the relationship between demand D and price p, is given by the function D = 20,000 - p" (See appendix for the value of n) n+1 1. Find the retailer's potential market size. 2. For a single pricing strategy, find the maximum retailer’s revenue. 3. For a two-tier pricing strategy with SAR 150, SAR 200, Find the revenue of each of the two classes (Note, first the retailer serves the high price customers as much as possible, then the lowest price) 4. The retailer is thinking of adding a new pricing tier with SAR 100. Find the revenue of the new class (Note, this class is served at last)
Given the problem is about the retailer selling a seasonal good where management estimates the price response function, the relationship between demand D and price p, is given by the function D = 20,000 - p^(n+1). The value of n is given in the appendix.
We have to determine the following:
1. Find the retailer's potential market size.
2. For a single pricing strategy, find the maximum retailer’s revenue.
3. For a two-tier pricing strategy with SAR 150, SAR 200, find the revenue of each of the two classes.
4. The retailer is thinking of adding a new pricing tier with SAR 100. Find the revenue of the new class.
Solution:1. The retailer's potential market size is 20,000 since D = 20,000 - p^(n+1), where p=0. Therefore, D = 20,000 - 0^(n+1) = 20,000. 2. For a single pricing strategy, the maximum retailer’s revenue can be found when the price is such that the derivative of revenue with respect to price is zero.
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Tango Company produces joint products M, N, and T from a joint process. This information concerns a batch produced in April at a joint cost of $130,000:
Product Units Produced and Sold After Split-Off
Total Separable Costs Total Final Sales Value
M 11,000 $ 10,000 $ 170,000
N 5,000 9,200 150,000
T 6,000 7,800 27,000
Required:
How much of the joint cost should be allocated to each joint product using the net realizable value method? (Do not round intermediate calculations. Enter your final answers in whole dollars.)
The allocated joint cost for each joint product using the net realizable value method is:
- product m: $65,000- product n: $56,900- product t: $7,800.
to allocate the joint cost to each joint product using the net realizable value (nrv) method, we need to calculate the proportion of the total nrv that each product represents. the nrv is determined by subtracting the total separable costs from the total final sales value for each product.let's calculate the nrv for each product:
for product m:nrv of m = total final sales value of m - total separable costs of m = $170,000 - $10,000 = $160,000
for product n:nrv of n = total final sales value of n - total separable costs of n = $150,000 - $9,200
= $140,800for product t:nrv of t = total final sales value of t - total separable costs of t
= $27,000 - $7,800 = $19,200next, we need to calculate the proportion of the total nrv that each product represents. this proportion will be used to allocate the joint cost:
total nrv = nrv of m + nrv of n + nrv of t = $160,000 + $140,800 + $19,200 = $320,000
now, let's calculate the allocation of the joint cost for each product:allocation for m = (nrv of m / total nrv) * joint cost
= ($160,000 / $320,000) * $130,000 = $65,000allocation for n = (nrv of n / total nrv) * joint cost
= ($140,800 / $320,000) * $130,000 = $56,900allocation for t = (nrv of t / total nrv) * joint cost
= ($19,200 / $320,000) * $130,000 = $7,800
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5. A restaurant has large tanks that are cleaned daily. Cleaning includes the use of packaged detergents, which dissolve in a solution inside the tanks. The company purchases detergent packages with a fill-weight specification of 11.47±0.08oz. A supplier representative claims that his company uses statistical process control and will promise an inherent process capability of 0.27oz for the fill-weight specification. The brochure says nothing else about the process except that the advertised weight of the detergent packages is 11.5oz.
Calculate Cpk
Should the food processor buy detergent from this supplier? Why or why not?
If the supplier had control chart evidence that its fill-weight process was in fact centered a 11.5oz, and was in a state of statistical control, how would your answer to question (a) change? Does all output meet specifications?
A process capability index is a statistical measure of how well a process is able to produce outputs that meet product specifications. Cpk is a process capability index that measures the capability of a process to produce outputs within customer specifications. It is used to evaluate the ability of a process to meet specified quality criteria. It is defined as the ratio of the process tolerance to the process variability. It is used to determine whether a process is capable of producing products that meet customer specifications. The Cpk index is used to determine the capability of a process to produce outputs that meet customer specifications. The higher the Cpk value, the more capable the process is of producing outputs that meet customer specifications.
In this problem, the food processor purchases detergent packages with a fill-weight specification of 11.47 ± 0.08 oz.
The supplier claims that their detergent packages have a process capability of 0.27 oz. The supplier brochure advertises the weight of the detergent packages as 11.5 oz.
We need to calculate the Cpk and determine if the food processor should buy detergent from this supplier. We also need to determine how the answer to part a would change if the supplier had control chart evidence that its fill-weight process was in fact centered at 11.5 oz, and was in a state of statistical control.Cpk is calculated as follows:
Cpk = min((USL - X-bar)/3*sigma, (X-bar - LSL)/3*sigma)
Where USL is the upper specification limit, LSL is the lower specification limit, X-bar is the process mean, and sigma is the process standard deviation.
The upper specification limit is USL = 11.47 + 0.08 = 11.55 oz.
The lower specification limit is LSL = 11.47 - 0.08 = 11.39 oz.
The process mean is X-bar = 11.5 oz.
The process capability is Cp = (USL - LSL)/6*sigma = (11.55 - 11.39)/6*0.27 = 0.30.
The process is capable of producing outputs that meet customer specifications because the Cpk is greater than 1.0. The food processor should buy detergent from this supplier because the detergent packages have a high process capability and can produce outputs that meet customer specifications. If the supplier had control chart evidence that its fill-weight process was in fact centered at 11.5 oz, and was in a state of statistical control, the answer to part a would not change because the process is already capable of producing outputs that meet customer specifications. All output meets specifications because the process capability is greater than 1.0.
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The culminating activity for this course will be a comprehensive business plan, presented in a formal report that includes all of the following:
A Title Page,Table of contents,Business Overview:
type of business (merchandising or service company);
products and services offered
form of business (sole proprietorship, limited or general partnership, corporation)
ownership structure and income sharing.
Financial Analysis of a Competitor:
download the most recent Annual Report for a public company in the same industry;
perform a financial analysis on this competitor (determine factors such as profit margin, debt ratio and current ratio to guide your financial estimates, as well as EPS and dividend yield if applicable);
make decisions on your operations based on the strengths and weaknesses of the competition.
Financial Plan:
amount and sources of required funding (owner capital, share/bond issues, loans, venture capital);
a projected Balance Sheet at start-up;
pricing and expected sales (revenue);
a projected Income Statement;
a projected Cash Flow Statement for the first year.
Internal Control:
inventory valuation method if applicable (FIFO, Average Cost or Specific Identification) and perpetual or periodic inventory;
technology, policies, cash control and security measures to safeguard assets and to ensure accurate representations of inventory and other assets;
what ways would you ensure that your company is socially responsible?
The comprehensive business plan for the course needs to be presented in a formal report and must include all of the following details:A title page.Table of contents.Business Overview:Under this, you need to identify the type of business which can be merchandising or service company. In addition, you also need to list the products and services offered by your business.
Furthermore, specify the form of business that you plan to adopt which can be a sole proprietorship, limited or general partnership, or corporation. Finally, the ownership structure and income sharing should be mentioned here.Financial Analysis of a Competitor:Under this, you need to perform a financial analysis of a competitor to help guide your financial estimates. To do this, you can download the most recent Annual Report for a public company in the same industry.
You need to determine factors such as profit margin, debt ratio, current ratio, EPS, and dividend yield if applicable. Based on the strengths and weaknesses of the competition, make decisions on your operations.Financial Plan:Under this, the amount and sources of required funding (owner capital, share/bond issues, loans, venture capital) should be specified. A projected Balance Sheet at start-up must be provided. Furthermore, pricing and expected sales (revenue) must also be included, along with a projected Income Statement. Finally, a projected Cash Flow Statement for the first year should also be included.Internal Control:Under this, you need to specify the inventory valuation method (FIFO, Average Cost, or Specific Identification) and perpetual or periodic inventory, technology, policies, cash control, and security measures to safeguard assets and to ensure accurate representations of inventory and other assets. Finally, you need to suggest ways in which you would ensure that your company is socially responsible. The culminating activity for this course will be a comprehensive business plan, presented in a formal report. This report must include the following details:A Title PageTable of contents.Business Overview:You need to identify the type of business that you will start, such as a merchandising or service company, and list the products and services offered by your business. Furthermore, you must specify the form of business that you plan to adopt, such as a sole proprietorship, limited or general partnership, or corporation. Finally, the ownership structure and income sharing should be mentioned.Financial Analysis of a Competitor:Under this, you need to perform a financial analysis of a competitor to help guide your financial estimates. To do this, you can download the most recent Annual Report for a public company in the same industry. You need to determine factors such as profit margin, debt ratio, current ratio, EPS, and dividend yield if applicable. Based on the strengths and weaknesses of the competition, make decisions on your operations.Financial Plan:You need to specify the amount and sources of required funding, such as owner capital, share/bond issues, loans, or venture capital. You must also provide a projected Balance Sheet at start-up, along with pricing and expected sales (revenue), a projected Income Statement, and a projected Cash Flow Statement for the first year.Internal Control:You need to specify the inventory valuation method (FIFO, Average Cost, or Specific Identification) and perpetual or periodic inventory, technology, policies, cash control, and security measures to safeguard assets and to ensure accurate representations of inventory and other assets. Finally, suggest ways in which you would ensure that your company is socially responsible.
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Explain how the aggregate supply curve differs in the immediate short run, the short run and the long run? describe the shape in each scenario
The aggregate supply curve represents the total supply of goods and services in an economy at different price levels. It can vary in shape and position in the immediate short run, short run, and long run.
In the immediate short run, the aggregate supply curve is typically assumed to be horizontal or nearly flat. This implies that changes in the overall price level have minimal impact on the quantity of output supplied. In this scenario, the economy is operating at or near full capacity, and firms are unable to adjust their production levels immediately. As a result, any changes in demand primarily affect prices rather than output.
In the short run, the aggregate supply curve is upward sloping. This indicates that as the price level increases, firms are willing to supply more output due to factors such as increased profits and higher production costs. However, the upward slope is relatively gentle, suggesting that there are some constraints on production capacity, such as limited availability of resources or bottlenecks in certain sectors.
In the long run, the aggregate supply curve becomes vertical. This reflects the idea that in the long term, the economy's potential output is determined by the available factors of production, such as labor, capital, and technology. Changes in the price level do not impact the economy's productive capacity, but only influence nominal values. In the long run, any increase in aggregate demand will only lead to higher prices, without affecting the overall level of output.
Overall, the shape of the aggregate supply curve differs in each scenario. It is horizontal or nearly flat in the immediate short run, upward sloping in the short run, and vertical in the long run. These variations reflect the different dynamics and constraints that affect the supply of goods and services in the economy over different time horizons.
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Blanda company's output for the current period was assigned a $300,000 standard direct material cost. The direct materials variances included a $24,000 favorable price variance and a $4,000 favorable quantity variance. What is the actual-total direct materials cost for the currrent period? || Martin Company's output for the current period results in a $10,000 unfavorable direct labor rate variance and an $5,000 unfavorable direct labor efficiency variance. Production for the current period was assigned a $200,000 standard direct labor cost. What is the actual total direct labor cost for the current period? ||| Gordon Company's output for the current period yields a $12,000 favorable overhead volume variance and a $21,500 unfavorable overhead controllable variance. Standard overhead charged to production for the period is $410,000. What is the actual total overhead cost incurred for the period? IV Managers use management by exception for control purposes. Explain how standard costs help managers apply this concept to monitor and control costs.
The price of the components and raw materials needed to make a product is referred to as the direct material cost. If the materials cannot be distinguished from the finished product, they are regarded as joint expenses.
The price of direct materials is directly related to the unit of production and is immediately identifiable. For instance, the price of glass is a direct material expense in the production of light bulbs. The primary component needed for the production of commodities or products was material.
Costs of raw materials or components used directly in the production of goods are referred to as direct material costs.
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The DEF Restaurant bought equipment on January 1, 2003. The restaurant has a calendar year-end. The equipment cost $29,000, has a residual value of $3,000, and has an estimated useful life of ten years. a. What is the expense for the equipment for 2003 under the cash basis? b. Under the accrual basis, compute the equipment's depreciable base. c. What is depreciation expense for the equipment for 2003 under the accrual basis? d. Compute the book value of the equipment under the accrual basis on December 31, 2004. .
Cash basis refers to the process of accounting for income and expenses when they are paid or received. Since this method is not used, no expense for the equipment will be recorded. b. Under the accrual basis, compute the equipment's depreciable base.
The equipment's depreciable base is calculated by subtracting the residual value from the cost of the equipment. The depreciable base for the equipment is computed as follows:29,000 - 3,000 = $26,000c. What is depreciation expense for the equipment for 2003 under the accrual basis?According to the straight-line method of depreciation, the annual depreciation expense for an asset is calculated by dividing the depreciable base by the number of years of the asset's useful life. As a result, the yearly depreciation expense for the equipment is $2,600 ($26,000/10).
d. Compute the book value of the equipment under the accrual basis on December 31, 2004.The book value of the equipment is the original cost minus the total amount of depreciation. Depreciation expense per year = $2,600Book value on December 31, 2004, can be calculated as follows:Book value on December 31, 2004 = Cost - Accumulated depreciationBook value on December 31, 2004 = $29,000 - ($2,600 x 2)Book value on December 31, 2004 = $23,800Therefore, the book value of the equipment under the accrual basis on December 31, 2004 is $23,800.
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does the value of cleaning your house count toward the value of gdp?
The value of cleaning your own house does not count toward the value of GDP (Gross Domestic Product).
GDP is a measure of the total value of goods and services produced within a country's borders during a specific period of time. In order to be included in GDP, an economic activity needs to involve a market transaction, where goods or services are exchanged for money. Cleaning your own house does not involve a market transaction, as you are not paying someone else for the service. Therefore, it is not considered a part of GDP. However, if you were to hire a cleaning service and pay them for their services, that would be included in GDP as it involves a market transaction.
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An analysis of external factors usually begins with
A) Employees
B) Competitors
C) Customers
D) All of the above
E) None of the above
An analysis of external factors usually begins with Competitors. Analysis of the external environment is a significant element of strategic management, and it includes various models to analyze the environment of a business to make a better strategic decision.
The external environment is divided into two primary categories: macro-environment and micro-environment.The external environment is unpredictable and unstable; thus, managers must be aware of the external factors that can affect the organization's performance. Companies cannot control the external environment; they can only adapt to it by considering the external factors that can have an impact on the business.Most business experts believe that competitor analysis is the most critical aspect of external environmental analysis.
Competitor analysis involves identifying the company's primary and secondary competitors. This will help the business to know the market conditions, the prices that customers are willing to pay for goods or services, the quality of products, and services that consumers expect in the market. As a result, a company can determine whether the business's products or services are competitive enough to withstand market competition. Therefore, the analysis of external factors usually begins with competitors.
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consider a perfectly competitive market that was in a long-run equilibrium when a permanent increase in demand occurs. which of the following will occur as a result? i. the existing firms will start to earn an economic profit. ii. new firms will be motivated to enter the market. iii. some firms that cannot meet the new demand will exit the market. group of answer choices ii and iii only iii only i and ii only i and iii i, ii and iii
The firms do not have enough resources or knowledge to meet the new demand. Therefore, the correct answer is (ii) and (iii) only.
In a perfectly competitive market, there is no market power; therefore, no individual firm has the power to influence the price of the product or service it sells. Furthermore, in a long-run equilibrium, all firms earn zero economic profits since firms can quickly and easily enter the market if they observe positive profits.This means that when demand rises, the equilibrium price rises as well since there is more demand for the product or service, and the quantity sold increases. Because of this, some of the existing firms will start to earn economic profit. Also, the increase in demand motivates new firms to enter the market because they will see that existing firms are earning an economic profit. This entrance of new firms will increase the supply of the product, causing the price to decrease.Firms that are not capable of meeting the new demand will exit the market. This could happen because the firms do not have enough resources or knowledge to meet the new demand. Therefore, the correct answer is (ii) and (iii) only.
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An analytical framework used in the analysis of strategic choices is: A. the tacit supply curve model. B. perfect competition. C. risk assessment. D. game theory.
Therefore, option D. Game theory is the analytical framework used in the analysis of strategic choices. An analytical framework used in the analysis of strategic choices is the game theory.
An analytical framework used in the analysis of strategic choices is the game theory.Game theory is an analytical framework that is used to analyze strategic choices. It is the study of how people make choices when they know that their outcomes depend on other people's choices.Game theory is used to study the strategies that people adopt when they are in situations of interdependence. It is used to analyze situations where the actions of one person affect the outcomes of other people and where the actions of other people affect one's own outcomes.Game theory provides a framework for analyzing strategic choices in situations of interdependence. It is used to study a wide range of situations, including business competition, international trade, and political conflict. Game theory can be used to study the behavior of firms in an industry, the behavior of countries in international trade negotiations, and the behavior of political parties in an election campaign.Therefore, option D. Game theory is the analytical framework used in the analysis of strategic choices.
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Your business has started using a new market research company that charges roughly 30% lower than the more established company you were using in the past. The research results appear to be markedly different from previous surveys. When questioned, the market research company tells you to not worry and suspects that they are probably "unintentional respondent errors" caused by "fieldworker errors." What control mechanisms should have been used by the market research company.
The market research company should have implemented several control mechanisms to ensure the accuracy and reliability of the research results.
Some of the key control mechanisms that should have been used are:
Training and Supervision of Fieldworkers: The market research company should have provided comprehensive training to its fieldworkers, ensuring they understand the research objectives, survey methodology, and proper techniques for data collection. Regular supervision and monitoring of fieldwork activities should have been in place to identify and address any potential errors or deviations from the research protocols.
Pilot Testing and Pretesting: Before conducting the actual surveys, the market research company should have conducted pilot tests or pretests to evaluate the survey instruments, identify potential issues or ambiguities in the questionnaire, and ensure that the questions are clear and relevant to the research objectives. This helps in minimizing respondent errors caused by poorly designed or confusing questions.
Data Validation and Quality Control Checks: The market research company should have implemented robust data validation procedures to identify and address data entry errors, inconsistencies, or outliers. Quality control checks, such as double data entry or data verification techniques, should have been performed to ensure the accuracy of the collected data.
Sampling Techniques: Proper sampling techniques should have been employed to ensure the selection of a representative sample. Random sampling, stratified sampling, or other appropriate sampling methods should have been used to minimize sampling bias and improve the generalizability of the results.
Data Analysis and Cross-Validation: The market research company should have conducted thorough data analysis, including cross-validation techniques, to ensure the reliability and consistency of the findings. Statistical tests or validation methods could have been employed to identify any potential discrepancies or anomalies in the data.
By implementing these control mechanisms, the market research company can enhance the accuracy and reliability of the research results, minimizing errors and deviations. It is important for businesses to work with market research companies that have stringent quality control measures in place to ensure the integrity of the data and the validity of the research findings.
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moves to improve a diversified company's overall performance do not include multiple choice retrenching to a narrower base of business operations. broadening the company's business scope by making new acquisitions in new industries. restructuring the company's business lineup and putting a whole new face on the company's business makeup. sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses. retaining weak-performing businesses in order to sustain a wide base of business operations.
Moves to improve a diversified company's overall performance do not include retrenching to a narrower base of business operations but rather sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses.
Step 1: Retrenching to a narrower base of business operations If a company reduces its operations to only a few areas of specialization, it may increase efficiency and reduce costs in the short term. However, it also puts the company at risk of losing out to more diversified competitors. As a result, retrenching to a narrower base of business operations is not a wise long-term strategy.
Step 2: Broadening the company's business scope by making new acquisitions in new industries acquiring companies in new industries can help a company expand its business operations, but it is not a guaranteed way to improve overall performance. Integration challenges, cultural differences, and changing market conditions can all present problems for the company.
Step 3: Restructuring the company's business lineup and putting a whole new face on the company's business makeup. This is an extreme step that is only necessary when a company is struggling to survive. In the majority of cases, it is better to stick with the existing business lineup and work to improve operations through innovation, increased efficiency, and a focus on growth opportunities.
Step 4: Sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses this is the most effective approach to improving a diversified company's overall performance. Rather than trying to reinvent the wheel, companies should focus on leveraging their existing strengths and identifying new growth opportunities within their existing operations. This approach can lead to increased efficiency, reduced costs, and improved profitability.
Step 5: Retaining weak-performing businesses in order to sustain a wide base of business operationsThis is not a good strategy for improving overall company performance. Weak-performing businesses can drag down the rest of the company, draining resources and reducing profitability. Instead of retaining weak-performing businesses, it is better to divest them and focus on the company's core strengths and growth opportunities.
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Stevenson Industries has compiled the following information for analysis.
May June
Number of Units 5,000 10,000
Variable costs $13,000 ??
Fixed costs $24,000 ??
Mixed costs $18,000 ??
Total costs $55,000 $73,000
Assuming that these activity levels are within the relevant range, the mixed costs for June were?
The mixed costs for June were $31,000, according to the provided information.
To determine the mixed costs for June, we need to calculate the difference in total costs between May and June and subtract the known variable and fixed costs for May. Total costs for May are given as $55,000, with variable costs of $13,000 and fixed costs of $24,000. Therefore, the mixed costs for May can be calculated by subtracting the known variable and fixed costs from the total costs: $55,000 - $13,000 - $24,000 = $18,000. To find the mixed costs for June, we use the same formula, but substitute the total costs and known variable and fixed costs for June: $73,000 - $13,000 - $24,000 = $36,000.
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Identify The Accounts Receivable Section For Starbucks. After Reviewing This Information, Explain How Accounts Receivable Can Impact Liquidity And Solvency Ratios. Additionally, You May Notice Some Companies Use Total Receivables Instead Of Net Receivables. Discuss How This Distinction Might Impact The Calculation And Liquidity Analysis. Provide An Example
Identify the accounts receivable section for Starbucks. After reviewing this information, explain how accounts receivable can impact liquidity and solvency ratios. Additionally, you may notice some companies use total receivables instead of net receivables. Discuss how this distinction might impact the calculation and liquidity analysis. Provide an example and describe how bad debt affects liquidity and solvency ratios.
Accounts Receivable:
The accounts receivable section represents the amounts owed to a company by its customers for goods or services that have been delivered but not yet paid for. It is typically reported as a current asset on the balance sheet.
Impact on Liquidity:
Accounts receivable can impact liquidity ratios, such as the current ratio and the quick ratio. The current ratio measures a company's ability to meet its short-term obligations, including accounts payable, by comparing current assets (including accounts receivable) to current liabilities. If accounts receivable are significant and take a long time to convert into cash, it may indicate a liquidity risk, as the company may face difficulty in meeting its short-term obligations.
The quick ratio is a more stringent measure of liquidity that excludes inventory and focuses on the most liquid current assets. If accounts receivable form a significant portion of a company's current assets, a high quick ratio may be an indication of a potential liquidity issue.
Impact on Solvency:
Accounts receivable can also impact solvency ratios, such as the debt-to-equity ratio. The debt-to-equity ratio measures the proportion of debt to equity used to finance a company's assets. If a company has a high level of accounts receivable relative to its equity, it may suggest that the company is relying heavily on credit sales, which can increase the risk of bad debts and impact its long-term solvency.
Total Receivables vs. Net Receivables:
Some companies may use total receivables, which includes the gross amount of all outstanding customer balances, while others use net receivables, which deducts an allowance for doubtful accounts or bad debts from the gross amount. The distinction between total and net receivables affects the calculation and liquidity analysis.
Calculating liquidity ratios using total receivables might overstate a company's ability to meet short-term obligations since it does not consider potential bad debts. On the other hand, using net receivables provides a more conservative measure of liquidity, reflecting the estimated amount the company is likely to collect.
Bad Debt's Impact on Liquidity and Solvency Ratios:
Bad debts, which represent the portion of accounts receivable that a company does not expect to collect, can have a significant impact on liquidity and solvency ratios. When bad debts increase, it reduces the value of accounts receivable, leading to a decrease in current assets and potentially lower liquidity ratios.
Furthermore, an increase in bad debts may indicate a higher credit risk associated with the company's customers, potentially impacting its ability to generate future revenue and meet long-term obligations. This can result in higher provisions for bad debts, affecting solvency ratios such as the debt-to-equity ratio.
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An import quota does which of the following?
Group of answer choices
Decreases the price of the imported good for the consumer
Increases the price of the domestic good for the consumer
Redistributes income from domestic producers to domestic consumers
Decreases the price received by foreign producers
An import quota refers to a restriction on the quantity of a product that can be imported into a country. An import quota affects the price of imported goods, the price of domestic goods, and the income distribution.
An import quota increases the price of the domestic good for the consumer.
Therefore, the correct option is to increase the price of the domestic good for the consumer.
Import quotas can be set in two different ways: a tariff-rate quota or an absolute quota.
A tariff-rate quota allows a set number of goods to be imported at a low tariff rate.
Once the quota has been reached, a higher tariff rate applies to additional goods.
This type of quota benefits domestic producers by allowing them to sell at higher prices than they would otherwise.
Absolute quotas set a limit on the quantity of a product that can be imported into the country, regardless of price.
This results in higher domestic prices because the demand for the product is greater than the supply.
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1. Write about whether or not a worker owned enterprise would need as many managers to monitor employees and what effect this would have on costs and competitiveness in the marketplace.
2.Write about some of the deleterious effects of modern corporations such as pollution, worker degradation, income inequality, etc., and analyze whether or not worker ownership would solve, worsen, or leave unchanged any of the problems that are associated with traditional workplaces.
In a worker-owned enterprise, there would likely be less of a need for as many managers to monitor employees as workers would have more of a say in the decision-making process.
This would likely lead to a more egalitarian and democratic workplace where workers have a greater sense of ownership and responsibility. With fewer managers, the enterprise would save money on salaries and administrative costs, which could lead to greater competitiveness in the marketplace. Additionally, workers who are more invested in the success of the enterprise may be more motivated and productive.
Modern corporations have been associated with a number of deleterious effects, including pollution, worker degradation, income inequality, and others. Worker ownership has been suggested as a solution to these problems. Some argue that worker ownership would solve or mitigate many of the problems associated with traditional workplaces.
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Biogen, is a biotechnology company. The sales of its newly released Alzheimer's drug (Aduhelm) has rapidly increased to USD 900 milion, while its total production and marketing costs are USD 200 million. Biogen's multiple sclerosis drug (Tecfidera) is facing strong competition from competitors generic drugs, which caused its sales to drop slightly What product life cycle stages are these bo drug 1 points Spr in? O a. Aduhelm is in introduction stage and Tecfidera in mature stage O b. Aduhelm is in product development stage and Tecfidera in mature stage c. Both Aduhelm and Tecfidera are in mature stage O d. Aduhelm is in growth stage and Tecfidera in mature stage Question REN
Biogen is a biotechnology company that has released two major drugs, Alzheimer's drug (Aduhelm) and multiple sclerosis drug (Tecfidera).
Aduhelm, the newly released Alzheimer's drug has been popular with sales that rapidly increased to USD 900 million, while its total production and marketing costs are USD 200 million. Tecfidera, Biogen's multiple sclerosis drug, has been facing strong competition from generic drugs of its competitors, which caused its sales to drop slightly.
Product life cycle stages are a series of stages that a product passes through from the time it is introduced into the market to its eventual withdrawal from the market. The different product life cycle stages are Introduction, Growth, Maturity, and Decline.In this case, Aduhelm, the newly released Alzheimer's drug is in the introduction stage of its life cycle since it was recently introduced into the market.
On the other hand, Tecfidera, Biogen's multiple sclerosis drug is in the maturity stage of its life cycle as it has been in the market for quite a long time now and is facing stiff competition from other generic drugs. Therefore, option A: Aduhelm is in the introduction stage and Tecfidera in the mature stage is the correct answer.
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Which of the following is not a "supply option" for sales & operations planning? A. Subcontracting. B. Using part-time workers. C. Adjusting pricing. D. Having workers work overtime.
Sales and Operations Planning (S&OP) is an integrated business management process that enables companies to align demand and supply across their organization, from the customer to the supplier.
It provides a continuous link between sales and operations planning in which the supply options are evaluated to determine the best course of action.Supply options for sales and operations planningSales and operations planning offers various supply options for managing the supply chain efficiently.
The supply options are:Produce or assemble goods in-house.Subcontract the production or assembly process to a third-party supplier.Use part-time employees to increase production.Adjust pricing to manipulate demand.Have employees work overtime to increase production.
Produce or assemble goods in-houseIn-house production or assembly involves manufacturing or assembling goods in the company's facility. This option is suitable when demand is consistent throughout the year and when the company has the required expertise and resources.
SubcontractingSubcontracting is when a third-party supplier is hired to produce or assemble goods for the company. It is suitable when demand is high, or when the company lacks the resources to manufacture the goods in-house.Part-time workersUsing part-time workers is an effective supply option when demand is variable.
Part-time workers can help to increase production during peak periods and can be released when the demand decreases.Adjusting pricingAdjusting pricing is used to manipulate demand by making the product more or less attractive to the customer. This option is suitable when demand is sensitive to price.Having workers work overtimeHaving workers work overtime is used to increase production in response to a sudden increase in demand.
It is suitable when demand is unpredictable and when production cannot be increased by using part-time employees.AnswerThe supply option that is not suitable for sales and operations planning is C. Adjusting pricing. This option is not a supply option, but a demand option. It is used to manipulate demand, not the supply chain.
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II. Like 'old' Classicals (A. Smith, ...), new Classicals believe in self- regulating nature of markets. To what extent does the views of new Classicals differ from those of 'old' Classicals in terms of economic policy making and the functioning of the markets? (14p.)
The "new" classical school of thought developed as a reaction to the Keynesian model. According to the new classical economists,
markets automatically generate full employment and can regulate themselves with no intervention from the government. Furthermore, they believe that the economy is self-correcting and that any short-run economic fluctuations are due to external shocks or market adjustments and are therefore temporary. Hence, they advocate for a laissez-faire approach and believe that government intervention in the economy causes inefficiencies and creates more harm than good. The new classical school's ideas are quite similar to the old classical school's perspective. Nonetheless, the new classical school emphasizes the importance of market clearing, while the old classical school did not. The new classical school suggests that markets will clear, even in the short run, and that supply and demand will match, regardless of price and wage rigidities.
Furthermore, new classical economists believe that individuals are rational and act in their best interests. In the long run, this results in full employment, as well as demand and supply equilibrium. On the other hand, the old classical economists believed in the concept of Say's Law, which states that supply creates its own demand. They held that in the long run, the economy would always be in equilibrium and that government intervention would only distort the market and cause long-term damage. While the new classical and old classical schools of thought have many similarities, the former stresses the importance of market clearing and equilibrium, while the latter does not.
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Stock XYZ is currently trading at $150. One-year futures contract price on XYZ is $152. XYZ is scheduled to pay $3 cash dividends per share in one year and the annually compounded risk-free rate is 4% p.a. To exploit the arbitrage opportunity, an arbitrageur would
Select one alternative:
Short-sell XYZ, lend money, and buy futures
Buy XYZ, borrow money, and sell futures
Buy XYZ, lend money, and sell futures
To exploit the arbitrage opportunity in this scenario, an arbitrageur would engage in the following steps:
Short Selling: The arbitrageur would short sell the underlying stock XYZ. This involves borrowing and selling the stock at the current market price of $150, with the intention of buying it back later at a lower price to repay the borrowed shares.
Buy Futures Contract: The arbitrageur would buy the one-year futures contract on XYZ at the price of $152. This contract obligates them to buy the stock at $152 at the contract's expiration.
Collect Dividends: Since XYZ is scheduled to pay a cash dividend of $3 per share in one year, the arbitrageur would collect this dividend. However, it is important to note that the dividend amount will be received only if the arbitrageur owns the stock at the dividend's ex-dividend date.
Investment of Proceeds: The arbitrageur would invest the proceeds from short selling the stock and collecting the dividend in a risk-free investment. The risk-free rate of 4% per annum can be used for this purpose.
Repurchase Stock and Close Futures Position: Towards the expiration of the futures contract, the arbitrageur would buy back the stock in the market at a price lower than the initial short sale price. The arbitrageur would then close the futures position by selling the futures contract.
Arbitrage Profit: The arbitrageur would make a profit from the price difference between the initial short sale and the subsequent repurchase of the stock. Additionally, the dividends collected and the returns from the risk-free investment would contribute to the overall profit.
By executing these steps, the arbitrageur can exploit the price discrepancy between the current stock price, the futures contract price, and the expected dividend payment, aiming to generate riskless profit from the arbitrage opportunity.
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