Nancy owned business equipment with a $16,950 adjusted basis and a $7,500 FMV that was destroyed by a tornado. The equipment was uninsured. As a result of this casualty, Nancy is allowed to deduct a $16,950 ordinary loss. Therefore, the correct answer is option C.
When business equipment is destroyed in a casualty event and the loss is not covered by insurance, it is considered a casualty loss. In this case, the adjusted basis of the equipment is $16,950, and the fair market value (FMV) is $7,500.
The deductible loss is the lesser of the adjusted basis or the FMV of the property. Since the FMV of $7,500 is lower than the adjusted basis of $16,950, Nancy can deduct the lower FMV as an ordinary loss. The deductible loss is the amount of financial loss that can be claimed as a deduction on Nancy's tax return.
It's important to note that this is an ordinary loss rather than a Section 1231 loss. Section 1231 losses apply to the sale or exchange of business property, whereas in this scenario, the loss is due to a casualty event.
In conclusion, Nancy would be allowed to deduct a $7,500 ordinary loss as a result of the destruction of the business equipment, which was uninsured. Therefore, the correct answer is option A.
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Complete Question:
Nancy owned business equipment with a $16,950 adjusted basis and a $7,500 FMV that was destroyed by a tornado. The equipment was uninsured. As a result of this casualty, Nancy:
Multiple Choice
a) Recognizes a $16,950 Section 1231 loss
b) Recognizes a $7,500 Section 1231 loss
c) Is allowed to deduct a $16,950 ordinary loss
d) Is allowed to deduct a $7,500 ordinary loss
Survival function of a certain population is as below.
lx = 10000 - x^2
a. Compute the actuarial present value of a 10-year insurance issued to a person age 25 with death benefit of RM 185000 payable at the end of year of death or survival benefit of RM 185000 at the end of year 10. Assuming − 3%.
b. Compute the actuarial present value of a 5-term insurance payable at the end of year of death issued to a person age 20 with death benefit of RM 145000. Assuming − 3%.
a. The actuarial present value of 10-year insurance issued to a person age 25 cannot be determined without the specific values for the survival function and interest rate.
b. The actuarial present value of 5-term insurance issued to a person age 20 cannot be determined without the specific values for the survival function and interest rate.
a. To compute the actuarial present value of a 10-year insurance issued to a person aged 25, we need to calculate the present value of the death benefit and the survival benefit.
Present value of death benefit:
[tex]PV_{death}[/tex] = [tex]\(RM \, 145,000 \cdot l_x \cdot e^{-0.03 \cdot (x + 5)} = RM \, 145,000 \cdot (10000 - (20+5)^2) \cdot e^{-0.03 \cdot (20 + 5)}\)[/tex]
Present value of survival benefit:
[tex]PV_{survival}[/tex] = [tex]\(RM \, 185,000 \cdot l_x \cdot e^{-0.03 \cdot 10} = RM \, 185,000 \cdot (10000 - (25+10)^2) \cdot e^{-0.03 \cdot 10}\)[/tex]
The actuarial present value is the sum of the present values of the death benefit and the survival benefit:
Actuarial present value = [tex]PV_{death}[/tex] + [tex]PV_{survival}[/tex]
b. To compute the actuarial present value of 5-term insurance issued to a person aged 20, we need to calculate the present value of the death benefit.
Present value of death benefit:
[tex]PV_{death}[/tex] = [tex]\(RM \, 145,000 \cdot l_x \cdot e^{-0.03 \cdot (x + 5)} = RM \, 145,000 \cdot (10000 - (20+5)^2) \cdot e^{-0.03 \cdot (20 + 5)}\)[/tex]
The actuarial present value is equal to the present value of the death benefit:
Actuarial present value = [tex]PV_{death}[/tex]
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New Century Computer issued $450 million of AA-rated 30-year $1,000 par bonds on this date in 2013, which have a coupon interest rate of 9 percent and pay interest annually. A decrease in the inflation rate by 2 percent and a decrease in corporate risk, (beta), have caused the required return on these bonds to be only 5 percent. 1. Find the annual interest payment 2. Find the current price of a bond.
the current price of the bond is approximately $1,428.92.
To answer your questions, we need to calculate the annual interest payment and the current price of the bond based on the given information.
1. Annual interest payment:
The annual interest payment can be calculated by multiplying the coupon interest rate by the face value of the bond. In this case, the coupon interest rate is 9%, and the face value is $1,000.
Annual interest payment = Coupon interest rate * Face value
Annual interest payment = 0.09 * $1,000 = $90
Therefore, the annual interest payment is $90.
2. Current price of the bond:
To calculate the current price of the bond, we can use the present value formula. The present value (PV) of the bond is the sum of the present value of its future cash flows, which are the annual interest payments and the face value to be received at maturity.
The formula for present value is:
PV = (Annual interest payment / Required return) * [1 - (1 / (1 + Required return) ²Number of years)] + (Face value / (1 + Required return) ²Number of years)
In this case, the annual interest payment is $90, the required return is 5% (0.05), and the number of years is 30.
PV = ($90 / 0.05) * [1 - (1 / (1 + 0.05) ^ 30)] + ($1,000 / (1 + 0.05) ²30)
Calculating this equation will give us the current price of the bond.
Please note that since the required return has decreased due to a decrease in inflation and corporate risk, the bond's price will increase.
Calculating this equation gives us:
PV ≈ $1,428.92
Therefore, the current price of the bond is approximately $1,428.92.
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deductibles both minimize attitudinal hazard and lower premium costs true or false
The statement, "Deductibles both minimize attitudinal hazard and lower premium costs" is TRUE.
Deductibles refer to the amount that an insurance policyholder has to pay out of their own pocket before the insurer begins to cover the expenses. Higher deductibles reduce the risk of insurance claims, as policyholders are incentivized to take care of their property to avoid paying high deductibles. The term "attitudinal hazard" refers to the risk of a policyholder filing a claim because they know that the insurer is obligated to cover the damages.
Attitudinal hazards are reduced by deductibles since policyholders are less likely to file claims if the deductible is higher. Higher deductibles help to minimize attitudinal hazard as policyholders have to pay for part of the expenses.In addition, higher deductibles translate to lower premiums costs, and vice versa.
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Which philosopher out these people believed that killing the
innocent is morally justifiable? and why? (Bentham, Mill, Kant, and
Aquinas.)
The philosopher who believed that killing the innocent is morally justifiable was Aquinas. According to Aquinas, killing an innocent person is morally justifiable if the act serves the greater good of society or if it is necessary to protect innocent lives.
In his philosophy, this is known as the Doctrine of Double Effect. Aquinas believed that a person could perform an act that has both a good effect and an evil effect as long as the following conditions are met, the act itself must be good, or at least morally neutral the good effect must be the direct result of the act and not the unintended consequence of the act the evil effect must be a consequence of the act but not the means by which the good effect is achieved the good effect must be proportionally greater than the evil effect, and the actor must intend only the good effect and not the evil effect.
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In regards to international financial management. What is a
trade account and how is it different from a current account?
A trade account refers to a subset of a current account in international financial management. The trade account specifically focuses on recording the imports and exports of goods between countries.
It includes the value of merchandise trade, such as physical goods like raw materials, finished products, and commodities.
On the other hand, a current account is a broader concept that encompasses various transactions between countries. It consists of not only the trade account but also other components such as services trade (e.g., tourism, transportation, financial services), income from investments (e.g., dividends, interest), and unilateral transfers (e.g., foreign aid, remittances).
The key distinction is that while the trade account solely deals with the exchange of goods, the current account captures a more comprehensive picture of a country's economic interactions with the rest of the world, including both trade in goods and various other financial flows.
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can you solve this by excel and by interpolation please! 2.50 The energy costs of a company involved in powder coating of outdoor furniture are expected to in- crease at a rate of $400 per year. The cost at the end of the next year (year 1) is expected to be $13,000. How many years will it be from now be- fore the equivalent annual cost is $16,000 per year. if interest is 8% per year?
The equivalent annual cost of a powder coating company involved in outdoor furniture is calculated below using the annual escalation rate provided and the interest rate per year.
Given that: Annual escalation rate = $400Interest rate per year = 8%Year 1 cost = $13,000Annual escalation rate = $400, therefore the cost at the end of Year 2 would be:Cost at the end of Year 2 = Year 1 cost + Annual escalation rate= $13,000 + $400= $13,400The annual cost of the Company can be calculated by discounting each cost to the present value using the formula given below:$$Equivalent\:Annual\:Cost = \frac{Cost\:at\:end\:of\:Year\:n\times (1+i)^n}{\sum\limits_{i=1}^{n}(1+i)^i}$$Where, n = number of years, i = discount rate in decimalsThe above formula can be solved using Excel formulae or by interpolation. The cost at the end of Year 2 is known and the equivalent annual cost required is also known.
Using interpolation method, the time to reach the equivalent annual cost can be calculated as:$$No\:of\:years = Year\:1 + \frac{(Equivalent\:Annual\:Cost - Year\:1\:cost)}{(Year\:2\:cost - Year\:1\:cost)}\times 1$$Where, Year 1 = 1, Year 2 = 2Year 1 cost = $13,000Year 2 cost = $13,400Equivalent annual cost = $16,000By substituting these values in the above equation, the number of years required to reach the equivalent annual cost of $16,000 can be calculated:No of years = 1 + [(16,000 - 13,000) / (13,400 - 13,000)] x 1= 1 + [3,000 / 400]= 1 + 7.5= 8.5 yearsTherefore, it will take 8.5 years from now to reach the equivalent annual cost of $16,000 for the powder coating company involved in outdoor furniture.
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what is the expected unit loading and hauling cost in $/bcy and $/bcm)?
Unit loading and hauling cost are a part of the mining industry. In the mining industry, we require high-speed transportation of materials from one place to another.
This transportation is done by using either a truck or a conveyor belt or both. The loading and hauling cost per unit are calculated to determine the profitability of the mining project. The cost of a unit load and haul is measured in dollars per cubic meter. The average loading cost is around $1.50 - $3.00 per ton of material. The average cost of hauling is $2.00 - $4.00 per ton of material. The expected unit loading and hauling cost in $/bcy and $/bcm depends on the type of material that is being transported.
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Pizza-Iz-Us charges an initial fee of $1,800,000 for a licensing contract, with $360,000 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 9%, is $1,166,000. Included in the initial fee is a $50,000 allowance for promotional services to be provided by Pizza-Iz-Us during the next five years. The value of the advertising is $1,000 a month. Collectibility of the payments is reasonably assured and Pizza-Iz-Us has performed all the initial services required by the licensing contract.
Required: Prepare the journal entry to record the initial licensing agreement including the initial cash receipt.
The Orlando Company is involved in a three-year long-term contract. The following data relate
A licensing agreement is a legal contract between two parties, known as the licensor and the licensee, that grants the licensee the right to use certain intellectual property, such as patents, trademarks, copyrights, or trade secrets, owned by the licensor.
To record the initial licensing agreement and the initial cash receipt, the journal entry would be as follows:
Date: [Date of agreement]
1. Initial Cash Receipt:
Debit: Cash - $360,000
Credit: Unearned Revenue - $360,000
2. Initial Licensing Fee:
Debit: Unearned Revenue - $1,440,000 [$1,800,000 - $360,000]
Credit: Revenue - Licensing Fee - $1,440,000
3. Promotional Allowance:
Debit: Unearned Revenue - $50,000
Credit: Revenue - Promotional Allowance - $50,000
Note: This entry records the receipt of $360,000 in cash, recognizing it as revenue and unearned revenue. The unearned revenue accounts will be recognized as revenue over time as services are provided.
Please note that this entry only captures the initial agreement and the cash receipt. The subsequent entries related to the annual payments and the advertising services would need additional information to be accurately recorded.
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Consider a newsvendor problem where demand D is a continuous and non-negative random variable that takes values in (0, [infinity]). Assume that D has probability density function f(x) and cumulative distribution function F(x). For the following, take derivatives of the functions below (using Leibniz rule). a. Show that E[min(D,Q)] is increasing in Q. b. Show that E[min(D,Q)] is concave in Q. C. Show that E[(D-Q)*] is decreasing in Q. d. Show that E[(D-Q)²] (the expected squared deviation of Q and D) is a convex function of Q. e. Find the order quantity that minimizes E[(D-Q)2]. Why do you think this is different than the optimal order quantity that minimizes the expected profit?
(a) Since Q * f(Q) is non-negative for all Q, we can conclude that E[min(D,Q)] is increasing in Q, when demand D is a continuous and non-negative random variable that takes value in 0.
(b) Since f(Q) and Q * f'(Q) are both non-negative for all Q, we can conclude that the second derivative is non-positive. Therefore, E[min(D,Q)] is concave in Q.
(c) Since (D-Q) * f(Q) is non-positive for all Q, we can conclude that E[(D-Q)*] is decreasing in Q.
(d) Since -f(Q) and (D-Q) * f'(Q) are both non-negative for all Q, we can conclude that the second derivative is non-negative. Therefore, E[(D-Q)²] is a convex function of Q.
(e) d/dQ [E[(D-Q)²]] = -f(Q) + (D-Q) * f'(Q)
= 0
Solving this equation will give us the order quantity that minimizes the squared deviation.
(a) To show that E[min(D,Q)] is increasing in Q, we need to take the derivative of E[min(D,Q)] with respect to Q and demonstrate that it is non-negative.
E[min(D,Q)] = ∫[0,Q] min(x,Q) * f(x) dx
Taking the derivative with respect to Q using Leibniz rule:
d/dQ [E[min(D,Q)]] = d/dQ [∫[0,Q] min(x,Q) * f(x) dx]
= min(Q,Q) * f(Q) + ∫[0,Q] 0 * f(x) dx (derivative of the lower bound is zero)
= Q * f(Q)
Since Q * f(Q) is non-negative for all Q, we can conclude that E[min(D,Q)] is increasing in Q.
(b) To show that E[min(D,Q)] is concave in Q, we need to show that the second derivative of E[min(D,Q)] with respect to Q is non-positive.
Taking the second derivative with respect to Q:
d^2/dQ^2 [E[min(D,Q)]] = d/dQ [Q * f(Q)]
= f(Q) + Q * f'(Q)
Since f(Q) and Q * f'(Q) are both non-negative for all Q, we can conclude that the second derivative is non-positive. Therefore, E[min(D,Q)] is concave in Q.
(c) To show that E[(D-Q)] is decreasing in Q, we need to take the derivative of E[(D-Q)] with respect to Q and demonstrate that it is non-positive.
E[(D-Q)*] = ∫[Q,∞] (D-Q) * f(x) dx
Taking the derivative with respect to Q using Leibniz rule:
d/dQ [E[(D-Q)*]] = d/dQ [∫[Q,∞] (D-Q) * f(x) dx]
= -(D-Q) * f(Q)
Since (D-Q) * f(Q) is non-positive for all Q, we can conclude that E[(D-Q)*] is decreasing in Q.
(d) To show that E[(D-Q)²] is a convex function of Q, we need to show that the second derivative of E[(D-Q)²] with respect to Q is non-negative.
Taking the second derivative with respect to Q:
d^2/dQ^2 [E[(D-Q)²]] = d/dQ [-(D-Q) * f(Q)]
= -f(Q) + (D-Q) * f'(Q)
Since -f(Q) and (D-Q) * f'(Q) are both non-negative for all Q, we can conclude that the second derivative is non-negative. Therefore, E[(D-Q)²] is a convex function of Q.
(e) The order quantity that minimizes E[(D-Q)²] is the value of Q for which the first derivative is equal to zero.
d/dQ [E[(D-Q)²]] = -f(Q) + (D-Q) * f'(Q)
= 0
Solving this equation will give us the order quantity that minimizes the squared deviation.
The optimal order quantity that minimizes the expected profit may differ from the order quantity that minimizes the squared deviation because the expected profit takes into account the costs and revenues associated with ordering and selling the goods, while the squared deviation focuses solely on the variability between the ordered quantity and the actual demand. The optimal order quantity for profit maximization would consider both the cost and revenue factors, which may lead to a different result than minimizing the squared deviation alone.
In conclusion, we have shown the derivatives and properties for E[min(D,Q)], E[(D-Q)*], and E[(D-Q)²], and discussed the difference between the order quantity that minimizes E[(D-Q)²] and the optimal order quantity for profit maximization.
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If customers can observe positive differentiating product characteristics such as the use of thinner metal supports or a smaller display screen, the in-line price for the product would tend to be a price higher than a customers reference value. Select one: O True O False
False. If customers can observe positive differentiating product characteristics, such as thinner metal supports or a smaller display screen, it is more likely that the in-line price for the product would tend to be a price lower than a customer's reference value.
In-line pricing strategy aims to set the initial price in line with customer expectations and perceived value. When customers can observe positive differentiating features, it creates an opportunity for the product to stand out and provide additional value. As a result, setting the price lower than the customer's reference value can help attract customers, encourage trial, and potentially gain market share. By offering a lower price, the product with positive differentiating characteristics can create a perceived value advantage over competing products and stimulate customer interest.
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A. Assuming that you are a proud Dog owner, what type of information search you would perform to find out about dog treats and why? B. While buying doggie desert, what type of the buying decision you are making and explain why?
As a proud dog owner, conducting an information search on dog treats would involve gathering relevant information to make an informed decision. The search would likely involve seeking information on different types of dog treats, their ingredients, nutritional value, reviews from other dog owners, and recommendations from veterinarians or trusted sources.
When searching for information on dog treats, a dog owner might explore various sources to gather knowledge about different brands, flavors, and types of treats available in the market. This could involve reading product labels, researching online platforms, visiting pet stores, engaging in online forums or communities, and seeking recommendations from other dog owners or professionals.
The purpose of this information search is to make an informed decision about which dog treats to purchase based on factors such as quality, nutritional value, taste preferences, and potential health benefits for the dog. By conducting a thorough information search, the dog owner can ensure they are providing their pet with safe and suitable treats.
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Scenario: You have been selected to lead a team to implement a new policy for your company. Your company is a law firm with offices in San Antonio, Dallas, Austin, Houston and Corpus Christi. You are in San Antonio and the headquarters are in Austin. The Firm has decided that in an effort to increase the attractiveness of the Firm as an employer of choice, the Firm should allow employees to bring their pets to work. Not just medically approved therapy animals, but any family pet. See article on back side of this case.
Word has already spread about this new initiative – many are excited about bringing these important family members to the workplace. However, many others are concerned about allergies, as well as if the pets will get along with other pets, also questions about if all of our employees will be able to participate or just some employees, the list of concerns goes on and on and on. You mentioned these concerns to the Austin Headquarters and they have agreed that you may hire an HR Project Manager to help with any issues that might arise. The Firm also reemphasized how confident they are in you and the San Antonio office’s ability to implement this policy stating "If our high profile San Antonio offices can make this a success then we should be able to implement this policy Firm-wide, dramatically increasing our ability to recruit employees who will see this as an important benefit."
Question 3)
Selection-Evaluation-Compensation – Which of the following best practices from the Selection-Evaluation-Compensation Grid might guide us as we hire our HR Project Manager Professional to assist with the issues that may/will arrive with this initiative. Circle the best practices that apply.
Recruiting Diamond
Job Fusion Triangle
Identification
1. Briefly describe what from these best practices will help in our recruiting and hiring approach:
2. Going back to KASH and Stimulus Fraction describe a picture of the person you’d like to have in this new HR position
3. Write out a couple questions you might want to ask an individual we may interview for this position.
Best practices from the Selection-Evaluation-Compensation Grid that can help in the recruiting and hiring approach for the HR Project Manager position include:
Job Fusion Triangle: This best practice emphasizes the alignment between job analysis, selection methods, and compensation. In this case, conducting a thorough job analysis will help identify the key competencies and skills required for the HR Project Manager position. This analysis will inform the selection methods used to assess candidates' suitability for the role, ensuring that they possess the necessary knowledge and experience to handle the challenges associated with implementing the pet-friendly policy. Additionally, a clear understanding of the job requirements will enable the organization to offer appropriate compensation and benefits.
Identification: This best practice involves identifying and attracting qualified candidates for the position. In this case, the organization should actively seek candidates with experience in HR project management, particularly in implementing policies or initiatives with potential challenges and concerns. By identifying individuals with relevant experience, the organization increases the likelihood of finding someone who can effectively address the issues associated with the pet-friendly policy.
KASH (Knowledge, Abilities, Skills, and Habits) and Stimulus Fraction can be used to describe the ideal candidate for the HR Project Manager position in this new initiative. The picture of the person you'd like to have in this position may include the following characteristics:
Knowledge: The ideal candidate should have a solid understanding of HR project management principles and practices. They should be familiar with policy implementation, change management, and have a good grasp of legal considerations related to employee benefits and workplace health and safety.
Abilities: The candidate should demonstrate strong leadership abilities and be able to navigate complex organizational dynamics. They should have excellent communication and interpersonal skills to address concerns and conflicts effectively. The ability to collaborate with different stakeholders and drive consensus will be crucial in successfully implementing the pet-friendly policy.
Skills: The candidate should possess project management skills, including planning, organizing, and coordinating initiatives. They should have experience in managing multiple tasks and deadlines, and the ability to analyze and mitigate risks associated with the implementation of the new policy. Strong problem-solving and decision-making skills will also be essential.
Habits: The ideal candidate should exhibit a proactive and solution-oriented approach, showing resilience and adaptability in dealing with challenges. They should be detail-oriented and demonstrate a high level of professionalism and ethical conduct. The candidate should have a passion for promoting a positive work environment and be sensitive to the needs and concerns of employees.
Sample interview questions for the HR Project Manager position:
a) Can you describe your experience in managing HR projects, especially those involving policy implementation? How have you dealt with challenges and concerns that arise during the process?
b) How would you approach addressing the concerns raised by employees regarding allergies and pet compatibility in the workplace? Can you provide examples of strategies you have used in similar situations?
c) Have you implemented initiatives in the past that required significant coordination and collaboration across multiple offices or locations? How did you ensure effective communication and engagement among different stakeholders?
d) How do you stay updated on current trends and best practices in HR project management? Can you give an example of how you have applied new knowledge or ideas to improve project outcomes?
e) Can you share an experience where you had to balance the needs and preferences of different employee groups or individuals while implementing a policy? How did you ensure fairness and equity in decision-making?
These questions aim to assess the candidate's knowledge, experience, problem-solving abilities, communication skills, and alignment with the organization's goals and values in implementing the pet-friendly policy.
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find indexes defined on oe.order_items table and list the number of distinct keys and clustering factor for each index
You can query the data dictionary using a query like `SELECT index_name, num_distinct, clustering_factor FROM user_indexes WHERE table_name = 'ORDER_ITEMS';` to retrieve the required information about the indexes, distinct keys, and clustering factor for the `oe.order_items` table.
How can I find the indexes defined on the `oe.order_items` table and obtain the number of distinct keys and clustering factor for each index?To find the indexes defined on the `oe.order_items` table and obtain the number of distinct keys and clustering factor for each index, you can query the database system's data dictionary.
By accessing the metadata information, you can gather the required details. The number of distinct keys represents the unique values in the indexed column, while the clustering factor indicates the degree of data clustering within the index.
Using a query like `SELECT index_name, num_distinct, clustering_factor FROM user_indexes WHERE table_name = 'ORDER_ITEMS';`, you can retrieve the information specific to the `oe.order_items` table.
The `index_name` column will provide the names of the indexes, `num_distinct` will show the number of distinct keys, and `clustering_factor` will display the clustering factor for each index.
This query will enable you to gather the desired data about the indexes defined on the `oe.order_items` table, including the number of distinct keys and the clustering factor for each index.
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Using the following information, explain how the BOC uses the channel corridor system to achieve their target for the overnight interest rate.
Current Rates: Inflation Rate 5.5%. Rate on Excess Reserves=0.25% Policy Rate=0.50% Bank Rate=0.75%. Assume that the BOC would like the real overnight interest rate to increase by 0.5% and is maintaining a 0.5% operating band.
The Bank of Canada (BOC) is responsible for regulating the supply of money and credit to the Canadian economy. It uses various methods to achieve its target for the overnight interest rate, including the channel corridor system. The channel corridor system is a method used by the BOC to manage the overnight interest rate.
The BOC sets a target for the overnight interest rate and a range within which it would like the rate to fluctuate. The target is currently set at 0.50%, and the operating band is 0.50%. This means that the BOC would like the real overnight interest rate to increase by 0.5%.The BOC uses several tools to manage the overnight interest rate within the operating band.
These tools include the rate on excess reserves, the policy rate, and the bank rate. The rate on excess reserves is currently set at 0.25%. This is the rate that banks receive on any excess reserves they hold with the BOC.The policy rate is the interest rate that the BOC charges on loans to financial institutions. This rate is currently set at 0.50%. Finally, the bank rate is the interest rate that the BOC charges on loans to commercial banks.
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Assume you receive a 3.5% raise in your 2014 salary for 2015. In addition, suppose the CPI was 225 in 2014 and 240 in 2015. The rate of inflation between 2014 and 2015 was therefore % . (Note: Calculate this to two decimal places.) From 2014 to 2015 your real wages decreased.
Real wages are adjusted for inflation, so if inflation exceeds wage growth, real wages will decline.
The rate of inflation between 2014 and 2015 is 6.67%. If the CPI was 225 in 2014 and 240 in 2015, the inflation rate can be calculated as [(240 - 225) / 225] x 100 = 6.67%. Since your salary only increased by 3.5% while the inflation rate was 6.67%, your real wages decreased from 2014 to 2015. This is because the cost of living increased faster than your salary did, resulting in a decrease in purchasing power. Real wages are adjusted for inflation, so if inflation exceeds wage growth, real wages will decline.
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Calibrate the simple growth model as below: max [log (c) + log(1 − 4)] {Ct,lt} s.t. Ct + xt = Yt xt = kt+1 (1-6) kt Yt = kall-a with the following information of real economy: in the long run, on average, the investment-capital ratio is 0.1; the capital income share in GDP is 0.4; the average working hours per day is 8, that is a third of one day; the capital-output ratio is 4; and the consumption-output ratio is 0.7. That is to find out the values of {3, 6, &, a} that make the model consistent with the real economy. Note that you have to list all the details of induction. (15 points) Hint: The key is to match the model steady state moments with real economy ratios through appropriate equations. t=0
In the long run, on average, the investment-capital ratio is 0.1; the capital income share in GDP is 0.4; the average working hours per day is 8, which is a third of one day; the capital-output ratio is 4; and the consumption-output ratio is 0.7.
To find out the values of {3, 6, &, a} that make the model consistent with the real economy, we need to calibrate the simple growth model. Following are the steps to calibrate the model:
Step 1: Steady-state conditions are calculated. As Ct = 0.7 Yt and xt = 0.1 Yt, we have the following equations:- C = 0.7 Y- x = 0.1 The steady-state values of consumption and investment are 0.7 and 0.1, respectively.
Step 2: Calculation of the capital-output ratio and capital-labor ratios k = K/L and y = Y/L, we have the following equations:- k = K/L- y = Y/LAs we have k/y = 4, we can write:- k/y = K/Y. Y/L = K/LTherefore, K/L = 4 (Y/L) = 4yUsing the capital-output ratio, we get:- K/Y = 4L/Y = 4(1/3) = 4/3Now, we have:- k = 4y- K/Y = 4/3
Step 3: Calculate the value of AWe have:- y = AK^(1/3)L^(2/3)In steady-state, we can write:- y = A^(1/3) . (k/L)^(1/3)Therefore, we have:- y = A^(1/3) . 4^(1/3)A = y^3/16
Step 4: Calculate the value of 3We have:- log (c) + log(1 − 4) = 3 log (C) + 6 log (L) = log(C^3) + log(L^6)Substituting the values of steady-state conditions, we get:- log (0.7) + log(1 − 4) = 3 log (0.7) + 6 logs (1/3)log (3) = log (0.7) − log (1 − 4) − 3 log (0.7) − 6 logs (1/3)Taking the antilogarithm of both sides, we get:- 3 = 0.4 * 1 / (1 - 4) * 0.7^(-3) * (1/3)^(-6) * 3^3 = 6.84
Step 5: Calculate the value of αWe have:- y = AK^(1/3)L^(2/3) In steady-state, we can write:- y = A^(1/3). (k/L)^(1/3)Therefore, we have:- A = y^(3) / (k^(4/3) . l^(2/3)) Now, we have:- y = 0.4y * K/Y = 0.4y * 4/3From this, we get:- Y/L = 0.4 * 4/3 * (k/L)^(1/3) The value of k/L in steady-state is 4y.So, we get:- Y/L = 0.4 * 4/3 * (4y)^(1/3) Using the value of A, we get:- A = 0.4^3 / (4^(1/3) * 4y^(4/3) * 8^(2/3))A = 0.01059 Putting all values, we get: {3, 6, &, a} = {6.84, 4, 0.01059, 1/3}The values of {3, 6, &, a} that make the model consistent with the real economy are {6.84, 4, 0.01059, 1/3}.
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Samsung Corporation produces a single product. The standard costs for one unit of its product are as follows Direct materials (6 pounds at $0.50 per pound) $3 Direct labor (2 hours at $10 per hour) Variable manufacturing overhead (2 hours at $5 per hour) 10 During November, 8,000 units were produced. The costs associated with November operations were as follows: Material purchased (36,000 pounds at $0.60 per pound) $21,600 Material used in production (28,000 pounds) Direct labor (18,400 hours at $9.75 per hour) 179.400 Variable manufacturing overhead incurred 110,400 What is the variable overhead efficiency variance for the product for November? O$ 18,400 Unfavorable O$ 12,000 Unfavorable $ 12,000 Favorable OS 18,400 Unfavorable 20
Option C is correct. The variable overhead efficiency variance for the product for November is $12,000 Favorable. Variable overhead efficiency variance can be defined as the difference between actual hours used in production and standard hours allowed times the standard variable overhead rate per hour.
The standard variable overhead rate per hour is calculated by dividing the total budgeted variable overhead cost by the total budgeted standard hours allowed. The given data is as follows:
Direct materials (6 pounds at $0.50 per pound) = $3
Direct labor (2 hours at $10 per hour) = $20
Variable manufacturing overhead (2 hours at $5 per hour) = $10
Material purchased (36,000 pounds at $0.60 per pound) = $21,600
Material used in production (28,000 pounds) = Direct labor (18,400 hours at $9.75 per hour) = $179,400
Variable manufacturing overhead incurred = $110,400
Variable manufacturing overhead applied = 8,000 standard hours x $5 per hour = $40,000
Variable manufacturing overhead efficiency variance = Actual hours - Standard hours allowed x Standard variable overhead rate per hour= 18,400 hours - 16,000 hours x $5= $12,000 Favorable
The variable overhead efficiency variance for the product for November is $12,000 Favorable.
Therefore, option C is correct.
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1 pts Question 20 What is more important than sales price? o purchasess contribution margin cogm variable cost 1 pts Question 19 What you start with, plus what you add equals what goes away and O what you had the month before what you have left what you will sell o what you pay taxes on
The contribution margin is more important than the sales price. Contribution Margin refers to the amount that covers fixed costs and provides profits for the company after variable costs are subtracted from revenue. It is calculated as sales minus variable costs.2.
The equation "What you start with, plus what you add equals what goes away" can be translated into the accounting principle of balance sheet equation, which is Assets = Liabilities + Owner's Equity. The Balance Sheet is a report that shows a company's financial position as of a specific date, which is determined by the accounting equation. Therefore, the equation "What you start with, plus what you add equals what goes away" is essentially the same as the accounting equation, which states that the total assets of a company are equal to the total liabilities plus the owner's equity, which is the same as what you have left after you have paid all the liabilities.
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A country's GDP is being measured by expenditure.Various categories of expenditure are recorded as follows:Households'spending on consumption=$100bnFirms'spending on capital goods=$15bn,Firms addition to inventories=$1bn,Government spending on services= $10bn,Government spending on capital goods=$2bn,Government transferssocial security etc=$10bn,Exports=$12bn,Imports=$10bn. What is the correct estimate of GDP in billion dollars?
The given categories of expenditure can be summed up to calculate GDP. So, the correct estimate of GDP in billion dollars would be 160 billion dollars.
In calculating GDP, expenditure approach is one of the methods used. The formula for GDP by expenditure approach is: GDP = C + I + G + (X − M)Where, C = Household's consumption expenditure, I = Investment, G = Government spending, X = Exports and M = Imports Using the given data: Household's consumption expenditure, C = $100 bn Firms' spending on capital goods, I = $15 bn Firms' addition to inventories, I = $1 bn Government spending on services, G = $10 bn Government spending on capital goods, G = $2 bn Government transfers - social security etc. ,
G = $10 bn Exports, X = $12 bn Imports, M = $10 bn Substituting the values in the formula: GDP = C + I + G + (X − M)GDP = $100 bn + $15 bn + $1 bn + $10 bn + $2 bn + $10 bn + $12 bn − $10 bn GDP = $160 bn.
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Two investors have each deposited an amount D in a bank. The bank has invested these deposit on a long-term project. If the bank is forced to liquidate its investment before the project matures, can retrieve a total of 2r, where D>r>(D/2). However, if the bank lets the investment mature, the final project will yield a total of 2R, where R>D. There are two dates on which investors can withdraw money from the bank: date 1 is before the maturity of the bank investment, date 2 is later. For simplicity, assume the discount factor equals 1. Let's suppose: • If both investors withdraw money on date 1, each one receives r and the game ends • If only one investor withdraws money on date 1, that investor receives D, the other receives 2r-D and the game ends. • If none of the investors withdraw money on date 1, the project expires and the investors they decide whether to withdraw their money or not on date 2 • On date 2, if both draw money, each receives R • On date 2, if only one decides to withdraw money, that investor receives 2R-D and the other receives D • On date 2, if neither decides to withdraw money, both receive R.
Suppose that both on date 1 and date 2 the investors at the moment of deciding do not know the decision of the other investor.
Find:
a. Represent the game extensively
b. Give the number of subgames.
c. Indicate the total strategies of the players
d. Find the Subgame Perfect Nash Equilibrium
and. Interpret the Subgame Perfect Nash Equilibrium
a. Representation of the game extensively is given below:Both investors have deposited a certain amount in the bank.
The bank invests these deposits in a long-term project. The bank can retrieve 2r if it liquidates its investment before the project matures. If the bank lets the investment mature, the final project will yield a total of 2R. The investors can withdraw their deposits on two dates: date 1, which is before the maturity of the investment, and date 2, which is later. The game can be represented in an extensive form as follows: b. The game has 3 subgames:the game that starts on date 1 with two players, and it ends if both players withdraw on date 1 or one player withdraws on date 1.the game that starts on date 2 with two players, and it ends if both players withdraw on date 2 or one player withdraws on date 2.the game that starts on date 1 with two players, and it ends on date 2 if neither player withdraws on date 1. c.
The players have the following strategies:the player can choose to withdraw money on date 1.the player can choose to withdraw money on date 2.the player can choose not to withdraw money on either date. d. The Subgame Perfect Nash Equilibrium is for both investors to withdraw their deposits on date 2. This outcome is the only Subgame Perfect Nash Equilibrium because it represents the only combination of strategies in which both players have no incentive to deviate from their chosen strategy. If both investors withdraw their deposits on date 2, they will receive R. If one investor decides to withdraw his or her deposit on date 1, the other investor will receive D, and the game will end.
The investor who withdraws the deposit on date 1 will receive 2r – D on date 2. Therefore, if both investors choose to withdraw their deposits on date 2, they will receive more than the maximum payoff that they can receive if one of them withdraws on date 1 and the other withdraws on date 2.
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Currently, the GBP/USD rate is 1.5058 and the six-month forward exchange rate is 1.5266. The six-month interest rate is 7.2% per annum in the U.S. and 4.9% per annum in the U.K. Assume that you can borrow £1,000,000 or its equivalent in USD. How much do you make/lose if you borrow the foreign currency and invest locally? (USD, no cents)
To calculate the profit or loss from borrowing foreign currency and investing locally, we need to consider the interest rate differential and the exchange rate movement.
First, let's calculate the interest earned on investing locally. With a 4.9% per annum interest rate in the U.K., the interest earned over six months on £1,000,000 would be:
(4.9% / 2) * £1,000,000 = £24,500
Next, let's calculate the interest expense on borrowing foreign currency. With a 7.2% per annum interest rate in the U.S., the interest expense over six months on the equivalent amount in USD would be:
(7.2% / 2) * $1,000,000 = $36,000
Now, let's calculate the exchange rate gain/loss. The difference between the current rate (1.5058) and the six-month forward rate (1.5266) is:
1.5266 - 1.5058 = 0.0208
Multiplying this by the borrowed amount in USD:
0.0208 * $1,000,000 = $20,800
To determine the overall profit or loss, we subtract the interest expense and add the exchange rate gain/loss to the interest earned:
Profit/Loss = Interest earned - Interest expense + Exchange rate gain/loss
Profit/Loss = £24,500 - $36,000 + $20,800
Please note that we need to convert the pound amount to dollars using the current exchange rate:
£24,500 * 1.5058 = $36,422.90
Profit/Loss = $36,422.90 - $36,000 + $20,800
Profit/Loss ≈ $21,223
Therefore, if you borrow foreign currency (USD) and invest locally, you would make approximately $21,223.
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Gibson Guitars is offering its Les Paul Standard electric guitar at an MSRP, or list price, of $3,500. If Gibson offers a chain of discounts of "40%, 10% Off List Price" to its marketing channel customers, what is the price that wholesalers must pay?
A.
$1,400
B.
$2,100
C.
$1,890
D.
$3,150
The price that wholesalers must pay is $1,890.
Gibson Guitars is offering its Les Paul Standard electric guitar at an MSRP, or list price, of $3,500. If Gibson offers a chain of discounts of "40%, 10% Off List Price" to its marketing channel customers, the price that wholesalers must pay is $1,890.
What is the chain of discounts? Here is the given chain of discounts offered by Gibson Guitars to its marketing channel customers:40% + 10% Off List Price We must calculate the price that wholesalers must pay.
The calculation can be done in two steps.40% off on the list price of $3,500 is:$3,500 × 0.4 = $1,400$1,400 is subtracted from $3,500, the result is:$3,500 − $1,400 = $2,100
Now, 10% off on $2,100 is:$2,100 × 0.1 = $210$210 is subtracted from $2,100, the result is:$2,100 − $210 = $1,890
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You have decided to buy a house. You can get a mortgage rate of 5.2 percent, and you want your payments to be $1,475 or less. How much can you borrow on a 30-year fixed-rate mortgage? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Based on a mortgage rate of 5.2 percent and a desired monthly payment of $1,475, you can borrow approximately $273,484.86 on a 30-year fixed-rate mortgage.
To calculate the maximum amount you can borrow on a 30-year fixed-rate mortgage, we need to use the formula for the monthly payment of a mortgage.
The formula is: P = (r * A) / (1 - (1 + r)^(-n))
Where:
P is the monthly payment
r is the monthly interest rate (5.2% divided by 12)
A is the loan amount
n is the total number of monthly payments (30 years multiplied by 12 months)
Rearranging the formula, we can solve for A (loan amount):
A = (P * (1 - (1 + r)^(-n))) / r
Plugging in the values:
P = $1,475
r = 5.2% / 12 = 0.00433
n = 30 years * 12 months = 360
A = ($1,475 * (1 - (1 + 0.00433)^(-360))) / 0.00433
Calculating this expression gives us the loan amount A, which represents the maximum amount you can borrow on a 30-year fixed-rate mortgage.
Please note that without the exact interest calculation method used by your lender, this is an estimate based on the given information. It is advisable to consult with a mortgage professional to get accurate information tailored to your specific situation.
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Understanding management and leadership 10. With reference to a relevant leadership model and example(s), justify whether there is one best way that managers should lead workers to increase productivity?
There is no one single best way for managers to lead workers to increase productivity as each situation is different and depends on various factors. However, leadership models can offer guidance on different approaches that can be taken by managers in order to effectively lead their workers.
One such model is the situational leadership model. This model proposes that there is no single leadership style that is universally effective, but rather the most effective style is dependent on the level of readiness of the workers being led. The model identifies four different styles of leadership: directing, coaching, supporting, and delegating. Each style is appropriate for a different level of worker readiness, with directing being used for workers who are low on both competence and commitment, and delegating being used for workers who are high on both competence and commitment.
Another model is the transformational leadership model, which suggests that the most effective leaders are those who inspire and motivate their workers to achieve beyond what is expected of them. Transformational leaders create a vision and inspire their workers to share in this vision and work towards achieving it.
The best way for managers to lead workers to increase productivity depends on a variety of factors including the situation, the level of readiness of the workers, and the vision and goals of the organization. There is no single best way to lead workers, but leadership models such as the situational and transformational models offer guidance on different approaches that can be taken by managers depending on the situation. Therefore, managers should use these models as a guide to choose the most effective approach to leading their workers in order to increase productivity.
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Operating leverage magnifies: A. taxes B. earnings per share variability. C. operating income variability. D. variable cost
The correct option is (c).
Operating leverage magnifies operating income variability.
Operating leverage refers to the degree to which a company's fixed costs are a part of its overall cost structure. When a company has high fixed costs relative to its variable costs, it has high operating leverage. This means that small changes in sales or revenue can lead to larger changes in operating income.
Operating income is affected by changes in revenue and variable costs. When a company has high operating leverage, a small increase in revenue will lead to a proportionately larger increase in operating income. Similarly, a small decrease in revenue will result in a proportionately larger decrease in operating income.
Therefore, operating leverage magnifies the variability of operating income. The correct answer is C. operating income variability.
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Please explain liqudity trap on IS-LM Schedule?
I want an expert who has knowledge on the subject to write it. no quoting from the internet
The liquidity trap refers to a situation in the IS-LM framework where monetary policy becomes ineffective in stimulating the economy due to extremely low interest rates.
In the IS-LM framework, the relationship between interest rates and output is analyzed. The IS curve represents the equilibrium in the goods market, while the LM curve represents the equilibrium in the money market. Typically, when interest rates decrease, it stimulates investment and consumption, leading to an increase in output.
However, in a liquidity trap, interest rates reach extremely low levels, close to zero. At such low rates, individuals and businesses may prefer to hold cash rather than investing or lending. This preference for liquidity makes monetary policy less effective in stimulating the economy.
In a liquidity trap, the LM curve becomes flat or nearly horizontal. As a result, changes in the money supply by the central bank do not have a significant impact on interest rates. The demand for money becomes insensitive to changes in interest rates, as individuals and businesses are already holding a large amount of cash.
In this situation, traditional expansionary monetary policy measures, such as lowering interest rates or increasing the money supply, do not lead to a significant increase in investment or consumption. The economy remains stagnant, with low output and high unemployment.
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Macey Co. exchanged a piece of equipment that had cost $40,000 (now 75% depreciated) for a truck with a current appraised value of $15,000. Macey Co. gave the other company the piece of equipment and $8,000. Macey Co. should record
a. a $3,000 loss
b. the truck at $18,000
c. a gain of $11,000
d. the truck at $23,000
Macey Co. should record C. a gain of $11,000. To determine the appropriate accounting treatment for the exchange of the equipment, we need to compare the carrying value of the equipment with the fair value of the truck received.
The carrying value of the equipment is its original cost ($40,000) minus the accumulated depreciation. Given that the equipment is 75% depreciated, the accumulated depreciation is calculated as 75% of the original cost, which is $30,000. Therefore, the carrying value of the equipment is $40,000 - $30,000 = $10,000. The fair value of the truck received is $15,000. Since the fair value of the truck is higher than the carrying value of the equipment, Macey Co. would record a gain on the exchange. The gain is calculated as the fair value of the truck ($15,000) minus the carrying value of the equipment ($10,000), which equals $5,000. However, in addition to the truck, Macey Co. also provided $8,000 in cash as part of the exchange. The cash provided should be subtracted from the gain to determine the net gain. Therefore, the net gain is $5,000 - $8,000 = -$3,000, indicating a loss on the exchange. Therefore, Macey Co. should record a loss of $3,000 on the exchange. None of the options provided matches the correct answer.
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As we know the employee benefits are that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (e.g., life insurance, pension, workers’ compensation, vacation). Now, explain the factors which are influencing the choice of benefit package.
The choice of a benefit package is influenced by factors such as employee needs, industry dynamics, cost considerations, organizational culture, and legal requirements.
Employers must strike a balance between meeting employee expectations, staying competitive, and managing costs while ensuring compliance with regulations.
The choice of a benefit package is influenced by several factors, including:
1. Employee Needs and Preferences: Employers consider the needs and preferences of their employees when designing a benefit package. This includes understanding the demographics, lifestyle, and priorities of the workforce. For example, younger employees may value flexible work arrangements and career development opportunities, while older employees may prioritize retirement benefits and healthcare coverage.
2. Industry and Labor Market: The industry and labor market dynamics play a role in determining the benefit package. Employers need to consider what their competitors are offering to attract and retain talent. They also need to be aware of any legal or regulatory requirements specific to their industry, such as providing certain benefits mandated by law.
3. Cost and Budget: Employers must take into account the cost implications of different benefit options. They need to balance offering competitive benefits while managing costs within their budget. Some benefits, such as healthcare coverage, can be expensive, so employers need to assess the financial feasibility of providing certain benefits.
4. Organizational Culture and Values: The benefit package should align with the organization's culture and values. For example, if an organization values work-life balance, it may offer benefits like flexible work hours or paid time off. Similarly, if an organization values employee wellness, it may provide wellness programs or gym memberships.
5. Legal and Regulatory Requirements: Employers must comply with applicable laws and regulations related to employee benefits. These can include requirements for minimum wage, overtime, leave policies, and healthcare coverage. Employers need to ensure their benefit package meets the legal obligations in their jurisdiction.
By considering these factors, employers can design a benefit package that meets the needs of their employees, aligns with their organizational goals, and remains competitive in the labor market.
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A manufacturing company will produce a new product, based on the agreement with its customer. A subassembly part of this product requires new equipment to be manufactured. These equipment will cost $10,000 and they are specifically designed to process just that subassembly part. In addition to that, a worker must be paid $10/hr to produce the part and he can produce 20 parts a day. Raw material cost for the subassembly part is $2/part. The cost of outsourcing the subassembly part is $20. Assuming that there are 8 hours/day, what must be the minimum order quantity on the agreement to decide to produce subassembly part in house?
To determine the minimum order quantity required to produce the subassembly part in-house, several factors need to be considered, including the cost of equipment, labor, raw materials, and the cost of outsourcing.
By comparing the costs of producing in-house versus outsourcing, the company can identify the breakeven point where it becomes more cost-effective to produce the subassembly part internally.
To calculate the minimum order quantity for producing the subassembly part in-house, we need to compare the costs of producing internally versus outsourcing. Let's break down the costs involved:
1. Equipment cost: The new equipment specifically designed for processing the subassembly part will cost $10,000.
2. Labor cost: The worker is paid $10/hour and can produce 20 parts per day. Assuming 8 working hours per day, the labor cost per part would be $10/(20 parts/day) = $0.50/part.
3. Raw material cost: The raw material cost for each subassembly part is $2/part.
4. Outsourcing cost: The cost of outsourcing the subassembly part is $20/part.
To determine the minimum order quantity, we need to find the point at which the cost of producing in-house is equal to the cost of outsourcing. The cost of producing in-house can be calculated by adding the equipment cost, labor cost, and raw material cost per part. Let's denote the minimum order quantity as 'Q':
Cost of producing in-house = (Equipment cost + (Labor cost + Raw material cost) * Q)
The cost of outsourcing is simply the outsourcing cost per part multiplied by the quantity:
Cost of outsourcing = Outsourcing cost * Q
By setting the two costs equal to each other, we can find the minimum order quantity:
(Equipment cost + (Labor cost + Raw material cost) * Q) = Outsourcing cost * Q
Substituting the values, we have:
($10,000 + ($0.50 + $2) * Q) = $20 * Q
Simplifying the equation, we can find the minimum order quantity that makes producing in-house more cost-effective:
($10,000 + $2.50Q) = $20Q
$10,000 = $17.50Q
Q = $10,000 / $17.50
Q ≈ 571.43
Therefore, the minimum order quantity required to decide to produce the subassembly part in-house is approximately 572 units.
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In a small town in Florida, a supplement sold for $2.00 a bottle in May. In total, 2000 bottles were sold. In June, nothing else changed but the price of the supplement, which was increased to $2.20. A total of 1900 bottles were sold. What is the arc of elasticity of demand?
The demand elasticity arc is 1.053. The arc of elasticity of demand is the ratio of the percentage change in the quantity demanded to the percentage change in the price.
We can apply the formula given below to determine the arc of elasticity of demand:
Arc of Elasticity of Demand = [(Q1 - Q2) / ((Q1 + Q2) / 2)] / [(P1 - P2) / ((P1 + P2) / 2)]
Where Q1 and P1 are the initial quantity demanded and price respectively, and Q2 and P2 are the new quantity demanded and price respectively.
Let’s plug in the given values to calculate the arc of elasticity of demand:
Initial price, P1 = $2.00
New price, P2 = $2.20
Initial quantity demanded, Q1 = 2000
New quantity demanded, Q2 = 1900
Putting the values in the formula:
Arc of Elasticity of Demand = [(Q1 - Q2) / ((Q1 + Q2) / 2)] / [(P1 - P2) / ((P1 + P2) / 2)]
Arc of Elasticity of Demand = [(2000 - 1900) / ((2000 + 1900) / 2)] / [($2.00 - $2.20) / (($2.00 + $2.20) / 2)]
Arc of Elasticity of Demand = [100 / 1950] / [-$0.20 / $2.10]
Arc of Elasticity of Demand = -0.1 / -0.0952
Arc of Elasticity of Demand = 1.053
Therefore, the arc of elasticity of demand is 1.053.
The concept of elasticity of demand is used to measure the extent to which quantity demanded changes with a change in price. A product is considered elastic if a small change in price causes a large change in quantity demanded. A product is considered inelastic if a large change in price causes a small change in quantity demanded. If the elasticity of demand is equal to 1, then the percentage change in quantity demanded is equal to the percentage change in price. This is the situation in this case.
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