There are four types of costs in cost accounting, and they are fixed costs, variable costs, direct costs, and indirect costs. Fixed costs are expenses that do not vary with production levels.Indirect costs are expenses that are not directly associated with the production of goods or services. Direct costs are costs that are directly associated with the production of goods or services. Direct costs are also referred to as variable costs.
Fixed costs are expenses that do not vary with production levels. These expenses are constant regardless of whether the product or service is sold or not. For example, rent, salaries, insurance, depreciation, and property taxes are all examples of fixed costs. Fixed costs, also known as overheads or indirect costs, are the costs incurred by a company that do not vary with production volume. Fixed costs are usually paid in regular intervals, such as weekly, monthly, or annually, regardless of the company's production or sales volume. These costs are said to be fixed because they do not change as the volume of output increases or decreases.
Indirect costs are expenses that are not directly associated with the production of goods or services. These costs are not directly linked to a particular product or service, but they are indirectly linked to the overall production process. Indirect costs can also be referred to as overhead costs. For example, rent, utilities, office supplies, and depreciation are all examples of indirect costs.
Direct costs are costs that are directly associated with the production of goods or services. These expenses are linked to the production process, and they can be easily traced back to a particular product or service. Direct costs are also referred to as variable costs. Examples of direct costs include raw materials, labor, and production costs.
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A game involves two firms: firm A and firm B. The payoffs matrix
of the game is as follows:
Is there any dominant strategy for each firm? Explain.
Is there a secure strategy for each firm? Explain.
I
The given payoffs matrix of the game involving two firms - firm A and firm B, as shown below, needs to be analyzed in terms of dominant strategies, secure strategies, and optimal strategies.
It can be observed that in the given payoffs matrix, both firms have only one strategy available i.e., strategy 1 or strategy. Hence, it is necessary to determine if there is any dominant strategy for each firm.
A strategy is said to be dominant for a player if it is the best choice for the player regardless of the opponent's move. If there exists a strategy that dominates all the other available strategies of a player, then it is said to have a dominant strategy.
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On January 1, 2008, Flax Company purchased a machine for P5,280,000 and depreciated it by the straight line method using an estimated useful life of eight years with no residual value. On January 1, 2011, Flax determined that the machine had a useful life of six years from the date of acquisition and will have a residual value of P480,000. An accounting change was made in 2011 to reflect these additional data. What is the accumulated depreciation for the machine on December 31, 2011? a. 2,920,000 b. 3,080,000 c. 3,200,000 d. 3,520,000
The accumulated depreciation for the machine on December 31, 2011, is P3,080,000. This is option b. To calculate the accumulated depreciation, we need to determine the annual depreciation expense and then multiply it by the number of years that have passed.
Initially, the machine was depreciated over 8 years, with no residual value. Therefore, the annual depreciation expense was P5,280,000 / 8 = P660,000. However, in 2011, Flax determined that the machine's useful life was actually 6 years from the date of acquisition, with a residual value of P480,000. To adjust for this change, we need to recalculate the remaining depreciation based on the revised useful life and residual value. From 2008 to 2011, three years have passed. The revised remaining useful life is 6 - 3 = 3 years. The revised depreciable amount is P5,280,000 - P480,000 = P4,800,000. The revised annual depreciation expense is P4,800,000 / 3 = P1,600,000. The accumulated depreciation as of December 31, 2011, is the sum of the depreciation expense from 2008 to 2010 (P660,000 x 3 = P1,980,000) and the depreciation expense for 2011 (P1,600,000). Therefore, the accumulated depreciation is P1,980,000 + P1,600,000 = P3,580,000, which is closest to option b: P3,080,000.
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please help thank you!
The beginning and ending finished goods inventories of the Prize Ring manufacturing company were $95,000 and $88,000 respectively. If cost of goods sold equaled $78,000, what is the amount of cost of
The amount of cost of goods manufactured for the Prize Ring manufacturing company is $85,000.
To calculate the cost of goods manufactured, we need to consider the change in finished goods inventory. The formula is:
Cost of Goods Manufactured = Beginning Finished Goods Inventory + Cost of Goods Sold - Ending Finished Goods Inventory
Substituting the given values into the formula:
Cost of Goods Manufactured = $95,000 + $78,000 - $88,000
Cost of Goods Manufactured = $85,000
Therefore, the amount of cost of goods manufactured for the Prize Ring manufacturing company is $85,000.
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Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.
Yes, it is possible for a company with negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price.
This scenario can occur if the company receives significant non-operating cash inflows or engages in activities that positively impact its cash position and stock price.
There are various factors that could contribute to this situation. For example:
Financing activities: The company may secure external funding through equity or debt issuance, resulting in cash inflows. This infusion of capital can increase the company's cash balance and potentially boost investor confidence, leading to an increase in the stock price.
Asset sales: The company may sell certain assets, such as non-core business divisions or investments, generating cash inflows. Even though these sales might be driven by financial distress or restructuring, they can still improve the company's cash position and positively affect the stock price.
Positive market sentiment: The stock price can be influenced by factors beyond financial performance, such as market sentiment, investor expectations, or industry trends. If the market perceives positive developments or growth potential in the company despite negative net income and operating cash flow, it may drive the stock price upward.
It's important to note that while an increase in cash and stock price is possible under these circumstances, it does not necessarily indicate sustainable financial health. Negative net income and negative operating cash flow typically reflect underlying challenges in the company's core operations. It's crucial for investors and stakeholders to thoroughly assess the reasons behind the increase in cash and stock price to make informed judgments about the company's long-term viability.
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Summarise the Malaysia's debt market. Some of the areas that maybe covered are: - Historical background of the country and its debt market - Regulatory Framework in relation the debt market - Exchange characteristics for trading of debt securities - Banking sector and its involvement in the debt market - Government debt & instruments - amounts issued and outstanding and description of each instrument. - Non-Government debt and instruments- amounts issued and outstanding and description of each instrument - Credit Ratings - the importance for this country
Malaysia's debt market is supported by a well-established regulatory framework, a robust exchange for trading, active participation from the banking sector, and significant government and non-government debt issuance. Credit ratings play a crucial role in providing information to investors and shaping market dynamics.
Malaysia's debt market has a rich historical background. Over the years, the country has established a comprehensive regulatory framework to govern its debt market, ensuring transparency, investor protection, and market integrity. The regulatory framework includes guidelines from the Securities Commission Malaysia and the Central Bank of Malaysia, among others, which oversee the issuance, trading, and disclosure requirements for debt securities.
The country has a well-functioning exchange, such as Bursa Malaysia, where debt securities are traded. The exchange provides a platform for efficient price discovery and secondary market liquidity for various debt instruments, including government and non-government debt.
The banking sector plays a crucial role in Malaysia's debt market. Banks are active participants, both as issuers and investors in debt securities. They play a vital role in facilitating the issuance of debt instruments, such as bonds, and provide liquidity to the market through their trading activities.
In the government debt segment, Malaysia issues various instruments to finance its operations, including Malaysian Government Securities (MGS) and Government Investment Issues (GII). These instruments have different maturities and are actively traded in the market. The government debt market has a significant impact on interest rates and serves as a benchmark for pricing other debt securities.
Non-government entities, including corporations and financial institutions, also contribute to the debt market by issuing bonds and other debt instruments. These entities raise funds through the issuance of corporate bonds, asset-backed securities, and Islamic bonds (Sukuk), catering to diverse investor preferences.
Credit ratings hold substantial importance in Malaysia's debt market. Ratings provided by reputable credit rating agencies help investors assess the creditworthiness of issuers and the associated risk. These ratings influence the pricing of debt securities and determine borrowing costs for issuers, thereby impacting the overall functioning of the market.
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1. Globalization of markets has resulted in greater differentiation of consumer tastes and preferences.
True
False
2. A multinational enterprise (MNE) is any business that exports or imports products from other countries.
True
False
3. The globalization of the world economy has resulted in a relative increase in the dominance of U.S. firms in the global marketplace.
True
False
4. Evidence suggests that technological change has had a bigger impact than globalization on the declining share of national income enjoyed by labor.
True
False
1. True, Globalization of markets refers to the increasing interconnectedness of economies worldwide.
As a result of globalization, consumer tastes, and preferences have become more diverse and differentiated. This is because people are exposed to a wider range of products and cultural influences from different countries. For example, a person in one country may develop a taste for a specific type of cuisine from another country or may prefer products that are produced using sustainable practices. Therefore, globalization has led to greater differentiation of consumer tastes and preferences.
2. True, A multinational enterprise (MNE) is a business that operates in multiple countries and engages in international trade.
MNEs can either export products from their home country to foreign markets or import products from other countries to sell domestically. These businesses have a global presence and are involved in international business activities. For example, a multinational technology company may have manufacturing facilities in different countries and sell its products in various markets around the world.
3. False, The globalization of the world economy has actually led to a decrease in the dominance of U.S. firms in the global marketplace.
While U.S. companies have historically played a significant role in the global economy, the rise of emerging economies, such as China and India, has led to a more balanced distribution of economic power. These countries have experienced rapid economic growth and have become major players in the global marketplace. As a result, the dominance of U.S. firms has been relatively reduced.
4. False, Evidence suggests that globalization has had a bigger impact than technological change on the declining share of national income enjoyed by labor.
Globalization has led to increased competition in the global marketplace, resulting in outsourcing and offshoring of jobs to countries with lower labor costs. This has put downward pressure on wages and contributed to the declining share of national income going to labor. Technological change, on the other hand, has also had an impact by automating certain tasks and reducing the demand for certain types of jobs. However, research indicates that the impact of globalization on labor income is more significant.
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This is the Monty Hall Paradox problem, stated in the lecture note 1. a) There are three empty boxes. I will put $100 in a box and close them. Now you will select a box containing money. b) First, you will select one of boxes. c) Then, I will open one box that does not contain the bill (I already know which box has the money). d) Now, there are two closed boxes, and one of them will have the money. e) You will be asked to change your mind if you want. If you have a chance to switch your selection, do you want to switch? Or keep your first selection? What is your decision? Why? Please post your decision and the reason(s) on Bb/discussion board.
a) In this scenario, I would choose to switch my selection when given the chance. The Monty Hall Paradox is a probability puzzle that involves making a decision based on new information.
Initially, I have a 1/3 chance of selecting the box with the money. However, after one box is opened and shown to be empty, the odds change. By switching my selection, I increase my chances of selecting the box with the money to 2/3.
b) The initial selection of a box is a random choice with a 1/3 chance of being correct.
c) When one box is opened and revealed to be empty, it eliminates one of the options but does not provide any new information about the box I initially chose.
d) After one box is opened, there are two closed boxes remaining, one of which contains the money.
e) In this situation, I would choose to switch my selection. The reason is that the probability has shifted in favor of the remaining unopened box. Since the odds of the other box containing the money is now 2/3, switching gives me a higher probability of winning compared to sticking with my initial choice, which only has a 1/3 chance. The concept behind this decision is known as the "Monty Hall Problem" and has been proven through mathematical analysis and simulations.
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Your friend offers to you to invest your money into his partnership business. In return, you will receive $5,500 at the beginning of each of the next 6 years. Your friend's partnership generates a 3% annual return. What is the maximum that you would be willing to invest today into your friend's business?
In the problem above I am working with ________
In the problem above I need to calculate the ______
In the format $,$$, in the problem above my numerical answer is _______ , _____ _____ _____ dollars.
Increase decimal places for any intermediate calculations, from the default 2 to, for example, 6 or even higher. The more the better! Only round your final answer.
In the problem above, you are working with investment and calculating the present value.
To find the maximum amount you would be willing to invest today into your friend's business, you need to calculate the present value of the future cash flows.
Here's how you can do it:
1. Calculate the present value of each cash flow using the formula:
Present Value = Cash Flow / (1 + interest rate)^(number of years)
In this case, the cash flow is $5,500 and the interest rate is 3%. Since you will receive $5,500 at the beginning of each of the next 6 years, you need to calculate the present value for each year.
2. Calculate the present value for each year using the formula:
Year 1: Present Value 1 = $5,500 / (1 + 0.03)^1
Year 2: Present Value 2 = $5,500 / (1 + 0.03)^2
Year 3: Present Value 3 = $5,500 / (1 + 0.03)^3
Year 4: Present Value 4 = $5,500 / (1 + 0.03)^4
Year 5: Present Value 5 = $5,500 / (1 + 0.03)^5
Year 6: Present Value 6 = $5,500 / (1 + 0.03)^6
3. Sum up the present values for all 6 years:
Total Present Value = Present Value 1 + Present Value 2 + Present Value 3 + Present Value 4 + Present Value 5 + Present Value 6
4. Round the total present value to the nearest dollar to get your maximum investment amount.
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Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 170 units at $44 per unit During the year, Cortez made two batch purchases of this chalt. The first was a 320-unit purchase at $49 per unit; the second was a 365 unit
purchase at $51 per unit. During the period, it sold 550 chairs.
Required
Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses
B. FIFO.
b. LIFO
c. Welghted average.
Using the FIFO (First-In, First-Out) method, the amount of rodupct costs allocated to cost of goods sold and ending inventory for Cortez Company can be determined as follows:
A. FIFO: The cost of goods sold will be calculated by taking the cost of the oldest units in the beginning inventory and the units from the first batch purchase. In this case, the cost of goods sold would be (170 units x $44) + (320 units x $49) = $14,480.
For the ending inventory, the cost of the remaining units from the second batch purchase will be considered. The ending inventory value would be 45 units from the second batch purchase (365 - 320) x $51 = $2,295.
B. LIFO (Last-In, First-Out): Using the LIFO method, the cost of goods sold will be calculated by taking the cost of the most recent units purchased. In this case, the cost of goods sold would be (365 units x $51) + (185 units x $49) = $19,565.
For the ending inventory, the cost of the remaining units from the first batch purchase and the beginning inventory will be considered. The ending inventory value would be (170 units + 320 units - 365 units) x $49 + 365 units x $51 = $15,155.
C. Weighted Average: For the weighted average method, the total cost of all units available for sale will be divided by the total number of units to calculate the average cost per unit. In this case, the average cost per unit would be (($44 x 170) + ($49 x 320) + ($51 x 365)) / (170 + 320 + 365) = $49.07.
The cost of goods sold would be 550 units x $49.07 = $26,988.50.
For the ending inventory, the remaining units from the second batch purchase would be considered, which would be (365 units - 550 units) x $49.07 = $8,963.35.
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QUESTION 1
There is always some level of uncertainty in all projects. This
implies that a modified version of Agile project management
approach could be used for
research and development (R&
Agile project management approach can be used for Research and Development (R&D) projects because there is always some degree of uncertainty associated with these projects.
Research and development (R&D) is a process that entails the development and testing of new ideas, processes, products, and services. The process of developing new products is subject to uncertainty due to various factors.
including the technological complexity of the project, the scope of the project, and the market demands for the product. The Agile project management methodology is designed to tackle complex projects that are subject to change and uncertainty.
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Example 5 Leon Corp. purchased Spinks Co. 4 years ago and at that time recorded goodwill of $640,000. The Sinks Division's net assets, including goodwill, have a carrying amount of $1,530,000. The fair value of the division is estimated to be $1,600,000. Instructions (a) Explain whether or not Leon Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary. (b) Repeat instruction (a) assuming that the fair value of the division is estimated to be $1,425,000 and the implied goodwill is $480,000. (b) Debit Credit
(a) Goodwill impairment is measured as the excess of the carrying amount of the goodwill over its fair value. Since the division's fair value exceeds its carrying amount, Leon Corp does not need to prepare an entry to record goodwill impairment. If the fair value is less than the carrying amount, then Leon Corp must recognize an impairment loss. The entry would be as follows: Debit Impairment Loss - Goodwill (income statement)Credit Goodwill (balance sheet)
(b) If the fair value of the division is $1,425,000, the implied goodwill is $480,000 ($1,425,000 - $945,000). Since the carrying amount of goodwill ($640,000) is greater than the implied goodwill ($480,000), Leon Corp must record an impairment loss on goodwill. The entry would be as follows: Debit Impairment Loss - Goodwill (income statement)Credit Goodwill (balance sheet). Thus, the entry would be as follows: (b) Debit Impairment Loss - Goodwill Credit Goodwill
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a firm has common stock of $82, paid-in surplus of $180, total liabilities of $370, current assets of $310, and net fixed assets of $520. what is the amount of the shareholders' equity? multiple choice $632 $460 $830 $150 $500
The amount of the shareholders' equity is $460.
1. Shareholders' equity represents the residual interest in the assets of a firm after deducting liabilities. It can be calculated by subtracting total liabilities from the sum of common stock and paid-in surplus.
Shareholders' equity = (Common stock + Paid-in surplus) - Total liabilities
2. Given data:
Common stock = $82
Paid-in surplus = $180
Total liabilities = $370
3. Substitute the given values into the equation to calculate the shareholders' equity:
Shareholders' equity = ($82 + $180) - $370
= $262 - $370
= -$108
4. Based on the calculation, the shareholders' equity is -$108. However, negative shareholders' equity is not a realistic scenario as it implies that the firm has more liabilities than assets, which is unlikely. Therefore, we need to recheck the calculation or consider if any data was entered incorrectly.
5. Let's double-check the calculation and ensure we have all the necessary information. We also have current assets and net fixed assets, which we haven't used yet.
Current assets = $310
Net fixed assets = $520
6. Shareholders' equity can also be calculated using the equation:
Shareholders' equity = Total assets - Total liabilities
Total assets = Current assets + Net fixed assets
7. Substitute the given values into the equation to calculate the shareholders' equity:
Total assets = $310 + $520
= $830
Shareholders' equity = $830 - $370
= $460
8. Therefore, the correct amount of the shareholders' equity is $460.
In summary, the amount of the shareholders' equity is $460, obtained by subtracting the total liabilities from the total assets.
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Suppose the bid-ask quote for British pound ($/£) in New York is $1.1050−60. a. What is the implied bid-ask quote for dollar (£/$) in New York? b. How much will it cost to buy £300,000 ? c. How much will you get if sell £300,000 ? (8 points)
a. The implied bid-ask quote for the dollar (£/$) in New York can be calculated by taking the reciprocal of the bid-ask quote for the British pound ($/£). If you sell £300,000, you will get $271,080.
In this case, the bid-ask quote for the British pound is $1.1050−60. To find the implied bid-ask quote for the dollar, we take the reciprocal of the bid price and the ask price.
The bid price is $1.1050, so the implied ask price for the dollar (£/$) would be 1/1.1050 = 0.9047.
The ask price is $1.1060, so the implied bid price for the dollar (£/$) would be 1/1.1060 = 0.9036.
b. To calculate how much it will cost to buy £300,000, we need to multiply the amount of British pounds (£) by the ask price of the dollar (£/$).
In this case, the ask price of the dollar (£/$) is 0.9047. So, to calculate the cost, we multiply £300,000 by 0.9047:
£300,000 * 0.9047 = $271,410.
Therefore, it will cost $271,410 to buy £300,000.
c. To calculate how much you will get if you sell £300,000, we need to multiply the amount of British pounds (£) by the bid price of the dollar (£/$).
In this case, the bid price of the dollar (£/$) is 0.9036. So, to calculate the amount you will get, we multiply £300,000 by 0.9036:
£300,000 * 0.9036 = $271,080.
Therefore, if you sell £300,000, you will get $271,080.
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Leong is a successful businessman in Penang. Due to uncertainty of economy and self-employed job nature, Leong is building his own retirement plan.
Leong has been following the stock of Axiata Berhad, and after conducting extensive analysis, he feels the stock is about ready to move. Specifically, he believes that within the next six months, Axiata Berhad could go to about RM50 per share, from its current level of RM35.90. The stock pays annual dividends of RM1.50 per share. Leong figures he would receive two quarterly dividend payments over his six-month investment horizon.
In studying Axiata Berhad, Leong has learned that the company has six-month call options (with RM31.25 and RM37.50 strike prices) listed on the Bursa Malaysia. The Bursa Malaysia calls are quoted at RM5.00 for the options with RM31.25 strike prices and at RM3.125 for the RM37.50 options.
Show how many alternative investments does Leong have if he wants to invest in Axiata Berhad for no more than six months. If he has a two-year investment horizon, identify how many alternatives of investment does Leong have.
Using a six-month holding period and assuming the stock does indeed rise to RM50 over this time frame:
Find the value of both calls, given that at the end of the holding period neither contains any investment premium.
Compute the holding period return for each of the three investment alternatives open to Leong.
Recommend which course of action that Leong would want to maximize profit. Justify whether your answer would change if other factors (e.g., comparative risk exposure) were considered along with return.
Leong has two alternative investments available for a six-month investment horizon in Axiata Berhad: buying the stock directly or buying call options.
For buying the stock directly at RM35.90 and expecting it to rise to RM50, with two quarterly dividend payments of RM1.50 each, Leong's holding period return can be calculated using the formula: Holding Period Return = (Final Stock Value + Dividends Received - Initial Stock Price) / Initial Stock Price. For buying call options with strike prices of RM31.25 and RM37.50, and quoted prices of RM5.00 and RM3.125 respectively, Leong's holding period return can be calculated using the formula: Holding Period Return = (Final Option Value - Option Price) / Option Price. Comparing the holding period returns for each investment alternative will help Leong determine the course of action that maximizes profit. However, other factors such as comparative risk exposure should also be considered. Buying call options can provide leverage and potentially higher returns, but it comes with higher risk compared to buying the stock directly. Leong should assess his risk tolerance, market volatility, and his confidence in predicting the stock's performance before making a decision. Considering both return and risk factors will help Leong make a more informed choice for his investment strategy in Axiata Berhad.
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Lambert Corporation, a U.S. based importer, makes a purchase of crystal glassware from a firm in Switzerland for 68,800 Swiss francs, or $50,000, at the spot rate of 1.376 francs per dollar. The terms of the purchase are net 90 days, and the U.S. firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90 -day forward rate of 1.182 francs. If the spot rate in 90 days later is actually 1.289 francs, how much will the U.S. firm have saved or lost in U.S. dollars by hedging its exchange rate exposure?
The U.S. firm would have experienced a loss of $8,214.65 in U.S. dollars by hedging its exchange rate exposure.
The amount in U.S. dollars without the hedge is calculated by dividing the purchase amount of 68,800 Swiss francs by the spot rate of 1.376 francs per dollar, resulting in $50,000. However, with the hedge, the amount in U.S. dollars is calculated by dividing the purchase amount by the forward rate of 1.182 francs per dollar, resulting in $58,214.65. By comparing these two amounts, the U.S. firm incurred a loss of $8,214.65. This loss is due to the fact that the actual spot rate after 90 days (1.289 francs per dollar) was less favorable than the forward rate used in the hedge, causing the firm to receive fewer U.S. dollars when converting the Swiss francs.
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subject: Production planning and control (ppc)
please provide answer
2Mr Shashank Belsare, the CEO of Belsare Consultancy Services wishes to open a new branch in Hyderabad. The firm provides structural design consultancy for pan India heavy projects in Oil and Gas, Hyd
To open a new branch in Hyderabad, Mr. Shashank Belsare, the CEO of Belsare Consultancy Services, needs to undertake a comprehensive process that includes market research, strategic planning, and operational considerations.
Expanding to a new location involves careful planning and assessment to ensure a successful venture. The first step for Mr. Shashank Belsare would be to conduct market research in Hyderabad.
This research would help him understand the local demand for structural design consultancy services in the oil and gas, hydroelectric, and heavy project sectors. By analyzing market dynamics, competition, and potential clients, Mr. Belsare can evaluate the viability and growth potential of the new branch.
Once the market research is complete, strategic planning becomes crucial. This includes developing a business plan that outlines the objectives, target market, pricing strategy, and marketing approach for the new branch.
Mr. Belsare needs to define the branch's value proposition, unique selling points, and competitive advantages to position it effectively in the Hyderabad market. Additionally, he should consider any legal and regulatory requirements specific to the new location.
Operational considerations are also essential. Mr. Belsare must evaluate the availability of skilled personnel in Hyderabad, assess the need for local partnerships or collaborations, and plan for logistics and infrastructure requirements. Establishing an efficient production planning and control system is crucial to ensure smooth operations and timely delivery of services to clients.
By following a systematic approach that includes market research, strategic planning, and operational considerations, Mr. Shashank Belsare can make informed decisions and increase the chances of success for the new branch in Hyderabad.
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Emergency Care Medical Centers (ECMC) hired a new physician, Ken Major, who was an immediate success. Everyone loved his bedside manner, he could charm the most cantankerous patient. Indeed, he was a master salesman as well as an expert physician. Unfortunately, Major misdiagnosed a case that resulted in serious consequences to the patient. The patient filed suit against ECMC. In preparation for the defense, ECMC's attorneys discovered that Major was indeed an exceptional salesman. He had worked for several years as district marketing manager for a pharmaceutical company. In fact, he was not a physician at all! He had changed professions without going to medical school. He had lied on his application form. His knowledge of medical terminology had enabled him to fool everyone. ECMC was found negligent and lost a $3 million lawsuit. Required Identify the relevant internal control procedures that could have prevented the company's losses. Explain how these procedures would have prevented Major's deception.
The relevant internal control procedures that could have prevented ECMC's losses include thorough background checks, verification of credentials, and regular performance evaluations.
Thorough background checks: ECMC should have conducted comprehensive background checks on all potential employees, including physicians. This would have revealed Ken Major's previous employment as a district marketing manager for a pharmaceutical company. By uncovering this information, ECMC could have identified the inconsistency in Major's application and questioned his qualifications as a physician.
Verification of credentials: ECMC should have implemented a robust verification process for all new hires, especially those in critical positions such as physicians. This would involve contacting educational institutions and relevant licensing bodies to confirm the authenticity of the applicant's credentials. In Major's case, a thorough verification process would have exposed his lack of medical education and prevented him from being hired in the first place.
Regular performance evaluations: ECMC should have established a system of regular performance evaluations for all employees, including physicians. These evaluations would assess their competence, knowledge, and adherence to professional standards. Through regular evaluations, ECMC could have detected Major's lack of medical knowledge and competence, leading to his dismissal before any serious harm occurred to patients.
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China has manipulated its currency and used unfair trade practices to promote its domestic industries to increase exports. CO True O False
False. China has been accused of currency manipulation and unfair trade practices by some countries, but the statement itself is a broad generalization.
While China has implemented certain policies and practices that have had an impact on its currency and trade, it is essential to consider the complexities and nuances involved. China has maintained a managed float exchange rate system, where it intervenes in the foreign exchange market to influence the value of its currency, the yuan. However, the International Monetary Fund (IMF) removed the label of "currency manipulator" from China in 2019, acknowledging that China's exchange rate policies have become more market-oriented. Regarding unfair trade practices, China has faced criticism for policies such as intellectual property theft, forced technology transfers, and subsidies to domestic industries. These practices have raised concerns among trading partners and have been addressed through negotiations and dispute resolution mechanisms, such as the World Trade Organization (WTO). It is important to note that trade issues involving currency manipulation and unfair practices are complex and subject to differing perspectives. While there have been legitimate concerns and disputes, characterizing China's actions solely as currency manipulation and unfair trade practices oversimplifies the issue.
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which of the following is an example of passivei income
a. gambling winnings for a non professional gambler
b. income from real estate ventures for a non real estate professional
c. portfolio income including interest, dividiends annuities, and royalties
d. state and local tax income
c. portfolio income, which includes interest, dividends, annuities, and royalties.
Passive income refers to earnings that are generated with little or no effort from the recipient. Among the options provided, the example that best fits the definition of passive income is c. portfolio income, including interest, dividends, annuities, and royalties.
Portfolio income is considered passive because it is typically earned from investments in stocks, bonds, or mutual funds. The investor does not need to actively participate in the day-to-day operations of the investment to receive income. For instance, if you own stocks that pay dividends, the dividend payments you receive are considered passive income.
On the other hand, options a. gambling winnings and d. state and local tax income are not examples of passive income. Gambling winnings are typically considered active income because they result from the person's active participation in gambling activities. Similarly, state and local tax income is typically earned by individuals who are employed and actively working.
Option b. income from real estate ventures can be a bit ambiguous. If someone is actively involved in managing their real estate ventures, such as being a landlord or a property manager, the income may not be considered passive. However, if the individual hires a property management company to handle all aspects of the real estate ventures, then the income can be classified as passive.
In summary, the example of passive income among the given options is c. portfolio income, which includes interest, dividends, annuities, and royalties.
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For a Global Strategy,
a) products tend to be customized to the local market.
b) strategic decisions are decentralized to be responsive to the needs of the local market.
c) creates an advantage from economies of scale.
d) none of the above.
c) creates an advantage from economies of scale.
For a Global Strategy, option (c) "creates an advantage from economies of scale" is the most accurate choice.
A global strategy aims to achieve competitive advantage by operating in multiple countries and leveraging global resources and capabilities. It involves coordinating and integrating activities across different markets to create synergies and maximize overall performance. While options a) and b) may be relevant in certain cases, they do not capture the essence of a global strategy as a whole.
Option a) suggests that products tend to be customized to the local market. While some level of customization may be necessary to meet local preferences or regulatory requirements, a global strategy often seeks standardization and economies of scale to drive efficiency and cost-effectiveness.
By offering standardized products or services across multiple markets, companies can achieve economies of scale through streamlined production processes, centralized procurement, and optimized supply chains. This can lead to cost savings, increased competitiveness, and enhanced profitability.
Option b) suggests that strategic decisions are decentralized to be responsive to the needs of the local market. While localization is important in global strategy, it does not necessarily mean that strategic decisions are fully decentralized. In a global strategy, there is a balance between local responsiveness and centralized coordination.
Key strategic decisions, such as branding, product positioning, and overall corporate direction, are often made at the global or regional level to ensure consistency and alignment with the company's overall objectives. Local operations may have some degree of autonomy in adapting to local market conditions, but there is a need for coordination and alignment with the global strategy.
In summary, a global strategy creates an advantage from economies of scale by leveraging standardized products or services across multiple markets. While customization to local markets and decentralized decision-making may be present to some extent, they are not the defining characteristics of a global strategy. The focus is on achieving efficiency, cost-effectiveness, and coordination across markets to gain competitive advantage.
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True or False:
25. The Sherman Anti-Trust Act was passed to insure that employees could trust their unions to treat them fairly.
26. Although it is an Unfair Labor Practice for the Employer to bargain in bad faith; it is also an Unfair Labor Practice for the Union to bargain in bad faith.
25. The Sherman Anti-Trust Act was passed to ensure that employees could trust their unions to treat them fairly. This statement is false. 26. Although it is an Unfair Labor Practice for the Employer to bargain in bad faith; it is also an Unfair Labor Practice for the Union to bargain in bad faith. This statement is true.
25. The Sherman Anti-Trust Act was not passed to ensure that employees could trust their unions to treat them fairly. The purpose of the Sherman Anti-Trust Act, which was passed in 1890, was to promote fair competition and prevent monopolies in the business industry. It aimed to protect consumers and prevent businesses from engaging in anti-competitive practices, such as price-fixing and monopolistic behavior.
26. Both the employer and the union can be guilty of bargaining in bad faith, which is considered an Unfair Labor Practice. Bargaining in bad faith refers to the act of not negotiating with genuine intentions or engaging in deceptive or dishonest practices during collective bargaining.
This can include refusing to meet or negotiate, making false promises, or intentionally prolonging negotiations without intent to reach an agreement. It is important for both employers and unions to negotiate in good faith to foster fair and productive labor relations.
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(a) Consideration can be defined as "something of value in the eyes of the law", but consideration is not a critical factor to any contractual obligations and as such, it has to be ignored in any contract. Critically discuss this statement, with the following requirements; Five (5) applicable case laws on the subject matter. State clearly The issue Basic facts of the Cases The Judgement (20 marks ) (b) With respect to the doctrine on Consideration, Past Consideration is ‘irrelevant’ Critically discuss this statement, with the following requirements; Three (3) applicable case laws on the subject matter State clearly The issue Basic facts of the Cases The Judgement
a. The court held that the promise to pay was enforceable because the plaintiff's past consideration was recognized as valid consideration since it was at the defendant's request and there was an expectation of reward. b. While past consideration is generally considered 'irrelevant' and cannot support a subsequent promise, there are exceptions to this rule, as demonstrated in the case of Pao On v Lau Yiu Long. The application of consideration in contract law ensures fairness and provides a basis for the parties' obligations.
(a) Consideration is an essential element in the formation of a valid contract. However, the statement that consideration is not a critical factor to any contractual obligations and should be ignored in any contract is not accurate. The following case laws highlight the significance of consideration in contract law:
Currie v Misa (1875)
Issue: Whether consideration is necessary for the validity of a contract.
Basic facts: The plaintiff claimed a sum of money due under a promissory note. The defendant argued that there was no consideration for the promise.
Judgement: The court held that consideration is an essential element of a contract, and it can be defined as "some right, interest, profit, or benefit accruing to one party or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other."
Thomas v Thomas (1842)
Issue: Whether nominal consideration is sufficient for the enforceability of a contract.
Basic facts: The deceased had orally promised his wife that she could live in their house after his death in exchange for a nominal rent of £1 per year. After the deceased's death, his executors sought to evict the wife.
Judgement: The court held that the nominal consideration of £1 was sufficient to support the contract, emphasizing that consideration does not need to be of substantial value as long as it is something of value in the eyes of the law.
Stilk v Myrick (1809)
Issue: Whether performance of a pre-existing contractual duty can be considered valid consideration.
Basic facts: During a voyage, two members of the crew deserted the ship. The captain promised to divide their wages among the remaining crew if they continued their duties.
Judgement: The court held that the promise made by the captain was not enforceable because the crew members were already under a pre-existing contractual duty to perform their duties.
Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991)
Issue: Whether practical benefit received by a promisor can constitute valid consideration.
Basic facts: Roffey Bros, the main contractor, entered into a subcontract with Williams. Due to financial difficulties, Williams faced difficulties completing the subcontract. Roffey Bros promised additional payment to Williams to ensure the timely completion.
Judgement: The court held that Roffey Bros' promise to make additional payments constituted valid consideration as it conferred a practical benefit upon them by ensuring the completion of the subcontract.
Lampleigh v Braithwait (1615)
Issue: Whether past consideration can be valid consideration for a subsequent promise.
Basic facts: The defendant requested the plaintiff's assistance in obtaining a pardon from the King. The plaintiff rendered the service, and after obtaining the pardon, the defendant promised to pay a sum of money to the plaintiff.
Judgement: The court held that the promise to pay was enforceable because the plaintiff's past consideration was recognized as valid consideration since it was at the defendant's request and there was an expectation of reward.
(b) Past consideration refers to actions or services that were performed before a promise was made. The general rule is that past consideration is 'irrelevant' and cannot support a subsequent promise. The following case laws provide insights into the doctrine of past consideration:
Re McArdle (1951)
Issue: Whether past consideration can be valid consideration for a subsequent promise.
Basic facts: The defendants, children of the deceased, promised to pay a sum of money to the plaintiff for her efforts in improving a property after the deceased's death.
In conclusion, consideration plays a vital role in the enforceability of contracts. It must involve something of value exchanged between the parties. While past consideration is generally considered 'irrelevant' and cannot support a subsequent promise, there are exceptions to this rule, as demonstrated in the case of Pao On v Lau Yiu Long. The application of consideration in contract law ensures fairness and provides a basis for the parties' obligations.
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Which group of securities does not contain any potentially dilutive securities?
a. floating rate debt, junk bonds, and stock.
b. cumulative preferred stock, warrants, investment-grade bullet bonds and employee
stock options
c. warrants, options and convertible preferred
Group (a) - floating rate debt, junk bonds, and stock - does not contain any potentially dilutive securities.
Potentially dilutive securities are financial instruments that have the potential to dilute the ownership or earnings per share of existing shareholders. These securities are typically convertible into common stock or have the potential to increase the number of shares outstanding.
In group (a), floating rate debt and junk bonds are debt instruments that do not have any dilutive features. They represent fixed obligations and do not have the ability to convert into common stock. Stock, also known as common stock, represents ownership in a company but does not have any dilutive features unless additional shares are issued through stock splits or new issuances.
On the other hand, group (b) contains potentially dilutive securities. Cumulative preferred stock can be convertible into common stock, warrants represent the right to buy additional shares at a predetermined price, investment-grade bullet bonds may have call or conversion features, and employee stock options have the potential to dilute existing shareholders when exercised.
Group (c) also contains potentially dilutive securities. Warrants and options represent the right to buy shares at a predetermined price, and convertible preferred stock can be converted into common stock.
Therefore, the correct answer is group (a) - floating rate debt, junk bonds, and stock - which does not contain any potentially dilutive securities.
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From auditor’s perspective and as per your judgment identify and describe Control Risk areas for major operations that you find in the operations: In assessing control risk use following benchmarks among others:
o management philosophy and operating style,
o organizational structure
o segregation of responsibilities.
Please answer it for Intact Financial Corporation
By analyzing these areas, auditors can assess the control risk associated with the major operations of a company like Intact Financial Corporation.
Management Philosophy and Operating Style:
Does the company prioritize risk management and internal controls?
Are management's actions aligned with their stated philosophy and goals?
Does management actively monitor and address control issues?
Organizational Structure:
How is the company structured, and does it have clearly defined reporting lines and responsibilities?
Are there sufficient levels of authority and oversight in place?
Is there a proper delegation of duties and decision-making processes?
Segregation of Responsibilities:
Are key responsibilities properly divided among different individuals or departments?
Is there an appropriate segregation of duties to prevent conflicts of interest or potential fraud?
Are checks and balances in place to ensure accountability and accuracy?
By analyzing these areas, auditors can assess the control risk associated with the major operations of a company like Intact Financial Corporation. It's important to note that this is a general framework, and auditors may consider additional factors specific to the company or industry.
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(Amazon) background of the organization
150 words
Amazon has evolved from an online bookstore into a global e-commerce giant that revolutionized the way people shop. Its customer-centric approach, focus on innovation, and wide range of products and services have made it a dominant player in the retail industry.
Amazon is a multinational technology company that was founded by Jeff Bezos in 1994. It started as an online marketplace for books but quickly expanded its product offerings to include electronics, clothing, and more. Amazon's mission is to be the "Earth's most customer-centric company" by offering a wide selection, low prices, and convenient shopping experiences.
One key aspect of Amazon's success is its focus on innovation and technology. It has developed numerous products and services such as Amazon Prime, Kindle e-readers, and Amazon Web Services (AWS), which is a cloud computing platform used by businesses around the world. Amazon's advanced logistics and fulfillment network ensure fast and reliable delivery to customers.
Amazon's growth has been fueled by strategic acquisitions and partnerships, allowing the company to enter new markets and expand its customer base. Notable acquisitions include Whole Foods Market and Twitch. Furthermore, Amazon has invested heavily in artificial intelligence and machine learning to enhance customer experiences and personalize recommendations.
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Allow free trade by preventing states from blocking commerce.
a. Regulate Business within a state.
b. Give the government power over business.
c. Allow free trade by preventing states from blocking commerce.
d. Give the Federal government the power to tax business
Option c emphasizes the need to allow free trade by preventing states from blocking commerce. By removing barriers and ensuring a level playing field for businesses, free trade can stimulate economic growth, enhance consumer welfare, and foster competition. This option supports the principles of a unified national market and a more efficient allocation of resources.
The answer to the question "Allow free trade by preventing states from blocking commerce" is option c: Allow free trade by preventing states from blocking commerce.
This option emphasizes the importance of removing barriers to trade between states and promoting economic activity by preventing states from impeding commerce. By allowing free trade, goods and services can flow freely across state lines, benefiting both businesses and consumers.
Here is a step-by-step explanation:
1. Free trade: Free trade refers to the absence of barriers, such as tariffs or quotas, that restrict the flow of goods and services between countries or, in this case, states. It promotes competition, lowers prices, and increases consumer choice.
2. States blocking commerce: In some cases, states may impose regulations or restrictions that hinder trade between them. These barriers can include tariffs, import quotas, or discriminatory regulations that favor local businesses. Such actions can limit competition, increase prices, and reduce consumer options.
3. Preventing states from blocking commerce: To promote free trade, it is important to prevent states from imposing barriers that block or hinder commerce. This can be achieved through federal legislation that establishes uniform rules and regulations for trade between states, overriding any state-level restrictions. By doing so, businesses can operate more efficiently and effectively across state lines, and consumers can benefit from a wider range of goods and services at competitive prices.
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Rocko Corporation sells two types of computer hard drives. The sales mix is 30% Premium Drives and 70% Ultra Drives based upon quantity of units sold. The Premium Drive has a unit variable cost of $90 and a unit selling price of $150. The Ultra Drive has a unit variable cost of $105 and a unit selling price of $195. The weighted-average unit contribution margin for Rocko is 4,455 3,300 11,000 7.700
The weighted-average unit contribution margin for Rocko Corporation is $81. This means that, on average, each unit sold contributes $81 towards covering the fixed costs and generating a profit.
The weighted-average unit contribution margin for Rocko Corporation can be calculated by finding the contribution margin for each type of hard drive and then taking the weighted average based on the sales mix.
Step 1: Calculate the contribution margin for the Premium Drive:
Contribution margin = Selling price - Variable cost
Contribution margin = $150 - $90
Contribution margin = $60
Step 2: Calculate the contribution margin for the Ultra Drive:
Contribution margin = Selling price - Variable cost
Contribution margin = $195 - $105
Contribution margin = $90
Step 3: Calculate the weighted-average contribution margin:
Weighted-average contribution margin = (Contribution margin for Premium Drive * Sales mix of Premium Drive) + (Contribution margin for Ultra Drive * Sales mix of Ultra Drive)
Weighted-average contribution margin = ($60 * 0.30) + ($90 * 0.70)
Weighted-average contribution margin = $18 + $63
Weighted-average contribution margin = $81
The weighted-average unit contribution margin for Rocko Corporation is $81. This means that, on average, each unit sold contributes $81 towards covering the fixed costs and generating a profit. It is an important metric for assessing the profitability of the company's product mix.
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You work in the research department of a large manufacturing firm of computer discs. You are asked to construct a linear equation which is used estimate the firms total variable costs. TVC linear function is constructed as a function of wages, W, and output, Q. You estimate the following regression equation using 64 quarters of data, where:
TVC = total variable costs of production
Q = the firms Output level
W = the wage rate to labor
The estimated equation takes he following form:
TVC = 0.14+0.80*Q + 0.036*W
(2.8) (3.8) (3.3)
R2 = 0.92 and D-W = 1.9
a. Suppose W = $10, derive the AVC function and the MC function.
b. What are the shapes of the AVC and MC functions? (you can use excel to draw the 2 graphs).
c. Explain why you would choose a linear function to estimate the equation rather than a
quadratic equation.
d. What the linear form of the TVC estimated equation the correct choice? Explain.
Upper management was so pleased with your work on problem #2 they gave you a new assignment. A previous study found the following equation for TVC and set TFC = $100.
TVC = 60*Q-12*Q² + Q³
TFC = $100
The price of the software is $60/unit (P = MR). Management asks you to find the following given the information above
a. Calculate the AVC and MC functions for the firm. Additionally, determine where the AVC curve intersects the MC functions (ie. where they intersect). See equations 8.22, 8.23 and 8.24 on page 356
b. Determine the breakeven output level and the output the firm maximizes total profit. A firm will maximize profits (П) by finding the output level(s) at which MR = MC.
Management provides you with some new information. If the firm purchases a new state of
technology in production the TC function is described by the following equation:
TC 50+ 20*Q+2*W + 3*r
Where w = wage rate and r = rental price of capital.
c. Assuming W = $20/unit and r = $10/unit, what is the new AVC function and MC function. Graph the 2 functions on the same Excel sheet.
d. Should you recommend adopting the new state of technology? If it does, determine the profit maximizing level of output assuming the price, P = $60/unit (note P = MR & the profit maximizing output level is the Q at which MR = MC).
To derive the AVC (Average Variable Cost) function, divide TVC by Q. In this case, AVC = (0.14 + 0.036W)/Q. To find the MC (Marginal Cost) function.
Take the derivative of TVC with respect to Q. MC = 0.80 + 0.036W. The AVC function is U-shaped, initially decreasing and then increasing as output increases. The MC function is upward sloping. A linear function is chosen over a quadratic function for simplicity and ease of interpretation. Linear functions are easier to estimate and understand.
The choice of a linear form for the TVC estimated equation is appropriate because the R-squared value is high (0.92), indicating a good fit. The Durbin-Watson statistic (1.9) is close to 2, suggesting minimal autocorrelation. The AVC function is given by AVC = (60*Q-12*Q^2+Q^3 + TFC)/Q. The MC function is the derivative of the TVC function with respect to Q. The AVC curve intersects the MC curve at the minimum point of the AVC curve.
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Which of the following is the LEAST likely benefit for MIC to bring in the Print on Demand system? A. The elimination of a storage place for preprinted forms B. The reduced cost of employee training c. The convenience of electronic files for storing and searching D. The ease to update and customize the electronic forms
The least likely benefit for MIC to bring in the Print on Demand system is the reduced cost of employee training. The other benefits include the elimination of a storage place for preprinted forms, the convenience of electronic files for storing and searching, and the ease to update and customize electronic forms.
The LEAST likely benefit for MIC to bring in the Print on Demand system is B. The reduced cost of employee training.
Here is a step-by-step explanation:
1. Print on Demand (POD) is a system that allows for the printing of materials only when they are needed, eliminating the need for storing preprinted forms. This means that MIC can reduce or eliminate the cost of renting or maintaining a storage place for these forms.
2. Another benefit of POD is the convenience of electronic files for storing and searching. Instead of having physical copies of forms, MIC can store them electronically, making it easier to organize and retrieve them when needed. This can save time and improve efficiency.
3. POD also offers the ease to update and customize electronic forms. With traditional preprinted forms, any changes or customization would require the printing of new forms. However, with POD, MIC can easily update and customize the electronic forms without the need for physical printing. This flexibility allows for quick changes and adaptations to meet specific requirements.
4. However, the reduced cost of employee training is the LEAST likely benefit for MIC to bring in the Print on Demand system. Employee training costs are not directly related to the implementation of POD. The cost of training employees would depend on the specific processes and technologies involved in the implementation, rather than the use of POD itself.
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Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format Income statement for the most recent month is given below Sales (17,000 units) Less: Variable expenses Contribution margin Less Fixed expenses Net operating loss 1405,000 306,000 102,000 108,000 $(6,000) Required: 1. Compute the company's CM ratio and its break even point in both units and dollars. (Do not round intermediate calculations. Round your "Break-even point in units" answer up to nearest whole number) Contribution margin rato Break even pont in units Break even point in dollars 2. The sales manager feels that an $18,000 increase in the monthly advertising budget, combined with an intensified effort by the sales start will result in a $120,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer) 4:00 3. Reler to the original data. The president is convinced that a 7% reduction in the selling price, combined with an increase of $37,000 in the monthly advertising budget, will double unit sales, Should the company make these changes? O Yes O No 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by 50.5 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $5,500? (Do not round intermediate calculations. Round your answer up to nearest whole number.) that sales to atta get proff unts 5. Refer to the original data. By automating, the company could slash its variable expenses in half However, fixed costs would increase by $45,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round your "Contribution margin retio answer to 2 decimal places. Round your "Break-even point" answers up to nearest whole number) Contribution margin ratio leak even point in units Break even point in dollars 4 b. Assume that the company expects to sell 25.000 units next month. Prepare two contribution format income statements one assuming that operations are not automated, and one assuming that they are. (Do not round intermediate calculations. Round "Per Unit" and "Percentage" to 2 decimal places) Sales 3 Comparative Income Statements Not Automated Per Unit Total 05 The point of indidence between the two options D 0:00 Fercentage (5) 0.00 $ units Total Automated Per Unit 0 $ 0 0:00 Percentage (5) e. This part of the question is not part of your Connect assignment. d. What is the point of indifference between the two options? (Do not round intermediate calculations. Round your answer up to nearest whole number) 4 0.00
The point of indifference between the two options is 28,000 units.
The computation for the company's CM ratio and its break-even point in both units and dollars is shown below:Contribution Margin Ratio = Contribution Margin / Sales * 100%= $102,000 / $405,000 * 100%= 25.19%Break-Even Point in Units = Fixed Expenses / Unit CM= $108,000 / ($17 - $9 - $2) = 12,000 unitsBreak-Even Point in Dollars = Break-Even Point in Units * Selling Price= 12,000 units * $25= $300,000The computation for the effect on the company's monthly net operating income or loss if the sales manager is right is shown below:Current Monthly Net Operating Loss = $6,000Increased Monthly Sales = $120,000Increased Advertising Budget = $18,000Contribution Margin Ratio = Contribution Margin / Sales * 100%= $102,000 / $1,525,000 * 100%= 6.69%Total Increase in Contribution Margin = $120,000 * 6.69%= $8,028Increased Advertising Budget = $18,000Net Increase in Monthly Operating Income = Total Increase in Contribution Margin - Increased Advertising Budget= $8,028 - $18,000= ($9,972)The computation for whether the company should make the changes if the president is convinced that a 7% reduction in the selling price, combined with an increase of $37,000 in the monthly advertising budget, will double unit sales is shown below:The current CM per unit is: $102,000 / 17,000 = $6The new selling price is: $25 * 93% = $23.25The new CM per unit is: $23.25 - $9 - $2 = $12.25The new contribution margin ratio is: $12.25 / $23.25 = 52.69%New break-even point in units: ($108,000 + $37,000) / $12.25 = 8,000 unitsThe current sales are 17,000 units and it is expected to double. New sales will be 34,000 units. If they sell 34,000 units they will earn a profit of $5,500.
Hence, the company should make the changes.The computation for the number of units that would have to be sold each month to earn a profit of $5,500 if the company's advertising agency thinks that a new package would help sales is shown below:Profit = Sales - Variable Expenses - Fixed Expenses$5,500 = (17,000 units x $6) + (17,000 units x $0.50) - $108,00017,000 units x $6.50 = $110,500$110,500 / $6.50 = 17,000 unitsThe computation for the new CM ratio and the new break-even point in both units and dollars if the company could slash its variable expenses in half is shown below:New Variable Expenses per unit = $11 / 2 = $5.50New CM per unit = $23 - $5.50 - $2 = $15.50New CM Ratio = New CM / Sales * 100%= $15.50 / $25 * 100%= 62.00%New Break-even Point in Units = Fixed Expenses / Unit CM= $153,000 / $15.50= 9,871 unitsNew Break-even Point in Dollars = Break-Even Point in Units * Selling Price= 9,871 units * $25= $246,775
The computation for the comparative income statements if the company expects to sell 25,000 units next month is shown below:Not Automated AutomatedSales $425,000 $625,000Variable expenses (221,000) (122,500)Contribution margin $204,000 $502,500Fixed expenses (108,000) (153,000)Net operating income $96,000 $349,500The point of indifference between the two options is the sales volume where the net operating income is the same regardless of which option is chosen. This is computed as follows:Contribution margin from automation = $625,000 - $122,500 - $153,000 = $349,500Contribution margin from not automating = $425,000 - $221,000 - $108,000 = $96,000Contribution margin from automation - Contribution margin from not automating = $45,000($15.50 - $9)Q = $45,000Q = 3,000 unitsNew sales volume = 25,000 + 3,000 = 28,000 unitsTherefore, the point of indifference between the two options is 28,000 units.
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