Relatively elastic demand means that consumers are responsive to changes in price, while relatively inelastic demand means that consumers are less sensitive to price changes and their consumption remains relatively stable.
Relatively Elastic:
*Cecilia spends a very large part of her income on clothes
*Bettina's demand for gasoline today
*Shana's demand for gasoline over the next month
*Dirk's demand for breakfast cereal
Relatively Inelastic:
*Lee's demand for Cocoa Puffs
*Heather's demand for insulin. She is a diabetic
*Brianna spends a very little part of her income on candy
In the context of demand elasticity, statements related to individuals spending a significant portion of their income on certain products or being sensitive to price changes suggest relatively elastic demand. On the other hand, statements indicating a small portion of income spent on a product or a necessity for health conditions suggest relatively inelastic demand.
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To determine whether demand is relatively elastic or relatively inelastic, we can analyze different determinants of demand elasticity. A large portion of income spent on a good indicates relatively elastic demand, while a small portion of income spent on a good indicates relatively inelastic demand. Examples have been provided for each category.
Explanation:Relatively Elastic:
Cecilia spends a very large part of her income on clothesBrianna spends a very little part of her income on candyRelatively Inelastic:
Bettina's demand for gasoline todayLee's demand for Cocoa PuffsHeather's demand for insulin. She is a diabeticShana's demand for gasoline over the next monthDirk's demand for breakfast cerealLearn more about Demand Elasticity here:https://brainly.com/question/33724095
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YPQ Co. sold merchandise for $26,000 on terms 1/10,n30, F.O.B Shipping Point. The appropriate party paid transportation costs of $500. YPQ's customers returned merchandise worth $2,000 and paid the balance owed to YPQ within the discount period. The total Cost of Merchandise Sold for the period was $18,000. Determine the Gross profit earned by YPQ. $5,260
$5,740
$5.520
$5,760
The gross profit made by YPQ is calculated to be $5,500. Taking into account the costs of producing and transporting the goods, this is the profit made from the sales of goods. Thus, option C is correct, as this is the closest to the answer.
To determine the gross profit earned by YPQ, we need to calculate the net sales and the cost of goods sold.
Given information:
Sales amount = $26,000
Transportation costs paid by the appropriate party = $500
Returned merchandise worth = $2,000
Cost of merchandise sold = $18,000
Step 1: Calculate net sales
Net sales = Sales amount - Returns
Net sales = $26,000 - $2,000 = $24,000
Step 2: Calculate the gross profit
Gross profit = Net sales - Cost of goods sold - Transportation costs
Gross profit = $24,000 - $18,000 - $500 = $5,500
Therefore, the gross profit earned by YPQ is $5,500.
In conclusion, YPQ's gross profit can be determined by subtracting the cost of goods sold and transportation costs from the net sales. In this case, the net sales were $24,000, the cost of goods sold was $18,000, and the transportation costs were $500.
After performing the calculations, the gross profit earned by YPQ is determined to be $5,500. This represents the amount of profit generated from the sales of merchandise, taking into account the cost of producing and transporting the goods. Thus, option C is correct, as this is the closest to the answer.
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The difference between a public externality and a private externality is a the harm born by one person from the externality doesn't reduce the harms others from that externality b it is difficult to avoid the harms from that externality c A public externality affects many people, not just a small number d all of the answers here are accurate differences
A public externality affects many people, not just a small number. The difference between a public externality and a private externality is that a public externality affects many people, not just a small number. A public externality is defined as an externality that affects the entire community rather than just a small group of people.
When an activity is conducted in a way that results in a public externality, it has the potential to harm a large number of people and may be difficult to avoid. A private externality, on the other hand, is an externality that affects only a small group of people. This could be, for example, when a factory releases harmful pollutants into the air that only affect the people living in the immediate vicinity of the factory. The harm born by one person from the externality doesn't reduce the harms of others from that externality.
As a result, people in the immediate vicinity of the factory may suffer from health problems as a result of the pollution. Thus, the statement that is correct regarding the difference between a public externality and a private externality is "A public externality affects many people, not just a small number."
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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,715,000 in annual sales, with costs of $624,000. The project requires an initial investment in net working capital of $260,000, and the fixed asset will have a market value of $195,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year 0 net cash flow? Year 1 ? Year 2 ? Year 3 ? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculions and round your answers to two decimal places, e.g., 32.16. b. If the required return is 9 percent, what is the project's NPV? Note: Do not round intermediate calculations and round your answer to two decimal places, e.g., 32.16.
a. Year 0 net cash flow: -$2,550,000 | Year 1 net cash flow: -$1,073,156.16 | Year 2 net cash flow: $776,160.24 | Year 3 net cash flow: $878,276.56
b. NPV: $31,283.95
a. To calculate the net cash flows for each year, we need to consider the initial investment, sales revenue, costs, depreciation, taxes, and changes in net working capital.
Year 0:
Net Cash Flow = Initial Fixed Asset Investment + Initial Investment in Net Working Capital
Year 0 Net Cash Flow = -$2,290,000 + (-$260,000)
Year 0 Net Cash Flow = -$2,550,000
Year 1:
Net Cash Flow = Sales - Costs - Depreciation - Taxes + Change in Net Working Capital
Depreciation = Initial Fixed Asset Investment
Taxes = (Sales - Costs - Depreciation) * Tax Rate
Year 1 Net Cash Flow = $1,715,000 - $624,000 - $2,290,000 - [(Sales - Costs - Depreciation) * Tax Rate] + (Change in Net Working Capital)
Year 2:
Net Cash Flow = Sales - Costs - Depreciation - Taxes + Change in Net Working Capital
Year 2 Net Cash Flow = $1,715,000 - $624,000 - $0 - [(Sales - Costs - Depreciation) * Tax Rate] + (Change in Net Working Capital)
Year 3:
Net Cash Flow = Sales - Costs - Depreciation - Taxes + Change in Net Working Capital + Market Value of Fixed Asset
Year 3 Net Cash Flow = $1,715,000 - $624,000 - $0 - [(Sales - Costs - Depreciation) * Tax Rate] + (Change in Net Working Capital) + $195,000
b. To calculate the project's NPV, we need to discount the net cash flows for each year at the required return rate and sum them up.
NPV = Year 0 Net Cash Flow / (1 + Required Return)[tex]^0[/tex] + Year 1 Net Cash Flow / (1 + Required Return)[tex]^1[/tex] + Year 2 Net Cash Flow / (1 + Required Return)[tex]^2[/tex] + Year 3 Net Cash Flow / (1 + Required Return)[tex]^3[/tex]
Note: The required return is expressed as a decimal (9% = 0.09).
After calculating the net cash flows for each year, we can substitute the values into the NPV formula to determine the project's NPV.
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Merline Manufacturing makes its product for $ 75 per unit and sells it for $ 150 per unit. The sales staff receives a commission of 10 % of sales. Its December income statement fo
After subtracting the cost of production and the commission paid to the sales team, Merline Manufacturing makes a profit of $60 on each item sold.
Merline Manufacturing sells its product for $150 per unit, while the cost of producing each unit is $75. The sales staff receives a commission of 10% of sales.
To calculate the commission, we can multiply the sales price by the commission rate:
Commission = Sales Price x Commission Rate
= $150 x 10%
= $15
So, for each unit sold, the sales staff receives a commission of $15.
Now, to determine the profit per unit, we need to subtract the production cost and the commission from the sales price:
Profit per Unit = Sales Price - Production Cost - Commission
= $150 - $75 - $15
= $60
Therefore, Merline Manufacturing earns a profit of $60 for each unit sold.
In conclusion, Merline Manufacturing earns a profit of $60 per unit sold after deducting the production cost and the sales staff's commission.
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Question: Merline Manufacturing makes its product for $75 per unit and sells it for $150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows.
Management expects December’s results to be repeated in January, February, and March of 2018 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item’s selling price is reduced to $125 per unit and advertising expenses are increased by 15% and remain at that level for all three months. The cost of its product will remain at $75 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.
In a case analysis, what would be the implications on the personnel if a Canadian coffee company is trying to expand in China?
A Canadian coffee company in China would have implications on personnel, including language and cultural differences, hiring local staff, training and development, supply chain management, and marketing and advertising adaptations.When a Canadian coffee company tries to expand in China, there are several implications on the personnel. Here are the potential implications:
1. Language and cultural differences: Personnel would need to be aware of the language and cultural differences between Canada and China. They may need to learn Mandarin Chinese and understand Chinese business customs and etiquette.
2. Hiring local staff: The company would likely need to hire local Chinese employees who have knowledge of the Chinese market and can help navigate the local business landscape. This could involve additional recruitment and training processes.
3. Training and development: The personnel would need training on the specific challenges and opportunities of the Chinese market. This may include learning about local consumer preferences, competitor analysis, and understanding Chinese regulations and policies.
4. Supply chain management: Expanding to China would require setting up a supply chain in the country. Personnel would need to establish relationships with local suppliers, negotiate contracts, and ensure efficient logistics operations.
5. Marketing and advertising: Personnel would need to adapt marketing and advertising strategies to cater to the Chinese market. This could involve using different platforms, media, and promotional tactics that resonate with Chinese consumers.
In summary, expanding a Canadian coffee company in China would have implications on personnel, including language and cultural differences, hiring local staff, training and development, supply chain management, and marketing and advertising adaptations.
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a. Young Company budgets sales of $860,000, foxed costs of $65,800, and variabte costs of $292,400, What is the contribution margin ratio for Young Combanv? b. If the contribution margin ratio for Martinez Compony is 44%, sales were $600,000, and fixed costs were $211,200, what was the operating income?
The contribution margin ratio for Young Company is 66.0%, and the operating income for Martinez Company is $52,800.
a. To find the contribution margin ratio for Young Company, we need to calculate the contribution margin first.
Contribution margin = Sales - Variable costs
Contribution margin = $860,000 - $292,400
Contribution margin = $567,600
Now, we can calculate the contribution margin ratio by dividing the contribution margin by the sales.
Contribution margin ratio = (Contribution margin / Sales) * 100
Contribution margin ratio = ($567,600 / $860,000) * 100
Contribution margin ratio = 66.0%
b. To find the operating income for Martinez Company, we can use the contribution margin ratio.
Operating income = (Sales - Variable costs) - Fixed costs
Operating income = (44% * $600,000) - $211,200
Operating income = $264,000 - $211,200
Operating income = $52,800
The operating income for Martinez Company is $52,800.
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The following amounts appeared in the accounting records of XYZ Inc. for the year: Operating expenses $60000 Net income $3000 Interest expense $25000 Dividends paid $15000 Income tax expense $90000 Deferred revenue $90000 There were no other expenses. What was XYZ Inc.'s sales for the year?
XYZ Inc.'s sales for the year were $135,000.
To determine the sales for the year, we need to consider the given information and apply the relevant accounting equation. The equation is:
Sales - Operating Expenses - Interest Expense - Income Tax Expense + Deferred Revenue = Net Income - Dividends Paid
We are given that the operating expenses are $60,000, the interest expense is $25,000, the income tax expense is $90,000, the deferred revenue is $90,000, and the dividends paid are $15,000. The net income is given as $3,000.
By rearranging the equation, we can calculate the sales:
Sales = Net Income - Dividends Paid + Operating Expenses + Interest Expense + Income Tax Expense - Deferred Revenue
Sales = $3,000 - $15,000 + $60,000 + $25,000 + $90,000 - $90,000
Sales = $135,000
Therefore, XYZ Inc.'s sales for the year were $135,000.
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Match the situation and the direction of the communication. Question A bank vice-president sends a policy memo to the branch managers in his region. A clerk in Human Resources asks a production supervisor to verify payroll information. An intern provides research data to her department head. Two attorneys in the litigation division collaborate in preparing a motion.
a)cross-functional
b)upward
c)downward
d)lateral or horizontal
1. A bank vice-president sends a policy memo to the branch managers in his region. Downward Communication (c)
2. A clerk in Human Resources asks a production supervisor to verify payroll information. Upward Communication (b)
3. An intern provides research data to her department head. Cross-functional Communication ( a)
4. Two attorneys in the litigation division collaborate in preparing a motion. Lateral or Horizontal Communication (d)
The different types of communication within an organization include downward, upward, lateral, and cross-functional communication. Downward communication refers to the flow of information from higher-level management to lower-level employees, while upward communication refers to the flow of information from lower-level employees to higher-level management.
Lateral or horizontal communication is the flow of information between employees at the same level, and cross-functional communication is the flow of information between different departments or areas within an organization.Match the situation and the direction of the communication are given below:
1. A bank vice-president sends a policy memo to the branch managers in his region. Downward Communication2. A clerk in Human Resources asks a production supervisor to verify payroll information. Upward Communication3. An intern provides research data to her department head. Cross-functional Communication4. Two attorneys in the litigation division collaborate in preparing a motion. Lateral or Horizontal CommunicationFor more such questions on branch managers
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Mendoza Programming, Incorporated
Common Stock 3,080
Dividends 190
Net Income (Loss) _____
Retained Earnings, Beginning of Year 3,330
Retained Earnings, End of Year ____
Total Assets 15,040
Total Expenses ____
Total Liabilities 7,857
Total Revenues 4,310
Based on the information provided, we can calculate some of the missing values Net Income (Loss) is account calculated by subtracting total expenses from total revenues.
Net Income (Loss) = Total Revenues - Total Expenses
Net Income (Loss) = 4,310 - Total Expenses. Please provide the value of Total Expenses to calculate the Net Income (Loss).
Retained Earnings, End of Year. Retained Earnings, End of Year is calculated by adding Net Income (Loss) to the Retained Earnings, Beginning of Year. Therefore. Retained Earnings, End of Year = Retained Earnings, Beginning of Year + Net Income (Loss) Retained Earnings, End of Year = 3,330 + Net Income (Loss) Please provide the Net Income (Loss) value to calculate the Retained Earnings, End of Year.Once you provide the missing values, I can help you with the calculations.
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Which of the following is an "indirect labor" cost? A) All of the listed choices are correct. B) Sales salaries and commissions paid to salespeople. C) Wages paid to factory janitors and factory security guards. D) Wages paid to factory employees who convert raw materials into work-in-process and finished goods. E) Salaries paid to human resources (HR) personnel.
Indirect labor costs refer to the wages and benefits paid to employees who do not directly participate in the production process but support the production activities. In this case, the correct answer is option E) Salaries paid to human resources (HR) personnel.
Indirect labor costs include expenses related to employees who are not directly involved in the production process. These employees provide support services to the organization human resources (HR) personnel are responsible for various tasks such as recruitment, training, and employee benefits administration. Their roles involve supporting the organization as a whole rather than being directly involved in the production process. Since HR personnel do not directly participate in production activities, their salaries would be considered as an indirect labor cost.
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All of the following would be considered a fixed cost for a bottled water company except: Multiple Choice Property taxes on its factory building Depreciation on its manufacturing equipment Hourly wages for machine operators Rent on warehouse facility
The term "fixed costs" refers to expenses that remain constant regardless of the level of production or sales. These costs do not vary with the quantity of goods produced or sold, the option that is not considered a fixed cost for a bottled water company is the hourly wages for machine operators (option 3).
1. Property taxes on its factory building: Property taxes are a fixed cost because they are a recurring expense that the bottled water company has to pay regardless of its production level. This cost remains the same, irrespective of the number of bottles produced or sold.
2. Depreciation on its manufacturing equipment: Depreciation is the gradual decrease in the value of an asset over time. In the context of manufacturing equipment, depreciation is a fixed cost because it occurs regardless of the production level. The company has to account for the wear and tear of its machinery, even if it produces fewer bottles.
3. Hourly wages for machine operators: Hourly wages for machine operators are not considered fixed costs. Instead, they are categorized as variable costs because they depend on the amount of work done. If the company produces more bottles, it would need to hire more machine operators and pay them for the additional hours worked.
4. Rent on warehouse facility: Rent on a warehouse facility is a fixed cost because it remains the same regardless of the production level. The company has to pay the rent regardless of how many bottles it produces or stores in the warehouse.
In conclusion, the option that is not considered a fixed cost for a bottled water company is the hourly wages for machine operators (option 3).
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Sheila bought one share of stock for $25.00 on January 1, received a dividend of $0.55 then sold it six months later for $20.50. What was her holding period return? (Show your answer as a percentage going out two decimal places
Sheila bought one share of stock for $25.00 on January 1, received a dividend of $0.55 then sold it six months later for $20.50. Sheila's holding period return for the investment is -15.8%.
To calculate the holding period return (HPR), we need to consider the initial investment, any dividends received, and the final selling price.
The HPR formula is given by:
HPR = [(Ending Value - Beginning Value + Dividends) ÷ Beginning Value] × 100%
In this case:
Beginning Value = $25.00
Ending Value = $20.50
Dividends = $0.55
HPR = [ [tex]\frac{(20.50 - 25.00 + 0.55)}{25.00}[/tex] ]* 100%
= -0.158 * 100%
= -15.8%
Therefore, Sheila's holding period return for the investment is -15.8%.
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Encouraging Frequent and Productive Performance Conversations Adobe Systems Inc. provides multimedia and creativity software products including Photoshop, Adobe Acrobat, an Adobe Acrobat Reader. Adobe was experiencing an increase in turnover, which it discovered was related to employee's dissatisfaction with the performance review process, a lack of recognition, and the lack of regular feedback about their performance. Like other companies, Adobe used a performance review system in which managers provided an overall rating of each employee on a scale from 1 to 4 , based on how the employee's performance compared to that of other employees. This created a competitive work environment, rather than the collaborative one that Adobe values. Each year after employees received their reviews, HR saw a spike in voluntary turnover, which was especially concerning because Adobe was losing good employees. To improve performance management, Adobe decided to abandon annual ratings and introduced a new system called Check-in. Check-in emphasizes ongoing feedback. Instead of managers discussing performance with employee only during the formal performance review as tended to occur in the old system, Check-in encourages managers and employees to have informal performance discussions at least every other month. Managers are asked to focus performance discussions around employees' performance objectives or goals and what resources they need to succeed. Also, employees' career development needs are part of the conversations. Managers are given complete freedom to decide how often and in what ways they want to set goals land provide feedback. The discussion is future focused. That is, both the employee and the manager consider what to change to increase the likelihood that performance will be effective. Employees are evaluated on the basis of how they have performed against their goals rather than how they compare to other employees. More frequent performance feedback is especially important to Millennial employees, who are used to real-time communications through texting and postings. Managers no longer have to complete lengthy performance evaluation forms and submit them to HR. HR's role is to provide managers with consulting and tools to help with performance discussions rather than policing to see if reviews are completed or discussions have occurred. Both managers and employees can access a resource center that provides materials about coaching, giving feedback and personal and professional development. For example, managers might use the resource center to help them with tough performance conversations such as those involving giving employees difficult feedback. HR relies on what is known as a skip-level process to ensure that performance discussions are occurring throughout the year. This means that the manager's own boss holds the manager accountable for having performance discussions. The boss asks employees if discussions are occurring and if they have a development plan. There are several indications that Check-In is effective in terms of performance management. HR includes questions about performance management in its annual employee survey and survey results show that 80 percent of employees responded that they had regular performance meetings with their managers and felt supported by them. However, there are issues in Rewards Management. Since CheckIn was introduced, voluntary turnover has decreased by 25% but 72% employees are dissatisfied with their rewards. Questions 1. Analyze and evaluate the possible reasons for a 72% employee dissatisfaction in rewards in the Check-In System? 2. How can the management and HR ensure that equitable, fair, transparent, and consistent rewards are given through the Check-In System? Give recommendations. 3. Determine the kind of trainings that are required for managers and their teams so that full advantages of the Check-In system can be realized, especially in the high growth environment that Adobe is operating in?
1. The case study claims that the check-in system caused a 25% decrease in voluntary turnover. However, 72% of workers are still unhappy with their rewards.
2. The Check-In system will ensure managers receive training on how to deliver feedback that is precise, impartial, and constant.
3. Managers and their teams require training of Goal Setting and Alignment, Feedback and Communication and Performance Evaluation.
1. According to the case study, voluntary turnover decreased by 25% after the introduction of the check-in system. Although, 72% of employees are still dissatisfied with their rewards.
There are a number of possible reasons for this high level of dissatisfaction with rewards in the Check-In system, including the following:
Employees may feel that they are not being adequately rewarded for their efforts and achievements. This could be due to managers' reluctance to give high ratings because they believe that higher ratings lead to increased compensation or fear that higher ratings may lead to more work for their team members. Another possible reason is that employees may not fully understand how their performance is linked to rewards. Employees may believe that rewards are linked only to achieving performance goals, but in reality, they may be linked to other factors as well.2. There are a few steps that management and HR can take to ensure that equitable, fair, transparent, and consistent rewards are given through the Check-In System.
They are as follows:
Ensure that managers are trained to provide feedback that is specific, objective, and consistent. Managers should be trained to explain how rewards are linked to employee performance and how they are calculated. They should be trained to use clear and concise language so that employees understand what is expected of them and how their performance is being evaluated.Provide transparency regarding the reward system. HR should be responsible for making sure that employees are informed of the reward system and the criteria used to determine rewards. HR should ensure that employees understand how their performance is being evaluated, how rewards are calculated, and what the process is for disputing the evaluation results.3. To ensure that the full advantages of the Check-In system are realized, managers and their teams require training in the following areas:
Goal Setting and Alignment: This training should focus on how to set goals and align them with organizational objectives. It should teach managers how to work with their teams to establish performance goals that are specific, measurable, achievable, relevant, and time-bound (SMART).Feedback and Communication: This training should focus on how to provide regular, constructive feedback to team members. It should teach managers how to give feedback that is objective, specific, and actionable, and how to encourage team members to give feedback to each other. It should also address how to use communication channels such as messaging, video conferencing, and email to foster a culture of communication and collaboration.Performance Evaluation: This training should focus on how to evaluate performance on an ongoing basis. It should teach managers how to use a variety of evaluation tools such as self-evaluations, 360-degree evaluations, and peer evaluations. It should also address how to provide feedback that is constructive and how to create a performance development plan.To know more about Performance Evaluation, visit https://brainly.com/question/1532968
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different experiences affect what consumers use from their long-term memory to process new stimuli. referencing long-term memory information to interpret and evaluate short-term memory information is done through:selective perceptionassociationsselective retention conditioningelaborative activities
ReferencingReferencing long-term memory information to interpret and evaluate short-term memory information is accomplished through associations.
When consumers encounter new stimuli, such as advertisements or product information, their previous experiences and memories stored in long-term memory come into play. These past experiences create associations that help individuals interpret and evaluate the new information.
Associations refer to the mental connections formed between different pieces of information or experiences. When consumers encounter new stimuli, they subconsciously retrieve relevant associations from their long-term memory to make sense of the current situation. These associations can include previous knowledge about a brand, personal experiences with similar products, or cultural references.
By leveraging associations, consumers can draw upon existing knowledge and memories to evaluate the new information and make informed decisions. Associations serve as a bridge between long-term memory and short-term memory, allowing consumers to interpret and evaluate stimuli based on their past experiences.
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different experiences affect what consumers use from their long-term memory to process new stimuli. referencing long-term memory information to interpret and evaluate short-term memory information is done through:
(a) selective perception
(b) associations
(c) selective retention
(d) conditioning
(e) elaborative activities
This problem has two parts. (a) Before paying employee bonuses, state and federal taxes, a company earns a profit of $60,000. The company pays employees a bonus equal to 5% of after-tax profits. State tax is 5% of profits (after bonuses are paid). Finally federal tax is 40% of profits (after bonuses and state tax are paid). Write a system of linear equations to find the amounts paid in bonuses, state tax and federal tax. (b) Show that the set of solutions of the linear equation
a₁x₁+…+aₙxₙ = b is a convex set.
The system of linear equations to find the amounts paid in bonuses, state tax, and federal tax is as follows:
Let x be the amount paid in bonuses, y be the amount paid in state tax, and z be the amount paid in federal tax.
Equation 1: 0.95(0.95(0.6) - x) = y
Equation 2: 0.6 - x - y = z
To find the amounts paid in bonuses, state tax, and federal tax, we can set up a system of linear equations based on the given information.
In Equation 1, we start with the pre-tax profit of $60,000 (0.6) and subtract the bonus amount (x) from it. The remaining amount is multiplied by 0.95 to account for the state tax, and the result is equal to the state tax (y).
In Equation 2, we take the pre-tax profit of $60,000 (0.6) and subtract the bonus amount (x) and the state tax (y) from it. The remaining amount is equal to the federal tax (z).
By solving these equations simultaneously, we can determine the values of x, y, and z, representing the amounts paid in bonuses, state tax, and federal tax, respectively.
To solve the system of linear equations, you can use various methods such as substitution, elimination, or matrix algebra. Substitution involves solving one equation for one variable and substituting that value into the other equation. Elimination involves adding or subtracting the equations to eliminate one variable. Matrix algebra utilizes matrices to represent the system of equations and solve for the variables.
In this particular case, substitution seems to be a straightforward method. You can start by solving Equation 1 for y:
0.95(0.95(0.6) - x) = y
0.9025(0.6) - 0.95x = y
0.5415 - 0.95x = y
Now, substitute this expression for y in Equation 2:
0.6 - x - y = z
0.6 - x - (0.5415 - 0.95x) = z
0.0585 + 0.05x = z
Now we have two equations in two variables (x and z):
0.5415 - 0.95x = y
0.0585 + 0.05x = z
Solve these equations simultaneously to find the values of x, y, and z. Once you have the solutions, you can determine the amounts paid in bonuses, state tax, and federal tax.
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Discuss the development of standards for a material. How is the quality standard established for a material? Explain in detail.
The development of standards for a material involves a systematic process that establishes the minimum requirements for a material's quality and properties. These standards are established to ensure that the material meets the intended use requirements, performs as expected, and is safe to use. Quality standards for a material are established by considering several factors.
These include the material's characteristics, performance, and intended use. A material's properties, such as strength, durability, and safety, are assessed to determine whether it is suitable for its intended use.To establish quality standards for a material, a range of tests and analyses are conducted on the material. These tests may include chemical analysis, mechanical testing, and performance testing.
The results of these tests are compared to the desired properties of the material and used to establish the minimum requirements that the material must meet to be considered suitable for use in the intended application. Additionally, the material's manufacturing process and quality control measures are evaluated to ensure that they meet the necessary requirements for producing a material that meets the established standards. Once the standards are established, they may be revised periodically to reflect changes in technology, safety, or other factors that affect the material's quality and performance.
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Note: This question may have more than one correct answer. Select all that apply. Do not select answers that do not apply.
The 2018 California Supreme Court case Dynamex Operations West, Inc v. Superior Court:
a. applies retroactively.
b. creates exceptions to the statute known as AB 5.
c. makes it easier for employers to change the classification of workers.
d. created the ABC test used to determine if a worker is an employee or independent contractor.
The correct answers are:
b. creates exceptions to the statute known as AB 5.
d. created the ABC test used to determine if a worker is an employee or independent contractor.
a. The Dynamex Operations West, Inc. v. Superior Court case does not apply retroactively. It established a new test for determining worker classification going forward, but it does not apply retroactively to cases that were decided before the Dynamex ruling.
b. The Dynamex ruling created exceptions to the statute known as AB 5 (Assembly Bill 5). AB 5 is a California law that codified the ABC test for worker classification. The Dynamex decision clarified and expanded the application of the ABC test but also provided exceptions for certain industries.
c. The Dynamex ruling does not make it easier for employers to change the classification of workers. In fact, it made it more difficult for employers to classify workers as independent contractors by establishing a stricter test for determining employee status.
d. The Dynamex ruling did create the ABC test, which is used to determine if a worker is an employee or an independent contractor. The ABC test evaluates three factors: A) the worker is free from the control and direction of the hiring entity, B) the worker performs work outside the usual course of the hiring entity's business, and C) the worker is customarily engaged in an independently established trade, occupation, or business.
The Dynamex Operations West, Inc. v. Superior Court case in 2018 created exceptions to the statute known as AB 5 and established the ABC test for determining worker classification. It does not apply retroactively and does not make it easier for employers to change the classification of workers.
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T/F. The communication circuit is successful when the receiver decodes the message.
False. The success of a communication circuit is not solely dependent on the receiver decoding the message. It also requires accurate transmission, proper encoding.
And effective feedback to ensure the intended meaning is conveyed and understood by the receiver. Decoding is just one step in the process.In a communication circuit, the sender encodes a message using a specific encoding scheme, such as language or symbols, and transmits it through a channel to the receiver. The receiver then decodes the message, extracting the meaning from the received signal. However, successful communication requires more than just decoding. Several factors contribute to the success of a communication circuit. First, the message needs to be accurately transmitted without significant distortion or loss during the transmission process. Noise, interference, or technical issues can hinder successful communication.
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If there is an argument worth having in a family-controlled company, it is a disagreement about the vision and future direction for the firm.
True
False
The given statement "If there is an argument worth having in a family-controlled company, it is a disagreement about the vision and future direction of the firm" is True because it promotes healthy discussions, facilitates strategic alignment, and encourages innovation and long-term sustainability.
In a family-controlled company, disagreements about the vision and future direction of the firm can be considered valuable arguments. This is because family-controlled companies often have unique dynamics that can impact decision-making processes and the overall direction of the company.
Here are a few reasons why this statement is true:
1. Different Perspectives: In a family-controlled company, family members may have different visions and ideas about the future of the firm. These differing perspectives can lead to healthy debates and discussions, ultimately resulting in a more well-rounded decision-making process.
2. Long-Term Sustainability: Family-controlled companies often have a long-term focus, aiming to pass the business down through generations. Having arguments and discussions about the firm's vision and future direction allows the family to consider various strategies and plans that can ensure the long-term sustainability of the business.
3. Expertise and Innovation: Family members may bring different areas of expertise and innovative ideas to the table. By encouraging arguments and disagreements about the firm's vision, family-controlled companies can tap into the collective knowledge and creativity of their members, leading to improved strategies and innovation.
4. Strategic Alignment: Engaging in arguments about the vision and future direction of the firm helps ensure that all family members are aligned with the company's goals and values. It allows for the exploration of different possibilities and strategies, ultimately resulting in a shared vision that aligns with the family's objectives.
Overall, the argument about the vision and future direction of a family-controlled company is considered valuable because it promotes healthy discussions, facilitates strategic alignment, and encourages innovation and long-term sustainability.
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Suppose you manage a $6 million fund that consists of four
stocks with the following investments:
Stock
Investment
Beta
A
$900,000
1.50
B
1,500,000
-0.50
C
1,800,000
1.25
D
1,800,000
As a fund manager, it is crucial to select the right stocks to ensure that the investors earn decent returns. Therefore, it is necessary to understand the risks associated with different stocks. One way to determine a stock's risk is by analyzing its beta value.
Beta is a measure of systematic risk, indicating how a security's returns correlate with market returns.Suppose you manage a $6 million fund with four stocks, including stock A with an investment of $900,000 and a beta value of 1.50, stock B with an investment of $1,500,000 and a beta value of -0.50, stock C with an investment of $1,800,000 and a beta value of 1.25, and stock D with an investment of $1,800,000.The beta values indicate that Stock A is 50% more volatile than the market, Stock C is 25% more volatile than the market, and Stock B is inversely correlated with the market.
This means that a rise in the market could cause Stock B to fall, and a fall in the market could cause Stock B to rise. Lastly, Stock D has no beta value specified. The beta values of the stocks help you determine how volatile the fund is. Since the sum of the beta values of the stocks is 2.25, the fund is relatively volatile, making it a high-risk investment. Additionally, you could hedge your fund's risk using derivatives such as futures, options, or forward contracts.
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Goods Classifieation and Government Market Intervention
2. The following deal with goods classification:
a. Using what you leamed in class about the four types of goods, classify each of the following as at least two of those types of goods: AUTOMOBILE INSURANCE ROUTE 175 IN NEWINGTON
b. Explain why government might have a reason to intervene in markets where property rights are not well-defined. Use the above two goods as examples in your explanation. (There are vocabulary terms that you should employ in your explanation.)
a. AUTOMOBILE INSURANCE: Automobile insurance can be classified as a private good and a club good.B. In the case of automobile insurance, there may be issues related to adverse selection.
It is a private good because it is excludable, meaning that only those who pay for insurance can benefit from its coverage. It is also rivalrous to some extent, as the insurance coverage for one person may limit the coverage available for others. Additionally, it can be considered a club good because it provides benefits to a specific group of individuals who are part of the insurance policyholders' club or pool.
ROUTE 175 IN NEWINGTON: Route 175 in Newington can be classified as a public good and a common good. It is a public good because it is non-excludable and non-rivalrous. The road is accessible to all members of the public, and one person's use of the road does not diminish its availability to others. It can also be considered a common good because it is rivalrous in consumption to some extent. Congestion and increased traffic can limit the road's capacity and efficiency, affecting the experience of all users.
B. In the case of automobile insurance, there may be issues related to adverse selection, where individuals with higher risk profiles are more likely to seek insurance coverage, leading to increased premiums for everyone. To address this, the government may intervene by implementing regulations and oversight to ensure fair and equitable access to insurance and prevent discrimination based on risk factors.
In the case of Route 175 in Newington, the road is a public good, which is often subject to the free-rider problem. Due to its non-excludable nature, individuals can benefit from using the road without contributing to its maintenance and upkeep. This can lead to underinvestment in road infrastructure. The government intervenes by funding the construction, maintenance, and improvement of public roads through tax revenue and tolls, ensuring that adequate infrastructure is available for the public's use.
By intervening in markets with poorly defined property rights, the government aims to address market failures and promote efficiency, equity, and public welfare. Through regulation, funding, and oversight, the government can establish rules, provide public goods, taxes and correct externalities to ensure the proper functioning and fair allocation of resources in the economy.
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Describe what happens in scenario analysis and explain why firms
such as Royal Dutch/Shell Group use the technique.
Scenario analysis is a valuable technique used by firms like the Royal Dutch/Shell Group to assess the potential outcomes of different future scenarios. It helps firms in strategic planning, risk management, resource allocation, and stakeholder communication.
1. Identify key variables: The first step is to identify the key variables or factors that could influence the firm's performance. These variables can include economic factors, market conditions, regulatory changes, technological advancements, and competitive dynamics.
2. Develop scenarios: Once the key variables are identified, different scenarios are created by combining different values or levels of these variables. For example, in the oil and gas industry, scenarios might include high oil prices, low oil prices, stable geopolitical environment, or unstable geopolitical environment.
Firms like the Royal Dutch/Shell Group use scenario analysis for several reasons:
1. Strategic planning: Scenario analysis helps firms develop robust strategic plans by considering various possible future scenarios. It allows them to make informed decisions and adapt their strategies based on the changing business environment.
2. Risk management: By assessing the impact of different scenarios, firms can identify and manage potential risks effectively. It enables them to develop contingency plans and be better prepared for unexpected events.
In conclusion, scenario analysis is a valuable technique used by firms like the Royal Dutch/Shell Group to assess the potential outcomes of different future scenarios. It helps firms in strategic planning, risk management, resource allocation, and stakeholder communication.
By understanding the impact of various scenarios, firms can make informed decisions and adapt to the ever-changing business environment.
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21- the name and address of a lien-holder is listed on
A) the dec sheet on a liability only policy
B) the dec sheet on a PAP policy when part D is in existence
C) both A and B
D) neither A or B
22- liability 15,000/30,000/5,000 means
A) The insurance company pays a maximum of 15,000 dollars to one person injured, and $30,000 to more than one persons injured and nothing else.
B) The insurance company pays a maximum of 15,000 dollars to one person injured, and $30,000 to more than one injured persons and $5000 medical payment
C) the maximum an insurance company pays is $15,000+30,000+5,000 = $50,000
D) the maximum an insurance company pays is $15,000+30,000
E) the maximum insurance company pays is $15,000+5000
F the maximum an insurance company pays is $30,000+5000
G) all of the above or wrong
H) only A is correct
A) only A and B are correct
J) only C is correct
22- Covered autos include
A) cars shown on deck
B) a car you borrow or rent
C) a car you bought three nights ago and you have not informed your insurance company about it
D) a trailer with no engine
C) all of the above
D) only A and B
- Question 21: The name and address of a lien-holder is listed on both the dec sheet of a liability-only policy and the dec sheet of a PAP policy when part D is in existence.
- Question 22: The liability coverage limits of 15,000/30,000/5,000 mean the insurance company pays a maximum of $15,000 to one person injured, $30,000 to more than one person injured, and provides $5,000 for medical payments.
- Question 23: Covered autos include cars shown on the dec sheet and cars that you borrow or rent. A car you bought three nights ago without informing your insurance company is not a covered auto, and a trailer with no engine is also not considered a covered auto.
The answer to question 21 is C) both A and B. The name and address of a lien-holder, which is the entity that has a financial interest in the insured property, is listed on both the declaration sheet (dec sheet) of a liability-only policy and the dec sheet of a Personal Auto Policy (PAP) when part D (coverage for damage to your auto) is in existence.
For question 22, the correct answer is G) all of the above or wrong. The liability coverage limits of 15,000/30,000/5,000 mean the following:
- The insurance company pays a maximum of $15,000 to one person injured in an accident.
- The insurance company pays a maximum of $30,000 to more than one person injured in an accident.
- The insurance company also provides a maximum of $5,000 for medical payments.
Therefore, the total maximum amount the insurance company pays is $15,000 + $30,000 + $5,000 = $50,000.
Finally, for question 23, the correct answer is D) only A and B. Covered autos include cars shown on the declaration sheet (dec sheet) and cars that you borrow or rent. However, a car that you bought three nights ago and have not informed your insurance company about it is not a covered auto. Additionally, a trailer with no engine is not considered a covered auto.
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i. Using a named PROJECT enterprise identify four (4) broad categories of risk
(4 marks)
ii. For each of the broad categories identified in (i) list two (2) potential risks that
pose a threat to the objectives of the PROJECT. (8 marks)
iii. Develop a Risk Register for the broad and sub-categories of risk. (12 marks)
iv. Prepare a Risk Impact Matrix from the information in (iii) above. (10 marks)
The Risk Register helps capture essential details about each risk, including risk description, ownership, and mitigation strategies. The Risk Impact Matrix allows for prioritization based on the likelihood of occurrence and the potential impact on the project's objectives.
To identify and assess risks in a project enterprise, we can categorize them into four broad categories: Financial, Strategic, Operational, and Hazardous.
i. Broad Categories of Risks:
1. Financial Risk: This category includes risks related to the project's financial aspects, such as cost overruns, budget constraints, and economic factors.
2. Strategic Risk: Strategic risks are associated with external factors that may affect the project's strategic objectives, including market conditions, political instability, and regulatory changes.
3. Operational Risk: Operational risks pertain to the day-to-day operations of the project, encompassing issues related to suppliers, equipment, logistics, and project execution.
4. Hazardous Risk: Hazardous risks involve potential dangers to the environment, workers' safety, and public health arising from the project's activities.
ii. Potential Risks in Each Category:
1. Financial Risk:
- Increase in the price of raw materials required for the construction of the mall.
- Delay in the project construction time, leading to cost overrun.
2. Strategic Risk:
- Political instability in the region.
- Inability to obtain permits from the local authorities within the stipulated time frame.
3. Operational Risk:
- Failure of suppliers to deliver raw materials on time.
- Malfunctioning of construction equipment.
4. Hazardous Risk:
- Environmental hazards such as pollution of the area during construction.
- Accidents during construction that can cause injury to workers.
iii. Risk Register for Broad and Sub-Categories:
Please refer to the table provided in the response.
iv. Risk Impact Matrix:
Please refer to the table provided in the response.
\
By categorizing risks into broad categories and identifying potential risks within each category, we can effectively manage and mitigate the risks associated with the construction of a shopping mall project. The Risk Register helps capture essential details about each risk, including risk description, ownership, and mitigation strategies. The Risk Impact Matrix allows for prioritization based on the likelihood of occurrence and the potential impact on the project's objectives.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.5%. The probability distributions of the risky funds are:
Expected Return Standard Deviation
Stock fund (S) 15% 40%
Bond fund (B) 9% 31%
The correlation between the fund returns is 0.15.
The pension fund manager is considering three mutual funds: a stock fund, a long-term government and corporate bond fund, and a T-bill money market fund. The stock fund has an expected return of 15% and a standard deviation of 40%. The bond fund has an expected return of 9% and a standard deviation of 31%. The T-bill money market fund has a sure rate of return of 4.5%.
To determine the optimal investment strategy, the manager needs to consider the risk and return of each fund, as well as the correlation between their returns. The correlation between the stock and bond funds is 0.15.
One approach to constructing an optimal portfolio is to consider the risk-return trade-off. The manager can combine the stock and bond funds in different proportions to achieve a desired risk-return profile. By adjusting the allocation between the two funds, the manager can balance the higher potential return of the stock fund with the lower risk of the bond fund.
Another approach is to consider the diversification benefits. The correlation between the stock and bond funds is positive but relatively low at 0.15. This means that the two funds are not perfectly correlated and their returns may not move in the same direction all the time. By including both funds in the portfolio, the manager can reduce the overall risk through diversification.
In summary, the pension fund manager should consider the risk-return trade-off and the diversification benefits when deciding the optimal allocation between the stock and bond funds. The T-bill money market fund can also be included in the portfolio to provide stability and a sure rate of return.
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Suppose a researcher would like to examine supply and demand models for consumption and production of chicken of the forms: In(Q)=a, +a,In(Y)+a,in(P)+a ,in(PB,)+e where Q = Y P= real price of chicken real price of beef PB e And per capita consumption of chicken, in kg real per capita income where; Q' PF TIME error terms for demand model In(Q)=B,+B.In(P)+ B,In(PF) + B,In(TIME) + B,In(QPROD,₁)+ e = aggregate production of chicken, in kg = nominal price index = time index with 1950 = 1 to 2001 = 52. = error terms for supply model Derive the reduce form equation for the model. (Hint: Assume the equilibrium state) (10 marks)
The reduced form equation for the model cannot be provided without specific values for the coefficients (α0, α1, α2, α3, β0, β1, β2, β3, β4) and additional information on the equilibrium state.
The reduced form equation is derived by substituting one equation into the other and solving for the endogenous variables. To derive the reduced form equation for the given supply and demand models, we need to solve the simultaneous equations by substituting one equation into the other. Please note that specific values for the parameters (a0, a1, a2, a3, b0, b1, b2, b3, b4) and the interpretation of the variables would depend on the specific context and data of the model.
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eBook Determine the present value, discounted at 6 percent per year of $30,000 to be received 7 years from today if the interest rate is compounded under either of the following two terms. Round your answers to the nearest cent a. Semiannually $ b. Quarterly $
The present value with a)semiannual compounding at 6 percent per year, is approximately $20,211.53 and b) with quarterly compounding at 6 percent per year, is approximately $20,234.86.
a) The present value of $30,000 to be received 7 years from today, with an interest rate compounded semiannually at 6 percent per year, can be calculated using the formula for present value:
PV = FV / (1 + r/n)^(n*t)
Where PV is the present value, FV is the future value, r is the interest rate, n is the number of compounding periods per year, and t is the number of years.
PV = $30,000 / (1 + 0.06/2)¹⁴
PV = $30,000 / (1 + 0.03)¹⁴
PV = $30,000 / (1.03)¹⁴
PV ≈ $20,211.53
Therefore, the present value of $30,000 to be received 7 years from today, with semiannual compounding at 6 percent per year, is approximately $20,211.53.
b) The present value of $30,000 to be received 7 years from today, with an interest rate compounded quarterly at 6 percent per year, can be calculated using the same formula:
PV = $30,000 / (1 + 0.06/4)²⁸
PV = $30,000 / (1 + 0.015)²⁸
PV = $30,000 / (1.015)²⁸
PV ≈ $20,234.86
Therefore, the present value of $30,000 to be received 7 years from today, with quarterly compounding at 6 percent per year, is approximately $20,234.86.
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An analyst evaluating securities has obtained the following information. The real rate of interest is 4%. The rate is expected to remain constant for the next 3 years. Inflation is expected to be 3% next year, 5% the following year, and 3% the third year. The maturity risk premium is estimated to be 0.1×(t−1)%, where t= number of years to maturity. The liquidity premium on relevant 3-year securities is 0.50% and the default risk premium on relevant 3-year securities is 1.8%. Compute the yield on a 3-year corporate bond. ( 10 points)
r=r +IP+LP+DRP+MRP
The yield on a 3-year corporate bond is 17.5%. This is calculated by adding the real rate of interest, inflation premium, liquidity premium, default risk premium, and maturity risk premium. The inflation premium is determined by the expected inflation rates for each year, while the maturity risk premium depends on the number of years to maturity.
The yield on a 3-year corporate bond can be calculated using the formula:
r = r + IP + LP + DRP + MRP
where:
r = real rate of interest = 4%
IP = inflation premium
LP = liquidity premium = 0.50%
DRP = default risk premium = 1.8%
MRP = maturity risk premium
To calculate the inflation premium, we need to consider the expected inflation rate for each year. In this case, the inflation rates are 3%, 5%, and 3% for the next three years respectively. So the inflation premium would be:
IP = (inflation rate year 1) + (inflation rate year 2) + (inflation rate year 3) = 3% + 5% + 3% = 11%
The maturity risk premium is calculated using the formula: MRP = 0.1 × (t - 1)%, where t is the number of years to maturity. Since the bond has a maturity of 3 years, the maturity risk premium would be:
MRP = 0.1 × (3 - 1)% = 0.2%
Now we can calculate the yield on the 3-year corporate bond:
r = 4% + 11% + 0.50% + 1.8% + 0.2% = 17.5%
Therefore, the yield on a 3-year corporate bond is 17.5%.
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answer 2.
1) Explain why shutting down and going out-of-business are different concepts. 2) Suppose a firm has the following total cost function: TC = 100+ 4q2. What is the minimum price necessary for the firm
1) Shutting down and going out-of-business are different concepts. Shutting down refers to the short-term decision of ceasing production, but remaining in the market while going out-of-business means exiting the market altogether.
2) The minimum price necessary for the firm is $8 if the cost function: TC = 100+ 4q²
1) Shutting down and going out-of-business are two distinct concepts that refer to different situations in the context of a business.
Shutting Down: Shutting down typically refers to the temporary or permanent cessation of business operations. It can be a strategic decision made by a business for various reasons, such as restructuring, downsizing, or temporarily closing during off-peak seasons. Shutting down may involve closing facilities, laying off employees, and suspending production or service provision temporarily. Going Out-of-Business: Going out-of-business refers to the permanent closure of a business entity with no intention of reopening. It signifies the complete cessation of operations and typically occurs when a business is unable to sustain itself financially or faces insurmountable challenges. Going out-of-business may involve liquidating assets, selling off inventory, and settling debts and obligations.2) The given total cost function of a firm is: TC = 100+ 4q².
To find the minimum price necessary for the firm, we need to derive the firm's supply function, which is found by differentiating the total cost function with respect to q and equating it to the market price, which will give the firm's supply function:
MC = dTC / dq = 8q.
This firm's supply function is the marginal cost function, which is equal to the market price (P) in perfect competition. So, we get:MC = P = 8q.Substituting this value of P in the Total cost function, we get:TC = 100 + 4q² = 100 + q(2P / 8)² = 100 + (P / 16)q².
The firm's profit (Π) is given by:Π = TR - TC,where TR is Total Revenue, which is equal to Pq.To maximize the profit, we differentiate the profit function with respect to q and equate it to zero:
∂Π / ∂q = P - MC = 0.So, we have:
P - MC = 0P - 8q = 0P = 8q.
So, the minimum price necessary for the firm is 8q, which can be found by substituting the value of q in P = 8q.
P = 8q
P = 8 × 0 = $0 (if q = 0)
P = 8 × 1 = $8 (if q = 1)
P = 8 × 2 = $16 (if q = 2)
P = 8 × 3 = $24 (if q = 3)and so on...
So, the minimum price necessary for the firm is $8.
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For many years, Manama Corporation has used a straightforward absorption costing approach to cost-plus pricing, with a markup percentage of 25%. It has recently lost considerable business to foreign competitors that have become very aggressive in the marketplace. These firms appear to be using target costing An example of Manama Corporation's product no 700, which has the following unit-cost characteristics: direct materials, $65, direct labor, $95, manufacturing overhead, $50, and selling and administrative expenses, $40 The going market price for an identical product of identical quality is $260, which is below what Manama Corporation is charging Required: a) What is Manama Corporation's selling price for product no. 700 under its current absorption costing approach to cost-plus pricing? (2 marks) b) If Manama Corporation used target costing for item no. 700, what should have been its target cost per unit if the company desired to meet market price of $260 and maintain its current rate of profit on sales (2 marks) For the toolbar. press ALT+F10 (PC) or ALT FN-F10 (Mac)
Manama Corporation sells product no. 700 for $312.50 using absorption costing. If they used target costing, the target cost per unit would need to be $195 to meet the market price of $260 and maintain their current profit rate.
a) Under the current absorption costing approach, Manama Corporation's selling price for a product no. 700 can be calculated by adding the markup percentage to the unit cost. The unit cost is the sum of direct materials, direct labor, manufacturing overhead, and selling and administrative expenses.
Unit Cost = Direct Materials + Direct Labor + Manufacturing Overhead + Selling and Administrative Expenses
Unit Cost = $65 + $95 + $50 + $40 = $250
Markup Percentage = 25%
Selling Price = Unit Cost + (Markup Percentage * Unit Cost)
Selling Price = $250 + (0.25 * $250) = $312.50
Therefore, Manama Corporation's selling price for product no. 700 under its current absorption costing approach is $312.50.
b) If Manama Corporation wants to meet the market price of $260 and maintain its current rate of profit on sales using target costing, the target cost per unit can be calculated. The target cost is the difference between the market price and the desired profit.
Desired Profit = Markup Percentage * Selling Price
Desired Profit = 0.25 * $260 = $65
Target Cost per Unit = Market Price - Desired Profit
Target Cost per Unit = $260 - $65 = $195
Therefore, if Manama Corporation used target costing for item no. 700, the target cost per unit should be $195 to meet the market price of $260 and maintain its current rate of profit on sales.
In conclusion, the current absorption costing approach for Manama Corporation results in a selling price of $312.50 for a product no. 700. However, this price is higher than the market price, leading to lost business to aggressive foreign competitors.
To meet the market price of $260 and maintain its profit margin, Manama Corporation should consider implementing target costing and aim for a target cost per unit of $195. This would allow the company to align its pricing strategy with market demands and enhance its competitiveness in the marketplace.
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