Adding a constant amount to each lottery prize does not change risk attitudes for cara utility functions.
(i) using the utility function u(x) = 1 - e⁽⁻ᵃˣ⁾, where a is a positive constant, we can demonstrate the impact of adding a constant amount to each lottery prize on risk attitudes for constant absolute risk aversion (cara) utility functions.
for a given lottery p, let x = p denote the lottery itself. let p' denote a lottery that adds an amount z to each prize in p. we want to show that 8x + zzp' holds.
using the utility function u(x), the utility of lottery p is given by:u(p) = ∑(i=1 to n) [1 - e^(-ap(i))] = 1 - ∑(i=1 to n) e^(-ap(i))
now, consider the utility of lottery p':
u(p') = ∑(i=1 to n) [1 - e^(-a(p(i) + z))] = ∑(i=1 to n) [1 - e^(-ap(i))e⁽⁻ᵃz⁾]
expanding the expression, we have:u(p') = ∑(i=1 to n) [1 - e^(-ap(i))]e⁽⁻ᵃz⁾ = (1 - ∑(i=1 to n) e^(-ap(i)))e⁽⁻ᵃz⁾
comparing u(p) and u(p'), we observe that u(p') is obtained by multiplying u(p) by e⁽⁻ᵃz⁾. this implies that the risk attitudes remain unchanged, as the multiplier e⁽⁻ᵃz⁾ affects the utility values proportionally across all prizes, without altering the ordering of the lotteries. (ii) in the case of constant relative risk aversion (crra) utility functions, represented by the utility function u(x) = x⁽¹⁻γ⁾ / (1-γ), where γ is the coefficient of relative risk aversion, we can show that proportional changes in prizes do not affect risk attitudes.
for a given lottery p, let dx = p denote the lottery itself. let p' denote a lottery that multiplies each prize in p by a positive constant a. we want to show that dx = axzp' holds.
using the utility function u(x), the utility of lottery p is given by:
u(p) = ∑(i=1 to n) [p(i)⁽¹⁻γ⁾ / (1-γ)]
now, consider the utility of lottery p':u(p') = ∑(i=1 to n) [(ap(i))⁽¹⁻γ⁾ / (1-γ)] = a⁽¹⁻γ⁾ ∑(i=1 to n) [p(i)⁽¹⁻γ⁾ / (1-γ)]
comparing u(p) and u(p'), we observe that u(p') is obtained by multiplying u(p) by a⁽¹⁻γ⁾. this implies that the risk attitudes remain unchanged, as the multiplier a⁽¹⁻γ⁾ affects the utility values proportionally across all prizes, without altering the ordering of the lotteries.
Learn more about lottery here:
https://brainly.com/question/31362089
#SPJ11
a) Why can we think of open market operations as money creation?
(b) What is the difference between borrowed and non-borrowed reserves?
(c) Suppose a crisis in the banking sector shook consumer confidence in banks.
How might that affect the money multiplier? Would this affect the ability of
the Fed to change the total money supply? Explain
(a) Open market operations can be thought of as money creation because when the central bank, such as the Federal Reserve in the United States, purchases government securities from commercial banks or the public, it pays for those securities by creating new money.
The central bank effectively increases the reserves of the banking system, which in turn allows banks to create new loans and expand the money supply.
(b) Borrowed reserves refer to funds that banks borrow from the central bank, usually through the discount window facility, to meet their reserve requirements or address short-term liquidity needs.
Non-borrowed reserves, on the other hand, are reserves that banks hold without having borrowed from the central bank. They can come from sources such as deposits, interest earnings, or previous borrowing that has been repaid.
(c) If a crisis in the banking sector shakes consumer confidence in banks, it may lead to increased withdrawals of deposits from banks. This would result in a decrease in the reserves held by banks and a contraction in the money supply.
The money multiplier, which represents the relationship between reserves and the money supply, would be affected as the withdrawal of deposits reduces the potential for banks to create new loans.
This would also impact the ability of the Fed to change the total money supply. With reduced reserves and a lower money multiplier, the effectiveness of open market operations and other monetary policy tools in influencing the money supply would be limited. The Fed may need to take additional measures, such as providing liquidity support to banks or implementing measures to restore consumer confidence, to mitigate the adverse effects on the money supply and stabilize the banking sector.
Learn more about the mechanisms of open market operations, reserve management, and the impact of crises on the money supply to gain a deeper understanding of these concepts here:
brainly.com/question/16260032
#SPJ11
You are requested to answer the following three questions as required. Describe the life cycle of a family business (staring, growing, maturity, decline phases).
The life cycle of a family business typically consists of four phases: starting, growing, maturity, and decline.
1. Phase:During the starting phase, a family business is established. It begins with an idea or a vision, often driven by the entrepreneurial spirit of the founding family members. In this phase, the business is characterized by limited resources, high risks, and a strong focus on survival. The family members usually take on multiple roles and responsibilities, working together to lay the foundation for the business.
2. Growing Phase:
As the family business gains traction and starts to grow, it enters the second phase. During this phase, the business experiences expansion in terms of customer base, market reach, and product/service offerings. The family members may start hiring non-family employees and implementing formal structures and processes. This phase requires strategic planning, professional management, and the ability to adapt to market changes.
3. Maturity Phase:In the maturity phase, the family business has established itself as a stable and profitable enterprise. It has achieved a significant market share and developed strong brand recognition. The business operations become more structured, and the roles and responsibilities of family members are more defined. Succession planning becomes critical, as the older generation prepares to pass on leadership to the next generation. The focus is on maintaining and enhancing the business's competitive position and profitability.
4. Decline Phase:
In the decline phase, the family business faces challenges that can lead to its decline or even closure. Factors such as increased competition, industry changes, succession issues, or poor strategic decisions can contribute to this phase. If not properly managed, the business may experience declining revenues, profitability, and market relevance. In some cases, the decline phase may be followed by reinvention or rejuvenation efforts, while in others, the business may cease to exist.
It's important to note that not all family businesses follow the same trajectory or experience each phase in the same way. External factors and internal dynamics can influence the progression through the life cycle. Successful family businesses anticipate and adapt to these challenges, ensuring long-term sustainability and continuity across generations.
Learn more about business here:
https://brainly.com/question/15826604
#SPJ11
Pick one of the games and or models that we used during the course apply it to a real setting and submit the results and the strategy in a brief report (2-3 pages) and 2-3 power point slides summarizing the scenario and the results. This option is for a SINGLE or AT MOST 2 students. Games and methods that can be Sim-Quick, SCREAM, Project management game
The SimQuick game can be applied to a real setting to provide decision-making insights. SimQuick is a software program used for simulation modeling.
It assists organizations in identifying and solving problems using simulations. SimQuick allows managers to build, analyze, and interpret models using a simple interface.
SimQuick can be applied to a real setting in the following way:Suppose an organization is experiencing slow sales in a particular product line. Using SimQuick, a model can be created to simulate the impact of different variables on sales of that product line. The model can consider various variables, such as pricing, promotion, and advertising.
The strategy that can be employed using the SimQuick game is to:
1. Identify the problem: The first step is to identify the problem that needs to be addressed. This can be a situation where a particular product line is experiencing slow sales.
2. Build a model: A model can be built using SimQuick to simulate the impact of different variables on the sales of the product line. The model should be designed to include all relevant variables that may affect sales.
3. Run the model: The model should be run with different input values to identify the impact of different variables on sales. The model can be run several times to identify the best course of action to increase sales.
4. Analyze the results: From the output of the model, a decision can be made on the best course of action to increase sales. The output can also be used to understand the impact of each variable on sales.
5. Implement the decision: The decision made from the output of the model should be implemented to increase sales.
The results of the SimQuick game can be summarized in 2-3 power point slides as follows:
Slide 1: Introduce the problem and the simulation model used.
Slide 2: Present the output of the simulation model and the impact of each variable on sales.
Slide 3: Highlight the best course of action to increase sales based on the output of the model.
In conclusion, the SimQuick game can be applied to real settings to provide decision-making insights. A strategy that can be employed using the SimQuick game involves identifying the problem, building a model, running the model, analyzing the results, and implementing the decision.
The results of the SimQuick game can be summarized in 2-3 power point slides.
To know more on Promotion visit:
https://brainly.com/question/15331436
#SPJ11
According to research, employees will have a more positive mood on sunny days as opposed to rainy days.
True
False
According to the research, it is true that employees will have a more positive mood on sunny days as compared to rainy days. The weather is an external factor that affects the way people think, feel, and behave.
Weather has been found to have an impact on mood and performance. The impact of the weather can be seen on the behavior of the employees. In general, it has been found that employees tend to be more productive, happy, and satisfied with their job on sunny days. On rainy days, however, employees tend to be more irritable, anxious, and unproductive. This is due to the fact that sunny weather has a positive impact on mood and attitude while rainy weather has a negative impact on mood and attitude. Therefore, organizations need to take into account the impact of the weather on the performance of employees. They need to create an environment that is conducive to productivity and well-being.
To know more about employees
https://brainly.com/question/27404382
#SPJ11
Order qualifiers are:
a. Terms and conditions of the product to be able to enter specific market.
b. Competitors in the market you entered
C. Supply chain problem
d. Suppliers who supplies raw material
Order qualifiers are the terms and conditions of the product that need to be met for the product to be able to enter a specific market.What are order qualifiers?
Order qualifiers are the minimal set of requirements that a product must meet to be accepted by a customer. This implies that without satisfying these basic needs, the product will never succeed in the market. Examples of order qualifiers are basic requirements such as cost, quality, lead times, and compliance with industry norms. Order qualifiers assist in determining which customers to target and, as a result, where to direct a company's resources.What is "more than 250" referring to?The question does not provide context for what "more than 250" is referring to.
Please provide additional information so that I can assist you with your question more accurately.
To know more about requirements visit:
https://brainly.com/question/7565399
#SPJ11
Which of the following statements is true?
Select one:
a. Different brands in the same category will generally receive the same satisfaction scores
b. Different brands in the same category will generally receive different satisfaction scores
c. Brands in different categories will get very similar satisfaction scores
d. There are no generalisable patterns in satisfaction scores
The following statement is true: Different brands in the same category will generally receive different satisfaction scores.
What is customer satisfaction?
Customer satisfaction is a term used to describe a customer's degree of satisfaction with a product or service. It is a term that is used to describe a customer's experience with a product or service. Customer satisfaction is influenced by a variety of factors, including the customer's expectations, the quality of the product or service, the price of the product or service, the level of customer service provided, and the customer's overall experience with the product or service.
What is a brand?
A brand is a product, service, or company that has a unique identity and personality. Brands are often used to differentiate similar products or services from one another, and they can be a powerful tool for building customer loyalty and creating a competitive advantage. Different brands in the same category will generally receive different satisfaction scores.
Therefore, option b, "Different brands in the same category will generally receive different satisfaction scores," is the correct answer.
To know more about customer satisfaction please visit.....
brainly.com/question/13085163
#SPJ11
In the long run, if firms in a particular market are earning positive profits then what should happen? Other firms will enter that market. Firms will exit that market. The firms will lay off workers. The firms will each create greater quantities of output. Question 8 (1 point) As firms enter a market the price in that market must increase. True False A00
If firms in a particular market are earning positive profits in the long run, other firms will enter that market. The correct option is “Other firms will enter that market. ”What is the Long Run in Economics ?
The long run in economics is an interval of time during which all factors of production and costs can be altered. In this sense, the long run refers to a duration during which a business can change its production capacity. It's not the same as the short run, which is the time it takes for a business to change its production capacity.
If companies in a specific market are earning positive profits in the long term, it indicates that the market is highly profitable. When such information becomes public, other businesses will be attracted to that market, increasing the competition. This will cause existing businesses to lose some of their market share, lowering their profits.
Know more about Long Run in Economics:
https://brainly.com/question/32762676
#SPJ11
Question 5. Time Attemp 1 Hou Suppose the capacity of each machine in Station 1 in the Littlefield Technologies game is 17 contracts per day. Suppose there are 5 machines in this station. The utilization of this station is 80%. On average, there are 20 contracts in this station (either in the waiting line or on the machines). Compute the flow time in this station in hours (assume a day is 24 hours). Enter your answer in terms of HOURS with ONE decimal point.
Flow Time in station 1 in hours = 2.4 hours
The formula to calculate Flow time is,Flow Time = Work-in-Process (WIP) / Throughput
First, let's calculate the Throughput of Station 1 which is given by the formula,
Throughput = Capacity x Utilization
Throughput = 17 x 5 x 80%
Throughput = 68 contracts/day
Now, calculate the Work-in-Process (WIP) of Station 1 which is given by,
Work-in-Process (WIP) = Throughput x Flow TimeWork-in-Process (WIP) = 68 x Flow Time
Now, we have to find Flow Time. Let's calculate that.Finally, the formula for Flow Time becomes,
Flow Time = WIP / Throughput
20 = (68 × Flow Time) / 100
Flow Time = 20 × 100 / 68
Flow Time = 29.41 hours (approx)
Therefore, the Flow Time in Station 1 in hours (approx) = 29.41 / 12 hoursFlow Time in station 1 in hours = 2.4 hours (approx)
To know more about Flow Time visit:
https://brainly.com/question/31428789
#SPJ11
In December, Sara’s Sodas produced 4.5 million liters of the beverage. Manufacturing overhead was $1,425,000 and the cost per liter was $0.45. Labor costs were 25 percent of materials cost.
Required:
a. Calculate the materials cost for December. (Enter your answer in dollars not in millions.)
b. Calculate the labor cost for December. (Enter your answer in dollars not in millions.)
The materials cost for December is $2,025,000 and the labor cost for December is $506,250.
Given Information: In December, Sara’s Sodas produced 4.5 million liters of the beverage. Manufacturing overhead was $1,425,000 and the cost per liter was $0.45. Labor costs were 25 percent of materials cost.
Materials Cost: Cost per liter = $0.45
Therefore, the cost of 4.5 million liters of the beverage is:
Cost of 4.5 million liters of the beverage = 4.5 million × $0.45 = $2,025,000
Therefore, the materials cost for December is $2,025,000.b.
Labor Cost: It is given that, Labor costs were 25 percent of materials cost.
Materials cost = $2,025,000
Therefore, Labor cost = 25% of $2,025,000= $506,250
Hence, the labor cost for December is $506,250.
The materials cost for December is $2,025,000 and the labor cost for December is $506,250.
To learn more about Labor Cost click on the given link:
https://brainly.com/question/26527325
#SPJ11
how will the case of lincoln stark impact your care with future clients?
The case of Lincoln Stark will have a significant impact on my care with future clients by reinforcing the importance of thorough and accurate documentation, communication, and adherence to ethical standards.
The case of Lincoln Stark involved a situation where there were serious consequences due to a lack of proper care and attention. It serves as a reminder of the potential risks and liabilities that professionals face in their work. As a result, I will be even more diligent in ensuring that all necessary steps are taken to provide quality care to future clients.
Moving forward, I will prioritize clear and effective communication with clients, ensuring that their needs and concerns are properly understood and addressed.
know more about Lincoln Stark here:
https://brainly.com/question/32826297
#SPJ11
In 2020, Juergen made after-tax contributions of $24,300 to his employer's qualified plan. In August 2021, he requested a nonperiodic distribution. At that time, his account balance was $78,000 and he received a one-time distribution of $13,000. How much of the distribution is tax-free?
$0
$4,050
$11,300
$13,000
The tax-free amount of Juergen’s distribution is option B) $4,050.
In 2020, Juergen made after-tax contributions of $24,300 to his employer's qualified plan. In August 2021, he requested a nonperiodic distribution. At that time, his account balance was $78,000 and he received a one-time distribution of $13,000. We need to calculate how much of the distribution is tax-free. First, we need to calculate Juergen’s basis or investment in his employer’s qualified plan. For that, we will use the following formula:
Basis = Total After-tax Contributions – Total Non-taxable Distributions
Juergen’s basis will be:
Basis = $24,300 - $0
Basis = $24,300
Now, we can calculate how much of the distribution is tax-free.
Tax-Free Amount = (Distribution Amount x Basis) ÷ Account Balance
Tax-Free Amount = ($13,000 x $24,300) ÷ $78,000
Tax-Free Amount = $4,050
Thus, the correct option is $4,050.
To learn more about distribution, visit:
https://brainly.com/question/30467880
#SPJ11
Entries for Equity Investments: Less than 20% Ownership Instructions Chart of Accounts Journal Instructions On February 22, Triangle Corporation acquired 7,400 shares of the 220,000 outstanding common stock of Jupiter Coat $12 plus commission charges of $195. On June 1, a cash dividend of $2.35 per share was received on November 12, 3,200 shares were sold at $50 less commission charges of $165. Al me end of the accounting period on December 31, the tur value of the remaining 4,200 shares of Jupher Company's stock was $42 53 por share Required: Using the cost method, journalize the entries for (a) the purchase of stock, (b) the receipt of dividends to the sale of 3,200 shares, and the change in fair value. Refer to the chart of accounts for the exact wording of the account is CNOW Jumals do not use lines for journal explanations. Every line on a journal page is used for debitor credit antries. CNOW journals will automatically inderat acreditentry when a credi amount is entered in your computations, round per share amounts to two decimal places. When required, round final answers to the nearest dollar
Using the cost method, the journal entries for Triangle Corporation's equity investments in Jupiter Company are as follows:
(a) Purchase of stock:
The cost of acquiring 7,400 shares of Jupiter Company stock at $12 per share is $88,800 ($12 * 7,400). The commission charges of $195 are added to the cost. Therefore, the journal entry is:
Debit: Investment in Jupiter Company Stock $88,980
Credit: Cash $88,785
Credit: Commission Charges $195
(b) Receipt of dividends:
The cash dividend received on 7,400 shares at $2.35 per share is $17,390 ($2.35 * 7,400). The journal entry is:
Debit: Cash $17,390
Credit: Dividend Revenue $17,390
(c) Sale of shares and change in fair value:
The sale of 3,200 shares at $50 per share generates proceeds of $160,000 ($50 * 3,200). The commission charges of $165 are subtracted from the proceeds. The remaining 4,200 shares have a fair value of $177,366 ($42.53 * 4,200). The change in fair value is calculated as $177,366 - $88,980 (initial cost of 7,400 shares). Therefore, the journal entry is:
Debit: Cash $158,760
Credit: Investment in Jupiter Company Stock $84,210
Credit: Gain on Sale of Investments $4,290
Credit: Loss on Change in Fair Value of Investments $75
To know more about stock click here: brainly.com/question/31476517
#SPJ11
Sixteen year old Marsha signs a written contract for the purchase of a car from Joss Motors of La Grande for $3500. She uses the car to drive back and forth to her job at Burger Bell in Pendleton. A year after the purchase, the car's engine blows up. Marsha calls up Joss Motors and tells them to send her money back. She decided she does not want the car. Joss refuses and Marsha sues to rescind the contract. A court will most likely:
Group of answer choices
A. Enforce the contract because Marsha impliedly ratified the contract by driving the car for a year.
B. Enforce the contract if Marsha looked 18 at the time she entered into the contract.
C. Not enforce the contract because Marsha can disaffirm her contractual obligations.
D. Not enforce the contract because it violated the Statute of Frauds.
Marsha is a minor, and therefore, she can disaffirm the contract at any time before she reaches the age of majority or within a reasonable period of reaching the age of majority. As a result, a court is most likely to not enforce the contract.
Marsha, who is sixteen years old, signed a written contract to purchase a car from Joss Motors of La Grande for $3500. A year after the purchase, the car's engine blew up. Marsha called Joss Motors and demanded her money back. She no longer wanted the car. Joss Motors refused, and Marsha filed a lawsuit to void the contract. A court is most likely to not enforce the contract because Marsha can disaffirm her contractual obligations. The answer is option C. Minors are not legally obligated to honor their contractual obligations, and they can void any contract they enter into without facing any legal repercussions. A minor who enters into a contract is entitled to disaffirm the contract before reaching the age of majority or within a reasonable time of reaching the age of majority.In the given scenario, Marsha is a minor, and therefore, she can disaffirm the contract at any time before she reaches the age of majority or within a reasonable period of reaching the age of majority. As a result, a court is most likely to not enforce the contract.
learn more about contract
https://brainly.com/question/25983486
#SPJ11
Identify and briefly explain the capital budgeting techniques. Which is the best method? Why?
Capital budgeting is a process that involves selecting a few of long-term investment plans that are in line with the company's goals and objectives. There are several methods that are used in capital budgeting.
These methods are net present value (NPV), internal rate of return (IRR), profitability index (PI), payback period (PBP), and discounted payback period (DPBP).
Let's discuss each method briefly.
Net Present Value (NPV)Net Present Value (NPV) is a capital budgeting method that considers the time value of money and calculates the present value of cash inflows less the present value of cash outflows.
Internal Rate of Return (IRR): The Internal Rate of Return (IRR) method is a capital budgeting method that determines the rate at which the net present value of an investment equals zero.
Profitability Index (PI)Profitability Index (PI) is a capital budgeting method that evaluates the worthiness of a project by comparing the present value of the expected cash inflows to the present value of the expected cash outflows.
Know more about capital budgeting here:
https://brainly.com/question/14020241
#SPJ11
outlines the inherent rights of everyone in 20 articles. It was adopted by the United Nations and is regarded as inherent dignity and of the equal and inalienable rights of all members of the human race.
Group of answer choices
Universal Declaration of Human Rights
The constitution
Affordable Care Act
Universal Declaration for Animal Rights
uxury care aka Boutique medicine focuses on making better access to low income residents and the elderly.
Group of answer choices
True
False
The inherent rights of everyone are outlined in 20 articles. It was adopted by the United Nations and is regarded as inherent dignity and of the equal and inalienable rights of all members of the human race. The correct option is: Universal Declaration of Human Rights.
The term that refers to this is the Universal Declaration of Human Rights.
2. Luxury care aka Boutique medicine focuses on making better access to low income residents and the elderly. This statement is false. Boutique medicine is the equivalent of luxury medicine.
The reason?It is a personalized medical practice that offers a high level of services and privileges, like shorter waiting times, exclusive care, access to a doctor via phone, email, or text messages, and much more.
It is different from traditional health care where patients have to go through a long and tedious process to see a doctor.
To know more on Boutique visit:
https://brainly.com/question/14228051
#SPJ11
Value is best defined as the: ______. A)worth of an asset to an individual. B)accounting measure of an asset's worth. C)amount of money needed to acquire an asset. D)none of the above.
The value is best defined as the: A) worth of an asset to an individual. Value, in the context of an asset, refers to the subjective perception of its worth or usefulness to an individual or entity.
It represents the importance, desirability, or utility that the asset holds for the specific individual or entity.
While accounting measures and the amount of money needed to acquire an asset can provide some indicators of value, they do not capture the full concept of value. Accounting measures, such as book value or fair value, are based on specific criteria and may not necessarily reflect the subjective worth of an asset to an individual or entity. Similarly, the amount of money needed to acquire an asset may be influenced by market conditions, negotiations, or other factors that do not necessarily align with the intrinsic value or worth of the asset.
Ultimately, value is a subjective concept that takes into account various factors such as utility, desirability, scarcity, and individual preferences or needs.
Learn more about individual here
https://brainly.com/question/28187988
#SPJ11
Match the following ✓ Selling goods without proper description, such as a shop owner selling clothes with unspecified sizes The Exchange of 10 kg A1 rice with 14 kg Basmathi rice and the delivery is made in the next two day Purchase of fruits without peeling or cutting off the skin to see the inside ✓ 5 kg of rice exchanged with RM 10 on deferred payment terms A. Gharar Fahish B. Riba Alfadhl C. Gharar-free DRiba-free E. Gharar Yasir
In the given scenarios, the following matches can be made:
Selling goods without proper description: Gharar Fahish
Exchange of 10 kg A1 rice with 14 kg Basmathi rice: Gharar-free
Purchase of fruits without peeling or cutting off the skin: Gharar Yasir
5 kg of rice exchanged with RM 10 on deferred payment terms: Riba Alfadhl
Selling goods without proper description, such as a shop owner selling clothes with unspecified sizes, is considered Gharar Fahish. Gharar refers to uncertainty or ambiguity in a transaction, and Gharar Fahish represents excessive uncertainty or deception.
The exchange of 10 kg A1 rice with 14 kg Basmathi rice, with delivery to be made in the next two days, does not involve any element of uncertainty or ambiguity. Hence, it can be categorized as Gharar-free.
Purchasing fruits without peeling or cutting off the skin to see the inside is also considered Gharar Yasir. It involves an element of uncertainty as the buyer is unsure about the quality or condition of the fruits hidden under the skin.
The exchange of 5 kg of rice with RM 10 on deferred payment terms implies the presence of Riba Alfadhl. Riba refers to usury or an unjust increase in a transaction, and Riba Alfadhl specifically refers to an excess in the exchange of similar commodities.
These categorizations are based on Islamic finance principles that aim to ensure fair and ethical practices in economic transactions.
Learn more about Islamic finance here:
https://brainly.com/question/29490162
#SPJ11
Golfers, Inc. (GI) manufactures golf-related equipment including golf balls. This year’s expected production of golf balls is 100,000 packs (each consisting of four golf balls). Cost data are as follows:
Per Pack 100,000 Packs
Product costs directly traceable to balls:
Direct materials $ 2.50 $ 250,000
Direct labour 1.20 120,000
Variable manufacturing overhead 0.15 15,000
Fixed manufacturing overhead 60,000
General allocated overhead 34,000
$ 479,000
The full cost of one pack of golf balls is $4.79. GI has received an offer from an outside supplier to supply any desired quantity of balls at a price of $5.85 per pack of four golf balls. The cost accounting department has provided the following information:
The direct fixed manufacturing overhead is the cost of leasing the machine that stamps out the balls. The machine can produce a maximum of 500,000 balls per year. If the balls are bought, the machine will no longer be needed.
No other costs will be affected.
Required:
1. Prepare an analysis showing whether GI would be better off making or buying the balls at a projected volume of 100,000 packs (400,000 golf balls). (Round "Per Unit" answers to 2 decimal places.)
per unit make buy difference
purchase
Direct Material
Direct Labour
varaible manufacturing overhead
fixed manuacturing overhead
common cost allocated to product line
total cost
2-a. At what volume would GI be indifferent between making and buying? (Do not round intermediate calculations and round your final answer to nearest whole number.)
indifference point ________________? packs
2-b. What does the indifference point indicate? (Do not round intermediate calculations and round your final answers to nearest whole number.)
it will cost more to buy/make? if the quality exceeds ______________ packs
it will cost more to buy/make if the quality exceed -------------- packs
The analysis shows that GI would be better off buying the golf balls rather than making them at a projected volume of 100,000 packs. The indifference point is at a volume of 39,000 packs, indicating the production level at which GI can choose between making and buying without any cost advantage.
1. Analysis showing whether GI would be better off making or buying the balls at a projected volume of 100,000 packs (400,000 golf balls):per unit make buy differencePurchase:$5.85Direct Material$0.625 $0.625 $0Direct Labor$0.3 $0.3 $0Variable manufacturing overhead$0.0375 $0.0375 $0Fixed manufacturing overhead $0.15 $0 $0.15Common cost allocated to product line$0.085 $0.085 $0Total cost$1.1975 $1.0975 $0.10Difference between making and buying$1.1975 - $1.0975 = $0.10, in favor of buying. Therefore, GI would be better off buying the balls than making them at a projected volume of 100,000 packs (400,000 golf balls).2-a. At what volume would GI be indifferent between making and buying?To find the indifference point, set the two costs equal to each other and solve for X.GI's Cost = Supplier's CostGI's Cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead + Common cost allocated to product line + Purchase costSupplier's Cost = Purchase Cost * Number of unitsX = (Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead + Common cost allocated to product line) / (Purchase Cost - Selling price per unit)Where, Direct materials = $2.50 per packDirect labor = $1.20 per packVariable manufacturing overhead = $0.15 per packFixed manufacturing overhead = $60,000Common cost allocated to product line = $34,000Purchase cost = $5.85 per packSelling price per unit = $4.79 / 4 = $1.1975GI's Cost = ($2.50 + $1.20 + $0.15 + $60,000 + $34,000) / 100,000 = $4.8075 per packSupplier's Cost = $5.85X = ($2.50 + $1.20 + $0.15 + $60,000 + $34,000) / ($5.85 - $1.1975)X = 39,000 packs (rounded to the nearest whole number)Therefore, at a volume of 39,000 packs, GI would be indifferent between making and buying.2-b. What does the indifference point indicate?The indifference point indicates the volume of production at which GI can choose between buying and making without any cost advantage. It means that if GI's projected volume is less than 39,000 packs, they would be better off buying the balls rather than making them because they would save $0.10 per pack if they buy. But if their projected volume is more than 39,000 packs, they would be better off making the balls because they would save $0.10 per pack if they make.
Learn more about production here :-
https://brainly.com/question/3246847
#SPJ11
Post the following transactions to the Cash T-account and calculate the ending balance. The beginning balance in the Cash T-account is $5,000. 1. Receive cash from customers, $15,000. 2. Pay cash for employee salaries, $9,000. 3. Pay cash for rent, $3,000. 4. Receive cash from sale of equipment, $8,000. 5. Pay cash for utilities, $1,000. 6. Receive cash from a bank loan, $4,000. 7. Pay cash for advertising, $7,000. 8. Purchase supplies on account, $3,000. Transaction (3) is opt post to becaus Cash 5,000 15,000 9,000 (2) 9,000 8,000 3,000 (3) (6) 4,000 1,000 (s) 7,000 (7) 12,000 (¹) € Page 90 a purchase on account does not (2) Involve cash
To calculate the ending balance in the Cash T-account, let's post the transactions one by one:
Receive cash from customers, $15,000:
Debit: $15,000
Credit: None
Ending balance: $5,000 + $15,000 = $20,000
Pay cash for employee salaries, $9,000:
Debit: None
Credit: $9,000
Ending balance: $20,000 - $9,000 = $11,000
Pay cash for rent, $3,000:
Debit: None
Credit: $3,000
Ending balance: $11,000 - $3,000 = $8,000
Receive cash from sale of equipment, $8,000:
Debit: $8,000
Credit: None
Ending balance: $8,000 + $8,000 = $16,000
Pay cash for utilities, $1,000:
Debit: None
Credit: $1,000
Ending balance: $16,000 - $1,000 = $15,000
Receive cash from a bank loan, $4,000:
Debit: $4,000
Credit: None
Ending balance: $15,000 + $4,000 = $19,000
Pay cash for advertising, $7,000:
Debit: None
Credit: $7,000
Ending balance: $19,000 - $7,000 = $12,000
Purchase supplies on account, $3,000:
Debit: None
Credit: None (no immediate impact on cash)
Ending balance remains at $12,000
The ending balance in the Cash T-account after all the transactions is $12,000.
To learn more about loan: brainly.com/question/30015539
#SPJ11
1. Company owned a machine that was bought on January 1, 2013 for P8,000,000. The machine was estimated to have a useful life of five years and a residual value of P500,000. The entity used the sum of years' digits method of depreciation. On January 1, 2016, the entity determined that the total useful life of the machine should have been four years and the residual value is P600,000. What amount should be recorded as depreciation expense on the machine for 2016?
2. Purchased on October 1, 2018 an equipment for P800,000. The equipment had an estimated useful life of 8 years. The estimated salvage value was estimated at P50,000 at the end of its useful life. The equipment is being depreciated using the double-declining balance method. What is the amount of depreciation to be charged against 2019 income?
3.Corporation purchased land for P6,000,000. The company expected to extract 1 million tons of mine from this land over the next 20 years at which time, residual value shall be zero. During the first 2 years of the mine's operations, 30,000 tons were mined each year and sold for 80 per ton. The estimate of the total remaining lifetime capacity of the mine was raised to 1,200,000 tons at the start of the third year and the residual value was estimated to be P480,000. During the third year, 50,000 tons were mined and sold for P85 per ton. How much would be the depletion for the third year?
1. The amount recorded as depreciation expense on the machine for 2016 should be **P1,350,000**.
Explanation: The sum of years' digits method calculates depreciation expense based on the remaining useful life of the asset. In this case, the total digits for the machine's useful life are (5 + 4 + 3 + 2 + 1) = 15. For 2016, the remaining useful life is 4 years, so the depreciation expense is calculated as (4/15) * (P8,000,000 - P600,000) = P1,350,000.
2. The amount of depreciation charged against 2019 income for the equipment is **P200,000**.
Explanation: The double-declining balance method applies a constant rate of depreciation to the asset's carrying value. In this case, the rate is (2 / 8) = 25% per year. For 2019, the depreciation expense is calculated as 25% * (P800,000 - P50,000) = P187,500. However, since the depreciation expense should not exceed the carrying value of the asset, the amount charged against 2019 income will be P187,500, which is less than the carrying value.
3. The depletion for the third year would be **P1,430,000**.
Explanation: Depletion expense is calculated based on the units of the resource extracted and sold. In the first 2 years, 30,000 tons were mined and sold each year. In the third year, 50,000 tons were mined and sold. The total tons mined after the third year are (30,000 + 30,000 + 50,000) = 110,000 tons. The total remaining capacity of the mine after the third year is (1,200,000 - 110,000) = 1,090,000 tons. The depletion rate per ton is calculated as (P6,000,000 - P480,000) / 1,200,000 tons = P4.40 per ton. Therefore, the depletion expense for the third year is 50,000 tons * P4.40 = P220,000.
Learn more about depreciation expense here:
https://brainly.com/question/17440027
#SPJ11
The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing Variable manufacturing overhead costs $186.000 Fixed manufacturing overhead costs $124,000 Normal production level in direct labor hours 62.000 Normal production level in units 31,000 During the year, 30,000 units were produced 64,000 hours were worked, and the actual manufacturing overhead costs were $322.000. The actual fixed manufacturing overhead costs did not deviate from the budgeted foxed manufacturing overhead costs Overhead is applied on the basis of direct labor hours Compute the total fixed, and variable predetermined manufacturing overhead rates Item Rate Variable Overhead S Fixed Overhead Compute the total Reed and variable predetermaacturing worladates Here Rate Varble Overd FdOver TutOver eTextbook and Media Compute the total controlate and volume overhead variances identify whether the varianon Favorable of Unforble Total Overheat Variance Overhead Controllable Variance S Overhead Volume Variance ODE
Given:Variable manufacturing overhead costs = $186.000Fixed manufacturing overhead costs = $124,000Normal production level in direct labor hours = 62,000Normal production level in units = 31,000Actual manufacturing overhead costs were $322.00030,000 units were produced64,000 hours were workedCompute the total fixed and variable predetermined manufacturing overhead rates:
Variable Overhead = Variable Manufacturing Overhead Costs / Normal Production Level in Direct Labor Hours= $186,000 / 62,000= $3 per Direct Labor HourFixed Overhead = Fixed Manufacturing Overhead Costs / Normal Production Level in Units= $124,000 / 31,000= $4 per UnitCompute the Total Overhead applied based on predetermined rates:
Variable Overhead Applied = Variable Overhead Rate * Actual Direct Labor Hours Worked= $3 per Direct Labor Hour * 64,000 Direct Labor Hours= $192,000Fixed Overhead Applied = Fixed Overhead Rate * Actual Units Produced= $4 per Unit * 30,000 Units Produced= $120,000Total Overhead Applied = Variable Overhead Applied + Fixed Overhead Applied= $192,000 + $120,000= $312,000
Compute the Total Overhead Variance:Total Overhead Variance = Actual Overhead - Overhead Applied= $322,000 - $312,000= $10,000Compute the Overhead Controllable Variance:Actual Variable Overhead = Variable Manufacturing Overhead Costs= $186,000Budgeted Variable Overhead = Variable Overhead Rate * Actual Direct Labor Hours Worked= $3 per Direct Labor Hour * 64,000
Direct Labor Hours= $192,000Overhead Controllable Variance = Actual Variable Overhead - Budgeted Variable Overhead= $186,000 - $192,000= -$6,000 (Unfavorable)Compute the Overhead Volume Variance:Budgeted Fixed Overhead = Fixed Overhead Rate * Actual Units Produced= $4 per Unit * 30,000 Units Produced= $120,000Overhead Volume Variance = Total Overhead Variance - Overhead Controllable Variance= $10,000 - (-$6,000)= $16,000 (Favorable)
Hence, the answers to the given questions are:Variable Overhead Rate = $3 per Direct Labor Hour Fixed Overhead Rate = $4 per Unit Variable Overhead Applied = $192,000Fixed Overhead Applied = $120,000Total Overhead Variance = $10,000Overhead Controllable Variance = -$6,000 (Unfavorable)Overhead Volume Variance = $16,000 (Favorable)
For more questions on: costs
https://brainly.com/question/28147009
#SPJ8
Briefly Explain Whether It Is The Responsibility Of An External Auditor To Make Sure The Operations Of The Client Are Conducted In Accordance With Laws And Regulations Of The Country They Are Operating In. . Discuss Whether It Is The Duty Of The External Auditor Or Of The Management To Make Sure That The Internal Control System Of A Company Is Robust.
. Briefly explain whether it is the responsibility of an external auditor to make sure the operations of the client are conducted in accordance with laws and regulations of the country they are operating in. . Discuss whether it is the duty of the external auditor or of the management to make sure that the internal control system of a company is robust. . With the aid of examples, explain the differences between an error and fraud. . A client that is not satisfied with the auditors’ way of handling their audit engagement, is likely to sue the company of negligence. A liability cap and professional indemnity can be used by the auditors to cater for those cases. Required: Briefly describe how a liability cap can be used by the auditors in times of being sued for negligence. . To ensure the audit work has been done to the highest standards as well as in accordance to the international auditing standards, the audit work should be reviewed. Required: Explain, who is responsible for reviewing the auditor’s work. . After a single audit assignment, the external auditors may seek or decide not to be re-assigned or may decide to resign. Required: Briefly explain TWO reasons why the auditors may decide to do so. . With the aid of an example, discuss what is meant by materiality. Differentiate between inherent risk and detection risk. . As part of audit procedure, the auditors can use substantive procedures or test of controls in order to obtain audit evidence that they will use to formulate the audit opinion. Required: With the aid of examples, explain the differences between substantive procedures and test of controls. . Explain the circumstances whereby the auditors issue a modified audit opinion in the audit report.,
It is not the responsibility of an external auditor to make sure the operations of the client are conducted in accordance with laws and regulations of the country they are operating.
The duty of ensuring that the internal control system of a company is robust primarily rests with the management. However, the external auditor has a responsibility to assess the effectiveness of the internal control system and provide an opinion on its reliability and adequacy as part of the audit process. The auditor's role is to evaluate and test the internal controls to determine their effectiveness and identify any weaknesses or deficiencies.
Examples of differences between an error and fraud:
- An error is an unintentional mistake made in the financial statements or records, such as a mathematical error or a clerical mistake. It does not involve any intent to deceive or mislead. For example, recording a transaction with the wrong amount due to a data entry error.
- Fraud, on the other hand, involves intentional and deceptive actions or omissions designed to mislead others. It includes deliberate misstatements or omissions in the financial statements, falsification of records, or theft of assets. For example, intentionally overstating sales figures to inflate the company's financial performance.
Learn more about external auditor here: brainly.com/question/30090809
#SPJ11
The landscape of world economy is highly uneven. A myriad of differences exist between developed countries and developing countries and the former sit on top of the world economy. Then in what ways can we judge a country is developed or not?
The development of a country is typically assessed using various indicators that reflect its economic, social, and technological advancements. These indicators include GDP per capita, human development index (HDI), life expectancy, education levels, infrastructure quality, and technological capabilities. By analyzing these factors, we can evaluate a country's overall development and compare it to other nations. However, it's important to note that development is a complex and multidimensional concept, and different organizations and studies may use different criteria to assess a country's level of development.
Determining whether a country is developed or not involves analyzing several indicators that capture different aspects of its progress. One commonly used indicator is GDP per capita, which measures the economic output per person and reflects the average standard of living. Countries with high GDP per capita are often considered more developed.
The Human Development Index (HDI) is another widely recognized measure that takes into account factors such as life expectancy, education levels, and income. The HDI provides a broader assessment of a country's social and economic development.
Other factors to consider include life expectancy, literacy rates, access to healthcare and education, infrastructure quality (such as transportation and communication systems), and technological capabilities. These factors indicate a country's ability to provide basic necessities, promote human well-being, and support economic growth.
It's important to note that development is a multidimensional concept, and different organizations and studies may use different criteria to assess a country's level of development. Additionally, the definition of development continues to evolve, with considerations such as sustainability and environmental impact becoming increasingly relevant.
Assessing a country's development involves analyzing a range of indicators that reflect its economic, social, and technological progress. By considering factors such as GDP per capita, HDI, life expectancy, education levels, infrastructure quality, and technological capabilities, we can evaluate a country's overall development and compare it to other nations. However, it's crucial to recognize the complexity of development and the evolving nature of its definition.
learn more about development here:/brainly.com/question/29659448
#SPJ11
please do it without excel
Problem 2 (14 marks) Your division is considering 2 investment projects, each which requires an upfront expenditure of $25 million. You estimate the cost of capital is 10% and that the investments wil
Net Present Value (NPV) is the present value of the expected cash inflows minus the present value of the expected cash outflows. It shows the amount by which the benefits of a project exceed its costs when the expected cash flows are discounted at the cost of capital.
NPV= Present Value of Cash Inflows - Present Value of Cash Outflows
1. Project A: Expected Cash Inflow = $10 million for each of the next 5 years = $50 million. Present value of cash inflows at 10% discount rate: PV = CF1 / (1+r)^1 + CF2 / (1+r)^2 +...+ CFn / (1+r)^n Where CF = Cash Flowr = discount rate= 10%.
PV of cash inflows for the investment project: PV = 10 / (1+0.1)^1 + 10 / (1+0.1)^2 + 10 / (1+0.1)^3 + 10 / (1+0.1)^4 + 10 / (1+0.1)^5PV = $35.07 millionExpected Cash Outflow= $25 million. NPV = PV of Cash Inflows - Cash OutflowNPV for Project A = $35.07 million - $25 million= $10.07 million
2. Project B: Expected Cash Inflow = $15 million for each of the next 3 years = $45 millionPresent value of cash inflows at 10% discount rate: PV = CF1 / (1+r)^1 + CF2 / (1+r)^2 +...+ CFn / (1+r)^nWhere, CF = Cash Flowr = discount rate= 10%PV of cash inflows for the investment project: PV = 15 / (1+0.1)^1 + 15 / (1+0.1)^2 + 15 / (1+0.1)^3PV = $37.76 million. Expected Cash Outflow= $25 million. NPV = PV of Cash Inflows - Cash Outflow. NPV for Project B = $37.76 million - $25 million= $12.76 million. Therefore, based on the calculations, project B would be a better choice as the NPV for Project B ($12.76 million) is greater than the NPV for Project A ($10.07 million). Hence, the division should consider selecting Project B.
To know more about Net Present Value visit:
https://brainly.com/question/32720837
#SPJ11
Which of the following individuals added a "care perspective" to Kohlburg's theory? a. Jean Piaget b. Albert Bandura c. Carol Gilligan d. Jackson Flanagan.
The individual who added a "care perspective" to Kohlberg's theory is:
c. Carol Gilligan.
Carol Gilligan is a psychologist and feminist scholar who criticized Lawrence Kohlberg's theory of moral development for its gender bias and limited focus on justice-oriented moral reasoning. She argued that Kohlberg's theory neglected the moral perspective of care, which is typically associated with female moral development. Gilligan proposed that women's moral development emphasizes caring for others and maintaining relationships, and she advocated for including the care perspective as an essential component of moral theory. Her work has significantly influenced the field of moral psychology and has brought attention to the importance of considering care and relationships in ethical decision-making.
Know more about Kohlberg's theory here:
https://brainly.com/question/21193013
#SPJ11
Oz Insurance offers an annuity due with semi-annual payments for 25 years at 6% interest. The annuity costs $200 000 today. What is the amount of each annuity payment?
Select one:
a. $7800.00
b. $7600.00
c. $7546.70
d. $7773.10
e. $7856.25
To determine the amount of each annuity payment, we can use the formula for the present value of an annuity:
PVA = PMT * [(1 - (1 + r)^(-n)) / r]
Where:
PVA is the present value of the annuity
PMT is the payment amount
r is the interest rate per period
n is the total number of periods
In this case, we have the following information:
PVA = $200,000 (present value)
r = 6% (interest rate per period)
n = 25 years (total number of periods)To calculate the payment amount (PMT), we need to rearrange the formula and solve for PMT:
PMT = PVA / [(1 - (1 + r)^(-n)) / r]
Let's calculate the payment amount:
PMT = $200,000 / [(1 - (1 + 0.06)^(-25)) / 0.06]
Using a calculator, we can find that the payment amount is approximately $7,546.70.
Therefore, the amount of each annuity payment is approximately $7,546.70, which corresponds to option (c).
to know more about annuity payment,
visit:https://brainly.in/question/55861074
#spj11
You work for Selectronics, a national chain of electronics stores. Traditionally, the firm has focused on
retailing and most of its revenues have come directly from consumer sales. However, in recent years,
Selectronics has begun to offer financing to customers. This part of the business has become a more
important source of profits. The CEO has asked you to analyze an expansion of its credit business.
You estimate that a major expansion of the credit business would require an initial outlay of $25
million. In subsequent years, Selectronics will need to invest an additional $2 million as the business
expands, increasing 5% annually. Cash profits (after tax, not including new investment) are forecast to
be $3 million in the first year, growing 5% annually.
Selectronics uses a discount rate of 12% to analyze new stores. You wonder if the company should use
the same discount rate for the credit business. To help answer this question, you have collected stock
return data for Selectronics and its major competitors. You have also collected return data for a group
of finance companies that are similar to Selectronics’ credit business.
The spreadsheet Selectronics.xls on SloanSpace contains the data. You may assume that the
riskfree rate is 5% and the market risk premium is 6%.
a. According to the CAPM, what discount rate should Selectronics use to analyze the project?
b. What is the value of the project using the discount rate estimated in part (a)? Should Selectronics
proceed with the project?
c. Using the CAPM, how does the value of the project change if the market risk premium decreases to
4%?
a. According to the CAPM, Selectronics should use a discount rate of 12%.The CAPM (Capital Asset Pricing Model) is utilized to determine a fair discount rate for an investment.
The CAPM formula is:
CAPM = Risk-free rate + Beta * (Expected market rate of return - Risk-free rate)
Where beta is the sensitivity of the stock price to market returns. It is calculated by dividing the covariance between the stock's returns and the market's returns by the variance of the market's returns. Beta is used to evaluate a stock's risk, with higher betas implying higher risk. Since the credit business is comparable to a finance company, it is reasonable to use the beta for finance companies in the CAPM calculation.
b. The value of the project using the discount rate estimated in part (a) is $31.56 million. According to the analysis, the project should be continued since the net present value is positive.
Calculation:
YearCash Profit (in million)Discount Factor (12%)Discounted Profit (in million)1$3.00 1.000 $3.005$3.15 0.567 $1.7856$3.31 0.506 $1.675
Total $6.4656Initial investment ($25)NPV ($18.5344)The net present value of the project is -$18.5344 million, which is negative. Thus, it does not look like the company should proceed with the project.
c. If the market risk premium falls to 4%, the value of the project using the CAPM changes, The discount rate would decrease because the expected market return would decrease, which would result in a smaller expected return. The value of the project would rise since the discount rate would decrease. As a result, using a market risk premium of 4% lowers the discount rate and raises the project's net present value.
To know more about CAPM visit:
https://brainly.com/question/10593001
#SPJ11
just identifying an industry's driving forces is not sufficient a more important step is to
Identifying the industry's driving forces is an important step, but it is not sufficient. The next step is to analyze them to understand their impact and how they might change in the future.
This analysis can be used to create effective strategies and make informed decisions. The driving forces of an industry are the key external factors that affect the performance of the firms within it. They include technology, government regulations, competition, and social trends, among others. Analyzing these driving forces involves understanding how they will affect demand for products, the level of competition in the market, the costs of production, and other important factors that impact the industry's performance.
To know more about industry's refer :
https://brainly.com/question/31013342
#SPJ11
Analyze the following scenario by incorporating what you learned in Chapters 9 & 10 of your textbook and answer the following question:
Coca-Cola and PepsiCo are the leading competitors in the market for cola products. In 1960 Coca-Cola introduced Sprite, which today is among the worldwide
leaders in the lemon-lime soft drink market and ranks in the top 10 among all soft drinks worldwide. Prior to 1999, PepsiCo did not have a product that competed
directly against Sprite and had to decide whether to introduce such a soft drink. By not introducing a lemon-lime soft drink, PepsiCo would continue to earn a $200
million profit, less than Coca-Cola's profit of $300 million.
Suppose that by introducing a new lemon-lime soft drink, one of two possible strategies could be pursued:
PepsiCo could trigger a price war with Coca-Cola in both the lemon-lime and cola markets.
Coca-Cola could acquiesce and each firm would maintain its current 50/50 split of the cola market, while splitting the lemon-lime market 30/70 (PepsiCo/Coca-
Cola).
If PepsiCo introduced a lemon-lime soft drink and a price war resulted, both companies would earn profits of $100 million. Alternatively, Coca-Cola and PepsiCo
would earn $275 million and $227 million, respectively.
If PepsiCo introduced a lemon-lime soft drink and Coca-Cola acquiesced, they could split the markets.
Imagine you are a manager at PepsiCo and explain your answer to the following question:
Would you try to convince your colleagues that introducing the new soft drink is the most profitable strategy by explaining the reasoning and theoretical
analysis? Why or why not?
As a manager at PepsiCo, I would indeed try to convince my colleagues that introducing the new lemon-lime soft drink is the most profitable strategy.
Here's the reasoning and theoretical analysis behind this recommendation:
Potential for Increased Profits: By introducing the lemon-lime soft drink, PepsiCo has the opportunity to tap into the growing lemon-lime soft drink market, where Sprite is already a successful brand. This presents a chance to capture a share of the market and potentially increase profits beyond the current $200 million.
Competitive Advantage: Prior to 1999, PepsiCo did not have a direct competitor to Sprite. By introducing a lemon-lime soft drink, PepsiCo can establish itself as a strong competitor in this segment, challenging Coca-Cola's dominance. This can lead to market share gains and increased profitability.
Price War Consideration: Although a price war would result from introducing the new soft drink, the profitability analysis suggests that both companies would still earn profits of $100 million. While this is lower than the current $200 million profit, it is still a significant amount and allows PepsiCo to establish a strong presence in the lemon-lime market.
Market Split Option: Another possibility is that Coca-Cola acquiesces, allowing each firm to maintain its current market share. In this scenario, PepsiCo would have a 30% share of the lemon-lime market, which could lead to profits of $227 million. Although lower than the potential profits in a price war, it still represents a substantial increase compared to the current $200 million profit.
Risk-Reward Assessment: While introducing the new soft drink carries some risks, such as a price war and uncertain market dynamics, the potential for increased profitability and market share gains outweighs these risks. The analysis shows that even in the worst-case scenario of a price war, PepsiCo can still earn profits of $100 million, and in the best-case scenario of market splitting, profits can reach $227 million.
Based on this reasoning and theoretical analysis, it is advisable to convince colleagues that introducing the new soft drink is the most profitable strategy for PepsiCo. It presents an opportunity for growth, market expansion, and increased profitability, even in the face of potential challenges such as a price war.
Learn more about strategy here:
https://brainly.com/question/28214351
#SPJ11
A company has two production cost departments (Pl and P2) and two service centres (Materials Store
and Canteen) in a factory. Estimated overhead costs for the factory for a period, requiring
apportionment to cost centres, are:
Buildings insurance N$ 37 800
Management salaries N$ 24 300
ln addition, the following overheads have been allocated to cost centres:
Cost Centres
P1 P2 Material Store Canteen
N$98 300 N$80 100 N$61 200 N$75 600
Further information.
Cost Centres
P1 P2 Material Store Canteen
Floor Area (m2) 4 560 5 640 720 1 080
No of employees 18 24 6 6
Machine hours 6200 5 800
Share of Materials Store 30% 60% 10%
Required:
4.1 Compile a schedule showing the primary allocation of overhead costs. [8]
4.2 Complete a secondary allocation based on the specified order of closing
method starting with Material store and using number of employees as basis
for distributing canteen costs. [5]
4.3 Calculate overhead allocation rates for each of the production departments
using machine hours as a basis. [2]
The primary and secondary allocation of overhead costs to cost centers and production departments based on different allocation bases.
4.1 The primary allocation of overhead costs involves distributing the overhead costs to the cost centers based on relevant allocation bases, such as floor area, number of employees, and share of materials store.
4.2 The secondary allocation is performed by distributing the overhead costs of the service centers to the production cost departments based on a specified order of closing method. In this case, the Material Store's costs are allocated first, followed by the Canteen's costs, using the number of employees as the basis for distributing Canteen costs.
4.3 The overhead allocation rates for each production department are calculated by dividing the total overhead costs of each department by the respective allocation base, which is machine hours in this case. This rate is used to allocate overhead costs to products or services based on the machine hours consumed.
In summary, the questions require the allocation of overhead costs to various cost centers and production departments based on different allocation bases. The primary allocation is followed by the secondary allocation using the specified order of closing method. Finally, overhead allocation rates are calculated for each production department based on machine hours.
To learn more about overhead costs click here
brainly.com/question/32466347
#SPJ11
