Acemoglu and Robinson (2012) note that the growth of transatlantic commerce occurred at a crucial juncture for the establishment of inclusive institutions in Britain, which were essential for the country's Industrial Revolution.
The authors argue that inclusive institutions that can offer strong property rights protection, contract enforcement, and open access to economic and political opportunities are the most important determinant of long-term economic growth in any society. In contrast, extractive institutions that only serve the interests of a small elite have a negative impact on growth. Acemoglu and Robinson assert that the transition to inclusive institutions in Britain began in the 17th century, when the Glorious Revolution of 1688 resulted in the establishment of a constitutional monarchy that protected property rights and fostered a rule of law.
Inclusive institutions encouraged entrepreneurship, innovation, and investment in new technologies, all of which contributed to the Industrial Revolution in Britain. Acemoglu and Robinson argue that inclusive institutions created a conducive environment for innovation by protecting property rights and providing access to credit and markets. The Industrial Revolution in Britain was characterized by rapid technological change, such as the use of steam power, which transformed the country's manufacturing sector and created new opportunities for growth and prosperity.
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i) Use two (2) coincidental indicators to explain the conditions that are experienced in a nation during a recession.
ii) Examine the causes of business cycle fluctuations in a nation.
Suppose the following information was published by the Australian Bureau of Statistics in 2017:
Item Amount (AUD billion)
Household consumption 5,029.81
Government consumption 20,340.92
Exports 1,386.39
Value of cocaine seized at Sydney Airport 20,500
Value of intermediate goods in tractor manufacturing 502,003
Gross private domestic investment 352.69
Imports 386.95
Components used in the manufacture of cars 40,000
Gifts 15,236
Government investment 88.19
Value of second-hand goods 500.00
Value of banned endangered species elephant tasks seized at Melbourne Airport 600.00
iii) Use the information provided to calculate Australia’s GDP in 2017
To calculate Australia's GDP in 2017, we need to add up the values of all the components of GDP: household consumption, government consumption, exports, gross private domestic investment, and imports. Australia's GDP in 2017 was $27,723.86 billion.
We exclude items such as the value of cocaine seized, value of intermediate goods in tractor manufacturing, gifts, value of second-hand goods, and value of banned endangered species seized as they are not directly related to the calculation of GDP.
The components that contribute to GDP are as follows:
Household consumption: $5,029.81 billion
Government consumption: $20,340.92 billion
Exports: $1,386.39 billion
Gross private domestic investment: $352.69 billion
Imports: $386.95 billion
To calculate GDP, we use the formula:
GDP = Household consumption + Government consumption + Gross private domestic investment + Exports - Imports
Substituting the values, we have:
GDP = $5,029.81 + $20,340.92 + $352.69 + $1,386.39 - $386.95
= $27,723.86 billionTherefore, Australia's GDP in 2017 was $27,723.86 billion.
Explanation: GDP represents the total value of all final goods and services produced within a country's borders during a specific period. In this case, we added up the values of household consumption, government consumption, gross private domestic investment, and exports, while subtracting imports to calculate Australia's GDP. The excluded items, such as seized goods and gifts, are not considered as part of GDP since they do not reflect production or income generated within the country.
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Assuming rapid approval in most countries, how would you allocate the vaccine units in the first two years to either individual countries or country groups? What factors external to the company would change your allocation decision? Answer in detail.
Answer:
Explanation:
Allocating vaccine units in the first two years to individual countries or country groups would require careful consideration of various factors. While the specific allocation strategy may vary based on the company's objectives and circumstances, here are some key considerations and external factors that could influence the decision:
Population Size and Vulnerability: Population size and vulnerability to the disease would be a crucial factor. Countries with larger populations or higher vulnerability, such as those with a significant number of elderly or immunocompromised individuals, may receive a higher allocation to ensure adequate coverage and protection.
Disease Burden and Transmission Risk: The prevalence of the disease and the transmission risk in different countries or regions would impact allocation decisions. Areas with high disease burden or rapid transmission rates may be prioritized to mitigate the spread and reduce the overall impact of the disease.
Healthcare Infrastructure: The existing healthcare infrastructure and capacity of countries would be a vital consideration. Allocating more vaccine units to countries with limited healthcare resources can help strengthen their ability to handle the disease, reduce severe cases, and prevent overwhelming healthcare systems.
Economic Impact: The economic impact of the disease on different countries is another factor to consider. Countries heavily impacted by the pandemic, experiencing significant economic losses, or facing challenges in economic recovery may be prioritized to support their efforts in mitigating the economic consequences of the disease.
International Commitments and Equity: Global commitments to equitable vaccine distribution, such as the COVAX initiative, would influence allocation decisions. Companies may prioritize allocating a portion of vaccine units to countries or regions with limited access to vaccines, ensuring a more equitable distribution and addressing global health disparities.
Epidemiological Data and Outbreak Patterns: Real-time epidemiological data, outbreak patterns, and the emergence of new variants may impact allocation decisions. Shifting vaccine units to regions experiencing sudden outbreaks or variants of concern can help contain the spread and mitigate the potential impact.
Regulatory Approvals and Market Demand: External factors such as rapid regulatory approvals in specific countries or regions and market demand for vaccines may influence allocation decisions. Companies may consider allocating more units to countries with quick approval processes or high demand to maximize the impact and reach of their vaccines.
Collaboration and Partnerships: Collaborative efforts with governments, international organizations, and public health agencies could influence allocation decisions. Working closely with these stakeholders can provide insights into specific country needs, distribution networks, and priority populations, enabling more informed and targeted allocation strategies.
It is important to note that these factors are interconnected, and a comprehensive approach that balances public health objectives, global equity, and practical considerations would be necessary. Flexibility in allocation strategies, responsiveness to changing circumstances, and adherence to ethical principles of fairness and transparency are crucial in making allocation decisions.
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Question: Discuss four (4) advantages of life cycle costing for Proton Holding.
The feature most associated with the waterfall software development methodology is that the client knows what their final product will look like in advance.
The waterfall methodology is a traditional, sequential approach to software development that follows a linear progression from one phase to another. One of the distinctive features of the waterfall methodology is that the client knows what their final product will look like in advance. This means that extensive planning and requirements gathering are conducted at the beginning of the project, and the entire scope of the project is defined and documented upfront.
Unlike agile methodologies that embrace change and deliver features continuously, the waterfall methodology aims to provide a clear and fixed plan. It emphasizes a comprehensive understanding of the project requirements and expectations from the outset, aiming to minimize the need for changes or iterations once development begins. The focus is on following the predetermined plan, completing each phase sequentially, and delivering the final product that matches the initial specifications.
While this approach can provide stability and predictability in terms of project scope and deliverables, it may not be as flexible or adaptable to changing requirements or evolving client needs. The waterfall methodology suits projects where the client's requirements are well-defined and unlikely to change significantly throughout the development process.
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Our goal for this discussion is to revlew the purpose behind and the reasons for establishing the Securities and Exchange Commission (SEC). What is the SEC and the principal legislation the agency enforces? Within your response, make sure to discuss the SEC's organization and structure, Including the agency's responsibility from an accounting standpoint, namely regarding U.S. Generally Accepted Accounting Principles (U.S. GAP). What role does the SEC have in the development of accounting theory and practices?
The Securities and Exchange Commission (SEC) is a U.S. government agency established in 1934 through the Securities Exchange Act.
Its purpose is to protect investors and maintain fair markets. The principal legislation it enforces includes the Securities Act of 1933, Securities Exchange Act of 1934, and Sarbanes-Oxley Act of 2002. The SEC is organized into divisions, including the Division of Corporation Finance and Division of Enforcement.
From an accounting standpoint, the SEC oversees financial reporting compliance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). It works with the Financial Accounting Standards Board (FASB) in developing accounting standards, reviewing and approving their issuance, and providing guidance and interpretations to ensure accurate and transparent financial reporting.
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Seitz Glassware is trying to determine its growth rate for an annual cash dividend. The most recent dividend, Divo, was $0.30 per share. The stock's target return rate is 10%. What is the stock's price if a. the annual growth rate is 2%? b. the annual growth rate is 4%? c. the annual growth rate is 6%? d. the annual growth rate is 8%? e. the annual growth rate is 9%?
the stock's price would be $3.75 if the annual growth rate is 2%, $5.00 if the growth rate is 4%, $7.50 if the growth rate is 6%, $15.00 if the growth rate is 8%, and $30.00 if the growth rate is 9%.
To determine the stock's price at different annual growth rates, we can use the Gordon Growth Model, also known as the Dividend Discount Model (DDM). The formula for the Gordon Growth Model is:
Stock Price = Dividend / (Rate of Return - Growth Rate)
a. Annual growth rate of 2%:
Stock Price = $0.30 / (0.10 - 0.02) = $0.30 / 0.08 = $3.75
b. Annual growth rate of 4%:
Stock Price = $0.30 / (0.10 - 0.04) = $0.30 / 0.06 = $5.00
c. Annual growth rate of 6%:
Stock Price = $0.30 / (0.10 - 0.06) = $0.30 / 0.04 = $7.50
d. Annual growth rate of 8%:
Stock Price = $0.30 / (0.10 - 0.08) = $0.30 / 0.02 = $15.00
e. Annual growth rate of 9%:
Stock Price = $0.30 / (0.10 - 0.09) = $0.30 / 0.01 = $30.00
Therefore, the stock's price would be $3.75 if the annual growth rate is 2%, $5.00 if the growth rate is 4%, $7.50 if the growth rate is 6%, $15.00 if the growth rate is 8%, and $30.00 if the growth rate is 9%.
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which of the following are common responses of employees when faced with change?
Common responses of employees when faced with change are resistance, fear, and anxiety. Anxiety might manifest itself as a reluctance to accept new assignments or as a sense of unease or tension.
Change is not always a comfortable prospect for employees. When changes are announced, people's reactions can vary widely, from welcoming to resisting or feeling anxious or frustrated. Here are the common responses of employees when faced with change: Resistance: Resistance is a typical response when change is perceived as threatening to employees' security, comfort, and/or control.
Employees may resist change by denying its relevance, criticizing it, or actively fighting it. Fear: Change often poses a potential danger to employees, whether it's the possibility of losing one's employment or of being unable to execute the new tasks required. Fear may lead to negative feelings such as worry, mistrust, and doubt, all of which might hinder progress. Anxiety: The mere thought of change may cause anxiety for some employees, especially if they are uncertain about what will happen in the future.
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a. Any employee who works more than 8 hours per day must be paid overtime. 1. True 2.False b. A corporation is a legal entity created and recognized by federal law. 1.True 2.False c. A law that has any impact on religion is unconstitutional. 1.True 2.False
a. True, according to federal law, employees who work more than 8 hours per day must be paid overtime.
b. True, a corporation is a legal entity created and recognized by federal law, separate from its owners or members.
c. False, laws can have an impact on religion as long as they do not violate the First Amendment's protections of freedom of religion.
a. Any employee who works more than 8 hours per day must be paid overtime. Answer: TrueExplanation: According to the federal law, if an employee works more than 8 hours per day, he or she should be paid overtime. The overtime pay is 1.5 times their normal rate of pay.b. A corporation is a legal entity created and recognized by federal law. Answer: TrueExplanation: A corporation is a legal entity created and recognized by federal law. It has its own rights, powers, and obligations separate from those of its owners or members. The process of incorporating a company involves filing the necessary paperwork with the state government in which the company wishes to incorporate.c. A law that has any impact on religion is unconstitutional. Answer: FalseExplanation: A law that has any impact on religion is not necessarily unconstitutional. The First Amendment to the US Constitution protects freedom of religion, but it does not mean that laws cannot impact religion at all. Laws can impact religion in various ways as long as they do not prohibit the free exercise of religion or establish a religion.
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review of resumes is most valid when the content of resumes is evaluated in
a) terms of incumbents competencies
b) conparison with other qualifications
c) terms of the industrial benchmarks
d) compaeison with other employees in an irganization
e) terms of elements if a job descriptions
Reviewing resumes is most valid when the content of resumes is evaluated in terms of elements of a job description.
When assessing resumes, it is important to evaluate how well the qualifications and experiences of the candidates align with the specific requirements and expectations outlined in the job description. By comparing the content of resumes to the elements of a job description, employers can determine the suitability of candidates for the position. This approach allows for a more objective and consistent evaluation, focusing on the relevant skills, competencies, and experiences needed for the job. Considering the job description ensures that the evaluation is directly tied to the specific requirements and responsibilities of the role, increasing the validity of the resume review process.
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Select all of the following that are TRUE.
Question 6 options:
If the fixed expenses increase in a company, and all other factors remain unchanged, then we can expect the margin of safety to decrease.
At a given level of sales, a low contribution margin ratio will result in less net income than a high contribution margin ratio.
If fixed expenses increase by $15,000 per year, then the level of sales needed to break even will also increase by $15,000
Once the break-even point has been reached, increases in contribution margin will be reflected dollar for dollar in increased net income.
In determining contribution margin, all manufacturing costs are deducted.
The margin of safety percentage is equal to the margin of safety in dollars divided by the number of units sold.
The statements that are TRUE are the following
1. If the fixed expenses increase in a company, and all other factors remain unchanged, then we can expect the margin of safety to decrease.
2. At a given level of sales, a low contribution margin ratio will result in less net income than a high contribution margin ratio.
3. Once the break-even point has been reached, increases in contribution margin will be reflected dollar for dollar in increased net income.
When fixed expenses increase, the margin of safety, which represents the excess of sales over the break-even point, decreases. This is because a larger portion of sales is now required to cover the higher fixed expenses, reducing the buffer or margin of safety.
The contribution margin ratio is the percentage of each sales dollar that contributes to covering fixed expenses and generating profit. A higher contribution margin ratio means a larger proportion of each sales dollar is available to cover fixed expenses and generate net income, resulting in more net income compared to a lower contribution margin ratio.
Once the break-even point is reached, any increase in contribution margin, which is the difference between sales and variable expenses, directly adds to the net income. This is because fixed expenses have already been covered, so any additional contribution margin increases the net income dollar for dollar.
The remaining statements are false:
1. If fixed expenses increase by $15,000 per year, the level of sales needed to break even will remain the same. It is the contribution margin that needs to increase to cover the higher fixed expenses and reach the break-even point.
2. In determining contribution margin, only variable expenses are deducted, not all manufacturing costs.
3. The margin of safety percentage is calculated by dividing the margin of safety in dollars by the total sales, not the number of units sold.
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Question 51 Grapevine Bank receives a deposit of $200,000. Its required reserve ratio is 12 percent. How much of this deposit is available to be loaned to borrowers? O $12.000 O $200,000 O $176.000 O $24,000 Question 52 Pinnacle Finance Bank has a 12 percent reserve requirement ratio. What is Pinnacle Finance's money multiplier? O 1.2 O 12 O 8.33 O 6 Question 53 If Pinnacle Finance Bank receives a new cash deposit of $150,000, and it has a required reserve ratio of 12 percent, how much total money could potentially be created from that deposit? O $18,000 O $1,800,000 O $1,250,000 O $150,000
In the given scenarios, the available amount to be loaned to borrowers depends on the required reserve ratio set by the banks. The money multiplier represents the potential increase in the money supply based on the reserve ratio. When a new cash deposit is made, the total money that can potentially be created is determined by applying the money multiplier to the deposit amount.
Question 51: The amount available to be loaned to borrowers is determined by subtracting the required reserves from the deposit. In this case, the deposit is $200,000 and the required reserve ratio is 12%. Therefore, the available amount to be loaned is $200,000 - ($200,000 x 12%) = $176,000.
Question 52: The money multiplier is calculated by dividing 1 by the reserve ratio. In this case, the reserve requirement ratio is 12%, so the money multiplier is 1 / 0.12 = 8.33.
Question 53: To calculate the total money that can potentially be created, we multiply the new cash deposit by the money multiplier. In this case, the new cash deposit is $150,000 and the money multiplier is 8.33. Therefore, the total potential money created is $150,000 x 8.33 = $1,249,500.
By understanding the reserve requirements and applying the money multiplier, banks can determine the amount available for loans and the potential increase in the money supply based on new deposits. These calculations are important for managing the lending capacity and liquidity of banks.
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The convertibility option for term life insurance policies
provide for:
a.
Such a clause to be included in the relevant policy document
subject to a medical examination.
b.
The insured to convert the
The convertibility option for term life insurance policies allows policyholders to convert their term policy into a permanent policy without a medical examination, providing flexibility and security for the insured.
The convertibility option for term life insurance policies allows the insured to convert their term policy into a permanent policy without undergoing a medical examination.
This option provides flexibility to policyholders who may want to extend their coverage beyond the term period or switch to a different type of policy.
a. The inclusion of a convertibility clause in the policy document is a key requirement for this option.
This clause outlines the terms and conditions under which the conversion can take place.
While some insurance companies may require a medical examination for the conversion, term policies with a convertibility option typically allow for conversion without the need for additional medical underwriting.
b. The insured has the right to exercise the convertibility option, usually within a specific time frame outlined in the policy.
By exercising this option, the insured can convert their term policy into a permanent policy, such as whole life or universal life insurance, without having to go through the usual medical underwriting process.
The premium for the permanent policy will be based on the insured's age at the time of conversion, and other factors as specified by the insurance company.
The conversion option provides an opportunity for policyholders to secure permanent life insurance coverage, which can offer benefits such as cash value accumulation and lifelong protection.
It eliminates the need for reapplying and undergoing medical exams, which can be advantageous if the insured's health has deteriorated since the purchase of the term policy.
In conclusion, the convertibility option for term life insurance policies allows policyholders to convert their term policy into a permanent policy without a medical examination, providing flexibility and security for the insured.
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Ken Smith wants to start a deck and fence company. To start the business, Ken plans to invest $70,000 in a pick-up truck and tools. The truck and tools are in Class 43 with a depreciation rate of 30%. Ken is forecasting that he will build 100 decks in the first year and 120 decks in years 2 and 3. He anticipates that the average deck will be priced at $5,500. Ken estimates that the cost of lumber for the typical deck is $2,000. Ken estimates that rent, office expenses, vehicle expenses, wages, and salaries will total $351,400 per year. The corporate tax rate is 30%. What are operating cash flows in the second year of the business? Round your answer to the nearest dollar.
The operating cash flows in the second year of the business are approximately $54,320.To calculate the operating cash flows in the second year of the business, we need to consider the revenues and expenses associated with the business activities.
Here's the breakdown:
Revenue:
Number of decks built in the second year: 120
Average price per deck: $5,500
Total revenue in the second year: 120 * $5,500 = $660,000
Expenses:
Cost of lumber per deck: $2,000
Cost of lumber for 120 decks: $2,000 * 120 = $240,000
Rent, office expenses, vehicle expenses, wages, and salaries: $351,400
Depreciation:
Depreciation expense on the truck and tools: $70,000 * 30% = $21,000
Taxable Income:
Revenue - Cost of lumber - Depreciation - Expenses
$660,000 - $240,000 - $21,000 - $351,400 = $47,600
Taxes:
Taxable Income * Tax rate
$47,600 * 30% = $14,280
Operating Cash Flows:
Taxable Income - Taxes + Depreciation
$47,600 - $14,280 + $21,000 = $54,320
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A bank wishes to decide how many staff to schedule during its lunch period. During this period customers arrive at a rate of 6 per hour and the enquiries that customers have (such as opening new accounts, arranging loans, etc.) take on average 20 minutes to deal with. The bank manager feels that 3 staff should be on duty during this period but wants to make sure that the customers do not wait more than 3 minutes on average before they are served.
The manager has been told by his small daughter that the distributions that describe both arrival and processing times are likely to be exponential. Therefore:
5.1
Calculate the utilization of the system where u = ra/ (re x m).
(6)
5.2
Using the formula for waiting time for an M/M/ m system, calculate the average waiting time.
(14)
In this scenario, the bank manager wants to determine the optimal number of staff to schedule during the lunch period to ensure efficient customer service. u = λa / (λe × m), where λa is the arrival rate, λe is the service rate, and m is the number of servers.
To calculate the utilization of the system, we need to determine the arrival rate (λa), service rate (λe), and the number of servers (m). In this case, the arrival rate is given as 6 customers per hour, and the service rate can be calculated as the reciprocal of the average service time, which is 1/20 (since the service time follows an exponential distribution). Therefore, λe = 1/20. The manager wants to schedule 3 staff members, so m = 3.
Using the formula for utilization, u = λa / (λe × m), we can substitute the values to calculate the utilization. The utilization in this case is (6 / (1/20 × 3)) = 120.
To calculate the average waiting time, we can use the formula for an M/M/m system, which is Wq = ρ / (m(1 - ρ)) × (1 / λa - 1 / λe), where ρ represents the traffic intensity (ρ = λa / (λe × m)).
By substituting the values into the formula, we can calculate the average waiting time (Wq). However, the value for ρ is already calculated as 120 in the previous step. Therefore, we can substitute the values into the formula and calculate the average waiting time.
Calculating the exact average waiting time requires the knowledge of the traffic intensity (ρ). However, the given information does not provide the exact value of ρ, so it is not possible to calculate the average waiting time in this scenario without additional information.
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choice of true or false:
Many firms choose to achieve target cost through adding additional profit centers.
Many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact, compete on both design and cost.
Target cost can be defined as competitive price minus throughput margin per unit.
Capacity must be considered when analyzing the merits of a special order.
The statement “Many firms choose to achieve target cost through adding additional profit centers” is false. This is because a profit center is a department or unit that generates revenue, while target cost is a cost management strategy that focuses on the design and development of products to meet specific cost targets.
To achieve target cost, a firm must take a design-to-cost approach that involves reducing costs during the product design stage.The statement “Many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact, compete on both design and cost” is true. This is because firms must have a balanced approach that combines cost leadership, differentiation, and product design.
A firm that can produce a product at a low cost and differentiate it from those of its competitors is likely to be successful.The statement “Target cost can be defined as competitive price minus throughput margin per unit” is true. This is because target cost is a cost management strategy that involves determining the maximum cost that can be incurred during the design and development of a product to meet a specific price target. The formula for target cost is Target Cost = Selling Price - Desired Profit Margin - Other Costs. In this formula, throughput margin is the same as desired profit margin.The statement “Capacity must be considered when analyzing the merits of a special order” is true. This is because a special order is an order that is different from the firm's standard products or services. In deciding whether to accept a special order, a firm must consider the costs and benefits of producing the order, including any additional capacity that may be required. The firm must ensure that it has sufficient capacity to produce the order and that the order is profitable. A firm must not accept a special order that would lead to a loss.The statement “Many firms choose to achieve target cost through adding additional profit centers” is false. The statement “Many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact, compete on both design and cost” is true. The statement “Target cost can be defined as competitive price minus throughput margin per unit” is true. The statement “Capacity must be considered when analyzing the merits of a special order” is true. Target cost is a cost management strategy that focuses on the design and development of products to meet specific cost targets. To achieve target cost, a firm must take a design-to-cost approach that involves reducing costs during the product design stage. This strategy requires cross-functional collaboration between the design, engineering, and manufacturing departments of a firm. Many firms are finding it difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact, compete on both design and cost. This is because customers are becoming more demanding and are looking for products that are high-quality, customized, and affordable. To meet these demands, firms must have a balanced approach that combines cost leadership, differentiation, and product design. A firm that can produce a product at a low cost and differentiate it from those of its competitors is likely to be successful. Target cost can be defined as competitive price minus throughput margin per unit. The formula for target cost is Target Cost = Selling Price - Desired Profit Margin - Other Costs. In this formula, throughput margin is the same as desired profit margin. The target cost approach is useful for firms that are operating in highly competitive markets where pricing pressure is high. To succeed in such markets, firms must have a deep understanding of their cost structure and must be able to reduce costs while maintaining product quality.Capacity must be considered when analyzing the merits of a special order. A special order is an order that is different from the firm's standard products or services. In deciding whether to accept a special order, a firm must consider the costs and benefits of producing the order, including any additional capacity that may be required. The firm must ensure that it has sufficient capacity to produce the order and that the order is profitable. A firm must not accept a special order that would lead to a loss.
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Dana Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing Direct materials $18 Direct labor $7 Variable manufacturing overhead $2 Variable selling and administrative $2 Fixed costs per year: Fixed manufacturing overhead $200,000 Fixed selling and administrative expenses $ 110,000 During the year, the company produced 20,000 units and sold 16,000 units. The selling price of the company's product is $50 per unit. Required: Assume that the company uses absorption costing a) Compute the unit product cost. (3 marks) (5 marks) b) Prepare an income statement for the year (use the detailed format of income statement which shows the calculation of the cost of goods sold).
The income statement for the year using absorption costing shows a net operating loss of -$22,000. a) To compute the unit product cost using absorption costing, we need to include both variable and fixed manufacturing costs in the calculation.
Variable costs per unit:
Direct materials: $18
Direct labor: $7
Variable manufacturing overhead: $2
Variable selling and administrative: $2
Total variable cost per unit: $18 + $7 + $2 + $2 = $29
Fixed costs per year:
Fixed manufacturing overhead: $200,000
Fixed selling and administrative expenses: $110,000
Total fixed costs: $200,000 + $110,000 = $310,000
Total units produced: 20,000
Unit product cost = (Total variable cost + Total fixed costs) / Total units produced
Unit product cost = ($29 x 20,000 + $310,000) / 20,000
Unit product cost = ($580,000 + $310,000) / 20,000
Unit product cost = $890,000 / 20,000
Unit product cost = $44.50
Therefore, the unit product cost using absorption costing is $44.50.
b) Income Statement (using the detailed format):
Sales:
Units sold: 16,000
Selling price per unit: $50
Total sales revenue: 16,000 x $50 = $800,000
Cost of Goods Sold:
Units sold: 16,000
Unit product cost: $44.50
Total cost of goods sold: 16,000 x $44.50 = $712,000
Gross Profit: $800,000 - $712,000 = $88,000
Operating Expenses:
Fixed selling and administrative expenses: $110,000
Net Operating Loss: $88,000 - $110,000 = -$22,000
Therefore, the income statement for the year using absorption costing shows a net operating loss of -$22,000.
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The Amelia Corporation was incorporated on January 1, 2005, with the following authorized capitalization: . 40,000 shares of common stock, no par value, stated value $40 per share · 10,000 shares of 5 percent cumulative preferred stock, par value $10 per share During 2005, Amelia issued 24,000 shares of common stock for a total of $1,200,000 and 6,000 shares of preferred stock at $16 per share. In addition, on December 20, 2005, subscriptions for 2,000 shares of preferred stock were taken at a purchase price of $17. These subscribed shares were paid for on January 2, 2006. What should Amelia report as total contributed capital on its December 31, 2005, balance sheet?
Total contributed capital on its December 31, 2005, balance sheet should be $1,560,000. Amelia Corporation has been authorized with 40,000 shares of common stock with no par value but with a stated value of $40 per share and 10,000 shares of 5 percent cumulative preferred stock, with a par value of $10 per share.
During 2005, Amelia issued 24,000 shares of common stock for a total of $1,200,000 and 6,000 shares of preferred stock at $16 per share. Furthermore, subscriptions for 2,000 shares of preferred stock were taken at a purchase price of $17 on December 20, 2005. These subscribed shares were paid for on January 2, 2006.
Therefore, the total contributed capital on its December 31, 2005, balance sheet should be $1,560,000. This is due to the fact that the number of shares issued by Amelia and their corresponding prices, which total $1,200,000 for 24,000 shares of common stock and $96,000 for 6,000 shares of preferred stock. And the subscription price for 2,000 shares of preferred stock at $17 per share will total $34,000.
Therefore, the sum of all of these is $1,560,000, which is the total contributed capital for Amelia Corporation as of December 31, 2005, for its balance sheet.
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the total cost of ownership of an information system refers to
The total cost of ownership of an information system encompasses all expenses incurred throughout its lifecycle, including acquisition, implementation, operation, and maintenance.
The total cost of ownership (TCO) of an information system refers to the overall expenses associated with owning and managing the system throughout its entire lifespan. TCO takes into account various cost factors, such as acquisition, implementation, operation, and maintenance.
The acquisition costs include the initial purchase price of hardware, software, and licenses, as well as any costs related to customization or integration with existing systems. Implementation costs involve activities like system installation, configuration, data migration, and user training.
Operating costs encompass ongoing expenses such as hardware and software maintenance, system administration, user support, and utilities. Maintenance costs cover software updates, bug fixes, and upgrades. TCO also includes costs associated with system downtime, security measures, and compliance with regulations.
Calculating the TCO provides organizations with a comprehensive understanding of the financial impact of an information system. By considering all expenses from acquisition to retirement, businesses can make informed decisions regarding budget allocation, resource planning, and system optimization. TCO analysis enables organizations to evaluate the long-term value and cost-effectiveness of an information system, helping them make informed decisions about investments, upgrades, and replacements.
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The total cost of ownership of an information system refers to the overall cost associated with acquiring, implementing, operating, and maintaining the system over its entire lifecycle.
The total cost of ownership (TCO) takes into account all expenses related to an information system beyond its initial purchase price. It includes costs incurred during the implementation phase, such as system customization, integration with existing infrastructure, and employee training. Operating costs, including hardware and software maintenance, licensing fees, and technical support, are also considered in the TCO.
Additionally, the TCO encompasses ongoing expenses associated with system updates, upgrades, and enhancements, as well as any necessary repairs or replacements. It takes into account factors like system downtime, productivity losses, and potential risks or security vulnerabilities.
By calculating the TCO, organizations can make informed decisions regarding their investments in information systems. It helps in evaluating the long-term financial impact and benefits of adopting a particular system, comparing different options, and optimizing resource allocation. The TCO analysis provides a comprehensive view of the financial implications associated with owning and managing an information system, enabling organizations to make strategic and cost-effective choices.
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the total cost of producing 5,000 doors in mexico, using the data provided, is ____________ in us$.
Based on the data provided, the total cost of producing 5,000 doors in Mexico is $2,300 in US dollars. The total cost of producing 1 door is the sum of direct material cost, direct labor cost, and variable manufacturing overhead cost.
It is given as $2.30 + $1.20 + $0.10 = $3.60.The fixed manufacturing overhead cost is $6,500. To determine the total variable manufacturing overhead cost, we need to multiply the total direct labor hours with variable manufacturing overhead rate. Here, the total direct labor hours are 30,000 and the variable manufacturing overhead rate is $0.02 per direct labor hour.
So, the total variable manufacturing overhead cost is 30,000 × $0.02 = $600.
The total manufacturing cost is the sum of total variable manufacturing overhead cost and total direct cost, which is $600 + (5,000 × $3.60) = $18,600.
The total cost includes manufacturing cost and fixed selling and administrative costs. It is given as $18,600 + $5,100 = $23,700. If we divide the total cost by the number of doors produced, we get the cost per door, which is $23,700 ÷ 5,000 = $4.74.
Therefore, the total cost of producing 5,000 doors in Mexico is $4.74 × 5,000 = $23,700 in US dollars.
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The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: An appropriate discount rate is 7 percentage, yielding a present value of $86,637. $18.500 $23,500 $28,500 $33,500 a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will be the initial value of the lease liability? Initial value of the lease liability a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1? Lease expense a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank - be certain to enter "0" wherever required.) Interest expense a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank - be certain to enter "0" wherever required.) Amortization expense a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank - be certain to enter "0" wherever required.) Amortization expense b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset b-2. If the lease is a finance lease, what will be the initial value of the lease liability? Initial value of the lease liability b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank - be certain to enter "0" wherever required.) Lease expense b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) Interest expense b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) Amortization expense
a-1. If the lease is an operating lease, the initial value of the right-of-use asset will be zero. In an operating lease, the lessee does not recognize the right-of-use asset on their balance sheet.
a-2. If the lease is an operating lease, the initial value of the lease liability will also be zero. In an operating lease, the lessee does not recognize a lease liability on their balance sheet.
a-3. If the lease is an operating lease, the lease expense shown on the income statement at the end of year 1 will be $18,500, which is the payment made for that year.
a-4. If the lease is an operating lease, there will be no interest expense shown on the income statement at the end of year 1 because the lessee does not recognize a lease liability.
a-5. If the lease is an operating lease, there will be no amortization expense shown on the income statement at the end of year 1 because the lessee does not recognize a right-of-use asset.
b-1. If the lease is a finance lease, the initial value of the right-of-use asset will be $86,637, which is the present value of the lease payments.
b-2. If the lease is a finance lease, the initial value of the lease liability will also be $86,637, which is the present value of the lease payments.
b-3. If the lease is a finance lease, the lease expense shown on the income statement at the end of year 1 will be $18,500, which is the payment made for that year.
b-4. If the lease is a finance lease, the interest expense shown on the income statement at the end of year 1 will be $6,064, which is calculated as the beginning lease liability ($86,637) multiplied by the discount rate (7%).
b-5. If the lease is a finance lease, the amortization expense shown on the income statement at the end of year 1 will be $12,436, which is calculated as the lease expense ($18,500) minus the interest expense ($6,064).
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You are buying new equipment for the office which will cost $1,250,000.
The current interest rate is 8%. Should you appove the investment? Why?
Year Cash Receipts Cash Disbursements Net Cash Flow What goes here?
1 900,000 500,000 400,000 ?
2 925,000 475,000 450,000 ?
3 800,000 450,000 350,000 ?
4 675,000 430,000 245,000 ?
Should you make this investment?
Why?
To determine whether you should approve the investment, we need to calculate the net present value (NPV) of the cash flows and compare it to the initial cost of $1,250,000.
The NPV takes into account the time value of money, considering that cash received in the future is worth less than the same amount received today due to the opportunity cost of investing.
To calculate the NPV, we discount each cash flow using the current interest rate of 8%. The formula for calculating the NPV is:
NPV = Σ [CFt / (1 + r)^t] - Initial Cost
Where:
CFt = Cash flow in year t
r = Discount rate (interest rate)
t = Year
Let's calculate the NPV for each year:
Year 1:
NPV1 = [400,000 / (1 + 0.08)^1] - 1,250,000
Year 2:
NPV2 = [450,000 / (1 + 0.08)^2] - 1,250,000
Year 3:
NPV3 = [350,000 / (1 + 0.08)^3] - 1,250,000
Year 4:
NPV4 = [245,000 / (1 + 0.08)^4] - 1,250,000
To calculate the net cash flow, you subtract cash disbursements from cash receipts:
Year 1:
Net Cash Flow1 = 900,000 - 500,000 = 400,000
Year 2:
Net Cash Flow2 = 925,000 - 475,000 = 450,000
Year 3:
Net Cash Flow3 = 800,000 - 450,000 = 350,000
Year 4:
Net Cash Flow4 = 675,000 - 430,000 = 245,000
Now let's calculate the NPV for each year:
NPV1 = [400,000 / (1 + 0.08)^1] - 1,250,000
NPV2 = [450,000 / (1 + 0.08)^2] - 1,250,000
NPV3 = [350,000 / (1 + 0.08)^3] - 1,250,000
NPV4 = [245,000 / (1 + 0.08)^4] - 1,250,000
To determine whether you should make this investment, you need to sum up the NPV values and see if the overall NPV is positive or negative. If the NPV is positive, it indicates that the investment is expected to generate a positive return and is generally considered favorable.
Overall NPV = NPV1 + NPV2 + NPV3 + NPV4
If the overall NPV is positive, you should approve the investment. If it is negative, you may want to reconsider.
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To determine whether you should approve the investment, we need to calculate the net present value (NPV) of the cash flows and compare it to the initial cost of $1,250,000.
The NPV takes into account the time value of money, considering that cash received in the future is worth less than the same amount received today due to the opportunity cost of investing.
To calculate the NPV, we discount each cash flow using the current interest rate of 8%. The formula for calculating the NPV is:
NPV = Σ [CFt / (1 + r)^t] - Initial Cost
Where:
CFt = Cash flow in year t
r = Discount rate (interest rate)
t = Year
Let's calculate the NPV for each year:
Year 1:
NPV1 = [400,000 / (1 + 0.08)^1] - 1,250,000
Year 2:
NPV2 = [450,000 / (1 + 0.08)^2] - 1,250,000
Year 3:
NPV3 = [350,000 / (1 + 0.08)^3] - 1,250,000
Year 4:
NPV4 = [245,000 / (1 + 0.08)^4] - 1,250,000
To calculate the net cash flow, you subtract cash disbursements from cash receipts:
Year 1:
Net Cash Flow1 = 900,000 - 500,000 = 400,000
Year 2:
Net Cash Flow2 = 925,000 - 475,000 = 450,000
Year 3:
Net Cash Flow3 = 800,000 - 450,000 = 350,000
Year 4:
Net Cash Flow4 = 675,000 - 430,000 = 245,000
Now let's calculate the NPV for each year:
NPV1 = [400,000 / (1 + 0.08)^1] - 1,250,000
NPV2 = [450,000 / (1 + 0.08)^2] - 1,250,000
NPV3 = [350,000 / (1 + 0.08)^3] - 1,250,000
NPV4 = [245,000 / (1 + 0.08)^4] - 1,250,000
To determine whether you should make this investment, you need to sum up the NPV values and see if the overall NPV is positive or negative. If the NPV is positive, it indicates that the investment is expected to generate a positive return and is generally considered favorable.
Overall NPV = NPV1 + NPV2 + NPV3 + NPV4
If the overall NPV is positive, you should approve the investment. If it is negative, you may want to reconsider.
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Timmothy Ltd. obtained a loan from the bank for $120,000 and is required to repay the loan with monthly payments of $3,500. This type of loan is an example of which one of the following? a. fixed principal payment b. blended payment c. fixed interest payment d. Bond payment
The loan obtained by Timmothy Ltd. with monthly payments of $3,500 is an example of a blended payment. Option B.
A blended payment loan, also known as an amortizing loan, is a type of loan where the periodic payments consist of both principal and interest portions. Each payment made by the borrower includes a portion that goes towards reducing the outstanding principal balance and another portion that covers the accrued interest.
In this case, the monthly payment of $3,500 includes both the repayment of the principal amount borrowed and the interest charged by the bank. As each payment is made, a portion of the payment goes towards reducing the principal balance of $120,000, while the remaining portion covers the interest on the outstanding balance.
This is different from other types of loan payments:
a. Fixed principal payment: In a fixed principal payment loan, the borrower would make equal payments towards the principal balance, meaning the amount allocated to principal would remain constant throughout the loan term. In this scenario, the monthly payment of $3,500 does not remain constant, indicating it is not a fixed principal payment loan.
b. Fixed interest payment: In a fixed interest payment loan, the borrower would make periodic payments covering only the interest charged on the loan, while the principal balance remains unchanged. In this scenario, the monthly payment of $3,500 includes both principal and interest, suggesting it is not a fixed interest payment loan.
d. Bond payment: Bond payments refer to the periodic interest and principal payments made by a bond issuer to its bondholders. While the loan obtained by Timmothy Ltd. may have similarities to bond payments, it is not specifically a bond payment.
Therefore, the loan with monthly payments of $3,500 obtained by Timmothy Ltd. is an example of a blended payment loan, as the payments include both principal and interest portions. Option B is correct.
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Suppose a monopolist is producing a level of output such that MR
> MC. What should the firm do to maximize its profits?
If a monopolist is producing a level of output where marginal revenue (MR) is greater than marginal cost (MC), the firm should increase its production level to maximize its profits.
In a monopolistic market, a firm has the ability to set the price and quantity of its products. To maximize profits, a monopolist should produce where marginal revenue equals marginal cost (MR = MC). However, if the monopolist is currently producing a level of output where MR > MC, it indicates that the firm can increase its profits by expanding production.
When MR > MC, each additional unit produced adds more to total revenue than it does to total cost. By increasing production, the monopolist can capture the additional revenue generated, contributing positively to its overall profits. The firm should continue expanding output until MR = MC, as this is the point where profits are maximized.
It is important to note that in a monopolistic market, the price charged is typically higher than the marginal cost, leading to a markup over marginal cost and potentially reduced consumer surplus. The monopolist's profit-maximizing strategy is to find the equilibrium level of output that maximizes profits while considering market demand and cost structure.
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(j) Explain the events that occur in the economy that transition the economy from the original equilibrium to the new equilibrium. Please be sure that this is an explanation of the economy and not an explanation of the math or the graph. (k) The central bank is interested in returning the economy to the original level of output. What kind of open market operation should it engage in? (1) What will happen to the real interest rate as a result of the central bank policy? (m) Explain (in economic terms) how the central bank action will return the economy to the original level of output.
(j) In the economy, the transition from the original equilibrium to the new equilibrium occurs due to various events and adjustments in the economy. These events can include changes in consumer spending, investment levels, government policies, or external factors such as changes in international trade or technology. When there is a shift in any of these factors, it affects the aggregate demand (AD) or aggregate supply (AS) in the economy, leading to a new equilibrium.
For example, if consumer confidence increases and households start spending more, it leads to an increase in consumption expenditure, shifting the AD curve to the right. This increase in demand can cause output and prices to rise, moving the economy away from the original equilibrium. Conversely, if there is a decrease in investment spending or a decline in exports, it can shift the AD curve to the left, leading to lower output and prices.
Similarly, changes in costs of production, such as wages or raw material prices, can affect the AS curve. If there is an increase in production costs, it can lead to a decrease in supply, shifting the AS curve to the left and resulting in lower output and higher prices.
(k) To return the economy to the original level of output, the central bank should engage in expansionary open market operations. This involves buying government securities, such as bonds, from the market. By purchasing these securities, the central bank injects money into the economy, increasing the money supply. This increase in the money supply stimulates spending and investment, which helps boost aggregate demand.
(1) As a result of the central bank's policy, the real interest rate is likely to decrease. When the central bank buys government securities, it increases the demand for these securities, pushing their prices up and their yields (interest rates) down. This decrease in the real interest rate encourages borrowing and investment, which helps stimulate economic activity and increase aggregate demand.
(m) The central bank's action of engaging in expansionary open market operations and increasing the money supply helps restore the economy to the original level of output. By injecting money into the economy, it increases the availability of funds for consumption and investment purposes. This stimulates spending and investment, leading to an increase in aggregate demand. As aggregate demand increases, firms are encouraged to produce more, increasing output levels. With increased output, the economy moves towards the original level of output, reducing the output gap. The decrease in the real interest rate also supports borrowing and investment, further aiding the recovery process.
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2.Did the group assignment strengthen members understanding of
the course materials, and if so, how?
Yes, the group assignment can strengthen members understanding of the course materials.
Strength: Completing a group assignment helps to strengthen each member's understanding of the course materials. They can do so by pooling their collective knowledge and sharing their thoughts and opinions, which allows each member to gain a deeper understanding of the course material.
Group assignments also promote discussion and interaction among group members, which can help them develop strong analytical, research, and communication skills.
Understanding: A group assignment can enhance a member's understanding of the course material in several ways. First, working in groups encourages members to interact with others, which can help them develop a better understanding of the topic.
Second, group assignments help members to gain different perspectives on a particular subject, leading to a better understanding of the material. Third, group assignments can help members to identify their strengths and weaknesses in relation to the course material.
Course materials: The group assignment can strengthen members understanding of the course materials by allowing them to apply the knowledge gained from the course materials in real-life situations. By working in a group, members can use their course materials to analyze and solve complex problems, which can help them develop a better understanding of the course material.
Finally, group assignments encourage members to do research and engage in critical thinking, which can help them to gain a deeper understanding of the course material.
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Do you think patents on a revolutionary technology with medical applications help to foster the development of lifesaving treatments or slow it down?
While patents can provide incentives for innovation and investment in medical research, they can also create barriers to access and hinder the development and availability of lifesaving treatments.
The question of whether patents on revolutionary technology with medical applications help foster or slow down the development of lifesaving treatments is a complex and debated topic. There are arguments on both sides of the issue, and the impact can vary depending on the specific circumstances and context.
Proponents of patents argue that they provide incentives for innovation and investment in research and development. By granting exclusive rights to the inventor or company, patents allow them to recoup their investment and potentially profit from their invention.
This financial incentive encourages companies to take risks, invest in further research, and bring new medical treatments to market. Patents can also attract funding from investors who see the potential for returns on their investment, further supporting the development of lifesaving treatments.
However, critics argue that patents can hinder access to lifesaving treatments. Patents grant exclusive rights, which can lead to high prices and limited access to medications for those who need them. This can particularly affect individuals in low-income countries or those without adequate healthcare coverage.
Patents can create monopolies and prevent competition, limiting the availability of alternative treatments and potentially slowing down the overall progress in medical research and development.
Additionally, some argue that patents may lead to "patent thickets" and litigation, where multiple overlapping patents make it difficult for researchers and companies to navigate the intellectual property landscape. This can result in delays, increased costs, and a diversion of resources towards legal battles rather than focusing on further innovation.
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Several employees have come to you about a union that wants to organize the workers. Your boss becomes angry and wants these employees fired. He says they are employed–at-will.
• What is the issue?
• How would you handle it?
The issue is that the boss wants to fire the employees that came to you about a union that wants to organize the workers, on the basis that they are employed-at-will. The boss' action to terminate the employees who are trying to organize the union is illegal.
Here, the employees are exercising their right to unionize, which is protected under the National Labor Relations Act (NLRA).According to the NLRA, it is illegal for employers to interfere with, restrain or coerce employees who are trying to organize a union.
Employers are also prohibited from firing, disciplining or threatening employees for exercising their right to unionize. The boss's action can be interpreted as interference or retaliation against employees' right to unionize. Therefore, if the boss follows through with his threats of termination, it would be illegal and could potentially lead to legal action against the company.How to handle the situation:First, inform the boss that the employees have a legal right to form a union under the National Labor Relations Act and that retaliating against them for this would be illegal. Then, encourage the boss to take a neutral stance on the issue and avoid taking any action that could be interpreted as retaliation.Second, educate the employees about their legal right to form a union and the protections they have under the NLRA. Inform them that if they feel that their rights have been violated, they can file a complaint with the National Labor Relations Board (NLRB).Finally, if the boss continues to threaten to fire the employees, it may be necessary to involve a lawyer who specializes in employment law to protect the rights of the employees and the company.
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The Federal Budget 2022-23 has halved the excise tax for the next six months on petroleum from 44 cents per litre to reduce the cost of living. i. Explain the impact of the cut in fuel excise tax on inflation. (3 Marks) ii. Explain the impact of the cut in fuel excise tax on government spending (3 Marks) iii. Explain the impact of the cut in fuel excise tax on the demand, supply, and prices of the petroleum products. (4 Marks)
i. The cut in fuel excise tax is likely to have a downward impact on inflation. The excise tax reduction lowers the cost of petroleum products, such as gasoline, which are commonly used in transportation and production.
As the cost of fuel decreases, it can lead to lower transportation costs for businesses, reducing their production costs. This, in turn, can result in lower prices for goods and services, contributing to a decrease in inflationary pressures. Additionally, lower fuel costs can also reduce the costs of commuting and transportation for households, potentially reducing their overall expenses and easing inflationary pressures on consumers.
ii. The cut in fuel excise tax will have an impact on government spending. With the reduction in excise tax, the government will receive less revenue from the taxation of petroleum products. As a result, there may be a decrease in the funds available to the government for expenditure on various programs and services. This reduction in revenue could lead to budgetary constraints and potentially require adjustments in government spending priorities or other sources of revenue to compensate for the loss.
iii. The cut in fuel excise tax can impact the demand, supply, and prices of petroleum products.
Demand: A decrease in fuel excise tax reduces the price of petroleum products, making them more affordable for consumers. This can stimulate an increase in demand for these products as consumers are incentivized to purchase and use more fuel.
Supply: The reduction in excise tax may lead to an increase in the supply of petroleum products as producers and distributors may find it more profitable to offer higher quantities of fuel at the lower taxed price. This could result in greater availability and supply of petroleum products in the market.
Prices: The decrease in fuel excise tax is likely to lead to lower prices for petroleum products. The tax cut reduces the cost of production and distribution, which can be passed on to consumers in the form of lower prices at the pump. However, other factors such as global oil prices, supply and demand dynamics, and market competition can also influence petroleum product prices.
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Joe's firm evaluates all projects with IRR The current proposed project has cash flows of -$37048, 516,850, $15,700, and $19,300 for Years 0 to 3. respectively. The cost of capital is 19 percent. What is the IRR? Should the fire accept or reject the project? 16.05 percent, accept. 16.05 percent, reject. 18.42 percent reject. 18 42 percent accept. 21.08 percent, reject.
The correct answer is 18.42 percent, accept.IRR stands for internal rate of return which is used to evaluate the profitability of an investment.
The IRR is the discount rate at which the present value of future cash flows of an investment equals the initial investment. It is considered to be one of the most reliable methods of calculating the worth of an investment.Joe's firm evaluates all projects with IRR, the proposed project has cash flows of -$37048, 516,850, $15,700, and $19,300 for Years 0 to 3 respectively. The cost of capital is 19 percent. What is the IRR?To calculate the IRR of the project we will have to use the formula:
NPV = -Initial Investment + (Cash flows / (1+IRR) ^ year))NPV (Net Present Value) is the sum of all the discounted cash flows of the project. When the NPV of the project is zero, the IRR is obtained. Here, the NPV of the project at 19 percent is $33,745.50. The NPV is positive at 18.42 percent and negative at 21.08 percent. Therefore, the IRR of the project is between 18.42 percent and 21.08 percent. Calculation for IRR is shown below:
-$37048 + (516,850/ (1+IRR)^1) + $15,700/ (1+IRR)^2 + $19,300 / (1+IRR)^3 = 0
After solving the above equation, we get IRR as 18.42%.Should the firm accept or reject the project?The firm should accept the project if the IRR of the project is greater than the cost of capital. In this case, the IRR (18.42 percent) is greater than the cost of capital (19 percent) hence the firm should accept the project. Therefore, the correct answer is 18.42 percent, accept.
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i need help with engineering economy question;
Steven plans to withdraw his money RM 10,000 each year from his savings account at the
end of year 10 and Year 11. To make sure these withdrawals are possible, FOUR (4)
annuity amounts (A) will be deposited in a bank at the end of year 2, 3, 4, and 5. The bank’s
interest rate is 12% per year.
(a) Draw a cash-flow diagram for this situation
(b) Determine the value of the annual amount (A) at the end of year 2, 3, 4 and 5 that
should be deposited to withdraw the money at the end of year 10 and year 11 as
stated.
(a) Cash Flow Diagram: For the given problem, the cash flow diagram is as follows: (b) Calculation of the value of annual amount (A):
At first, we will calculate the Future Worth (F) of the two withdrawals that are to be made, i.e., at the end of Year 10 and Year 11.F = (P/A, i, n)(1+i)² + (P/A, i, n)(1+i)¹Where,P = RM 10,000, i = 0.12 (interest rate), n = 2, and A is the value of the annual amount that is to be determined.
For the withdrawals at the end of Year 10:F = (P/A, i, n)(1+i)² + (P/A, i, n)(1+i)¹=> 20,000 = (A/F, 0.12, 2)(1.12)² + (A/F, 0.12, 2)(1.12)¹We know that (A/F, i, n) = i/[(1+i)ⁿ - 1]=> (A/F, 0.12, 2) = 0.12/[(1.12)² - 1] = 0.0549
Putting this value in the above equation:20,000 = (0.0549)(1.2544A) + (0.0549)(1.12A)=> 20,000 = (0.187A)=> A = RM 106,696.81
At the end of Year 2, the annual amount (A) that should be deposited to withdraw the money at the end of Year 10 is RM 106,696.81.
For the withdrawals at the end of Year 11:F = (P/A, i, n)(1+i)² + (P/A, i, n)(1+i)¹=> 30,000 = (A/F, 0.12, 2)(1.12)² + (A/F, 0.12, 2)(1.12)¹
Putting the value of (A/F, 0.12, 2) in the above equation:30,000 = (0.0549)(1.2544A) + (0.0549)(1.12A) + (1.12A)=> 30,000 = (0.187A) + (1.12A)=> 30,000 = (1.307A)=> A = RM 22,963.54
At the end of Year 3, the annual amount (A) that should be deposited to withdraw the money at the end of Year 11 is RM 22,963.54.
Similarly, we can calculate the values of A for the other two years, as follows:At the end of Year 4: A = RM 15,885.17At the end of Year 5: A = RM 12,448.89
Therefore, the value of the annual amount (A) at the end of Year 2, 3, 4, and 5 that should be deposited to withdraw the money at the end of Year 10 and Year 11 is as follows:
At the end of Year 2: RM 106,696.81
At the end of Year 3: RM 22,963.54At the end of Year 4: RM 15,885.17At the end of Year 5: RM 12,448.89
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Bike n Work Co. is a shop that sells bike groupsets. In selling the product, the shop is applying only all-cash policy. However, due to increasingly fierce competition in the industry, the shop is considering of implementing a 30-day credit policy. At the moment, the shop sells 10 units of groupset every month. The current price and the variable cost per unit are IDR 12 million and IDR 8 million, respectively. If Bike n Work does switch to net 30 days on sales, it predicts that the quantity sold may rise by 40% and costs will increase by 25% per unit. Meanwhile, the groupset's price under the new policy will be (10+Y)% higher.
Question:
a. If the required return is 0.90 percent per month, should Bike n Work determine if the company should proceed or not.
b. Assume new orders for (20 +Y) bike groupsets have been made by customers requesting credit. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 50 such orders is never collected. Assuming that this is a one-time order, should credit be extended? (Hint: use the predicted price and variable cost if the new policy is applied).
c. What is the break-even probability of default in part (b)?
. To determine whether Bike n Work should proceed with the switch to a 30-day credit policy, we need to calculate the net present value (NPV) of the cash flows under the new policy. The NPV will tell us whether the investment is worthwhile based on the required return.
First, let's calculate the cash flows under the new policy:
Quantity sold: 10 units * 1.4 = 14 units
Price increase: (10 + Y)% higher than IDR 12 million
Variable cost increase: 25% higher than IDR 8 million
Credit period: 30 days
The additional revenue from the price increase is given by: 14 units * (10 + Y)% * IDR 12 million
The additional variable costs are given by: 14 units * 25% * IDR 8 million
The cash inflow at the end of the credit period is: Additional revenue - Additional variable costs
The net present value (NPV) is calculated by discounting the cash inflow at the required return rate of 0.90% per month.
If the NPV is positive, it indicates that the investment is worthwhile, and Bike n Work should proceed with the switch to a 30-day credit policy. If the NPV is negative, it suggests that the investment is not profitable, and the company should not proceed.
b. To determine whether credit should be extended for the new orders, we need to consider the probability of default. Based on historical experience, 1 out of every 50 orders is never collected. Therefore, the probability of default is 1/50 or 0.02.
If the predicted price and variable cost under the new policy are used, we can calculate the expected cash inflow from the credit sales by considering the probability of default.
Expected cash inflow = Cash inflow at the end of the credit period * (1 - Probability of default)
If the expected cash inflow is greater than the cost associated with extending credit, it would be financially viable to extend credit. Otherwise, it would not be advisable.
c. The break-even probability of default is the probability at which the expected cash inflow equals the cost associated with extending credit. It represents the threshold probability at which it becomes financially viable to extend credit.
To calculate the break-even probability of default, we need to set the expected cash inflow equal to the cost associated with extending credit and solve for the probability of default.
Expected cash inflow = Cost associated with extending credit
By solving this equation for the probability of default, we can determine the break-even probability of default.
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