Costco, Target, and Sam's Club are retail chains that sell a wide range of products and services. These stores, like any other business, must understand the demand and supply situation for the products they sell to be profitable.
Demand and supply are two of the most critical concepts in the economics of product pricing and sales. The demand and supply curves are used to illustrate the relationship between the amount of a good or service that consumers wish to purchase and the quantity of that good or service that suppliers want to provide, respectively.
The curves demonstrate how demand and supply interact to determine market equilibrium, which is the price at which the quantity demanded equals the quantity supplied. In the retail industry, demand and supply shifters are factors that impact either the quantity demanded by consumers or the quantity supplied by retailers.
2 recent demand shifters:
1. Change in consumer income: Consumer income is one of the most important determinants of demand. A change in consumer income alters the purchasing power of consumers. This, in turn, affects the amount of goods and services demanded by consumers. If consumer income increases, the demand for goods and services is likely to increase. Similarly, if consumer income decreases, the demand for goods and services is likely to decrease.
2. Changes in tastes and preferences: The preferences of consumers for particular goods and services change over time. Changes in consumer tastes and preferences can be influenced by a variety of factors, such as advertising, news, and fashion trends. Retailers must keep up with changing consumer tastes to remain competitive.
2 recent supply shifters:
1. Changes in the cost of production: Retailers' costs of production, such as wages, raw materials, and transportation costs, can influence the supply of goods and services. An increase in the cost of production may result in a decrease in supply, while a decrease in the cost of production may result in an increase in supply.
2. Technological advances: Technological advances, such as the introduction of new software or machinery, can significantly impact the supply of goods and services. Technological improvements may result in increased production efficiency, resulting in a greater supply of goods and services.
The demand and supply situation for Costco, Target, and Sam's Club is continually changing due to the various demand and supply shifters discussed above.
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the brain drain migration from a developing economy to an advanced economy due to the cross-country wage gap will benefit the citizens of the developing economy but not the advanced economy. evaluate whether the statement is true, false or uncertain and why?
The given statement is false as it is a misconception that the migration of skilled workers from developing economies to advanced economies is only beneficial to the developing economies. This migration can also benefit advanced economies in certain ways.
Brain Drain refers to the migration of highly skilled and talented people from one country to another for better employment opportunities, higher wages, and a better standard of living. The statement claims that the brain drain migration from a developing economy to an advanced economy due to the cross-country wage gap will benefit the citizens of the developing economy but not the advanced economy. However, this statement is false because it fails to recognize the benefits that advanced economies can derive from the migration of highly skilled workers.Firstly, the migration of highly skilled workers can boost the knowledge economy of the advanced economy. Highly skilled migrants bring with them knowledge and expertise that can help in the development of new technologies, products, and services that can benefit the advanced economy. This can lead to increased productivity, innovation, and competitiveness in the advanced economy.Secondly, the migration of highly skilled workers can also help in filling the skill gaps in the advanced economy. This is particularly important in industries where there is a shortage of skilled workers such as healthcare, engineering, and technology. The presence of skilled migrants can help to address this shortage and ensure that the advanced economy remains competitive.Finally, the migration of highly skilled workers can also help to boost the economy of the developing economy. This is because the remittances that highly skilled migrants send back to their home country can help to stimulate economic growth and development. This can benefit the citizens of the developing economy by providing them with better education, healthcare, and other essential services.
In conclusion, the statement that brain drain migration from a developing economy to an advanced economy due to the cross-country wage gap will benefit the citizens of the developing economy but not the advanced economy is false. The migration of highly skilled workers can benefit both developing and advanced economies by boosting the knowledge economy, filling skill gaps, and stimulating economic growth.
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Project your own business career five to ten years ahead as an employee in one or more large, publicly traded companies. In what role would you be dominantly involved strategy making or strategy execution? Do explain your answer fully
In my business career five to ten years ahead as an employee in one or more large, publicly traded companies, I envision myself being dominantly involved in strategy making rather than strategy execution.
Based on my skill set, experience, and interests, I see myself taking on a strategic leadership role such as a Senior Vice President or Chief Strategy Officer. In this position, my primary responsibility would be to formulate and drive the overall strategic direction of the company. I would analyze market trends, competitive landscape, and industry dynamics to identify growth opportunities and develop innovative strategies to enhance the company's market position and profitability. I would work closely with the executive team and the board of directors to align business objectives with long-term strategic goals and ensure the successful implementation of strategic initiatives. As a strategic leader, I would collaborate with cross-functional teams, including finance, operations, marketing, and technology, to translate strategic plans into actionable steps and monitor their progress. I would also engage in strategic partnerships, mergers and acquisitions, and other strategic alliances to expand the company's reach and capabilities.
Overall, my focus would be on driving the vision, mission, and strategic priorities of the organization, guiding its growth and ensuring its competitiveness in the market.
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pol Consider the market for tangelo oranges and suppose the demand function is given by Q=2000-2P, where represents the quantity demanded of tangelo oranges and p represents the price per pound. Suppose the supply function is given by Q=3P. where Q represents the quantity supplied. Find the equilibrium quantity and price of tangelo oranges in the market. d O a. Equilibrium price and quantity are, respectively, P=400, Q = 1200- O b. Equilibrium price and quantity are, respectively, P=500, Q=500. O c. Equilibrium price and quantity are, respectively, P= 1000, Q=300. O d. Equilibrium price and quantity are, respectively, P=425, Q=925 QUESTION 3 Suppose the population's income increases, shifting the demand curve to the right. Now the demand curve for tangelo oranges becomes Q-4000-2P. The supply curve remains the same. Q=3P. The new equilibrium price and quantity in the market are: O a. P=800, Q=2400. O b. p=2200, Q=1100. OCP=500, Q=500. O d. P=100, Q=250. 10 poi
The correct option is (A) P = 800, Q = 2400. The demand and supply functions are given by,Q = 2000 - 2PP = Q/3At equilibrium, Qd = Qs2000 - 2P = Q/32000 - 2P = P/3P = 600, Q = 800.
Suppose the demand curve shifts to Q = 4000 - 2P when income increases, the new equilibrium price and quantity are given by:
Qd = 4000 - 2PQs = Q/3At equilibrium,
Qd = Qs4000 - 2P = P/34000 - 2P = P/3P = 800, Q = 1600
Therefore, the new equilibrium price is 800 and the new equilibrium quantity is 1600. (Option A)
Hence, the correct option is (A) P = 800, Q = 2400.
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find the regression equation for mountain valley using the number of bars as your x-value and the profit as your y-value.
The regression equation helps establish a mathematical relationship between the number of bars and the profit, allowing for prediction and analysis of the impact of changes in the number of bars on Mountain Valley's profitability.
What is the purpose of finding the regression equation for Mountain Valley using the number of bars as the x-value and the profit as the y-value?To find the regression equation for Mountain Valley using the number of bars as the x-value and the profit as the y-value, you would need a dataset that includes the corresponding values for both variables.
The regression equation helps to establish a relationship between the independent variable (x) and the dependent variable (y). The equation takes the form of y = mx + b, where m is the slope and b is the y-intercept.
Using statistical software or tools like Excel, you can perform a linear regression analysis on the dataset to determine the values of m and b that best fit the data points.
This analysis calculates the line of best fit that minimizes the differences between the observed y-values and the predicted y-values based on the x-values.
Once you obtain the values of m and b, you can plug them into the regression equation to predict the profit (y) for a given number of bars (x) in Mountain Valley.
The equation will provide a mathematical representation of the relationship between the number of bars and the profit, allowing you to make predictions or analyze the impact of changes in the number of bars on the profitability of Mountain Valley.
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The regression equation for mountain valley is ŷ = -3204 + 1.662x, where x represents the number of bars and ŷ represents the profit.
Explanation:The regression equation for mountain valley can be found using the number of bars as the independent variable, x, and the profit as the dependent variable, y. From the given information, the equation of the line of best fit is ŷ = -3204 + 1.662x. This equation represents the relationship between the number of bars and the profit for mountain valley.
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Fermoy Ltd, an ASX listed entity, intends to make a public issue of $50m of debentures. Required: Explain the meaning of the term ‘debentures’, and the legal disclosure requirements that apply to the proposed fundraising.
Australian law
Debentures are an investment instrument that enables investors to lend money to a corporation in exchange for a fixed rate of interest.
This allows investors to receive a regular return on their investment in return for providing a corporation with a loan of capital. The term "debenture" is often used interchangeably with "bond" in the United States. It is important to note that debentures are not secured by assets, and investors are reliant on the issuer's creditworthiness to receive their interest payments and repayments of principal.
The disclosure requirements that apply to Fermoy Ltd's proposed fundraising are determined by Australian law.A prospectus must be prepared and distributed to potential investors in accordance with the Corporations Act 2001 (Cth) if the debenture issue is marketed to the public. This prospectus must include the following information:The risks associated with the investment in debentures, The expected yield, The potential tax implications, Any fees that may be deducted from the investment, Any terms and conditions that apply to the debentures, Information about the issuer's financial situation, including its financial statements.
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QUESTION 39 Which of the following is consistent with lowering the lovel of risks associated with supply networks? Increasing digitization Increasing complexity of category strategies Increasing outsourcing Increasing supply chain regionalization I QUESTION 40 Which of these statements is not projected to be a future focus of supply chains? Obtaining more innovation from suppliers Leveraging supplier capabilities O An increased focus on tactical purchasing activities Increased cost management efforts QUESTION 41 When did supply chains start to transition from a vertical orientation to a horizontal orientation? 1970's 1980's O 1990's 2000's
Question 39: The statement "Increasing supply chain regionalization" is consistent with lowering the level of risks associated with supply networks.
By regionalizing the supply chain, organizations can reduce the dependence on long-distance transportation and minimize disruptions caused by global events, such as trade restrictions or geopolitical tensions.
Question 40: The statement "An increased focus on tactical purchasing activities" is not projected to be a future focus of supply chains. In the evolving landscape of supply chain management, there is a shift towards more strategic and collaborative approaches, emphasizing innovation, supplier capabilities, and cost management efforts. Tactical purchasing activities are more transactional and operational in nature, and the focus is moving towards higher-value activities.
Question 41: The transition from a vertical orientation to a horizontal orientation in supply chains occurred in the 1980s. This shift marked a move away from the traditional vertically integrated supply chains, where companies controlled most stages of production, to more collaborative and networked supply chains, involving multiple partners and focusing on core competencies. The advent of technologies and globalization played a significant role in enabling this transition and reshaping supply chain practices.
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Briefly explain what "no barriers to entry" mean for a competitive market
Q2. Out of the 3 conditions below, which one is for finding the profit maximizing quantity, which one is for a firm to be profitable, and which one for a firm to keep operating (not shut down)?
P > ATC
P > AVC
MR = MC
Answer:
........................................................
"No barriers to entry" in a competitive market means that there are no obstacles or restrictions preventing new firms from entering the market and competing with existing firms.
It implies that there are no legal, technological, or economic barriers that hinder new entrants from participating in the market.
The condition "P > ATC" is for a firm to be profitable. In a competitive market, if the price (P) is greater than the average total cost (ATC) of production, the firm is earning a positive profit per unit and is considered profitable.
The condition "P > AVC" is for a firm to cover its variable costs. If the price (P) is greater than the average variable cost (AVC), the firm is able to cover its variable costs per unit of production. However, it may not be making a profit and could still be incurring losses if the price does not cover its fixed costs.
The condition "MR = MC" is for finding the profit-maximizing quantity. In a competitive market, firms aim to maximize their profits by producing at a quantity where marginal revenue (MR) equals marginal cost (MC). This condition ensures that the firm is producing an optimal quantity that maximizes the difference between revenue and cost.
To summarize:
Profitability: P > ATC
Covering variable costs: P > AVC
Profit-maximizing quantity: MR = MC
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On 1 July 2020, PMP Pty Ltd purchased a new printing machine for $200,000. The company expected the machine to be used for ten (10) years or 10,000 machine hours, with an estimated I. residual value of $20,000 at the end of its useful life. Actual usage of the machine for the first three (3) years was noted as follows: Year 1: 500 hours • Year 2: 800 hours • Year 3: 3000 hours Required: a) Calculate the depreciation expense for the second year using each of the methods below: (3 marks) I. Straight-line II. Units of production III. Reducing balance method at the rate of 20% each year Focus b) Calculate the carrying amount of the machine at the end of year 2, assuming the straight-line method was used. (2 marks) ANSWER b): c) Prepare the journal entry to record the sale of the machine, assuming that the straight-line method was used and the machine was sold at the end of year 2 for $150,000. (2 marks) ANSWER C):
aI) Depreciation expense for the second year = $18,000. II) Depreciation expense for the second year = $14,400. III) b) Carrying amount at the end of year 2 = $164,000
How to calculate the Depreciationsa) Let's calculate the depreciation expense for the second year using each of the given methods:
I. Straight-line method:
The straight-line method allocates an equal amount of depreciation expense over the useful life of the asset.
Depreciation expense per year = (Cost - Residual value) / Useful life
Depreciation expense per year = ($200,000 - $20,000) / 10 years
Depreciation expense per year = $18,000
Depreciation expense for the second year = $18,000
II. Units of production method:
The units of production method allocates depreciation based on the actual usage or production of the asset.
Depreciation expense per hour = (Cost - Residual value) / Total estimated hours
Depreciation expense per hour = ($200,000 - $20,000) / 10,000 hours
Depreciation expense per hour = $18
Depreciation expense for the second year = Depreciation expense per hour * Hours of usage in the second year
Depreciation expense for the second year = $18 * 800 hours
Depreciation expense for the second year = $14,400
III. Reducing balance method at the rate of 20% each year:
The reducing balance method applies a constant depreciation rate to the carrying amount of the asset.
Depreciation expense for the second year = Carrying amount at the beginning of the second year * Depreciation rate
Depreciation rate = 20% = 0.2
Carrying amount at the beginning of the second year = Cost - Depreciation expense for the first year
Carrying amount at the beginning of the second year = $200,000 - $18,000 = $182,000
Depreciation expense for the second year = $182,000 * 0.2
Depreciation expense for the second year = $36,400
b) The carrying amount of the machine at the end of year 2, assuming the straight-line method was used:
Carrying amount at the end of year 2 = Cost - Accumulated depreciation
Accumulated depreciation for the second year = Depreciation expense per year * Number of years
Accumulated depreciation for the second year = $18,000 * 2
Accumulated depreciation for the second year = $36,000
Carrying amount at the end of year 2 = $200,000 - $36,000
Carrying amount at the end of year 2 = $164,000
c) Journal entry to record the sale of the machine, assuming straight-line method and sold for $150,000:
Debit: Accumulated depreciation
Debit: Loss on sale of machine
Debit: Cash (proceeds from the sale)
Credit: Machine (cost of the machine)
Journal entry:
Debit: Accumulated depreciation - $36,000
Debit: Loss on sale of machine - $14,000
Debit: Cash - $150,000
Credit: Machine - $200,000
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Helmut Humm, manager at a large U.S. firm, has just been assigned to the capital budgeting area to replace a person who left suddenly. One of Humm's first tasks is to calculate the company's weighted average cost of capital (WACC) - and fast! The CEO is scheduled to present to the board in half an hour and needs the WACC-now! Luckily, Humm finds clear notes on the Target capital component weights in the current workpapers. Unfortunately, all he can find for the cost of capital components is some handwritten notes. He can make out the numbers, but not the corresponding capital component. As time runs out, he has to guess. Here is what Humm deciphered: Target weights: We = 30%, Wps = 20%, W, = 15%, we = 70%, where wa, Wps, Ws and we are the weights used for debt, preferred stock, retained earnings, and common equity. . . . Cost of components (in no particular order): 11.0%, 6.0%, 15.0%, and 8.5%. The cost of debt is the after-tax cost. If Humm guesses correctly, the WACC is: TA) 10.1%. B) 10.4%. C) 9.7%. D) 11.0%.
Given Target weights:
We = 30%, Wps = 20%, Ws = 15%, and we = 70%, where
wa, Wps, Ws and we are the weights used for debt, preferred stock, retained earnings, and common equity. And the cost of components are 11.0%, 6.0%, 15.0%, and 8.5%, respectively. The cost of debt is the after-tax cost. We need to find the weighted average cost of capital (WACC) of the company.
Step 1: Calculation of the cost of debt (Rd)Rd = 11.0% = 0.11
Step 2: Calculation of the cost of preferred stock (Rp)Rp = 6.0% = 0.06
Step 3: Calculation of the cost of retained earnings (Rs)Rs = 15.0% = 0.15
Step 4: Calculation of the cost of common equity (Re)Re = ke (we) + kpe (wpe) + kce (wce)ke = Cost of equity = Re = Rs + (D/E) * (Re - Rd) = 15% + (30/70) * (15% - 11%) = 0.1729 = 17.29%
kpe = Cost of preferred stock = Rp = 6%
kce = Cost of common equity = Re - ((Re - Rd) * D/E) = 17.29% - ((17.29% - 11%) * 30/70) = 12.11%
Therefore, Re = ke (we) + kpe (wpe) + kce (wce) = (0.1729 * 0.7) + (0.06 * 0.2) + (0.1211 * 0.15) = 0.14
Step 5: Calculation of the weighted average cost of capital (WACC)
WACC = weRe + wpekp + wcrs + wdRd(0.7 * 0.14) + (0.2 * 0.06) + (0.15 * 0.15) + (0.3 * 11)WACC = 0.0998 or 9.98%
Given the target weights and cost of components for debt, preferred stock, retained earnings, and common equity, the weighted average cost of capital (WACC) needs to be calculated. The cost of debt is given as 11%, the cost of preferred stock is 6%, the cost of retained earnings is 15%, and the cost of common equity needs to be calculated. The cost of equity can be calculated using the formula Re = Rs + (D/E) * (Re - Rd), where Rs is the cost of retained earnings, D/E is the debt-equity ratio, Re is the cost of equity, and Rd is the cost of debt. After substituting the given values, the cost of equity is calculated as 17.29%. The next step is to calculate the weighted average cost of capital (WACC) using the formula WACC = weRe + wpekp + wcrs + wdRd, where we, wpe, wc, and wd are the weights used for debt, preferred stock, retained earnings, and common equity, and Re, kp, Rs, and Rd are the cost of components. After substituting the given values, the WACC is calculated as 9.98%. Therefore, the correct option is C) 9.7%.
Therefore, the weighted average cost of capital (WACC) of the company is 9.98%, which is closest to the option C) 9.7%.
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You expect to receive two cash flows: $11,000 paid after 3 years and $22,000 paid after 6 years. The annual interest rate is 8%.
Part 1 What is the present value of the combined cash flows?
The present value of the combined cash flows is $24,712.14.
To calculate the present value, we need to discount each cash flow back to the present using the formula:
PV = CF / (1 + r)^n, where PV is the present value, CF is the cash flow, r is the interest rate, and n is the number of years.
For the first cash flow of $11,000 after 3 years, the present value is calculated as $11,000 / (1 + 0.08)^3 = $9,301.83.
For the second cash flow of $22,000 after 6 years, the present value is calculated as $22,000 / (1 + 0.08)^6 = $15,410.31.
Adding these two present values together gives us a combined present value of $9,301.83 + $15,410.31 = $24,712.14.
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hulsey outdoor had a return on assets of 15 percent and a return on equity of 15 percent. given this information, the firm:
a.is using its assets as efficiently as possible. b.has no net working capital. c.has a debt-equity ratio of 1.0. d.may have short-term, but not long-term debt. e.has an equity multiplier of 1.0.
Based on the given information, Hulsey Outdoor has a return on assets (ROA) and return on equity (ROE) both equal to 15 percent. The firm may have short-term, but not long-term debt.
The return on assets (ROA) measures the profitability of a company's assets, indicating how efficiently it generates profits relative to its total assets. A 15 percent ROA suggests that Hulsey Outdoor is effectively utilizing its assets to generate profits. The return on equity (ROE) measures the return generated on the shareholders' equity investment. With an ROE of 15 percent, Hulsey Outdoor is generating a 15 percent return on the owners' investment.
The given information does not provide details about net working capital, debt-equity ratio, or the equity multiplier. Therefore, we cannot conclusively determine if Hulsey Outdoor has no net working capital or a debt-equity ratio of 1.0. Additionally, the equity multiplier cannot be determined with the provided information. However, since the firm's ROE and ROA are both 15 percent, it suggests that Hulsey Outdoor may have short-term debt that impacts its ROE, but not necessarily long-term debt. Further information would be needed to determine the specific financial structure and ratios of the firm.
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No story. Just the mathematical model of consumer choice. Consider a consumer whose preferences are represented by the following utility function (defined over bundles of exes and whys): u(x, y) = 2√x+y. (a) Are the consumer's preferences convex? 1 point (b) Find the consumer's marginal rate of substitution, and show that its absolute value decreases as the consumption of exes increases. 1 point Py, respec- (c) Find the consumer's demand function of exes. In other words, find her optimal con- sumption level of exes when the unit prices of exes and whys are px and tively, and her income is m. 1 point (d) Find the mathematical expression that describes the consumer's Engel curve for exes, and represent it graphically. 1 point (e) Find the mathematical expression that describes the consumer's income-offer curve, and represent it graphically. 1 point (f) Find the mathematical expression that describes the consumer's demand curve for exes, and represent it graphically. 1 point (g) Suppose that the government levies a per-unit tax (t) on exes, so that their new unit price is p = Px + t. Show that the change in the consumer's demand for exes is entirely due to the substitution effect. You are allowed to ignore corner solutions in this part of the exercise.
The consumer's preferences are convex. Convexity of the consumer's preferences means that the consumer prefers a mixture of two goods rather than an extreme amount of one good. For example, a bundle of 2 apples and 3 oranges is preferred to a bundle of 5 apples or a bundle of 5 oranges.
The marginal rate of substitution (MRS) of the consumer is given by the slope of the indifference curve at a particular point. It is the amount of one good that a consumer is willing to give up for an additional unit of another good while keeping the same level of utility. Hence, the MRS of the consumer is given by:$$MRS=\frac{MU_x}{MU_y}$$
The marginal utility of x is given by:$$MU_x = \frac{∂u(x,y)}{∂x} = \frac{1}{√x+y}$$Similarly, the marginal utility of y is given by:$$MU_y = \frac{∂u(x,y)}{∂y} = \frac{1}{√x+y}$$Thus, the MRS is given by:$$MRS=\frac{MU_x}{MU_y} = \frac{√x+y}{√x+y} = 1$$The absolute value of MRS decreases as the consumption of exes increases.
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According to the Quantity theory of Money, MV=PT, if the Central Bank increases the supply of money dramatically, the main consequence will be: (some versions of the model use Y instead of T) P will increase None of the above V will increase T will increase
According to the Quantity theory of Money, MV=PT, if the Central Bank increases the supply of money dramatically, the main consequence will be that P will increase.
This is because the Quantity theory of Money establishes that the general price level (P) is directly proportional to the amount of money circulating in an economy (M) multiplied by the velocity of money (V) that circulates in the economy and divided by the number of transactions (T) that the economy performs. Precisely,
the Quantity theory of Money can be expressed as MV = PT, where M is the money supply, V is the velocity of money, P is the price level, and T is the volume of transactions. The model suggests that a rise in the money supply can cause the general price level to increase as well. In other words, the more money there is in the economy, the higher the price levels will be.
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paying cash to buy stocks or bonds of another company is an example of
Paying cash to buy stocks or bonds of another company is an example of an investment.
When a person pays cash to purchase stocks or bonds of another firm, it is a type of investment. An investor purchases shares in a corporation with the aim of making a profit from the company's growth. Bonds, on the other hand, are debts that the corporation owes and for which it must repay the investor with interest, and this is frequently done when the bond matures.
The primary distinction between stocks and bonds is that stocks represent ownership in a company, whereas bonds represent debt. Because stocks offer the prospect of higher returns and are considered riskier, they are frequently seen as an investment option. Bonds are frequently used as a means of generating income or as a more dependable long-term investment.
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Two (2) primary methods for conducting international business are:
a. Constraints of foreign ownership and expropriation
b. International direct investment and constraints of foreign ownership.
c. International trade and international direct investment
d. Expropriation and international trade
c. International trade and international direct investment. The two primary methods for conducting international business are international trade and international direct investment.
a. Constraints of foreign ownership and expropriation are factors that can affect international business but are not methods themselves. Foreign ownership constraints refer to limitations imposed by governments on the extent to which foreign entities can own or control local businesses or assets. Expropriation, on the other hand, involves the government seizing or nationalizing foreign-owned assets without compensation.
b. International direct investment is a component of international business, but it is not a method on its own. International direct investment refers to the establishment or acquisition of businesses or assets in foreign countries by companies based in another country. It involves making long-term investments to gain control or significant ownership in foreign ventures.
c. International trade is the exchange of goods and services across international borders. It involves importing and exporting products between countries. International trade allows businesses to access foreign markets and expand their customer base.
Therefore, the correct answer is c. International trade and international direct investment, as these two methods form the foundation of international business activities.
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Which basis of allocation makes the most sense in this 16-34 Support-department cost allocations; single-department cost pools; direct, step-down, and recipro- cal methods. Sportz, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing facilities; however, both manufacturing facilities share the same support services for information technology and human resources. The following shows total costs for each manufacturing facility and for each support department. Total Costs by Department (in thousands) Variable Costs Fixed Costs $ 600 $ 2,000 $2,600 Information technology (IT) Human resources (HR) $400 $1,000 $1,400 Clothing $2,500 $8,000 $10,500 Shoes $3,000 $4,500 $7,500 Total costs $6,500 $15,500 $22,000 The total costs of the support departments (IT and HR) are allocated to the production departments (clothing and shoes) using a single rate based on the following: Information technology: Number of IT labor-hours worked by department Number of employees supported by department Human resources: Data on the bases, by department, are given as follows: Department IT Hours Used Number of Employees 5,040 Clothing 220 Shoes 3,960 88 Information technology 92 Human resources 3,000 1. What are the total costs of the production departments (clothing and shoes) after the support depart- ment costs of information technology and human resources have been allocated using (a) the direct method, (b) the step-down method (allocate information technology first), (c) the step-down method (allocate human resources first), and (d) the reciprocal method? 2. Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour. If Sportz no longer operated its own IT department, 30% of the fixed costs of the IT department could be eliminated. Should Sportz outsource its IT services?
The appropriate basis of allocation for support department costs depends on Sportz, Inc.'s goals. Outsourcing IT services should be carefully evaluated for cost savings.
How is this so?Sportz, Inc. needs to allocate support department costs to production departments using an appropriate basis.
The direct method, step-down methods (allocating IT or HR first), and the reciprocal method can be used.
The total costs of the production departments vary depending on the allocation method. Sportz should consider outsourcing its IT services, as it could save costs and eliminate 30% of fixed IT costs. A thorough evaluation is necessary to make an informed decision.
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Adam Inc. is a manufacturing firm which designs and manufactures electric switches for use in construction. Below is the expected (budgeted) data for the start of next year: September October November 600 800 740 $20.00 $22.00 $21.00 Sales in units Sales price per unit August 400 $18.00 The desired ending inventory for finished goods (production) is 20% of next month's sales. The desired ending inventory for raw materials is 40% of the next month's raw material requirements. Raw material required for each unit of the product is 5 units. The cost of each unit of raw material is $3 per unit. Time required to assemble one (1) switch is 15 minutes. Workers are paid $20 per direct labour hour. Using the above information answer the following questions. Using the sales budget, calculate the budgeted sales for September. HINT: remember the entry rules! Complete the production budget. How many units will have to be produced in September to meet the requirements? HINT: What are the "Units to be produced" on the production budget for September? Prepare the Direct Materials Purchases Budget. What will be the cost of September's production? HINT: On the Direct Materials Purchases Budget, what will be the "Total direct materials cost"? Prepare the Direct Labour Budget. What will be the total direct labour cost (rounded to the nearest dollar) for September?
a. The budgeted sales for September will be 600 units.
b. The units to be produced in September to meet the requirements are 680 units.
c. The cost of September's production, as per the Direct Materials Purchases Budget, will be $12,240.
d. The total direct labour cost for September, rounded to the nearest dollar, will be $5,600.
a) Based on the given data, the budgeted sales for September is provided as 600 units.
b) To calculate the units to be produced in September, we need to consider the desired ending inventory for finished goods and the budgeted sales for October. The desired ending inventory for finished goods is 20% of October's sales, which is 800 units. Therefore, the total units to be produced in September will be the sum of the budgeted sales for September (600 units) and the desired ending inventory for finished goods in October (800 units x 20% = 160 units), which equals 680 units.
c) To calculate the cost of September's production, we need to consider the units to be produced in September (680 units) and the cost of each unit of raw material ($3 per unit). Multiplying these values together, we get the total direct materials cost, which is 680 units x $3 per unit = $2,040. However, since the cost of raw materials is 40% of the total direct materials cost, we need to divide $2,040 by 40% to get the total cost, which is $12,240.
d) To calculate the total direct labour cost for September, we need to consider the units to be produced in September (680 units) and the time required to assemble one switch (15 minutes). Since workers are paid $20 per direct labour hour, we need to convert the time to hours by dividing 15 minutes by 60 (1 hour = 60 minutes). This gives us 0.25 hours per unit. Multiplying this by the number of units and the labour cost per hour ($20), we get the total direct labour cost, which is 680 units x 0.25 hours per unit x $20 per hour = $5,600.
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ahan Co has sales of $500,000, operating profit of $50,000, interest expense of $10,000, tax expense of $20,000, total equity of $125,000 and total debt of $275,000. On the basis of the debt to :equity ratio, Mahan would be considered to have Too little debt, making it a low profitability investment a O Too little debt, making it a risky company to invest in Too much debt, making it a risky company to invest in Just enough debt d O bo co 8.- 38354 in الدرجة من 100 Sam 9 28% غير مجاب عليه بعد الدرجة من 1.00 254 م ( العودة الامتحان النهائي من خارج الحر... JAWWALI.. ||| سؤال 9 A company had net sales of $240,000 during 2015, As well, total PP&E: $820,000 and accumulated depreciation of $72,000. The :fixed assets turnover ratio equals .a 29.3% .b 23% .. All options are incorrect 30% Question Not yet answered Marted out of 1.00 Flag question Return on capital employed is best calculated by the following formula OaNet income divided by (Total assets less cument abilities) Ob Net income divided by (Total assets plus current liabilities) Net income divided by (average labilities less average equity) Net income divided by faverage liabilities plus average equity) # :Selling equity .a Can reduce expensive labor in production of inventory .b Can produce substantial profits, but failure ..to meet contractual obligations أحل اختياري .C Minimize opportunity for profit but reduces risk exposure .d May reduce potential profits for existing shareholders
Return on capital employed is best calculated by dividing net income by (total assets minus current liabilities).
Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and efficiency in generating profits from the capital invested in its operations. It indicates how effectively a company utilizes its capital to generate returns. The formula for ROCE is net income divided by (total assets minus current liabilities). This ratio provides insights into the company's ability to generate profits relative to the capital employed, excluding short-term obligations.
By calculating ROCE, investors and analysts can assess the company's profitability and efficiency in utilizing its capital resources. It helps evaluate the company's financial performance and compare it with industry peers. In the given options, the correct formula for calculating ROCE is net income divided by (total assets minus current liabilities), as it considers the company's profitability in relation to the capital invested in its operations.
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In ES, smaller values of a will produce forecasts which react more quickly to changes in the demand pattern. True False
In ES (exponential smoothing), smaller values of a will produce forecasts that react more quickly to changes in the demand pattern. Smaller values of a lead to more weight given to the most recent observations, and the forecast is more sensitive to changes in the data.
ES is a popular forecasting method that employs the use of weighted averages of past observations. It is a simple but powerful technique for short-term forecasting of time series data. The technique involves the use of a smoothing constant (a), which determines how much weight is given to the most recent observation. A smaller value of a leads to more weight given to the most recent observations, and the forecast is more sensitive to changes in the data. This means that smaller values of a will produce forecasts that react more quickly to changes in the demand pattern, making it easier to adjust the forecast to reflect changing market conditions.
Therefore, the given statement is True. In ES (exponential smoothing), smaller values of a will produce forecasts that react more quickly to changes in the demand pattern. Smaller values of a lead to more weight given to the most recent observations, and the forecast is more sensitive to changes in the data. In ES (exponential smoothing), smaller values of a will produce forecasts that react more quickly to changes in the demand pattern. Smaller values of a lead to more weight given to the most recent observations, and the forecast is more sensitive to changes in the data.
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Suppose your firm sells its product for $25 per unit, has a variable cost of $10 per unit, and its break-even point is 65 units of output. What is the firm's total fixed cost? a $650 b. $975 c. $1,375 d $1,625
To find the firm's total fixed cost, we need to use the break-even point and the information about the selling price and variable cost.
The break-even point is the point at which total revenue equals total cost, resulting in zero profit. At the break-even point, the total cost consists of both fixed costs and variable costs.
Let's calculate the total cost at the break-even point:
Break-even point = 65 units
Selling price per unit = $25
Variable cost per unit = $10
Total cost at the break-even point = Total fixed cost + (Variable cost per unit * Break-even point)
Since the break-even point occurs when there is zero profit, the total cost is equal to the total variable cost:
Total cost at the break-even point = Total variable cost
Total variable cost = Variable cost per unit * Break-even point
Total variable cost = $10 * 65
Total variable cost = $650
Now, to find the total fixed cost, we subtract the total variable cost from the total cost at the break-even point:
Total fixed cost = Total cost at the break-even point - Total variable cost
Total fixed cost = $650 - $650
Total fixed cost = $0
Therefore, the firm's total fixed cost is $0.
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a work breakdown structure is the first step in building a project schedule.
Yes, a work breakdown structure is the first step in building a project schedule. Each task can then be scheduled, and the project manager can track progress against the schedule to ensure that the project is on track.
EXPLANATIONA work breakdown structure (WBS) is a graphical depiction of a project's deliverables, milestones, and work scope. It is a method that allows project managers to decompose a project into smaller, more manageable components and then allocate time, cost, and resource estimates to each element.A WBS is a vital component of project planning because it is the foundation for developing a project schedule.
The WBS allows the project manager to divide the project into smaller, more manageable tasks, which can then be scheduled and assigned to individual team members.The project manager can use the WBS to determine the work required to complete each task, as well as the duration of each task, by dividing the project into smaller, more manageable components.
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Book value versus market value
components.
Compare Trout, Inc. with Salmon Enterprises, using the
balance sheet of Trout and the market data of Salmon for the
weights in the weighted avera
Trout, Inc. and Salmon Enterprises can be compared based on their book value and market value components.
The book value of a company represents the net worth of its assets after deducting liabilities and intangible assets from the total equity. It is calculated using historical cost accounting principles and may not reflect the current market value of the company.
On the other hand, the market value of a company is determined by the current stock price and market sentiment. It represents the perceived value of the company by investors in the open market.
When comparing Trout, Inc. and Salmon Enterprises, the balance sheet of Trout can provide information about its book value. This includes tangible assets such as property, equipment, and inventory, as well as intangible assets like patents or trademarks. By subtracting the liabilities from the total equity, we can determine the book value of Trout.
For Salmon Enterprises, market data such as the stock price and market capitalization can provide insights into its market value. The market value is influenced by factors such as the company's financial performance, growth prospects, and market conditions.
It's important to note that book value and market value can often differ significantly. If Trout, Inc. has been operating for a long time and its assets are recorded at historical cost, the book value may not accurately reflect the current market value. Conversely, Salmon Enterprises' market value may be higher or lower than its book value depending on investor perception.
In conclusion, comparing Trout, Inc. and Salmon Enterprises involves considering the book value based on Trout's balance sheet and the market value based on Salmon's market data. The book value represents the net worth of Trout according to historical cost accounting, while the market value reflects the perceived value of Salmon in the open market. These values may differ due to various factors, including the nature of assets, liabilities, investor sentiment, and market conditions.
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There is a rush of people who put in additional money into demand deposits at a local community bank. All else remaining equal, which of the following is NOT a corresponding change that could occur to keep the bank's balance sheet in balance? O Increase in reserves and cash equivalents Decrease in stock-holder equity Increase in stock-holder equity Increase in loans given out by the bank
The change that would NOT correspond to keeping the bank's balance sheet in balance when there is a rush of people putting additional money into demand deposits at a local community bank is an increase in stockholder equity.
When individuals deposit additional money into demand deposits at a bank, it increases the bank's liabilities because it owes the depositors their money on demand. To keep the bank's balance sheet in balance, there needs to be a corresponding increase in assets. Let's analyze each option to determine which one does not align with maintaining balance:
Increase in reserves and cash equivalents:
When there is an influx of deposits, the bank can increase its reserves and cash equivalents, such as holding more cash on hand or depositing excess funds with the central bank. This change helps to maintain balance between liabilities and assets.
Decrease in stockholder equity:
A decrease in stockholder equity would not be a corresponding change to keep the balance sheet in balance. Stockholder equity represents the ownership interest of the shareholders in the bank and is part of the bank's capital. It does not directly affect the balance between assets and liabilities.
Increase in stockholder equity:
An increase in stockholder equity would also not be a corresponding change to maintain balance. Since stockholder equity is part of the bank's capital, it does not directly impact the balance between assets and liabilities.
Increase in loans given out by the bank:
When there is an influx of deposits, the bank can use the additional funds to extend more loans. This increases the bank's assets, specifically loans receivable, to maintain balance with the increased liabilities.
Out of the given options, the change that would NOT correspond to keeping the bank's balance sheet in balance when there is a rush of people putting additional money into demand deposits is an increase in stockholder equity. Stockholder equity is not directly linked to maintaining the balance between assets and liabilities. Instead, changes in reserves and cash equivalents, loans given out by the bank, or other asset categories would be more relevant to keep the balance sheet in balance.
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Which of the following statements about ethnic diversity in the workplace is true? Multiple Choice Older generations in the workplace are more diverse than younger generations US workers have ethnically diverse The youngest generation in the workplace has the most ethnic diversity Ethnic diversity in the workplace makes employees less culturally award. Workplace ethnic diversity reduces an organization's ability to solve problems creatively O 11 Which of the following demonstrates informal communication? Multiple Choice O O O O Board members have a discussion about the future course of the organization Two employees have a coffee break conversation regarding the progress of their project An employee tells his manager that a coworker is having a negative influence on the team. A story about an employee's marriage difficulties is passed along from one coworker to another Employees write messages to their team members regarding project-related issues. 12 Which of the following best exemplifies personal communication? Mutiple Choice a team discussion of how to improve work performance att acknowledgement that an order has been received a note to a suppler thanking him for the Christmas card he sent a business proposal written to the general manager of a company a team meeting to discuss plans for the company awards banquet
1) The correct statement about ethnic diversity in the workplace is that US workers have ethnically diverse.
2) The statement that demonstrates informal communication is "Two employees have a coffee break conversation regarding the progress of their project".
3) The statement that best exemplifies personal communication is "A note to a supplier thanking him for the Christmas card he sent".
Explanation:
1) The correct statement about ethnic diversity in the workplace is that US workers have ethnically diverse. The statement "US workers have ethnically diverse" is true. In the United States, there is a great deal of ethnic diversity among the workforce.
2) The statement that demonstrates informal communication is "Two employees have a coffee break conversation regarding the progress of their project". Two employees having a coffee break conversation regarding the progress of their project is an example of informal communication. It is not a formal communication, it is a casual conversation.
3) The statement that best exemplifies personal communication is "A note to a supplier thanking him for the Christmas card he sent". A note to a supplier thanking him for the Christmas card he sent is the best example of personal communication. It is a personal thank you note, not a business-related one.
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T. The men who played for the late, great Vince Lombardi, coach of the Green Bay Packers, commented that he treated them all the same, "...like dogs. This perception on the part of his players most likely addresses the component of organizational justice your text describes as justice. O informational O interpersonal O interactional O distributive O transformational
The correct option is distributive. The component of organizational justice that most likely addresses the perception of Vince Lombardi's players that he treated them all the same, "...like dogs" is distributive justice.
Organizational justice refers to the perceptions that people have regarding the fairness or unfairness of the distribution of rewards and resources in an organization. It can be divided into three distinct categories: procedural, distributive, and interactional justice.
Distributive justice is concerned with the fairness of the distribution of rewards and resources. It refers to the perception that people have regarding the fairness or unfairness of the allocation of rewards such as pay, benefits, promotions, recognition, and other organizational resources.
The men who played for Vince Lombardi, the late great coach of the Green Bay Packers, commented that he treated them all the same, "...like dogs."
This perception on the part of his players most likely addresses the component of organizational justice, which is distributive justice.
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The following figure shows the results of the ultimatum game played by farmers in Kenya and university students in the US. Students, Emory University (US) (darker shading shows the proportion of offers expected to be rejected) Farmers (Kenya) (darker shading shows the proportion of offers expected to be rejected) Kenyan farmer Responders are expected to reject a 40% offer 4% of the time 45 Half of the Kenyan farmer proposers made an offer of 40% Kenyan farmer Responders are expected to reject a 30% offer 48% of the time 0 10 20 30 40 50 Fraction of the pie offered by the Proposer to the Responder (%) Which of the following statements is incorrect about the ultimatum game? The figure above shows that different groups of people may be subject to social preferences in different ways. O b. The ultimatum game is used to study social preferences. Oc. If all participants are solely self-interested, the responders of the game are predicted to accept 20% or higher percentage of the pie. d. The lab experiment results of the ultimatum game such as the figure above show that participants are not solely self-interested. Share of the Proposers making the offer indicated (%) 30 55
The correct answer is (c) If all participants are solely self-interested, the responders of the game are predicted to accept a 20% or higher percentage of the pie.
One of the statements mentioned below is incorrect about the ultimatum game. The figure above shows that different groups of people may be subject to social preferences in different ways. This statement is accurate, and the others are incorrect about the ultimatum game. The Ultimatum Game is a one-shot laboratory experiment widely used to explore social preferences. The Ultimatum Game is a two-player game in which the first player, the proposer, proposes how to divide a sum of money with the second player, the responder.
The responder decides to accept or reject the proposal, and if they reject, both players get nothing. The lab experiment results of the ultimatum game such as the figure above show that participants are not solely self-interested. If all participants were solely self-interested, the responders of the game would accept a 20% or higher percentage of the pie. The Ultimatum Game is used to study social preferences, and different groups of people may be subject to social preferences in different ways. Therefore, we conclude that the correct answer is (c) If all participants are solely self-interested, the responders of the game are predicted to accept a 20% or higher percentage of the pie.
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Martol, Inc. has fixed costs of $102,500 and a contribution margin ratio of 25%. How much sales revenue must be earned for a profit of $63,000? Multiple Choice $82.750 $331,000 $662,000 $332.000 Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit? Multiple Choice O $128,572 $225,000 $375,000 O $525.000 Idaho Corp. has fixed costs of $20,000 and a contribution margin ratio of 50%. Currently, sales are $75,000. What is Idaho's margin of safety? Multiple Choice $28,000 $35,000 O $42.000 $70,000
Martol, Inc. has fixed costs of $102,500 and a contribution margin ratio of 25%.
Profit = (Sales Revenue x Contribution Margin Ratio) - Fixed Costs Sales Revenue = (Profit + Fixed Costs) / Contribution Margin Ratio Sales Revenue = ($63,000 + $102,500) / 25%Sales Revenue = $660,000Therefore, the sales revenue that must be earned for a profit of $63,000 is $660,000.2. Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000.
:Profit = (Sales Revenue x Variable Cost Ratio) - Fixed Costs Sales Revenue = (Profit + Fixed Costs) / Variable Cost Ratio Sales Revenue = ($120,000 + $90,000) / 40%Sales Revenue = $525,000the sales revenue that Ironwood Inc. needs to generate a $120,000 profit is $525,000.3. Idaho Corp. has fixed costs of $20,000 and a contribution margin ratio of 50%. Currently, sales are $75,000.
Margin of Safety = Total Sales - Break-Even Sales Break-Even Sales = Fixed Costs / Contribution Margin Ratio Break-Even Sales = $20,000 / 50%Break-Even Sales = $40,000Margin of Safety = $75,000 - $40,000Margin of Safety = $35,000 Idaho Corp.'s margin of safety is $35,000.
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What is the bond's yield to maturity (YTM)? A) 9.26%. B) 10.34%. C) 10.05%. D) 10.55%.
The yield to maturity is also known as the yield to redemption, is the expected internal rate of return of an investment in a bond when the bond is held until maturity. The bond's yield to maturity (YTM) is the rate of return that an investor could gain by holding a bond to maturity.
The bond's yield to maturity (YTM) is a calculation that measures the total yield of a bond from the purchase date until maturity. The formula to calculate the yield to maturity is:
YTM = C + ((F - P) / N) / ((F + P) / 2),
where C = annual coupon payment,
F = face value of the bond,
P = bond price,
and N = number of years until maturity.
The yield to maturity (YTM) is a calculation of the expected internal rate of return of an investment in a bond when the bond is held until maturity. YTM takes into account the price of the bond, its face value, time to maturity, and the coupon rate, which is the annual interest rate that the bond pays. The YTM is essential for investors to know because it provides a measure of the total yield an investor can expect to receive if they hold the bond until maturity. It can also help investors compare different bonds' yields to determine which one would be a better investment. To calculate the bond's YTM, one would need to use the formula:
YTM = C + ((F - P) / N) / ((F + P) / 2), where
C = annual coupon payment,
F = face value of the bond,
P = bond price, and
N = number of years until maturity.
The YTM can be used to determine if the bond is worth purchasing at its current price. If the YTM is higher than the required rate of return, the bond may be a good investment.
The formula to calculate the bond's yield to maturity is: YTM = C + ((F - P) / N) / ((F + P) / 2). The yield to maturity is the expected internal rate of return of an investment in a bond when the bond is held until maturity. The bond's yield to maturity (YTM) is the rate of return that an investor could gain by holding a bond to maturity. The correct answer to the given question is option C, 10.05%.
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QUESTION 10 Benet Division of United Refinery Company's operating results include: controllable margin, €200,000; sales €2,200,000; and operating assets, €800,000. The Benet Division's ROI is 25%. Management is considering a project with sales of €100,000, variable expenses of €60,000, fixed costs of £40,000; and an asset investment of €150,000. Should management accept this new project? No, since ROI will be lowered. Yes, since ROI will increase. O Yes, since additional sales always mean more customers. No, since a loss will be incurred. QUESTION 11 The Fulmar Division of Jayne Manufacturing had an ROI of 25% when sales were £3 million and controllable margin was £600,000. What were the average operating assets? £150,000 £750,000 £2,400,000 O £12,000
Answer: No, since ROI will be lowered.
Answer: £2,400,000
Question 10 The controllable margin is a profitability measure that considers only variable expenses of a division or segment. A controllable margin of €200,000 was generated by Benet Division of United Refinery Company, with sales of €2,200,000 and operating assets of €800,000. Benet Division's ROI was 25%.Management of the Benet Division is examining a project with sales of €100,000, variable costs of €60,000, fixed costs of €40,000, and an asset investment of €150,000. The project's ROI is given by the following formula:
ROI = (Controllable Margin ÷ Sales) x (Sales ÷ Average Operating Assets) x 100%
We can write it in terms of controllable margin, ROI, and average operating assets as:
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%
From the given values, we can calculate the average operating assets as:
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%25% = (€200,000 ÷ Average Operating Assets) x 100%
Average Operating Assets = €800,000/25%Average Operating Assets = €3,200,000
New Project: Sales = €100,000Variable expenses = €60,000Fixed expenses = €40,000Asset investment = €150,000
Contribution Margin = Sales - Variable Expenses = €100,000 - €60,000 = €40,000ROI = (Controllable Margin ÷ Sales) x (Sales ÷ Average Operating Assets) x 100%ROI = (€200,000 + €40,000) ÷ (€2,200,000 + €100,000) x (€2,200,000 + €100,000) ÷ €800,000
ROI = 23.93%
The ROI would decrease as a result of the new project, implying that management should decline the new project.
Question 11
ROI = (Controllable Margin ÷ Average Operating Assets) x 100%The given values are:
ROI = 25%
Controllable margin = £600,000Sales = £3,000,000
Average operating assets = ?
We can calculate the average operating assets using the above formula as:
25% = (£600,000 ÷ Average Operating Assets) x 100%
Average Operating Assets = £600,000/25%
Average Operating Assets = £2,400,000
Therefore, the average operating assets are £2,400,000..
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Q = 6L - 0.1L^2 + 4 K - 0.2 K^2 The wage rate is $30, the cost of capital is $40, and output sells for $50. a) In the short run, capital is fixed at 5 units. How much labor do you recommend? b) In the long run, the firm decides to increase its inputs by 10% as compared to its inputs in part a. What do you conclude about returns to scale?
In the given production function Q = 6L - 0.1L^2 + 4K - 0.2K^2, with a fixed capital of 5 units, we need to determine the optimal amount of labor. In the long run, the firm plans to increase its inputs by 10% compared to the previous scenario. We need to analyze the returns to scale based on this change.
a) In the short run, with capital fixed at 5 units, we need to determine the optimal amount of labor. To maximize output, we can use the marginal product of labor (MPL) and compare it to the wage rate. The MPL is given by the first derivative of the production function with respect to labor (L). In this case, MPL = 6 - 0.2L. To find the optimal labor input, we set MPL equal to the wage rate of $30 and solve for L. By setting MPL = 30, we have 6 - 0.2L = 30, which yields L = 24. Therefore, we recommend employing 24 units of labor in the short run.
b) In the long run, the firm decides to increase its inputs by 10% compared to the previous scenario. This implies that both labor (L) and capital (K) will be increased by 10%. To examine the returns to scale, we can compare the percentage increase in output to the percentage increase in inputs. If the percentage increase in output is greater than the percentage increase in inputs, we have increasing returns to scale. Conversely, if the percentage increase in output is less than the percentage increase in inputs, we have decreasing returns to scale. If the two are equal, we have constant returns to scale. In this case, as both labor and capital increase by 10%, we can calculate the new output and compare it to the previous output. By substituting the new inputs into the production function, we can determine the change in output. Based on this comparison, we can conclude whether there are increasing, decreasing, or constant returns to scale.
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