The answer is , Vasco's optimal bundle is X* = 2.47 units
and Y* = 17.18 units.
How to find?We can now apply Cobb-Douglas function and find out Vasco's optimal bundle.
To maximize the utility function, we need to differentiate it with respect to X and Y separately.
We get ∂U/∂X = 20XY. ∂U/∂Y
= 10X^2. √Y + 5XY / √Y.
The condition for maximizing the utility function is given by MRS = - (PX/PY)
Let us compute the MRS.
We know that
MRS = ∂U/∂X / ∂U/∂Y
= (20XY) / (10X^2. √Y + 5XY / √Y) / 10X^2.
We get MRS = 2Y / (X^2. √Y + 1 / 2 Y )
= 2Y^2 / X^2. √Y + 1 / 2 Y-----(1)
Given px = $12,
py = $2 and
income = $60, we can form the budget equation aspxX + pyY = I substituting the given values, we get
12X + 2Y = 60 i.e.,
6X + Y = 30 or
Y = 30 - 6X ----(2)
Substituting equation (2) in equation (1), we get
MRS = 2 (30 - 6X)^2 / X^2 √(30 - 6X) + 1/2 (30 - 6X)
= 60 (5 - X)^2 / X^2. √(30 - 6X) + (30 - 6X)----(3)
Differentiating equation (3) with respect to X and equating it to zero, we get
dMRS / dX = - 60(5 - X)(5 - 2X) / X^3.√(30 - 6X) - 6 / √(30 - 6X)
= 0.
Solving for X, we get X = 2.47 units approx.
Substituting X in equation (2), we get Y = 17.18 units approx.
Therefore, Vasco's optimal bundle is X* = 2.47 units and
Y* = 17.18 units.
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Required information [The following information applies to the questions displayed below] Mason Corporation began operations at the beginning of the current year. One of the company's products, a refrigeration element, sells for $185 per unit. Information related to the current year's activities follows. Mason carries its finished-goods inventory at the average unit cost of production and is subject to a 30 percent income tax rate. There was no work in process at year-end. 2. Compute Mason's net income for the current year ended December 31.
Mason Corporation's net income for the current year ended December 31 can be computed by deducting the cost of goods sold and operating expenses from the total sales revenue. The net income is then adjusted for income tax at a rate of 30 percent.
Mason's net income, we need to consider the following factors. Firstly, we have the sales revenue, which is calculated by multiplying the selling price per unit ($185) by the total number of units sold. Secondly, we need to determine the cost of goods sold (COGS). Since Mason carries its finished-goods inventory at the average unit cost of production, we can multiply the average unit cost by the number of units sold to find the COGS. Next, we need to factor in the operating expenses, such as administrative and selling expenses, which are subtracted from the gross profit (sales revenue minus COGS).
Once we have the gross profit, we deduct the operating expenses to obtain the operating income. To calculate the net income, we subtract the income tax expense at a rate of 30 percent from the operating income. Finally, the resulting amount represents Mason Corporation's net income for the current year ended December 31.
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View Policies Show Attempt History Current Attempt in Progress During 2021, Blossom Company borrowed cash from Sunland Company by issuing notes payable as follows: June 1, 2021, issued an eight-month, 7% note for $86,400. Interest and principal are payable at maturity, October 1, 2021, issued a three-month, 5% note for $31,200. Interest is payable monthly on the first day of the month. Principal is payable at maturity. 1. 2 Blossom Company has a November 30 fiscal year end and prepares adjusting entries on an annual basis.
At the end of its fiscal year, Blossom Company will record an interest expense of $2,880 for the first note payable and accrue $260 for the second note payable, reflecting the interest obligations and adjusting the notes payable on the financial statements.
As Blossom Company has a November 30 fiscal year-end and prepares to adjust entries on an annual basis, the company needs to make adjusting entries at the end of its fiscal year to recognize interest expense and adjust the notes payable.
The first note is payable, issued on June 1, 2021, with a maturity date of October 1, 2021, the note has a term of eight months and carries an interest rate of 7%.
Since the note matures before the fiscal year-end, Blossom Company will need to record the interest expense for the portion of the note term that falls within the fiscal year. In this case, four months of the term fall within the fiscal year (July, August, September, and October).
To calculate the interest expense, we can use the formula: Interest Expense = Principal x Interest Rate x Time. For the first note, the interest expense for the four-month period will be $86,400 x 7% x (4/12) = $2,880.
For the second note payable, issued on October 1, 2021, with a three-month term and a 5% interest rate, the interest is payable monthly on the first day of each month.
Since the note extends beyond the fiscal year-end, Blossom Company will need to accrue the interest expense for the months that fall within the fiscal year. In this case, two months of interest expense will be accrued (November and December).
To calculate the interest expense for the second note, we can use the formula: Interest Expense = Principal x Interest Rate x Time. For the second note, the interest expense for the two-month period will be $31,200 x 5% x (2/12) = $260.
Therefore, as part of the adjusting entries at the end of the fiscal year, Blossom Company will record an interest expense of $2,880 for the first note payable and an accrual of $260 for the second note payable. These entries will reflect the interest obligations and adjust the notes payable accordingly on the company's financial statements.
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You and several classmates are studying for the next accounting examination. They ask you to answer the following questions: If cash is borrowed on a $67,200, 11-month, 10% note on August 1. how much interest expense would be incurred by December 31? 1. 2. 3. The cash register total including sales taxes is $46,410, and the sales tax rate is 5%. What is the sales taxes payable? If $46,410 is collected in advance on November 1 for 6-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31? $ TA I
If cash is borrowed on a $67,200, 11-month, 10% note on August 1, then the interest expense incurred by December 31 can be calculated as follows:Step 1: Find the total interest payable on the note.
The interest payable can be calculated using the formula: Interest payable = (Principal × Rate × Time) ÷ 12Here, the principal is $67,200, the rate is 10% per annum, and the time period is 11 months. We need to convert the time period to years by dividing it by 12. Interest payable = ($67,200 × 10% × 11/12) ÷ 100 Interest payable = $6,960Step 2: Calculate the interest expense incurred by December 31.
We know that the note was taken on August 1 and the interest is payable for 11 months. So, the interest expense incurred by December 31 is calculated by multiplying the total interest payable with the proportion of the time period for which the interest is payable. Interest expense = Total interest payable × (Time period for which interest is payable ÷ Total time period)We need to find the time period from August 1 to December 31.
This is 5 months. Interest expense = $6,960 × (5/11). Interest expense = $3,163.64. Therefore, the interest expense incurred by December 31 is $3,163.64.
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During the COVID-19 pandemic, many places have seen people rushing to supermarkets for daily essentials such as toilet paper, especially when there was a recent breakout in the local area. That has led to empty shelves and stock-outs for a prolonged period of time in many supermarkets, even though the supermarkets and the product suppliers reassured that there is sufficient production capacity.
From a logistics and supply chain perspective, explain two reasons why supermarkets experienced stockout for a considerable period of time, when the suppliers had sufficient production capacity.
During the COVID-19 pandemic, many places have seen people rushing to supermarkets for daily essentials such as toilet paper, especially when there was a recent breakout in the local area.
That has led to empty shelves and stock-outs for a prolonged period of time in many supermarkets, even though the supermarkets and the product suppliers reassured that there is sufficient production capacity.The two reasons that led to supermarkets experiencing stockouts for a considerable period of time, even when the suppliers had sufficient production capacity are:Inability of the suppliers to produce goods efficiently.
This occurs due to the suppliers requiring additional resources and time to produce and deliver products to supermarkets. The additional time can lead to the delay in replenishing stock at the supermarkets, thus, leading to empty shelves and stock-outs.Shortage of storage space.Suppliers may not have enough storage space to hold all of the goods that are required to be produced. This could lead to delays in the delivery of products to the supermarkets, which can, in turn, lead to empty shelves and stockouts.
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Projecting inventory levels for next year would be an example of, Select one: O a. Financial accounting O b. Managerial accounting O c. Tax accounting O d. None of the above 4 ed out of n The benefits of providing a certain level of accounting information must outweigh the cost. This represen Select one: O a. Cost-effectiveness O b. Reliability O c. Conservatism O d. Matching
Projecting inventory levels for the next year would be an example of Managerial Accounting. Option (B) is the correct answer.In accounting, Managerial Accounting involves preparing and using financial and nonfinancial data to help in making organizational choices.
It is also known as management accounting, and it is used to track internal financial data and to forecast the firm's future economic performance. Managerial accounting is concerned with providing internal stakeholders with relevant financial information that they may use to make informed choices about the firm's future direction, as well as to establish organizational goals and objectives. It enables management to understand the costs associated with running the organization, allowing them to plan, budget, and forecast for future growth and development.
Thus, projecting inventory levels for the next year would be an example of Managerial Accounting. Benefits of providing a certain level of accounting information must outweigh the cost. This represents cost-effectiveness. Option (A) is the correct answer.Cost-effectiveness is a principle that involves comparing the advantages of providing a certain level of accounting information with the costs of doing so.
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Sales of Volkswagen's popular Beetle have grown steadily at auto dealerships in Nevada during the past 5 years (see table below). Year Sales
1 455 2 510 3 520 4 575
5 575
a) Forecasted sales for year 6 using the trend projection (linear regression) method are sales (round your response to one decimal place). b) The MAD for a linear regression forecast is sales (round your response to one decimal place) c) The MSE for the linear regression forecast is sales (round your response to one decimal place).
a) The trend projection method is used to forecast future sales. To begin, the linear trend line must be calculated using the data given. The equation for the line of best fit is y = a + bx, where y is the dependent variable, a is the y-intercept, b is the slope, and x is the independent variable.
The slope can be calculated using the formula b = (N∑XY - ∑X∑Y) / (N∑X^2 - (∑X)^2)Where X is the time period, Y is the sales, N is the number of years, ∑XY is the sum of the products of the time period and sales, and ∑X and ∑Y are the sums of the time periods and sales, respectively. Substituting the given values, b = ((5x2825)-(15x2101))/((5x55)-(15^2))= 14/5≈ 2.8The y-intercept can be calculated using the formula a = (∑Y - b∑X)/N= (2635 - 2.8(15))/5= 507/5≈ 101.4The linear trend line can be written as y = 101.4 + 2.8x. Using this equation, forecasted sales for year 6 can be calculated by substituting x = 6. Therefore, the forecasted sales for year 6 is y = 101.4 + 2.8(6) = 119.8 ≈ 119.8.
b) Mean absolute deviation (MAD) is a measure of how well a forecast fits the data. It calculates the average absolute error between the forecast and actual data. To calculate MAD, we need to first calculate the absolute error, which is the difference between the forecasted and actual sales. Absolute error = | actual value - forecasted value | Using the given data and the equation y = 101.4 + 2.8x, we can calculate the absolute error for each year and sum them up. The MAD is then calculated by dividing the sum of absolute errors by the number of years. MAD = ∑(| actual value - forecasted value |) / n= (|455-455.8| + |510-458.6| + |520-461.4| + |575-464.2| + |575-467|) / 5≈ 28.8Therefore, the MAD for the linear regression forecast is 28.8.
c) The mean squared error (MSE) is another measure of how well a forecast fits the data. It calculates the average of the squared errors between the forecast and actual data. To calculate MSE, we first need to calculate the squared error, which is the square of the difference between the forecasted and actual sales. Squared error = ( actual value - forecasted value )^2 Using the given data and the equation y = 101.4 + 2.8x, we can calculate the squared error for each year and sum them up.
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The owners of Global Green Books Publishing understand the importance of the project management life cycle, and so they have set up a project scope. They have asked you to assist them with a cost-benefit analysis to analyse the financial viability of their project. First, they require you to calculate the total production cost and the total profit of each unit sold.
Use the information provided to calculate the following:
• The total cost for each task completed;
• The total cost of internal labour;
• The total cost of other expenses;
• The total cost of production;
• The total profit of if a 30% profit margin is applied. Use the following equation: Total cost of production x 30% = Profit per unit sold
The project management life cycle has been set up by the owners of Global Green Books Publishing who realize the importance of the project management life cycle. They have requested you to help them with a cost-benefit analysis to determine the project's financial feasibility.
To do so, the following computations must be made:
To begin, a cost-benefit analysis is conducted to assess the project's financial viability. The expenses incurred during project completion are compared to the project's forecasted earnings.
The following formula may be used to estimate the financial viability of the project:
Financial Viability = Estimated Benefits / Estimated Costs
The following information was provided:
Each unit costs $4.50 to produce. (Total cost of production)Internal labor costs are $2.50 per unit.
Other expenses are $1.25 per unit.
Using the above information,
the following computations may be made:
Total cost of production = $4.50
Internal labor costs = $2.50Other expenses = $1.25
Total cost of each unit produced = $8.25
Total production cost and the total profit of each unit sold may be computed using the following equation:
Profit per unit sold = Total cost of production x 30%
Total profit of production = Profit per unit sold - Total cost of production
To compute, substitute the value of the total cost of production to the formula:
Profit per unit sold = $4.50 x 30% = $1.35
Total profit of production = $1.35 - $4.50 = $5.85
Total cost for each task completed = $8.25
Total cost of internal labor = $2.50
Total cost of other expenses = $1.25
Total cost of production = $4.50
Total profit of production = $5.85
Therefore, a 30% profit margin would result in a total profit of $5.85 per unit sold.
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The supply and demand for dog clothing is given by Q 0
=500−10P and Q s
=5P−25 5. What is the equilibrium price and quantity? 6. Suppose a tax of $12 per unit is imposed on sellers in the 6. Suppose a tax of $12 per unit is imposed on sellers in the market. The equilibrium price and quantity are now 7. (2 points) The tax burdens (per unit bought or sold) are Burden on Buyers =…4 Burden on Sellers =
Given, the supply and demand for dog clothing is given by Q₀ = 500 − 10P and Qs = 5P − 25.
Respectively, we know that Q₀ is the demand curve and Qs is the supply curve.
At equilibrium, the quantity supplied will be equal to the quantity demanded, therefore:
Q₀ = Qs500 − 10P = 5P − 25Solving the above equation for P, we get:
P = 12.50Therefore, the equilibrium price is 12.50To find out the equilibrium quantity, substitute P = 12.50 in either the supply or demand equation.
Let us use the demand equation Q₀ = 500 − 10P,Q₀ = 500 − 10(12.50) = 375
Therefore, the equilibrium quantity is 375Now suppose a tax of 12 per unit is imposed on sellers in the market .The supply equation becomes:
Qs = 5P - 25 - 12Qs = 5P - 37
Substituting Qs into the demand equation, we have:
500 - 10P = 5P - 3750 = 15PP = 2,50
Substitute P = 2.50 in the supply equation
Qs = 5(2.50) - 25 - 12Qs = 12.50 - 25Qs = -12.50
So the new equilibrium quantity is 0.
As a result, the equilibrium quantity is now zero.
Tax Burden on Buyers = 0.00Tax Burden on Sellers = 12.00
As the government imposes a tax of 12 per unit on sellers in the market, the tax burden on buyers is 0.00 and the tax burden on sellers is 12.00.
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David works in a clothing factory. Currently, his firm pays him $40 per hour and he works 35 hours per week. Each hour he works he experiences disutility of effort from working valued at $7 per hour. In addition, should David lose his job the government will pay him an unemployment benefit of $23 per hour, for each hour he would otherwise work each week, for a maximum of 20 weeks. Prior to the coronavirus pandemic if David lost his job the expected duration of unemployment before he would find another job is 15 weeks.
a. Calculate David’s (i) employment rent per hour and his (ii) total employment rent. (3 marks)
b. With the advent of the coronavirus pandemic the economy has gone into recession causing David’s expected duration of unemployment to increase to 35 weeks. Furthermore, the dramatic increase in the expected duration of unemployment has resulted in psychological stress from unemployment valued at $3 per hour. In the light of these developments re-calculate David’s (i) employment rent per hour (2 marks) and (ii) total employment rent (4 marks).
c. Describe the relationship between the size of the employment rent and (i) the expected duration of unemployment (ii) the size of the unemployment benefit per hour and (iii) the size of the psychological cost of unemployment per hour.
(a) The disutility of effort from working is valued at $7 per hour, so David's wage would be $40 - $7 = $33 per hour.
Also, David is working for 35 hours per week, therefore his weekly earnings are: $33 × 35 = $1155. David's employment rent per hour would be the difference between the wage per hour and the unemployment benefit per hour. So, the employment rent per hour will be $23 - $33 = -$10. This is a negative rent as the wage is lower than the unemployment benefit. David's total employment rent will be -$10 × 35 = -$350. (b)With the advent of the coronavirus pandemic, the expected duration of unemployment before David would find another job increased to 35 weeks. So, David will be entitled to receive the unemployment benefit for 20 weeks. David's total unemployment benefit would be $23 × 20 = $460. The psychological stress from unemployment is valued at $3 per hour. Therefore, David's wage will be $33 - $3 = $30 per hour. David's employment rent per hour will be $23 - $30 = -$7. This is also negative which implies that David would receive an unemployment benefit of $23, which is higher than his wage. David's total employment rent would be -$7 × 35 = -$245. (c) The employment rent is the difference between the wage and the unemployment benefit. If the expected duration of unemployment increases, then the employment rent will decrease. This is because the unemployment benefit is given for a limited time, after which the worker may face financial problems. So, if the expected duration of unemployment is longer, the worker would receive less unemployment benefits and would have to rely on savings or other sources of income. Therefore, the employment rent would decrease. The size of the unemployment benefit per hour and the psychological cost of unemployment per hour affect the employment rent. If the unemployment benefit per hour is higher, then the employment rent would decrease.This is because the worker would have an alternative source of income if he loses his job. If the psychological cost of unemployment per hour is higher, then the employment rent would increase. This is because the worker would be less willing to give up his job as the cost of unemployment would be higher.
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Q)Overall process of Governance for a startup business
Governance is the manner in which an organization is run, administered, and regulated. Governance processes apply to both established and startup companies. A governance framework assists entrepreneurs in keeping their businesses stable, in compliance with regulatory regulations, and with minimal hazards.
Startup businesses must set up a strong governance process in which risk management procedures are established, and procedures and processes are documented. Compliance with regulations and laws is necessary for the company to succeed. The governance process should include regular audits, financial management, and internal control mechanisms to ensure that the organization operates with transparency and integrity.
In conclusion, governance is a critical component of a startup business. An effective governance framework aids startups in complying with regulatory requirements, managing risk, and remaining accountable to all stakeholders. The governance process should be established early on in the business's life cycle and followed diligently to ensure the company's long-term success.
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1. How many Franchisee businesses are there in Surrey? Write names of maximum business you find.
2. Write all types of business and profession you find in BC. With example.
3. Write any business /franchisee which is growing fast? With example.
4. Write Biggest challenge to start business. Write names of franchisee/Business with their competitors name under same area/field.
5. Why Central bank of Canada (CBC) change interest rate and its affect on economy.
In Surrey, there are a lot of franchised enterprises. By providing its clients with top-notch goods and services, they have thrived and expanded.
Chiropractors, hairdressers, attorneys, and plumbers are just a few of the companies and professions that you may discover in BC. All companies require at least one individual, or entrepreneur, to make their start-up a reality, even if there is no one description for the different business and profession kinds available in BC.
It offers the greatest product on the market and has cutting-edge technology that makes it simple to use. We wish to speak with you if you have any interest in launching your own cutting-edge company in the near or distant future.
Identifying the market trend is the largest obstacle when starting a business. Examine the statistics from prior years, look up all the resources relevant to your sector, and compare it to the offerings of your competitors.
Interest rates need to be raised or lowered by CBC in order to manage inflation. If the Canadian economy is strong and the CBC decides to raise interest rates, it will make borrowing money more costly, making it less likely that unproductive businesses would grow and increasing pressure on pricing.
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The Bank of Canada adjusts interest rates to manage the country's monetary policy and achieve its macroeconomic objectives.
The Bank of Canada adjusts interest rates to manage the country's monetary policy and achieve its macroeconomic objectives. Here are the general steps involved and the potential effects on the economy:
Assessing economic conditions: The Bank of Canada closely monitors various economic indicators such as inflation, employment rates, GDP growth, and consumer spending. It analyzes these indicators to gauge the overall health of the economy.
Determining the target interest rate: Based on the economic assessment, the Bank of Canada's Governing Council decides whether to change the target interest rate. The target interest rate is the rate at which banks lend and borrow money from the Bank of Canada.
Changing the interest rate: If the Bank of Canada decides to change the target interest rate, it will either increase or decrease it. An increase is called a tightening monetary policy, while a decrease is called an easing monetary policy.
Effects on borrowing and lending rates: When the Bank of Canada changes the target interest rate, it influences the borrowing and lending rates in the economy. If the target rate is increased, borrowing and lending rates for consumers and businesses generally rise. Conversely, if the target rate is decreased, borrowing and lending rates tend to decrease.
Impact on consumer spending and investment: Changes in interest rates affect the cost of borrowing for consumers and businesses. Higher interest rates can discourage borrowing and lead to reduced consumer spending and business investment. Lower interest rates, on the other hand, can stimulate borrowing, spending, and investment.
Managing inflation: One of the primary goals of the Bank of Canada is to maintain price stability and keep inflation within a target range. Adjusting interest rates is a tool used to manage inflation. Higher interest rates can help curb inflationary pressures by reducing spending and credit growth. Lower interest rates can stimulate economic activity and increase inflationary pressures.
Influencing exchange rates: Changes in interest rates can also impact the exchange rate of the Canadian dollar. Higher interest rates can attract foreign investment, strengthening the Canadian dollar. Lower interest rates may have the opposite effect, potentially weakening the currency.
It's important to note that the effects of interest rate changes can vary and depend on various factors, including the current state of the economy, consumer and business behavior, and global economic conditions.
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Discuss what integration of the global economy means for companies and their managers.
paragraph answer question
Integration of the global economy means that there is a growing interconnectedness and interdependence among the countries of the world, where goods, services, information, and capital can flow freely across national borders.
The integration of the global economy has significant implications for companies and their managers.Companies and their managers need to keep up with the constant changes in the global economy to remain competitive. The integration of the global economy opens up new markets, increases the pool of resources available, and offers opportunities for growth.
They need to be able to communicate effectively with people from different cultures and backgrounds.The integration of the global economy has revolutionized the way companies conduct business and has provided many opportunities for growth. However, it also requires companies and their managers to adapt to new environments, navigate through complex regulations, and manage a diverse workforce.
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Cash equivalents typically appear in the long-term investments
section of a balance sheet.
True
False
The statement that cash equivalents typically appear in the long-term investments section of a balance sheet is False.Cash equivalents are assets that can be easily converted into cash in a short period of time and with a low risk of loss of value.
These assets have maturity periods of 90 days or less, and they are highly liquid in nature. Therefore, cash equivalents usually appear in the current assets section of a balance sheet.
This is because current assets are those that can be converted into cash or consumed within one year or less from the reporting date, and they include cash, cash equivalents, accounts receivable, and inventory. The purpose of reporting cash equivalents in the current assets section is to give the readers of the financial statements an idea of the liquidity and the short-term debt-paying ability of the company.
Hence, the statement that cash equivalents typically appear in the long-term investments section of a balance sheet is False.
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What are some strategies to prevent communication issues at work and bring employees together?
Communication is essential to creating a healthy and productive workplace. Unfortunately, communication issues can arise and, if not addressed, can lead to misunderstandings, decreased productivity, and low morale among employees.
They should also encourage employees to build trust with each other. This can be achieved by setting up team-building activities such as retreats or outdoor activities.3. Provide training: Training can help employees develop the skills needed for effective communication. Training can range from conflict resolution to active listening skills.4. Use technology: Technology can be an excellent tool for improving communication in the workplace.
Managers should encourage teamwork by creating a collaborative work environment, promoting cross-functional teams, and setting team goals. Overall, there are many strategies that can be used to prevent communication issues at work. By fostering open communication, building trust, providing training, using technology, and promoting teamwork, employers can create a positive and productive work environment.
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The Chem-Tex Chemical company is considering two additives for improving the dryweather stability of its low-cost acrylic paint. Additive A will have a first cost of $140,000 and an annual operating cost of $60,000. Additive B will have a first cost of $185,000 and an annal operating cost of $45,000. If the company uses a 4-year recovery period for paint products and a MARR of 15% per year, what is the incremental rate of return and which process should be selected? a. Incremental ROR=12.6%; Select A None of the above b. Incremental ROR=7.7%; Select A c. Incremental ROR =12.6%; Select B d. Incremental ROR=7.7%; Select B
Incremental ROR=12.6%; Select A is the incremental rate of return and which process should be selected. Thus, option (a) is correct.
The incremental rate of return is the difference between the present value of the cash inflows and the present value of the cash outflows, divided by the cash outflows.
IRR = (PV of cash inflows - PV of cash outflows) / Cash outflows
PV of cash outflows = $140,000 + $60,000 / (1 + 0.15) + $60,000 / [tex](1 + 0.15)^2[/tex] + $60,000 / [tex](1 + 0.15)^3[/tex] + $60,000 / [tex](1 + 0.15)^4[/tex] = $327,947.72
PV of cash inflows = $80,000 / (1 + 0.15) + $80,000 / [tex](1 + 0.15)^2[/tex] + $80,000 / [tex](1 + 0.15)^3[/tex] + $80,000 / [tex](1 + 0.15)^4[/tex] = $253,308.22
IRR for Additive A = ($253,308.22 - $327,947.72) / $140,000 = -0.186
PV of cash outflows = $185,000 + $45,000 / (1 + 0.15) + $45,000 / [tex](1 + 0.15)^2[/tex]+ $45,000 / [tex](1 + 0.15)^3[/tex]+ $45,000 / [tex](1 + 0.15)^4[/tex]= $415,617.91
PV of cash inflows = $100,000 / (1 + 0.15) + $100,000 / [tex](1 + 0.15)^2[/tex] + $100,000 / [tex](1 + 0.15)^3[/tex] + $100,000 / [tex](1 + 0.15)^4[/tex] = $362,339.08
IRR for Additive B = ($362,339.08 - $415,617.91) / $185,000
IRR for Additive B = -0.287
Therefore, option (a) is correct.
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All but which of the following are factors that affect the intensity of the firms' rivalries? numerous competitors slow industry growth high fixed costs low exit barriers Question 7 (1 point) emphasized connection to other fields of study such as psychology and sociology to comprehensively understand organizational behavior. Behavioral management theory Taylorism New leadership theory Industrialization
Factors that affect the intensity of firms' rivalries include numerous competitors, slow industry growth, high fixed costs, and low exit barriers.
Factors that affect the intensity of firms' rivalries include numerous competitors, slow industry growth, high fixed costs, and low exit barriers. These factors can contribute to intense competition among firms within an industry. Numerous competitors can result in a crowded market where firms vie for customers and market share.
Slow industry growth can lead to limited opportunities for expansion, making competition more fierce as firms compete for a stagnant pool of customers. High fixed costs, such as those associated with production facilities or equipment, can create financial pressure on firms, forcing them to compete aggressively for revenue.
Low exit barriers, which refer to the ease with which firms can leave an industry, can increase rivalry as firms have less incentive to exit and instead continue to compete. These factors are all significant in determining the intensity of rivalries among firms.
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Suppose Market Demand For A Good Is MB = 100 -2Q And The Marginal Cost Of Supplying The Good Is MC = 40 + 8Q. (A) (I) What Is The MB Of The 5th Unit? In) What Is The TB From 5 Units? (Ill) What Is The MC Of The 5th Umit? (Iv) What Is The TC Of 5 Units? (V) What Is The NB Of 10 Units? (Vi) Which Unit Has MB Of $40? Of $60? (Vit) Which Unit Has MC Of $40?
Suppose market demand for a good is MB = 100 -2Q and the marginal cost of supplying the good is MC = 40 + 8Q. (a) (i) What is the MB of the 5th unit? in) What is the TB from 5 units? (ill) What is the MC of the 5th umit? (iv) What is the TC of 5 units? (v) What is the NB of 10 units? (vi) Which unit has MB of $40? Of $60? (vit) Which unit has MC of $40? Of$60? (vill) How much benefits would a 6th unit add to total benefits? (ix) How much cost would a 6th unit add to total cost? (b) Calculate the following assuming the market acts competitively: market Q, market P, consumer surplus, producer surplus, net benefits. (c) Repeat part b assuming the market is a monopoly.
Consumer surplus is found by finding the area under the demand curve and above the market price for all units up to Q. Net benefits are found by summing consumer surplus and producer surplus. Competitive market Market Q is found by equating MB and MC.100 - 2Q = 40 + 8Q, Q = 6.
(i) TB from 5 units = MB(1) + MB(2) + MB(3) + MB(4) + MB(5)= $400
(ii) NB of 10 units= MB(1) + MB(2) + MB(3) + MB(4) + MB(5) + MB(6) + MB(7) + MB(8) + MB(9) + MB(10)- TC(1) - TC(2) - TC(3) - TC(4) - TC(5) - TC(6) - TC(7) - TC(8) - TC(9) - TC(10)= $230
(iii) To find which unit has an MB of $40, solve for Q in the following equation .Thus, the 30th unit has an MB of $40. To find which unit has an MB of $60. Thus, the 20th unit has an MB of $60
(iv) Benefits from the 6th unit = MB(6) = 100 - 2(6) = $88. Additional cost from the 6th unit = MC(6) = 40 + 8(6) = $88. Therefore, a 6th unit would add $88 in benefits and $88 in costs to the total (TB and TC, respectively).
(b) Market P is found by substituting Q into either the demand or supply equation. P = 100 - 2Q = $88. CS = (1/2)(Q)(P max - P)
(c) Market P is found by substituting Q into the demand equation. P = 100 - 2Q = $88.
Producer surplus is found by finding the area above the supply curve and below the market price for all units up to Q.PS = (1/2)(Q)(P - P min)PS = (1/2)(6)($88 - $40) = $144. Monopoly market Market Q is found by equating MB and MC.100 - 2Q = 40 + 8Q, Q = 6.
NB = CS + PS = $36 + $144 = $180
CS = (1/2)(6)($100 - $88) = $36
TB from 5 units = 100 - 2(1) + 100 - 2(2) + 100 - 2(3) + 100 - 2(4) + 100 - 2(5)= $400
NB of 10 units= 100 - 2(1) + 100 - 2(2) + 100 - 2(3) + 100 - 2(4) + 100 - 2(5) + 100 - 2(6) + 100 - 2(7) + 100 - 2(8) + 100 - 2(9) + 100 - 2(10)- (40 + 8(1)) - (40 + 8(2)) - (40 + 8(3)) - (40 + 8(4)) - (40 + 8(5)) - (40 + 8(6)) - (40 + 8(7)) - (40 + 8(8)) - (40 + 8(9)) - (40 + 8(10))= $230
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In preparation for being an ethical worker, you can practice being an ethical consumer. How can you become an ethical consumer?
In preparation for being an ethical worker, you can practice being an ethical consumer. Becoming an ethical consumer involves being aware of the products you buy and the companies that produce them, as well as the effects of your purchases on the environment and society.
Among the ways to become an ethical consumer include:
1. Research products and companies: Ethical consumers should conduct thorough research on the products and companies they buy from. By doing so, one can learn about a company's track record of social and environmental responsibility.
2. Buy local: Buying local products promotes sustainability and helps reduce carbon emissions from transportation.
3. Look for eco-friendly products: Ethical consumers should look for products that are made using sustainable and eco-friendly materials. These products are manufactured in a way that does not harm the environment.
4. Support fair trade: Fair trade is a certification given to products that are made in conditions that are safe and just for workers.
5. Reduce, reuse, and recycle: Ethical consumers should try to reduce their overall consumption, reuse items, and recycle as much as possible.
In conclusion, becoming an ethical consumer involves being aware of the products and companies you buy from, and the effects of your purchases on the environment and society. By adopting ethical consumption practices, you can contribute to a more sustainable future for everyone.
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T/F. A union whether its craft or industrial is headed by a national organization
True. Whether it is a craft union or an industrial union, both are typically headed by a national organization.
Craft unions and industrial unions are generally led by national organizations that serve as the governing bodies for their respective unions. These national organizations play a crucial role in representing the interests of union members at a national level. They negotiate collective bargaining agreements, advocate for workers' rights, and coordinate activities and initiatives that benefit their members. Craft unions are typically organized based on specific skills or trades, while industrial unions represent workers across various industries. Regardless of the type of union, a national organization is commonly responsible for overseeing and leading the union's activities and initiatives.
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(iii) For hedging purpose, the client is of the opinion that the
delta normal method is the most appropriate method. Advise the
client on the appropriateness of the method.
The appropriateness of the delta normal method for hedging purposes depends on the client's risk profile and the characteristics of their portfolio.
The delta normal method is a commonly used approach in risk management and hedging strategies. It involves estimating the change in the value of a portfolio or position based on changes in the underlying asset's price, as represented by the delta.
While the delta normal method can provide a simplified and efficient way to estimate portfolio risk, it also has certain limitations that need to be considered. One of the main limitations is that it assumes a linear relationship between the underlying asset's price and the portfolio's value. This assumption may not hold in cases of extreme market movements or when there are non-linear risk factors involved.
Additionally, the delta normal method relies on the assumption of normal distribution for the underlying asset's price movements. In reality, financial markets often exhibit non-normal and sometimes fat-tailed distributions, which can lead to underestimation or overestimation of risk.
Therefore, it is important for the client to be aware of these limitations and assess whether they are appropriate for their specific hedging needs. If the client's portfolio or position is subject to significant non-linear risks or if the underlying asset's price distribution deviates significantly from normality, alternative methods such as Monte Carlo simulation or other advanced risk models may be more appropriate.
Ultimately, the suitability of the delta normal method depends on the client's risk tolerance, the complexity of their portfolio, and their specific hedging objectives. It is recommended that the client consults with a financial professional or risk management expert to assess the appropriateness of the method in their particular context.
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Malek Company sells a special putter for $20 each. It applies standard costing system. In March, it sold 30,000 putters while manufacturing 32,000. Budgeted putters for March are 33,000. There are no variances other than production volume variance. There was no beginning inventory on March 1. Production information for March is: 15 minutes $40,000 Direct manufacturing labor per unit Fixed selling and administrative costs Fixed manufacturing overhead Direct materials cost per unit 132,000 2 Direct manufacturing labor per hour Variable manufacturing overhead per unit 4 Variable selling expenses per unit 2 Required: 1. Prepare income statement for March under both variable and absorption costing. 2. Reenneile absorption anarating income with variable 24
Income statement for March under both variable and absorption costing:To prepare the income statement under both variable and absorption costing, let's first calculate the cost per unit
Variable Costing:Direct Materials + Direct Labor + Variable Manufacturing Overhead = $2 + $0.25 + $0.25 = $2.50 per unit Absorption Costing:Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead per unit = $2 + $0.25 + $0.50 + $0.5 = $3.25 per unit
Fixed manufacturing overhead = $132,000Fixed selling and administrative expenses = $60,000 Absorption costing net operating income = $273,000Variable costing net operating income = $198,000Increase in net operating income from absorption costing to variable costing = $198,000 - $169,000 = $29,000
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Kingbird's Sports Store has a customer loyalty program in which it issues points to customers for every cash purchase that can be applied to future purchases. For every dollar spent, a customer receives three points. Each point is worth one cent. There is no expiry date on the points. Kingbird's estimates that 34% of the points issued will eventually be redeemed. Kingbird's has a December 31 year end. The program was started in 2023. During 2023, 1,014,000 points were issued. Sales for 2023 were $338,000. In 2024, 1,425,000 points were issued. Total sales for 2024 were $475,000
Kingbird's Sports Store has a customer loyalty program where points are issued for cash purchases. 34% of the issued points are expected to be redeemed. In 2023, 1,014,000 points were issued, resulting in a $3,459.60 cost for rewards. In 2024, 1,425,000 points were issued, costing $4,845 for rewards. These costs create an estimated liability transferred to the accrued liability account at year-end.
Kingbird's customer loyalty program awards points to customers for cash purchases, where every dollar spent earns three points. Each point holds a value of one cent. The company estimates that 34% of the points issued will eventually be redeemed.
In 2023, a total of 1,014,000 points were issued. To calculate the expected points to be redeemed, we multiply the total points issued by the redemption rate: 1,014,000 points × 34% = 345,960 points. The total cost of rewards for 2023 can be found by multiplying the expected redeemed points by the value of each point: 345,960 points × $0.01 = $3,459.60.
In 2024, a total of 1,425,000 points were issued. Following the same calculation, the expected redeemed points are 1,425,000 points × 34% = 484,500 points. The total cost of rewards for 2024 is then 484,500 points × $0.01 = $4,845.
Therefore, at the end of 2023, the estimated liability for Kingbird's is $3,459.60, representing the total cost of rewards for points earned but not yet redeemed. This amount is transferred to the accrued liability account.
At the end of 2024, the estimated liability increases to $4,845, which will be added to the opening balance of the accrued liability account to determine the closing balance. This liability accounts for the total cost of rewards for points earned but not yet redeemed in that year.
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Kingbird's Sports Store loyalty program gives customers three points, with no expiry, for each dollar spent. These points can be redeemed for future purchases. The case presented outlines the points issued in 2023 and 2024 alongside the sales for those years.
Explanation:Based on the information provided, Kingbird's Sports Store implemented a customer loyalty program where purchases earn customers points that can be utilized for future purchases. Each dollar spent gives customers three points, with each point having a value of one cent. Importantly, there is no expiry on these points, meaning they can be redeemed at any time.
In 2023, the program's debut year, 1,014,000 points were issued off the back of $338,000 in sales. This implies that customers received points in line with their purchases, as expected. The following year, 2024, saw 1,425,000 points issued due to sales amounting to $475,000.
Given that the total number of points issued equals the number of dollars spent multiplied by three, and that Kingbird's estimates 34% of these points will be redeemed, one can estimate the impact this loyalty program will have on future revenue.
However, it is important to note that the precise impact on revenues can only be estimated as it is depending on whether and when customers redeem their points.
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On January 1, Manteca Company has decided to sell one of its batting cages. The initial
cost of the equipment was $215,000 with an accumulated depreciation of $185,000.
Depreciation taken up to the end of the year. The company found a company that is
willing to buy the equipment for $20,000. What is the amount of the gain or loss on this
transaction?
a. Gain of $20,000
b. Loss of $10,000
c. No gain or loss
d. Cannot be determined
The result is a loss of $10,000 on this transaction (option b). To determine the amount of gain or loss on the transaction, we need to compare the book value with the selling price.
To determine the amount of gain or loss on the transaction, we need to compare the book value of the equipment (net of accumulated depreciation) with the selling price. Book value = Initial cost - Accumulated depreciation; Book value = $215,000 - $185,000; Book value = $30,000. Since the selling price is $20,000, we can calculate the gain or loss by subtracting the selling price from the book value. Gain/Loss = Selling price - Book value.
Gain/Loss = $20,000 - $30,000. Gain/Loss = -$10,000. The result is a loss of $10,000 on this transaction (option b). The company will experience a loss of $10,000 when selling the equipment for $20,000, as the selling price is lower than the book value.
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Why will strategy execution be important to the company’s success? Please explain
Strategy execution is a crucial factor in determining a company's success. The implementation of a strategy refers to the processes and activities needed to make a strategic plan a reality. Companies that excel at executing their strategy tend to have better business results than companies that don't.
A good strategy will fail without effective execution. Many organizations have failed to execute their strategy successfully. Execution is the point where the business is won or lost, and a successful execution is the result of planning and preparation.
Strategy execution is the process of establishing, implementing, and evaluating an organization's plan. It entails carrying out a range of activities that align an organization's capabilities and resources with its strategic goals and objectives. This is done to ensure that the goals and objectives of the strategy are met, which is critical to the company's success. The process of execution necessitates leadership and management expertise in order to create the appropriate conditions and environment for successful implementation and evaluation.
To summarize, strategy execution is essential for a company's success. Companies that execute their strategies well tend to outperform those that don't. Effective strategy execution can only be achieved through meticulous planning and preparation, as well as leadership and management expertise. The company must be able to align its capabilities and resources with its strategic goals to achieve successful strategy execution.
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Consider the following interest-only CPM; - $100,000 Mortgage - 7% Interest - 30 Years - Monthly Payments - Loan points =3 What is the lender's effective loan yield (\%) if the loan is prepaid after five years?
The lender's effective loan yield if the loan is prepaid after five years is 7.96%.
The mortgage loan is $100,000 at a 7% interest rate per annum.
The loan points are 3%, meaning that the lender receives $3,000 in upfront points when the loan closes.
The loan's term is 30 years, with monthly payments.
Since the mortgage is interest-only, only the interest component is due every month, while the principal amount remains constant.
The monthly interest payment can be calculated using the formula; I = Prt, where I is the interest, P is the principal amount, r is the interest rate, and t is the time.
Therefore, the monthly interest payment is;$100,000 x 7/100 / 12= $583.33.
The effective loan yield is the actual rate of return that a lender makes on a loan. In this case, the loan is prepaid after five years, which means that the lender receives five years of interest payments plus the principal.
To calculate the effective loan yield, we need to calculate the loan's future value and use it to compute the actual rate of return.
For an interest-only loan, the future value can be calculated using the formula;
FV = P + I × n,
The future value of the loan after five years can be calculated as follows;
$100,000 + ($583.33 × 12 × 5) = $130,999.8
The lender's effective loan yield can be computed using the following formula;
Effective loan yield = (FV - P - points) / P×100%.
Substituting the values we obtain,
Effective loan yield = ($130,999.8 - $100,000 - $3,000) / $100,000 × 100% = 7.96%.
Therefore, the lender's effective loan yield if the loan is prepaid after five years is 7.96%.
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The following statement was made by the Vice President of finance of Legend Guitars Inc.:
"The managers of a company should use the same information as the shareholders of the firm. When managers use the same information in guiding their internal operations as shareholders use in evaluating their investments, the managers will be aligned with the shareholders' profit objectives."
Discuss whether you agree or disagree with the vice president's statement and why.
I agree with the vice president of finance of Legend Guitars Inc.’s statement. The statement made by the Vice President of finance of Legend Guitars Inc. is that managers of a company should use the same information as the shareholders of the firm.
When managers use the same information in guiding their internal operations as shareholders use in evaluating their investments, the managers will be aligned with the shareholders' profit objectives.I agree with this statement because the interests of the managers and shareholders of a company are interrelated. Managers make decisions that can affect the financial performance of the company, while shareholders invest their money in the company and expect to make a profit from it.
Thus, the managers must use the same information as the shareholders so that they can make informed decisions that will be in the best interest of the company and the shareholders.The information that the managers and shareholders need to evaluate the performance of the company includes financial statements, revenue, profit and loss, cash flow statements, balance sheets, and other financial reports.
In conclusion, the statement made by the Vice President of finance of Legend Guitars Inc. is valid, and I agree with it. The managers of a company should use the same information as the shareholders so that they can make informed decisions that will be in the best interest of the company and the shareholders.
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Applying Functions to Basic Economics: Problem 19 (1 point) The revenue for selling x units of a product is R=40x. The cost of producing x units is C=20x+10500. In order to obtain a profit, the revenue must be greater than the cost, so we want to know, for what values of x will this product return a profit. To obtain a profit, the number of units must be greater than You have attempted this problem 2 times. Your overall recorded score is 0\%. You have unlimited attempts remaining.
C = 20x + 10500 is the cost of manufacturing x units. We want to know what values of x this product will return a profit for since in order to make a profit, the revenue needs to be higher than the cost.
Given, R=40x is the revenue generated by selling x units of a product. C=20x+10500 is the price of manufacturing x units. We want to know what values of x this product will return a profit for since in order to make a profit, the revenue needs to be higher than the cost.
Let's begin by calculating the profit function: Profit = Revenue – Cost$ P(x) = R(x) - C(x)$ $P(x) = 40x - (20x + 10500)$ $P(x) = 20x - 10500$
Now, let us find the break-even point. In the break-even point, the profit equals zero.
Thus, we have to solve for $P(x) = 0$ $20x - 10500 = 0$ $20x = 10500$ $x = 525$Therefore, if we sell 525 units, we will break even.
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Organization of the sales force by product: A) Is not advisable for companies selling highly technical products B) Is best used when cost is the deciding factor on which organizationally structure to use C) Requires fewer sales management personnel and lower administrative costs than a geographic organization D) Can result in duplication of sales effort E) Is most commonly used by firms that manufacture only one product line
The organization of the sales force by product is a method that involves grouping salespeople based on the specific products they sell.
A) It is not advisable for companies selling highly technical products because these products require a deep understanding and expertise that might be difficult to develop and maintain within a product-based sales force organization.
B) This method is best used when cost is the deciding factor on which organizational structure to use. By organizing the sales force by product, companies can streamline their sales efforts and reduce costs associated with training and managing salespeople across different product lines.
C) It requires fewer sales management personnel and lower administrative costs than a geographic organization. With a product-based organization, sales managers can focus on specific product lines, resulting in a more efficient use of resources.
D) However, it can result in duplication of sales effort. If multiple salespeople are responsible for selling the same product to different customers, it can lead to inefficiencies and potential conflicts within the sales force.
E) The organization of the sales force by product is most commonly used by firms that manufacture only one product line. This allows for a clear alignment between the sales force and the product, ensuring a focused and dedicated sales effort.
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Manufacturing company requires additional factory space and machine to increase its production. The Production manager and CEO have two proposals under consideration. Relevant data for two proposals are as follows:
Propsal X: Inv = 500,000, Incremental Fixed cost per year = 40,000, Additional capacity in machine hours = 50,000hours, Useful life=10 years, Salvage value=0
Propsal Y: Inv = 700,000, Incremental Fixed cost per year = 50,000, Additional capacity in machine hours = 70,000hours, Useful life=10 years, Salvage value=0
The company produces three products A,B and C, the following data have been furnished by the management accountant with the help of production regarding the capacity utilization:
Product A: Increased in sales units = 7,500, Contribution margin per unit= $5, Machine hours required per unit = 2
Product B: Increased in sales units = 10,000, Contribution margin per unit= $6, Machine hours required per unit = 4
Product C: Increased in sales units = 7,500, Contribution margin per unit= $10, Machine hours required per unit = 5
Corporate tax rate is 35% and cost of capital is 14%. Investment allowance is 25%. Company uses SLM depreciation. You are required to determine which of the two plants should be selected and how the increased capacity should be used?
Answer should be solved through cash flows
To determine the better option, Proposal X or Proposal Y, calculate the net present value (NPV) of each proposal by considering incremental cash flows, applying the cost of capital, and adjusting for investment allowance and tax effects.
To determine which proposal, X or Y, should be selected and how the increased capacity should be utilized, we need to calculate the relevant cash flows and compare the net present value (NPV) of each proposal.
1. Calculate the incremental cash flows for each proposal:
For Proposal X:
- Incremental fixed costs per year: $40,000
- Additional capacity in machine hours: 50,000 hours
- Calculate the incremental contribution margin for each product based on the increased sales units:
- Product A: 7,500 units * $5 = $37,500
- Product B: 10,000 units * $6 = $60,000
- Product C: 7,500 units * $10 = $75,000
For Proposal Y:
- Incremental fixed costs per year: $50,000
- Additional capacity in machine hours: 70,000 hours
- Calculate the incremental contribution margin for each product based on the increased sales units:
- Product A: 7,500 units * $5 = $37,500
- Product B: 10,000 units * $6 = $60,000
- Product C: 7,500 units * $10 = $75,000
2. Calculate the incremental operating cash flows:
- Calculate the incremental cash inflows by subtracting the incremental fixed costs from the incremental contribution margin for each product.
- Multiply the incremental cash inflows by the machine hours required per unit to determine the incremental cash inflows per machine hour.
3. Determine the net cash flows:
- Subtract the incremental fixed costs from the incremental cash inflows per machine hour to obtain the net cash flows per machine hour.
- Multiply the net cash flows per machine hour by the additional capacity in machine hours to determine the total net cash flows.
4. Calculate the present value of the cash flows:
- Apply the cost of capital (14%) to discount the net cash flows for each year over the useful life of 10 years.
- Calculate the present value of the net cash flows for each proposal.
5. Calculate the net present value (NPV):
- Determine the NPV by subtracting the initial investment from the present value of the cash flows.
6. Consider the investment allowance and tax effects:
- Apply the investment allowance (25%) to the initial investment.
- Calculate the tax shield by multiplying the corporate tax rate (35%) with the depreciation expense (initial investment divided by useful life).
- Adjust the NPV by subtracting the tax shield.
Compare the NPV of Proposal X and Proposal Y to determine the better option. The proposal with the higher NPV should be selected, indicating the more favorable investment for the manufacturing company.
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PA 16-14 (Algo) Larry Ellison starts a company that manufactures... Larry Ellison starts a company that manufactures high-end custom leather bags. He hires two employees. Each employee only begins working on a bag when a customer order has been received and then she makes the bag from beginning to end. The average production time of a bag is 1.7 days, with a standard deviation of 3 days. Larry expects to receive one customer order per day on average. The interarrival times of orders have a coefficient of variation of one. (Carry at least 4 decimal places in all intermediate calculations.
Round your final answer to 2 decimal places.) What is the expected duration, in days, between when an order is received and when production begins on the bag?
Larry Ellison has started a company that manufactures high-end custom leather bags. He has hired two employees. Every worker begins working on a bag when a customer order has been received and then he or she makes the bag from beginning to end. The average production time of a bag is 1.7 days, with a standard deviation of 3 days.
Larry expects to receive one customer order per day on average. The inter-arrival times of orders have a coefficient of variation of one. The duration between when an order is received and when production begins on the bag is termed as the expected duration. Let the random variable X represents the duration between when an order is received and when production begins on the bag. Since the average customer order per day is 1, the average time between customer orders will be 1 day. This would be the expected time period between orders. The coefficient of variation (CV) of inter-arrival times of orders is 1. So, we have CV=Standard deviation / Mean CV = 1, therefore,1 = Standard deviation / Mean Standard deviation = Mean Let's say, mean of inter-arrival times of orders = E(X). Hence, the standard deviation of inter-arrival times of orders = E(X).So, Mean of inter-arrival times of orders = E(X) = 1 day.(Because Larry expects to receive one customer order per day on average)And Standard deviation of inter-arrival times of orders = E(X) = 1 day.
Therefore, Expected duration between when an order is received and when production begins on the bag= E(X) + E(Y) = 1 + 1.7 = 2.7 days So, the expected duration between when an order is received and when production begins on the bag is 2.7 days.
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