Midyear on July 31st, the Digby Corporation's balance sheet reported: Total Liabilities of $102.335 million Cash of $8.040 million Total Assets of $165.097 million Retained Earnings of $35.132 million. What was the Digby Corporation's common stock
Answer:
$27.63 million
Explanation:
Total equity = Common stock + Retained earnings
Common stock = Total equity - Retained earnings
Common stock = (Total assets - Total liabilities) - Retained earnings
Common stock = ($165.097 million - $102.335 million) - $35.132 million
Common stock = $62.762 million - $35.132 million
Common stock = $27.63 million
Telecommuters are not key to a business continuity plan (BCP) because they work from remote locations. Therefore, any disruptions would not affect them. True
Answer:
This false
Explanation:
A telecommuter is a remote worker that does his or her job from home and when it is time to have communications with their office, they do so through emails, fax, phone or the internet. the BCP is the ability of the organization to continue with its services and production even after a disruption occurred in the business.
A disruption in the business is capable of affecting the telecommuter too. Working remotely does not make their job less important
We should always show the mean, mode and median when reporting analysis graphics.
Select one:
O True
O False
Answer:
answer: true
Explanation:
hope it helps thanks
The beginning inventory was 300 units at a cost of $10 per unit. Goods available for sale during the year were 1,300 units at a total cost of $14,400. In May, 600 units were purchased at a total cost of $6,600. The only other purchase transaction occurred during October. Ending inventory was 550 units.
Required:
a. Calculate the number of units purchased in October and the cost per unit purchased in October
b-1. Assume the periodic inventory system is used. Calculate cost of goods sold and ending inventory using FIFO method
b-2. Assume the periodic inventory system is used. Calculate cost of goods sold and ending inventory using LIFO method
Answer:
a. The number of units purchased in October = 400
The cost per unit = $12
b-1. Cost of goods sold = $7,950
Ending inventory = $6,450
b-2. Cost of goods sold = $8,650
Ending inventory = $5,750
Explanation:
a) Data and Calculations:
Beginning inventory 300 units at $10 per unit = $3,000
May purchases 600 units at $11 per unit = 6,600
October purchases 400 units at $12 per unit = 4,800
Goods available 1,300 units $14,400
Ending inventory 550 units
Goods sold 750 units
a. The number of units purchased in October = 400 (1,300 - 300 - 600)
The cost per unit = $12 ($4,800/400)
b-1. Cost of goods sold and ending inventory using FIFO method:
Cost of goods sold:
300 units at $10 per unit = $3,000
450 units at $11 per unit = 4,950 $7,950
Ending inventory = $6,450 ($14,400 - $7,950)
b-2. Cost of goods sold and ending inventory using LIFO method:
Cost of goods sold:
350 units at $11 per unit = 3,850
400 units at $12 per unit = 4,800
Total Cost of goods sold = $8,650
Ending inventory = $5,750 ($14,400 - $8,650)
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $234,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows:
Year Hours Used
1 2,800
2 1,900
3 2,000
4 2,000
5 1,800
6 1,500
Required:
a. Prepare a depreciation schedule for six years using the straight-line method.
b. Prepare a depreciation schedule for six years using the double-declining-balance method.
c. Prepare a depreciation schedule for six years using the activity-based method.
Answer:
University Car Wash
a. Straight-line Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $34,500 $34,500 $199,500
2 $234,000 $34,500 $69,000 $165,000
3 $234,000 $34,500 $103,500 $130,500
4 $234,000 $34,500 $138,000 $96,000
5 $234,000 $34,500 $172,500 $61,500
6 $234,000 $34,500 $207,000 $27,000
b. Double-Declining-Balance Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $77,220 $77,200 $156,780
2 $234,000 $51,737 $128,937 $105,043
3 $234,000 $34,664 $163,601 $70,379
4 $234,000 $23,225 $186,826 $47,154
5 $234,000 $15,561 $202,387 $31,583
6 $234,000 $4,593 $206,980 $27,000
c. Activity-Based Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $48,300 $48,300 $185,700
2 $234,000 $32,775 $81,075 $152,925
3 $234,000 $34,500 $115,575 $118,425
4 $234,000 $34,500 $150,075 $83,925
5 $234,000 $31,050 $181,125 $52,875
6 $234,000 $25,825 $206,950 $27,050
Explanation:
a) Data and Calculations:
Cost of new machines = $234,000
Residual value of equipment = $27,000
Depreciable amount = $207,000
Estimated useful life = 6 years
Straight-line depreciation expense per annum = $34,500 ($207,000/6)
Double-declining-balance rate = 33% (100%/6 * 2)
Year Depreciation Declining Balance
1 $77,220 $156,780
2 $51,737 $105,043
3 $34,664 $70,379
4 $23,225 $47,154
5 $15,561 $31,583
6 $4,593 $27,000
Estimated useful life in hours = 12,000
Depreciation rate per hour = $17.25 ($207,000/12,000)
Actual usage per year:
Year Hours Used Usage Charge
1 2,800 $48,300 (2,800 * $17.25)
2 1,900 $32,775 (1,900 * $17.25)
3 2,000 $34,500 (2,000 * $17.25)
4 2,000 $34,500 (2,000 * $17.25)
5 1,800 $31,050 (1,800 * $17.25)
6 1,500 $25,825 (1,500 * $17.25)
You are bullish on Telecom stock. The current market price is $62 per share, and you have $6,200 of your own to invest. You borrow an additional $6,200 from your broker at an interest rate of 7.6% per year and invest $12,400 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.)
Answer:
Telecom Stock
If the price of the Telecom stock goes up by 9% during the next year, your rate of return will be:
= 10.4%
Explanation:
a) Data and Calculations:
Current market price = $62 per share
Investment in stock = $12,400
Margin account = $6,200
Loan = $6,200 ($12,400 - $6,200)
Units of stock bought on margin = 200 ($12,400/$62)
Margin account interest rate = 7.6%
Growth rate of stock price = 9%
Expected market price of the stock = $67.58 ($62 * 1.09)
Expected value of stock = $13,516 (200 * $67.58)
Interest on loan = $471.20 ($6,200 * 7.6%)
Principal & loan amount $12,400
Return on the stock = $644.80
Rate of return = 10.4% ($644.80/$6,200 * 100)
The ending retained earnings balance of Juan's Mexican Restaurant chain increased by $6.9 million from the beginning of the year. The company declared a dividend of $2.4 million during the year. What was the amount of net income during the year
Answer:
the amount of net income during the year is $9.3 million
Explanation:
The computation of the net income is shown below:
= Increased in the retained earnings + dividend declared
= $6.9 million + $2.4 million
= $9.3 million
Hence, the amount of net income during the year is $9.3 million
The same should be considered and relevant
The Industrial Revolution brings about the use of production processes dependent on new machines and interchangeable parts.
a. True
b. False
Answer:
True
Explanation:
Industrial Revolution can be regarded as transition from old to the new manufacturing processes which begins from some part of the world such as
Europe and United States, within some period from of 1760 and it's improving up till date. Some of the causes of Industrial Revolution are development of trade as well as the rise in business activities. It should be noted Industrial Revolution brings about the use of production processes dependent on new machines and interchangeable parts.
The following is a comprehensive problem which encompasses all of the elements learned in previous chapters. You can refer to the objectives for each chapter covered as a review of the concepts.
Note: You must complete part 1 before completing part 2.
Based on the following data, prepare a bank reconciliation for December of the current year:
a. Balance according to the bank statement at December 31, $283,000.
b. Balance according to the ledger at December 31, $245,410.
c. Checks outstanding at December 31, $68,540.
d. Deposit in transit, not recorded by bank, $29,500.
e. Bank debit memo for service charges, $750.
f. A check for $12,700 in payment of an invoice was incorrectly recorded in the accounts as $12,000.
Enter all amounts as positive numbers.
Kornett Company
Bank Reconciliation
December 31, 2014
Subtotal
Adjusted Balance
Deduct
Adjusted Balance
Answer:
Balance as per bank statement $243,960
Balance as per ledger $243,960
Explanation:
Preparation of a bank reconciliation for December of the current year
KORNETT COMPANY Bank Reconciliation
December 31, 2014
Balance as per bank statement at December 31 $283,000
Add deposit in transit $29,500
Less check outstanding ($68,540)
Adjusted balance $243,960
Balance as per ledger at December 31 $245,410
Less bank service charges ($750)
Less Error in recording in check ($700)
($12,700-$12,000)
Adjusted balance $243,960
Therefore bank reconciliation for December of the current year will be :
Balance as per bank statement $243,960
Balance as per ledger $243,960
When using process costing, nonmanufacturing costs are ______.
a) included as part of the cost of the product
b) expensed during the period
c) incurred ignored treated as part of conversion costs
Answer:
b) expensed during the period
Explanation:
Process costing can be defined as a cost accounting method used for assigning manufacturing or production costs to the units of goods produced by a business firm over a specific period of time. It is mostly used by firms that produce a large quantity of homogeneous or similar products on a continuous basis.
Typically, process costing uses more than one Work in Process Inventory account because costing is done at each stage of the production or manufacturing process.
Generally Accepted Accounting Principles (GAAP) can be defined as the set of commonly used accounting standards in the U.S.
This ultimately implies that, the United States of America, Generally Accepted Accounting Principles (GAAP) is the accounting principles, procedures and standard issued by the Financial Accounting Standards Board (FASB) and adopted by the United States of America, Securities and Exchange Commission (SEC).
Under U.S Generally Accepted Accounting Principles (GAAP), when using process costing, non-manufacturing (administrative and selling) costs are expensed on the income statement of the company during the accounting period they were incurred.
Answer:
b) expensed during the period
Explanation:
When using process costing, nonmanufacturing costs are expensed during the period.
Assume that you own a small apartment building close to a major commercial street and a service station. You learn that there has been a major leak of underground storage tanks from the service station, and the gasoline has spread onto and below the surface of your property. Discuss sources of value loss to your property from the contamination.
Explanation:
A good source of value loss is the amount of money that the property owner would have to spend to get rid of this contamination. One way to go would be to get a good environmental consultant to take a risk assessment on your property and environment. The expense burden should be lighter on you since it is expected that the service station owners take responsibility. This contamination would cause the value of this property to fall.
list three steps you will take before granting credit to customers
Step 1: Ask the Customer to Submit a Credit Application.
Step 2: Check Business Credit Rating.
Step 3: Set Credit Limit and Repayment Terms.
Answer:
1. Credit Application from Your Customer. Your credit application doesn’t need to be complicated, but …
2. Bank and Trade References. Checking bank and trade references is a very common practice, and …
3. Check Business Credit Using Credit Bureaus. There are a number of commercial credit bureaus that …
Explanation:
Steve borrowed $750 for a new dresser. He made 9 monthly payments to repay the loan. He paid $45 interest. What is his simple interest rate?
Answer:
222
Explanation:
You invest $2,100 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 20% and a Treasury bill with a rate of return of 7%. __________ of your complete portfolio should be invested in the risky portfolio if you want your complete portfolio to have a standard deviation of 13%.
Answer: 65%
Explanation:
The formula that's used for the calculation of the portfolio's standard deviation will be:
(Standard deviation of portfolio)² = (Weight of asset)² × (Standard deviation of asset)²
(Weight of asset)² = (0.13)²/(0.2)² = 0.0169 / 0.04
= 0.4225
Weight of asset = ✓0.4225
Weight of asset = 0.65
Weight of asset = 65%
Therefore, 65% of the portfolio should be invested.
In 2016, David Hay started his own business, Hays Gardening and Landscapes. David was previously an employer of another business/
a) What was the opportunity costs for David when he started his business?
A. Cost of marketing to attract customers.
B. Loss of earnings from employment
C. Payment of taxes on profits
D. Risk of business failure
ANSWER:
b) Explain why this answer is correct?
Answer:
B. Loss of earnings from employment
Explanation:
David's opportunity cost in this scenario would be the loss of earnings from employment. This is because is no longer employed, meaning that he no longer makes money from his employment due to him "choosing" to quit and start his own business. Therefore, that is the cost of him choosing another opportunity. The financial costs of marketing, taxes, and risk of business failure are all costs he may or may not incur from the chosen opportunity but are not the same as "opportunity costs" since they are costs that need to be met in order to continue this opportunity and not something that was given up in order to choose this opportunity.
The owners of Peterson's, a large discount store chain, are frustrated by the high level of unemployment in the communities in which it serves. The company decides to take a stand and do what it can to help reduce unemployment. What can Peterson's do to achieve this goal?
A. It can create enough jobs to hire all the hardcore unemployed people in their communities.B. It can eliminate unfilled positions for which applicants are not qualified.C. It can train its current employees to make sure they never become unemployed.D. It can donate to programs that provide specialized funding for community businesses.E. It can pressure other companies in their communities to create more jobs.
Answer:
D
Explanation:
Unemployment is when people who are willing and able to work do not have jobs
Types of unemployment
structural unemployment is an unemployment that occurs as a result of changes in the economy. These changes can be as a result of changes in technology, polices or competition. Structural unemployment tends to be permanent.
Frictional unemployment: the period of time a person is unemployed from the period he leaves his current job and the time he gets another job. Eg. when a real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California.
Voluntary unemployment: e.g. worker at a fast-food restaurant who quits work and attends college.
Cyclical unemployment: it occurs as a result of fluctuations in the economy. Unemployment would be high in a downturn and low in a boom
It is impractical to the owners of the store to attempt to employ all the unemployed people in their communities. the most practical step that can be taken is to make donations that fund businesses. this would provide funds needed for those unemployed to start their own businesses. this would reduce unemployment
An open-end fund has a net asset value of $12.70 per share. It is sold with a front-end load of 8%. What is the offering price? (Round your answer to 2 decimal places.)
Answer:
$13.80
Explanation:
Calculation to determine the offering price
Using this formula
Offering Price = NAV/1-load
Let plug in the formula
Offering Price = $12.70/1-0.08
Offering Price =$12.70/0.92
Offering Price = $13.80
Therefore the offering price is $13.80
What is the Production Possibilities Frontier's purpose?
:a. Showing businesses that in order to produce more, they need to hire more output
b. Show businesses that businesses should not produce at their maximum capacity because they could exhaust their workers and capital goods
c. Show businesses that they need to produce at their maximum capacity to be efficient
d. Showing businesses that a worker's high morale is necessary to make them efficient
Answer:
Uhh b
Explanation:
You are scheduled to receive $34,000 in two years. When you receive it, you will invest it for 7 more years at 7.5 percent per year. How much will you have in 9 years
Answer: $65186.16
Explanation:
Since the individual is scheduled to receive $34,000 in two years and will then invest it for 7 more years at 7.5 percent per year. The amount that the person will have in 9 years will be:
FV = PV(1 + rate)^n
where,
PV = present value = $34000
Rate = 7.5% = 0.075
n = number of years = 7
FV = 34000 × (1 + 7.5%)^9
FV = 34000 × (1 + 0.075)^9
FV = 34000 × 1.075^9
FV = 34000 × 1.91724
FV = $65186.16
The amount in 9 years will be $65186.16
Sunland Company uses a job order cost system. On May 1, the company has balances in Raw Materials Inventory of $15,700 and Work in Process Inventory of $4,210 and two jobs in process: Job No. 429 $2,420, and Job No. 430 $1,790. During May, the company incurred factory labor of $14,710. During May, a summary of source documents reveals the following.
Job Number Materials Labor Time
Requisition Slips Tickets
429 $3,040 $2,300
430 4,020 3,430
431 4,740 $11,800 7,870 $13,600
General use 900 1,310
$12,700 $14,910
Stine Company applies manufacturing overhead to jobs at an overhead rate of 62% of direct labor cost. Job No. 429 is completed during the month
1. Prepare summary journal entries to record (1) the requisition slips, (2) the time tickets, (3) the assignment of manufacturing overhead to jobs, and (4) the completion of Job No. 429.
2. Post the entries to Work in Process Inventory, and prove the agreement of the control account with the job cost sheets.
Answer:
Sunland Company
1. Journal Entries:
1) Requisition slips:
Debit Work in Process:
Job 429 $3,040
Job 430 $4,020
Job 431 $4,740
Credit Raw materials $11,800
To record direct materials slips to work in process.
Debit Manufacturing Overhead $900
Credit Raw materials $900
To record indirect materials slip to overhead.
Debit Work in Process:
Job 429 $2,300
Job 430 $3,430
Job 431 $7,870
Credit Direct labor $13,600
To record direct labor tickets to work in process.
Debit Manufacturing Overhead $1,310
Credit Indirect labor $1,310
To record indirect labor tickets to overhead.
Debit Work in Process:
Job 429 $1,426
Job 430 $2,127
Job 431 $4,879
Credit Manufacturing overhead $8,432
To apply 62% of direct labor as overhead to work in process.
Debit Finished Goods $9,186
Credit Work in Process: Job 429 $9,186
To record the completion of Job 429
2. T-accounts:
Work in Process Inventory
Account Titles Debit Credit
Beginning balance $4,210
Raw materials 11,800
Direct labor 13,600
Mfg overhead 8,432
Finished goods $9,186
Ending balance 28,856
Total $38,042 $38,042
Explanation:
a) Data and Calculations:
May 1 Inventory Balances:
Raw materials = $15,700
Work in Process = $4,210
Job No. 429 = $2,420
Job No. 430 = $1,790
During May:
Factory labor cost = $14,710
Job Number Materials Labor Time
Requisition Slips Tickets
429 $3,040 $2,300
430 4,020 3,430
431 4,740 7,870
Sub-total $11,800 $13,600
General use 900 1,310
Total $12,700 $14,910
Job Sheets: Job 429 Job 430 Job 431 Total
Beginning balance $2,420 $1,790 $4,210
Direct materials 3,040 4,020 $4,740 11,800
Labor 2,300 3,430 7,870 13,600
Overhead (62% DL) 1,426 2,127 4,879 8,432
Total costs $9,186 $11,367 $17,489 $38,042
Finished goods ($9,186) $11,367 $17,489 $28,856
define economic development
Answer:
developing the economy
1.8 Advise businesses on FIVE ways in which professional, responsible, ethical and
effective business practice should be conducted.
Answer:
Explanation:
There are various ways in which professional, responsible, ethical and
effective business practice should be conducted. Five of them are:
1. Payment of fair wages and salaries to employees
2. Equal treatment among workers
3. Accountability and responsibility on business decisions made from top to bottom or managers to workers
4. Provision of quality goods and services to the masses
5. Transparency, including adequate internal controls, monitoring, and evaluation.
discuss the benefits of considering a reservation in a restaurant.
Answer:
Another important benefit of making a reservation in the desired restaurant is the better quality of service one will receive. As the restaurant knows at what time and with how many people the customer will arrive, a comfortable table with enough seats and space will be reserved, and the restaurant's staff will be prepared to serve ...
Explanation:
A dispute between labor and management at an automobile production plant has effectively stopped production for 2 months and has cost the company a tremendous amount of money. Despite the use of third parties, neither side can agree on a solution, but they do agree that the dispute must be settled soon. How should this dispute at this stage be settled
Answer:
Arbitration
Explanation:
The arbitration process seems to be the best way to make the settlement process happen in this case. The arbitration process will be between labor and management as an impartial third party (arbitrator or arbitral tribunal) takes charge of the process. Once both parties have agreed to arbitraueb, the arbitrator then proffers powerful ways of ensuring dispute resolution in such a way that a mutual agreement is reached by both labor and management. Even though proferred solution shouldn't be compulsorily adopted by the conflicting parties.
Sunland Company reported a net profit of $8.15 per share and a dividend of $3.50 per share. If you buy shares of the stock at $94.85 per share, what is your dividend yield
Answer:
The answer is "[tex]3.69\%[/tex]"
Explanation:
Dividend Share [tex]= \$3.50[/tex]
stock purchasing Price[tex]= 94.85[/tex]
[tex]\text{Dividend yield} = \frac{Dividend}{Purchase price}\\\\[/tex]
[tex]=\frac{3.50}{94.85}\\\\=0.036900369 \approx 3.69\%[/tex]
Given the following information, what are the NZD/SGD currency against currency bid-ask quotations?
American Terms European Terms Bank Quotations Bid Ask
New Zealand dollar 0.7265 0.7272 1.3751 1.3765
Singapore dollar 0.6135 0.614 1.6287 1.63
Answer:
In American terms: 0.8436 ÷ 0.8451
In European Terms: 1.1832 ÷1.1853
Explanation:
the computation of the NZD/SGD currency against currency bid-ask quotations is shown below:
In american terms In european terms
USD/NZD 0.7265 ÷ 0.7272 E/NZD 1.3751 ÷ 1.3765
USD/SGD 0.6135 ÷ 0.6140 E/SGD 1.6287 ÷ 1.6300
NZD/SGD = (0.6135 ÷ 0.7272) ÷ (0.6140 ÷ 0.7265) = 0.8436 ÷ 0.8451
(1.6287 ÷ 1.3765) ÷ (1.6300 ÷ 1.3751) = 1.1832 ÷ 1.1853
Yi Min started an engineering firm called Min Engineering. He began operations and completed seven transactions in May, which included his initial investment of $18,000 cash. After those seven transactions, the ledger included the following accounts with normal balances.
Cash $ 37,641
Office Supplies 890
Prepaid Insurance 4,600
Office Equipment 12,900
Accounts Payable 12,900
Y. Min, Capital 18,000
Y. Min, Withdrawals 3,329
Engineering Fees Earned 36,000
Rent Expense 7,540
Prepare a trial balance for this business as of the end of May. (The items in the Trial Balance should be grouped as follows: Assets, Liabilities, Equity, Revenues and Expenses). Complete this task on an excel spreadsheet in proper form
Answer:
Trial Balance
Items Group Debit ($) Credit ($)
Cash Asset 37641
Office Supplies Asset 890
Prepaid Insurance Asset 4600
Office Equipment Asset 12900
Accounts Payable Liability 12900
Capital Equity 18000
Withdrawals Equity 3329
Engineering Fees earned Revenue 36000
Rent Expense Expense 7540
Total $66900 $66900
In planning Hong Kong Disneyland, Disney took special care to assure that the theme park would be culturally acceptable by: Group of answer choices deciding to incorporate feng shui in planning and construction. making sure that the park’s hotels have no 4th floors. setting the opening date based on its listing in the Chinese almanac as auspicious for opening a business. all of the above factors were taken into consideration. Next
Answer: All of the above
Explanation:
Disney realized that China has different values from the United States and so Disneyland had to be built by Chinese standards not that of the U.S. in order for it to be a successful venture.
To this end, they brought in a Feng Shui expert who helped construct the park according to the principles of Feng Shui. They also made sure that the park's hotels had no 4th floor because the number four is considered bad luck in Chinese culture.
They also set the opening date to a date that was considered auspicious for the opening of a business to inspire good luck.
The beta of a stock is 1.2. The risk free rate is 3%. The expected market return is 9%. The dividends of the company are expected to grow by 5.6% a year. The current dividend is $6.80. Using the Gordon growth model, what is the intrinsic value of the firm
Answer: $156.09
Explanation:
First find the required return of the stock using CAPM:
= Risk free rate + Beta *( Market return - Risk free rate)
= 3% + 1.2 * (9% - 3%)
= 10.2%
Find out the Next dividend to be paid:
= Current dividend * (1 + growth)
= 6.8 * (1 + 5.6%)
= $7.18
Gordon Growth Model:
= Next dividend / (Return on stock - growth rate)
= 7.18 / (10.2% - 5.6%)
= $156.09
FILL IN THE BLANK Please add the appropriate word or words to complete the sentences. 1. Price ceilings are governmental price that are set the market equilibrium price. 2. This kind of policy typically creates a(n) because the quantity demanded the quantity supplied. 3. Price floors are governmental price that are imposed the market equilibrium price. 4. This kind of policy usually generates a(n) in the market because the quantity exceeds the quantity . 5. Shortages and surpluses are reflected in inventories. Inventory is the raw material to goods or the stocks of finished goods that are ready to be sold. g
Answer:
1. Price ceilings are governmental price that are set below the market equilibrium price.
2. This kind of policy typically creates a shortage because the quantity demanded exceeds the quantity supplied.
3. Price floors are governmental price that are imposed above the market equilibrium price.
4. This kind of policy usually generates a surplus in the market because the quantity supplied exceeds the quantity demanded.
5. Shortages and surpluses are reflected in inventories. Inventory is the raw material which is processed to goods or the stocks of finished goods that are ready to be sold.
Explanation:
Price ceilings, as a part of the price control mechanisms, seem to benefit the consumers, while price floors are attempts to support suppliers and producers. While they roll back the excesses of market forces in determining the prices of goods and services, some unintended consequences, including allocative inefficiencies, usually arise from price ceilings and price floors. Therefore, they should be applied sparingly.