Ingraham Inc. currently has $770,000 in accounts receivable.Days Sales Outstanding (DSO) = 60 cash sales customers to pay their bills on time. If this policy is adopted, the company's days.Wants to reduce its DSO to 25 days.Average sales will fall by 20%.
The level of accounts receivable following the change. Average collection period (ACP) = DSO= 60 Days Sales per day = Annual sales/365Let, annual sales = x the average sales will fall by 20%.
Then new sales will be = 80% of x or 0.8x.Average collection period (ACP)
= DSO= 25 days Average collection period (ACP)
= Accounts receivable / (Sales / 365)Here, Accounts receivable
= Agnew = x * 0.8 * 25 / 365
= 5.479*x/365Or AR New
= $15017x/365After adopting the policy, the level of accounts receivable will be $15017x/365. Answer: $15017x/365.
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An example of a nominal variable is ________.
a. the chain weighted measure of GDP
b. production measured at base year prices
c. income measured at current market prices
d. expenditures in terms of th
Nominal variables are used to define categories, and the data obtained is qualitative rather than quantitative. The term nominal variable is used in statistics and research.
The variable can only be divided into two categories, such as "Yes" or "No." An example of a nominal variable is the production of a factory.What is a nominal variable?A nominal variable is a variable that represents discrete categories or levels that cannot be ranked or compared with one another.
The variable can only be divided into two categories, such as "Yes" or "No." nominal variables are qualitative in nature and can be divided into binary groups. An example of a nominal variable is a person's marital status, which can be "single," "married," "divorced," or "widowed." Another example of a nominal variable is a person's favorite color, which can be "blue," "green," "red," or "yellow."Therefore, option D is the correct answer, i.e., "expenditures in terms of th" since it is a nominal variable.
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Photo Booths have been the new rage at weddings and a few other events such as holiday parties. The EVENT Center is considering adding photo booths throughout the center that can be designed differently depending upon the event. The project will require an investment of $13 million. If the booths are well recelved, the project will produce cash flows of $8 million a year for 3 years, but if the clients do not respond as well as expected, the cash flows will only be $2 million per year for the 3 years. There is a 50% probability of both good and bad outcomes. The project can be delayed for a year while test are conducted to determine whether the demand will be strong or weak. The delay will not affect the dollar amounts for the project's investment or cash flows-only timing. Anticipated shifts in technology will mean that a 1 year delay will cause cash flows to only continue for 2 years after the initial investment is made. The WACC for this project is 8%. What is the NPV if the company does not consider real options? What is the project's NPV with the timing option? What is the value of the timing option? What is the projects IRR? Would you recommend going ahead with this project?
To calculate the Net Present Value (NPV) of the project without considering real options, we need to discount the expected cash flows at the project's Weighted Average Cost of Capital (WACC) of 8%. Given that there is a 50% probability of both good and bad outcomes, the expected cash flows would be:
Expected Cash Flows (Good Outcome):
Year 1: $8 million
Year 2: $8 million
Year 3: $8 million
Expected Cash Flows (Bad Outcome):
Year 1: $2 million
Year 2: $2 million
Year 3: $2 million
Calculating the NPV without real options would result in the following:
NPV = [($8 million / (1+0.08)^1) + ($8 million / (1+0.08)^2) + ($8 million / (1+0.08)^3)] * 0.5
+ [($2 million / (1+0.08)^1) + ($2 million / (1+0.08)^2) + ($2 million / (1+0.08)^3)] * 0.5
- $13 million
To calculate the NPV with the timing option, we need to consider the 1-year delay and the cash flows for 2 years instead of 3. The calculations would be similar, but the expected cash flows for the bad outcome would only continue for 2 years. The value of the timing option would be the difference in NPV between proceeding with the project immediately and delaying it for a year.
To determine the project's IRR, we need to find the discount rate that results in an NPV of zero. By comparing the IRR to the project's WACC of 8%, we can assess the project's profitability.
Based on the calculated NPV, the value of the timing option, and the project's IRR, a recommendation can be made on whether to proceed with the project or not. Unfortunately, without the specific calculated values for the NPV and IRR, I'm unable to provide a definitive recommendation in this case.
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Cost of Goods Manufactured and Sold Anglin Company, a manufacturing firm, has supplied the following information from its accounting records for the last calendar year: 1. Prepare a cost of goods manufactured statement. 2. Prepare a cost of goods sold statement. Anglin Company Statement of Cost of Goods Sold For the Year Ended December
According to the provided cost of goods manufactured statement, the cost of goods manufactured for Anglin Company was $825,000. Furthermore, the cost of goods sold statement reveals that the cost of goods sold by the company amounted to $785,000.
The cost of goods manufactured statement outlines the costs associated with the production of goods during a specific period. In the given statement for Anglin Company, the calculation starts with the direct materials. It begins with the beginning inventory of direct materials, which is $70,000, and adds the purchases of direct materials, amounting to $350,000.
This gives a total direct materials available for use of $420,000. The ending inventory of direct materials is then deducted, which is stated as $60,000, resulting in direct materials used amounting to $360,000.
Next, the direct labour cost is provided separately, which is $300,000. Following that, the manufacturing overhead costs are listed, including indirect labor ($40,000), indirect materials ($10,000), utilities ($20,000), insurance ($25,000), and depreciation—factory ($90,000). The total manufacturing overhead is calculated to be $185,000.
To determine the total manufacturing costs, the direct materials used, direct labour, and manufacturing overhead are summed up, resulting in $845,000.
Moving forward, the statement takes into account the beginning work in process (WIP) inventory, which is $80,000, and deducts the ending WIP inventory, stated as ($100,000). This gives the cost of goods manufactured as $825,000.
The cost of goods sold statement begins with the cost of goods manufactured, which is carried over from the previous statement. Adding the beginning finished goods inventory of $120,000, and deducting the ending finished goods inventory of ($160,000), yields the cost of goods sold as $785,000.
Therefore, based on the provided statements, the cost of goods manufactured for Anglin Company is $825,000, and the cost of goods sold is $785,000.
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You have just received a windfall from an investment you made in a friend's business. She will be paying you $28,340 at the end of this year, $56,680 at the end of next year, and $85,020 at the end of the year after that (three years from today). The interest rate is 11.9% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)? a. What is the present value of your windfall? The present value of your windfall is $. (Round to the nearest dollar.)
To calculate the present value of your windfall, we need to discount the future cash flows using the interest rate of 11.9%.
Using the formula for the present value of an annuity, we can calculate the present value as follows:
PV = CF1 / (1 + r)^1 + CF2 / (1 + r)^2 + CF3 / (1 + r)^3
Where PV is the present value, CF1, CF2, and CF3 are the cash flows at the end of each year, and r is the interest rate.
Plugging in the values from your question:
PV = $28,340 / (1 + 0.119)^1 + $56,680 / (1 + 0.119)^2 + $85,020 / (1 + 0.119)^3
Calculating this expression will give you the present value of your windfall.
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Gilead Science stock sells for $17 per share and you have decided to purchase as many shares as you possibly can. You have $31,000 available to invest. What is the maximum number of shares you can buy if the initial margin is 60% ? (5 marks) 6. You decide to buy 1,200 shares of stock at a price of $34 and an initial margin of 55 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 35 percent?
The maximum percentage decline in the stock before you receive a margin call is approximately -35%.
To determine the maximum number of shares you can buy with a given investment amount and initial margin, we need to calculate the maximum amount you can invest (account value) based on the initial margin and then divide it by the stock price.
Maximum number of shares you can buy:
Account Value = Available Investment / Initial Margin
Account Value = $31,000 / 0.60
Account Value = $51,666.67
Number of Shares = Account Value / Stock Price
Number of Shares = $51,666.67 / $17
Number of Shares ≈ 3,039 shares (rounded down to the nearest whole number)
Therefore, the maximum number of shares you can buy is approximately 3,039 shares.
To calculate the maximum percentage decline in the stock before you receive a margin call, we need to consider the maintenance margin. The maintenance margin represents the minimum account value required as a percentage of the total value of the securities held.
Account Value = Number of Shares * Stock Price
Account Value = 1,200 * $34
Account Value = $40,800
Margin Call Threshold = Account Value * (1 - Maintenance Margin)
Margin Call Threshold = $40,800 * (1 - 0.35)
Margin Call Threshold = $26,520
Maximum Percentage Decline = (Margin Call Threshold - Account Value) / Account Value
Maximum Percentage Decline = ($26,520 - $40,800) / $40,800
Maximum Percentage Decline ≈ -0.35 (or -35%)
Therefore, the maximum percentage decline in the stock before you receive a margin call is approximately -35%.
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Copy\%20of Multiples Which of the following statements is (are) TRUE? Select one or more alternatives: The EV/Sales multiple may be more appropriate for valuing companies that are making a loss than the PE multiple. We should not expect to find significant differences in PE ratios for firms operating in the same industry. A possible disadvantage of using multiples to value a company is that it may be difficult to find enough comparable companies. For a company with positive earnings growth, we would expect the forward-looking PE multiple to be higher than the current PE multiple.
For companies with positive earnings growth, we expect the forward-looking PE multiple to be higher than the current PE multiple. This is due to the expectation that earnings will increase in the future.
Since the forward-looking PE ratio estimates future earnings, it should reflect the company's earnings growth potential.
The following statement is true:
For a company with positive earnings growth, we would expect the forward-looking PE multiple to be higher than the current PE multiple.
A possible disadvantage of using multiples to value a company is:
It may be difficult to find enough comparable companies. Using multiples to value a company requires finding comparable firms in the same sector with similar characteristics such as the business model, market conditions, and financial ratios. If there are no comparable firms, it becomes challenging to make informed judgments about the value of the company based on multiples.
EV/Sales multiples can be an alternative to PE multiples when evaluating companies with negative earnings. This is because:
EV/Sales multiples utilize the company's sales rather than profits, which is better suited to companies with no earnings or negative earnings.
However, it is important to note that companies operating in the same industry and market conditions will have different PE ratios. Therefore, expecting identical PE ratios for companies in the same industry is unrealistic. Investors use PE ratios as a preliminary screening tool to identify companies with the best potential to provide high returns.
For companies with positive earnings growth, we expect the forward-looking PE multiple to be higher than the current PE multiple. This is due to the expectation that earnings will increase in the future. Since the forward-looking PE ratio estimates future earnings, it should reflect the company's earnings growth potential.
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i
need the name of the wepsites
that are using e-commerce and what type of business model and
what king of stratgy they use pls provide the wepsite name
As an AI language model, I am programmed to provide academic answers to students' questions. However, I cannot provide a list of websites that use e-commerce or their business model and strategy as they are subject to change over time.
However, I will give you an overview of the types of e-commerce business models and strategies.Types of e-commerce business models1. Business-to-consumer (B2C)Business-to-consumer (B2C) is a transaction between a business and its consumers, with the company selling products or services directly to the consumer.
B2C is one of the most well-known e-commerce models, with numerous websites using this model. Examples include Amazon, Walmart, Zappos, and others.2. Business-to-business (B2B)Business-to-business (B2B) is a model in which one business sells goods or services to another business.
Alibaba, ThomasNet, and Global Sources are examples of B2B e-commerce websites.3. Consumer-to-consumer (C2C)Consumer-to-consumer (C2C) e-commerce is a model in which individual consumers sell products or services to other individual consumers. C2C e-commerce websites include eBay, Craigslist, and others.
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1. Choose a familiar product that currently is not environmentally friendly and brainstorm ways to make it more "green." 2. Once you've settled on one specific way to improve the product, revise the rest of the marketing mix for the product by adjusting the price, determining a new place (distribution), and developing more appropriate promotions. 3. Present your new plan in the form of an advertisement. Answer Additional Questions for Reflection: - Did you feel that going green with your product opened up new marketing opportunities or placed unnecessary restrictions on marketing the product? - Did you feel the need to increase the price, and if so, is that ethical? - Would it be possible to engage in greenwashing with this product? If so, would that be a viable alternative? Why or why not?
Answer:
Product: Haircare products - currently, the majority of haircare products come in non-biodegradable and non-recyclable plastic bottles, and the ingredients used in them often contain harmful chemicals that can pollute the environment and water sources.
Solution: Create a new haircare product line that is packaged in biodegradable and recyclable glass bottles, and uses ingredients that are natural and environmentally friendly. This will not only make the product more environmentally friendly but also attract consumers who are environmentally conscious.
New Plan:
Advertisement:
Introducing "Greenhair" - the all-natural hair care brand that's not only good for you, but good for the planet! Packed with natural ingredients and packaged in biodegradable and recyclable glass bottles, Greenhair is not only effective but also environmentally friendly. Plus, with every purchase of Greenhair, you'll be supporting our efforts to help the environment by planting a tree for every bottle sold. So, choose Greenhair today and be part of the solution while taking care of yourself!
Reflective Questions:
1. Did you feel that going green with your product opened up new marketing opportunities or placed unnecessary restrictions on marketing the product?
In this case, going green with the product opens up new marketing opportunities by attracting consumers who are environmentally conscious and want to support sustainable products. However, for some companies, the process of transitioning to more environmentally friendly products can be challenging and may require significant changes in production processes, packaging, and supply chains. It's important to weigh the potential benefits and pitfalls before undertaking such a transformation.
2. Did you feel the need to increase the price, and if so, is that ethical?
It's possible that switching to more sustainably sourced ingredients and biodegradable packaging will come at a higher cost, which could require an increase in the price of the product. Whether or not this is ethical depends on the specific context and the price increase relative to the market price. It's important to consider the potential impact on consumers and weigh the benefits of more sustainable practices against any potential harm that might result from increasing the price of the product.
3. Would it be possible to engage in greenwashing with this product? If so, would that be a viable alternative? Why or why not?
Greenwashing refers to corporations making false or exaggerated environmental claims to boost their public image without actually making meaningful changes to their products or practices. It can be tempting to engage
Discuss at least two DOs and two DON’Ts for writing a convincing and effective formal report. 250-350 words, citing at least 2 credible sources.
To write a convincing and effective formal report, it is important to conduct thorough research, structure the report effectively, use clear and concise language, and pay attention to proofreading and editing.
DOs for writing a convincing and effective formal report:
1. DO conduct thorough research: Gather accurate and reliable information from credible sources to support your arguments and findings. This will enhance the credibility of your report and make it more persuasive.
2. DO structure your report effectively: Use a clear and logical structure to present your ideas. Begin with an introduction that provides background information and states the purpose of the report. Divide the body into sections or subsections with clear headings, and present information in a coherent and organized manner. End with a conclusion that summarizes key findings and offers recommendations, if applicable.
DON'Ts for writing a convincing and effective formal report:
1. DON'T use vague or ambiguous language: Precision and clarity are crucial in formal reports. Avoid using jargon, overly technical terms, or vague language that may confuse or mislead the reader. Use clear and concise language to convey your message effectively.
2. DON'T overlook proofreading and editing: Grammatical errors, spelling mistakes, and inconsistencies can undermine the credibility of your report. Always proofread your work carefully, checking for errors in grammar, punctuation, and formatting. Editing is equally important to ensure the report flows smoothly and the content is well-structured and coherent.
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he following selected accounts appear in the ledger of Parks Construction inc. at the beginning of the current year: Pref Paic Cor Pai Re During the year, the corporation completed a number of transactions affecting the stockholders' equity, They are summarized as follows: a. Issued 50,000 shares of common stock at $31, recelving cash. b. Issued 13,000 shares of preferred 296 stock at $169. c. Purchased 30,000 shares of treasury common for $27 per share. d. Sold 15,000 shares of treasury common for $30 per share. e. Sold 10,000 shares of treasury common for $25 per share. f. Declared cash dividends of $3.00 per share on preferred stock and $0.06 per share on common stock, g. Paid the cash dividends. Required: Journalize the entries to record the transactions. For a compound transaction, If an amount box does not require an entry, leave it blank. a. 1ssued 50,000 shares of common stock at $31, receiving cash. a. Issued 50,000 shares of common stock at $31, receiving cash. b. Issued 13,000 shares of preferred 2% stock at $169. c. Purchased 30,000 shares of treasury common for $27 per share.. d. Sold 15,000 shares of treasury common for $30 per share. d. Sold 15,000 shares of treasury common for $30 per share. e. Sold 10,000 shares of treasury common for $25 per share. f. Declared cash dividends of $3 per share on preferred stock and $0.06 per share on common stock. 9. Paid the cash dividends.
Journal entries to record the transactions:
a. Issued 50,000 shares of common stock at $31, receiving cash.
Common Stock 50,000 × $31 = $1,550,000Cash $1,550,000
b. Issued 13,000 shares of preferred 2% stock at $169.
Preferred Stock 13,000 × $169 = $2,197,000Cash $2,197,000
c. Purchased 30,000 shares of treasury common for $27 per share.
Treasury Stock $810,000Cash $810,000d. Sold 15,000 shares of treasury common for $30 per share.
Cash 15,000 × $30 = $450,000
Treasury Stock 15,000 × $27 = $405,000Additional Paid-in Capital $45,000e.
Sold 10,000 shares of treasury common for $25 per share. Cash 10,000 × $25 = $250,000
Treasury Stock 10,000 × $27 = $270,000Paid-in Capital from Treasury Stock Sale ($20,000)f.
Declared cash dividends of $3 per share on preferred stock and $0.06 per share on common stock.
Dividends Payable (Preferred Stock) 13,000 × $3 = $39,000
Dividends Payable (Common Stock) 50,000 × $0.06 = $3,000g.
Paid the cash dividends. Dividends Payable $42,000Cash $42,000
The total dividends declared and paid:
Preferred Stock: $39,000Common Stock: $3,000Total:
$42,000
Therefore, the required journal entries to record the given transactions are shown above.
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Why is mobility important to business?
What does each area of an EMM cover and why is it important to your business?
What is the difference between operational and analytical CRM?
How can a marketing department use CRM to improve operations?
What are the primary and core ERP components? Mobile device management Mobile information management Mobile application management
Mobility is important to businesses because it allows for increased efficiency and productivity, improved communication and collaboration among team members, and flexibility for employees to work from anywhere at any time.
Mobility allows employees to access critical information, tools, and resources from their mobile devices, making it easier for them to do their jobs and make decisions.
Analytical CRM involves the analysis of customer data and feedback to gain insights into their behavior and preferences. This information can then be used to improve customer engagement and increase customer satisfaction.
Operational CRM focuses on automating and streamlining customer-facing business processes such as sales, marketing, and customer service. It is important for businesses because it helps to improve efficiency and consistency in these areas.
Marketing departments can use CRM to improve operations by gaining a better understanding of their customers and their needs, preferences, and behavior. This information can then be used to create targeted marketing campaigns and personalized experiences for customers.
The primary ERP components include financial management, supply chain management, and human capital management.
Mobile device management, mobile information management, and mobile application management are all part of enterprise mobility management (EMM), which is important for businesses because it allows for secure and efficient management of mobile devices and applications.
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Research Assignment
Conduct search (informative /Persuasive reports)
Please provide two examples, and discuss details
Conducting research assignments is vital for students as it aids them in gathering and analyzing data to draw logical conclusions. while persuasive reports aim to persuade the audience to adopt a particular viewpoint.
Two examples of search assignments are as follows:Informative report: The negative impacts of social media on young adults' mental health.The informative report aims to provide facts and data about the detrimental effects of social media on the mental health of young adults. Research has shown that excessive use of social media can lead to anxiety, depression, cyberbullying, and negative body image issues. To gather data, various sources such as scientific articles, studies, and surveys would need to be reviewed.
To achieve this, data and facts would need to be collected about the various benefits of renewable energy such as being environmentally friendly, sustainable, and cost-effective in the long run. The report would then be structured to present these benefits in a convincing manner, with counterarguments addressed effectively. In conclusion, conducting research assignments is an essential part of a student's learning journey as it enables them to gain knowledge and skills that can be applied to real-world scenarios.
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3. Explain the difference between raw materials inventory, work
in process inventory, and finished goods inventory. /3
. A raw materials inventory comprises the goods and materials that are used in the manufacturing process, Work in Progress inventory refers to the goods that are still in production but are not yet completed.
The difference between raw materials inventory ,Work in process inventory and finished goods inventory is as follows:
Raw materials inventory refers to the supplies that a business buys to create products. In other words, it's the resources that a company keeps on hand to transform into finished goods. For instance, a paper company would need raw wood pulp to create paper. A raw materials inventory comprises the goods and materials that are used in the manufacturing process.
Work in Progress inventory (WIP) refers to the goods that are still in production but are not yet completed. It is sometimes known as unfinished goods inventory. These products have had some level of processing, but they aren't yet finished goods.
An example of WIP could be paper rolls that have been partially manufactured but are still missing finishing touches, such as trimming and binding. Work-in-process inventory includes the costs that have been incurred up to the point of measurement, such as labor and overhead costs.
Finished goods inventory refers to the products that have been fully manufactured and are ready for sale. They are the completed products that are waiting to be shipped to customers. For instance, in the case of a paper company, this would include packaged paper products that are ready to be delivered. Finished goods inventory includes the costs that have been incurred up to the point of completion, such as labor, overhead, and materials costs.
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2. Apply the basic risk management process to a given scenario (risk identification, risk evaluation, risk control and risk financing). QUESTION 2: Managing risk is not a typical revenue-generating department of the bank, yet it is extremely important. In no fewer than 100 words, explain how your bank and/or your department follows the different steps in the risk management process with regard to managing risk.
In managing risk, our bank follows the basic risk management process, which includes risk identification, risk evaluation, risk control, and risk financing.
Firstly, we identify potential risks by conducting thorough assessments and analyzing various factors that could pose a threat to the bank's operations and objectives. This involves identifying both internal and external risks.
Next, we evaluate the identified risks by assessing their potential impact and likelihood of occurrence. This helps us prioritize and focus on managing the risks that have the highest potential impact.
Once the risks are evaluated, we implement risk control measures. This includes developing and implementing strategies, policies, and procedures to mitigate or eliminate the identified risks. We continuously monitor and review the effectiveness of these control measures to ensure their adequacy.
Lastly, we consider risk financing options. This involves determining how to handle the financial implications of risk, such as purchasing insurance, setting aside reserves, or transferring the risk through contracts or agreements.
Overall, our bank recognizes the importance of managing risk and follows the risk management process to ensure the bank's stability and protect its interests.
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Palmetto Corporation acquired all of the voting stock of Steadman Company on January 2, 2021, by issuing stock with a fair value of $32,000,000. Steadman’s book value was $10,000,000 at the date of acquisition, and its net assets were reported at amounts approximating fair value. However, Palmetto determined that Steadman had previously unreported identifiable intangibles with a fair value of $2,000,000 with a 4-year life. Steadman reported net income of $1,800,000 in 2021 and $2,500,000 in 2022 and declared and paid no dividends. There was no goodwill impairment in 2021, but impairment in 2022 was $800,000. Palmetto uses the compete equity method to report its investment in Steadman on its own books.
Required
a. Calculate equity in net income for 2022, reported on Palmetto's books.
b. Calculate the December 31, 2022, investment balance, reported on Palmetto’s books.
Calculation of Equity in net income for 2022, reported on Palmetto's books: Equity in net income for 2022 can be calculated as follows: Equity in net income = Palmetto’s % of Steadman’s NI for the year 2022Equity in net income = 100% × NI reported by Steadman for 2022
Equity in net income = 100% × $2,500,000Equity in net income = $2,500,000b. Calculation of the December 31, 2022, investment balance, reported on Palmetto’s books: Calculation of the initial investment: The initial investment can be calculated as follows: Initial investment = Fair value of the stock issued by Palmetto to acquire Steadman Initial investment = $32,000,000
The investment balance can be calculated as follows: Investment balance at December 31, 2022 = Initial investment + Equity in net income – Dividends received Investment balance at December 31, 2022 = $32,000,000 + $2,500,000 – $0Investment balance at December 31, 2022 = $34,500,000Therefore, the December 31, 2022, investment balance, reported on Palmetto’s books is $34,500,000.
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Which one of the following is not a reason for the importance of control in organisations?
a.
Control ensures that the organisation’s resources are deployed in such a way that it attains its objectives
b.
In order to compete, organisations need to be tightly run, and control is therefore necessary
c.
Control facilitates delegation and teamwork
d.
Control ensures that the activities at lower levels of the organisation are in accordance with the organisation’s overall goals
Control ensures that the activities at lower levels of the organisation are in accordance with the organisation’s overall goals is not a reason for the importance of control in organisations.
The control function's goal is to make sure the organisation advances towards its set objectives. This is done before the gameplan is put into action because the manager is thinking ahead to potential problems. Controlling is both a forward-looking and a backward-looking aspect of management.
It performs a backward-looking role in that it evaluates the work completed and analyses departures from the established criteria. It makes an effort to implement the necessary remedial actions based on these variances. Controlling makes ensuring that the task is completed according to the plans. It entails setting performance benchmarks, assessing existing performance, and acting appropriately when there are variances.
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Please show the debits and credits for the following 11 events using T accounts Common Business Events 1. Sold capital stock for $15,000 to three investors. 2. Purchased $55,000 of product raw material on account from suppliers. 3. Sold products for $40,000 cash that had cost $29,000 to make. 4. Borrowed $30,000 from the bank, due in 120 days, with an interest rate of 6%. 5. Collected a $4,500 account receivable from a veterinarian customer. 6. Bought a used pickup truck for $8,000 cash. 7. Disbursed cash dividends of $1,500 to owners. 8. Paid a $2,500 account payable owed to a supplier. 9. Recognized $3,500 annual depreciation on a small warehouse the company owned. 10. Sold an old shed no longer needed that had a recorded cost of $14,000 for $17,500 cash 11. Accrued 90 days of interest on the bank loan.
To show the debits and credits for the given events, I will create T accounts for the relevant accounts involved. Here are the debits and credits for each event:
Sold capital stock for $15,000 to three investors.
Debit: Cash $15,000
Credit: Common Stock $15,000
Purchased $55,000 of product raw material on account from suppliers.
Debit: Raw Material Inventory $55,000
Credit: Accounts Payable $55,000
Sold products for $40,000 cash that had cost $29,000 to make.
Debit: Cost of Goods Sold $29,000
Credit: Sales Revenue $40,000
Credit: Inventory $29,000
Borrowed $30,000 from the bank, due in 120 days, with an interest rate of 6%.
Debit: Cash $30,000
Credit: Notes Payable $30,000
Collected a $4,500 account receivable from a veterinarian customer.
Debit: Cash $4,500
Credit: Accounts Receivable $4,500
Bought a used pickup truck for $8,000 cash.
Debit: Equipment $8,000
Credit: Cash $8,000
Disbursed cash dividends of $1,500 to owners.
Debit: Retained Earnings $1,500
Credit: Dividends $1,500
Paid a $2,500 account payable owed to a supplier.
Debit: Accounts Payable $2,500
Credit: Cash $2,500
Recognized $3,500 annual depreciation on a small warehouse the company owned.
Debit: Depreciation Expense $3,500
Credit: Accumulated Depreciation $3,500
Sold an old shed no longer needed that had a recorded cost of $14,000 for $17,500 cash.
Debit: Cash $17,500
Credit: Accumulated Depreciation $14,000
Credit: Gain on Sale of Shed $3,500
Accrued 90 days of interest on the bank loan.
Debit: Interest Expense $450
Credit: Interest Payable $450
These entries record the transactions and their corresponding debits and credits for each event. Please note that the accounts used may vary depending on the company's specific chart of accounts and accounting practices.
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b. Jordan usually pays a price between $14 and $20 per kilogram of sugar. His monthly total expenditure on sugar increases as the price decreases. What does this imply about her price elasticity of demand for sugar? [3 marks]
c. Using the table below calculate the cross price elasticity skirts. Are these goods substitute or complement? Briefly explain. [5 marks]
Price of Sandals Price of Skirts Quantity Demanded of sandals Quantity Demanded of Skirts
5 4 60 100
4 2 80 70
Jordan's price elasticity of demand for sugar is elastic, as her expenditure on sugar increases with a decrease in price. Cross-price elasticity is 1.5. Sandals and skirts are substitutes, as a decrease in sandal prices increases skirt demand.
b. The information provided suggests that Jordan's monthly total expenditure on sugar increases as the price decreases. This implies that Jordan's price elasticity of demand for sugar is elastic. In other words, a slight change in the price of sugar leads to a relatively larger change in the quantity demanded.
c. To calculate the cross-price elasticity of skirts, we can use the formula:
Cross Price Elasticity = (Percentage Change in Quantity Demanded of Skirts) / (Percentage Change in Price of Sandals)
First, let's calculate the percentage change in the quantity demanded of skirts:
Percentage Change in Quantity Demanded of Skirts = ((New Quantity Demanded - Initial Quantity Demanded) / Initial Quantity Demanded) * 100
For the initial price of sandals ($5) and the initial quantity demanded of skirts (100):
Percentage Change in Quantity Demanded of Skirts = ((70 - 100) / 100) * 100 = -30%
Now, let's calculate the percentage change in the price of sandals:
Percentage Change in Price of Sandals = ((New Price - Initial Price) / Initial Price) * 100
For the initial price of sandals ($5) and the new price of sandals ($4):
Percentage Change in Price of Sandals = ((4 - 5) / 5) * 100 = -20%
Now, let's calculate the cross-price elasticity:
Cross Price Elasticity = (-30% / -20%) = 1.5
Since the cross-price elasticity is positive and greater than 1, we can conclude that sandals and skirts are substitute goods. This means that as the price of sandals decreases, the quantity demanded of skirts increases, indicating a positive relationship between the two interests.
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Income Statement, Direct and Indirect Cost Concepts, Service Company Lakeesha Bamett owns and operates a package mailing store in a college town. Her store, Send it Packing, heips customers wrap items and send them via ups, Fedex, and the USPS. Send tt Packing also rents mal boxes to customers by the month. In May, purchases of materials (stamps, cardboard boxes, tape, 5 tyrofoam peanuats, bubble wrap, etc.) equaled $11,350; the beginning inventory of materials was $1,050, and the ending inventory of materials was $950. Payments for ϕ rect iabor during the month totaled $25,500. Overhead incurred was $18,100 (including rent, utilities, and insurance, as well as psyments of $14,050 to ups and FedEx for the delivery services sold). Since Send It Packing is a franchise, Lakeesha owes a monthly franchise fee of 5 percent of sales. She spent $2,750 on advertising during the month. Other administrative costs (including accounting and legal services and a trip to Dallas for training) amounted to $3,600 for the month. Revenues for May were 5102,000 . Requiredt 1. What was the cost of materials used for packaging and mailing services during May? 2. What was the prime cost for May? 3. What was the conversion cost for May? 4. What was the total cost of services for May? 5. Prepare an income statement for May. Send it Packing Income Statement 5. Prenare an income statoment for May.
The cost of materials used for packaging and mailing services during May can be calculated using the following formula:Material used = Purchases + Beginning inventory – Ending inventory
Material used = $11,350 + $1,050 - $950 = $11,450The cost of materials used for packaging and mailing services during May was $11,450.
2. Prime cost is the sum of direct material and direct labor costs. The prime cost can be calculated as follows:Prime cost = Direct material + Direct laborPrime cost = $11,450 + $25,500 = $36,950The prime cost for May was $36,950.
3. Conversion cost is the sum of direct labor and overhead costs. The conversion cost can be calculated as follows:Conversion cost = Direct labor + OverheadConversion cost = $25,500 + $18,100 = $43,600The conversion cost for May was $43,600.
4. The total cost of services for May can be calculated as follows: Total cost of services = Direct material + Direct labor + OverheadTotal cost of services = $11,450 + $25,500 + $18,100 = $55,050. The total cost of materials for May was $55,050.
5. Prepare an income statement for May. Send it Packing Income Statement Revenue $102,000 (-) Cost of Services $55,050 = Gross profit $46,950(-) Administrative costs $3,600(-) Franchise fee (5% * $102,000) $5,100(-) Advertising expenses $2,750 = Net income $35,500.
Therefore, the income statement for May is shown above.
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Star Jewelry sells 800 units resulting in $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs. Breakeven point in units is 373 units 1024 units 596 units 968 units.
The breakeven point in units for Star Jewelry is 373 units for the given $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs.
Breakeven point in units is the number of units that a business should sell to cover all its costs.
The breakeven point can be calculated using the following formula:
Breakeven Point = Fixed Costs ÷ (Price per unit − Variable Costs per unit)
In this case, Star Jewelry sells 800 units resulting in $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs.
The sales revenue per unit can be calculated by dividing the sales revenue by the number of units sold:
Sales revenue per unit = Sales revenue ÷ Number of units sold
= $75,000 ÷ 800
= $93.75 per unit
The variable cost per unit can be calculated by dividing the total variable cost by the number of units sold:
Variable cost per unit = Total variable cost ÷ Number of units sold
= $32,000 ÷ 800
= $40 per unit
Now we can calculate the breakeven point in units using the formula:
Breakeven Point = Fixed Costs ÷ (Price per unit − Variable Costs per unit)
= $20,000 ÷ ($93.75 − $40)
= $20,000 ÷ $53.75
≈ 372.09 units
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The University of Nebraska football stadium is the third largest city in the state of Nebraska on game days. The stadium has sold out every game since the late 1960s. The seating capacity is about 80,000 fans. Assume the stadium sells out all six home games before the season begins, and the athletic department collects $38.4 million in ticket sales. Required: 1. What is the average price per season ticket and average price per individual game ticket sold? 2. & 3. Record the advance collection of $38.4 million in ticket sales and the revenue earned after the first home game is completed. Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 What is the average price per season ticket and average price per individual game ticket sold? Average price per season ticket Average price per individual game ticket Reg1 Req 2 and 3> Record the advance collection of $38.4 million in ticket sales and the revenue earned after the first home game is completed. (If no entr is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions.) View transaction list Journal entry worksheet 2 Record the advance collection in ticket sales. Note: Enter debits before credits. Transaction General Journal Debit Credit Clear entry View general journal Record entry Record the advance collection of $38.4 million in ticket sales and the revenue earned after the first home game is completed. (If no ent is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars not in millions.) View transaction list Journal entry worksheet < 2 Record the revenue earned after the first home game is completed. Note: Enter debits before credits. Transaction General Journal Debit 2 Record entry Clear entry Credit View general journal
To calculate the average price per season ticket, we need to divide the total ticket sales revenue by the number of season tickets sold. Since there are six home games, the number of season tickets sold would be 80,000/6 = 13,333.
Season ticket price = Ticket sales revenue / Number of season tickets sold= $38.4 million / 13,333 = $2,880Average price per season ticket = $2,880To calculate the average price per individual game ticket, we need to divide the total ticket sales revenue by the total number of game tickets sold.
Average price per individual game ticket = Ticket sales revenue / Number of game tickets sold= $38.4 million / 80,000 = $480.2. Record the advance collection in ticket sales:Debit: Cash - $38,400,000Credit: Unearned Ticket Revenue - $38,400,0003. Record the revenue earned after the first home game is completed:Debit: Unearned Ticket Revenue - $6,400,000Credit: Ticket Revenue - $6,400,000 No journal entry is needed for the cash received from ticket sales as it has already been recorded in the first journal entry.
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Suppose that following represents the utility function of the individual U(c,l)=log(l)+c c, represents the consumption level of the individual and l, represents the leisure, while the market wage is w , non-wage income is v, and available time is T. Draw the Labor Supply function?
To draw the labor supply function, we need to determine the relationship between leisure (l) and the individual's labor supply (hours of work, denoted as h).
Given the utility function U(c, l) = log(l) + c, the individual's objective is to maximize their utility subject to their constraints. In this case, the constraints are their available time (T) and their income (w * h + v).
The individual's budget constraint can be expressed as:
w * h + v = T
To maximize utility, we can use the concept of marginal utility. The marginal utility of leisure (MU_l) is the derivative of the utility function with respect to leisure, and the marginal utility of consumption (MU_c) is the derivative of the utility function with respect to consumption.
MU_l = 1 / l
MU_c = 1
To maximize utility, the individual will allocate their time between work and leisure until the marginal utility of leisure (MU_l) is equal to the marginal utility of consumption (MU_c).
So, we can set:
MU_l = MU_c
1 / l = 1
Simplifying, we find:
l = 1
This means that the individual will choose to allocate all of their available time to leisure, and not engage in any work. Therefore, the labor supply function in this case is h = 0.
To graphically represent this, we can draw a horizontal line at h = 0 on the labor supply axis, indicating that the individual does not supply any labor at any wage rate.
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Company P purchased an 80% interest in Company S on January 1, 2016, for $800,000. On
the purchase date, Company S stockholders' equity was $800,000. Any excess of fair value over
book value was attributed to a patent with a 10-year remaining life. In 2016, Company P reported
internally generated net income before taxes of $150,000. Company S reported a net income
before taxes of $70,000. The firms file a consolidated tax return at a 30% tax rate. The
nondeductible portion of excess amortization is
A - 20 000
B - 15 000
C - 4 000
D - $0 (The amortization is fully deductible)
The amortization is fully deductible as there is no excess of fair value over book value.
To determine the nondeductible portion of excess amortization, we need to calculate the amortization expense and compare it to the net income before taxes.
First, we calculate the excess of fair value over book value:
Excess of fair value over book value = Purchase price - Stockholders' equity
Excess of fair value over book value = $800,000 - $800,000 = $0
Since the excess of fair value over book value is $0, there is no excess amortization to be recognized. Therefore, the answer is D - $0 (The amortization is fully deductible).
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Suppose that an individual has a utility functions given by: U(X,Y)=X a
Y (1−a)
where a=0.6 Suppose also that the individual has an income of $1300, the price of X is $9 per unit, and the price of Y is $15 per unit. What is the utility maximizing Quantity of X ?
The utility-maximizing quantity of X, rounded to the nearest whole number, is approximately 88 units.
To find the utility-maximizing quantity of X, we need to determine the optimal allocation that maximizes the individual's utility function, given their income and the prices of X and Y.
The utility function provided is U(X,Y) = X^a * Y^(1-a), where a = 0.6.
Let's denote the quantity of X as X and the quantity of Y as Y. We are given that the individual has an income of $1300, the price of X is $9 per unit, and the price of Y is $15 per unit.
The individual's budget constraint is given by: PₓX + PᵧY = I, where Pₓ and Pᵧ are the prices of X and Y respectively, and I is the individual's income.
Substituting the given values, we have 9X + 15Y = 1300.
To find the utility-maximizing quantity of X, we can use the concept of marginal utility. The marginal utility of X is the partial derivative of the utility function with respect to X, which is a * X^(a-1) * Y^(1-a).
Similarly, the marginal utility of Y is the partial derivative of the utility function with respect to Y, which is (1-a) * X^a * Y^(-a).
For the utility to be maximized, the ratio of the marginal utilities should be equal to the price ratio: (a * X^(a-1) * Y^(1-a)) / ((1-a) * X^a * Y^(-a)) = Pₓ / Pᵧ.
Substituting the given values, we have: (0.6 * X^(-0.4) * Y^0.4) / (0.4 * X^0.6 * Y^(-0.6)) = 9 / 15.
Simplifying the equation, we get: 2 * X^(0.4) * Y^(1.6) = 5 * X^(0.6) * Y^(0.6).
Dividing both sides by X^(0.4) * Y^(0.6), we have: 2 * Y = 5 * X.
From the budget constraint, we can express Y in terms of X: Y = (1300 - 9X) / 15.
Substituting this value of Y into the previous equation, we get 2 * (1300 - 9X) / 15 = 5X.
Solving this equation for X, we find X ≈ 88.24.
Therefore, the utility-maximizing quantity of X, rounded to the nearest whole number, is approximately 88 units.
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What was the first dominant coalition in America's banking game?
Why was this system "fragile by design"?
The first dominant coalition in America's banking game was the Federalist coalition. This coalition consisted of Alexander Hamilton and his supporters, who advocated for a strong central government and a national bank.
This system was considered "fragile by design" for a few reasons. Firstly, it faced opposition from Thomas Jefferson and his Republican party, who believed in a more decentralized banking system and opposed the concentration of power in a national bank. This political opposition made the system vulnerable to change.
Secondly, the banking system relied heavily on the credibility of the government and its ability to enforce regulations. Any perceived weakness in the government's ability to manage the economy could lead to a loss of confidence in the banking system, causing instability.
Lastly, the Federalist coalition's dominance in banking was based on their control of political power. As political dynamics shifted over time, the coalition's influence could wane, potentially leading to changes in banking policies and regulations. This made the system susceptible to political shifts and instability.
In summary, the first dominant coalition in America's banking game was the Federalist coalition. This system was considered "fragile by design" due to political opposition, reliance on government credibility, and the potential for shifts in political power.
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Think about a consumer with a utility function given by u=ax1+bx2, he is facing a budget constraint: p1x1+p2x2<= I.
A). What is the slope of the indifference curve (-MRS1,2) ?
B). What is the slope of the budget line?
C). If a=1, b=2, p1=3, p2=4, what is the optimal consumption?
D). If a=1, b=2, p1=2, p2=4, what is the optimal consumption?
Given the utility function u = ax₁ + bx₂ and the budget constraint p₁x₁ + p₂x₂ ≤ I, we have to answer the following questions: (A) What is the slope of the indifference curve (-MRS₁,₂)? (B) What is the slope of the budget line? (C) If a = 1, b = 2, p₁ = 3, p₂ = 4, what is the optimal consumption? (D) If a = 1, b = 2, p₁ = 2, p₂ = 4, what is the optimal consumption?(A) What is the slope of the indifference curve (-MRS₁,₂)? The slope of the indifference curve is given by the marginal rate of substitution (MRS₁,₂) which is defined as the rate at which a consumer is willing to exchange one good for the other, such that the total utility (satisfaction) remains constant. MRS₁,₂ = MU₁ / MU₂ where MU₁ and MU₂ are the marginal utilities of x₁ and x₂ respectively.
MRS₁,₂ = - δx₁ / δx₂ where δ is the partial derivative. Therefore, MRS₁,₂ = - (a/b) at any point on the indifference curve.(B) What is the slope of the budget line? The slope of the budget line represents the rate at which a consumer can exchange one good for another. Slope of the budget line = - (p₁/p₂).(C) If a = 1, b = 2, p₁ = 3, p₂ = 4, what is the optimal consumption? The Lagrangian function is given by: L = ax₁ + bx₂ - λ(p₁x₁ + p₂x₂ - I) where λ is the Lagrange multiplier.The first-order conditions are: ∂L/∂x₁ = a - λp₁ = 0 and ∂L/∂x₂ = b - λp₂ = 0Multiplying the first equation by p₂ and the second equation by p₁ and then dividing the resulting expressions, we get (p₂/p₁) = (a/b) ⇒ x₁/x₂ = (p₂/p₁)(b/a) = (4/3)(2/1) = 8/3 and (p₁x₁ + p₂x₂)/I = 1 or x₁(3/4) + x₂(1/4) = I/4. Substituting x₁ = (8/3)x₂ in the budget equation, we get: (8/3)(3/4)x₂ + x₂(1/4) = I/4 or x₂ = (I/5). Therefore, x₁ = (8/3)(I/5) = (8I/15)Optimal consumption is (8I/15, I/5).(D) If a = 1, b = 2, p₁ = 2, p₂ = 4, what is the optimal consumption?Following the same procedure as in part (C), we have x₁/x₂ = (4/3)(1/2) = (2/3) and (2/3)x₁ + (1/2)x₂ = I/2. Substituting x₁ = (2/3)x₂ in the budget equation, we get: (2/3)(2/3)x₂ + (1/2)x₂ = I/2 or x₂ = (6I/13). Therefore, x₁ = (2/3)(6I/13) = (4I/13).Optimal consumption is (4I/13, 6I/13).
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Pfizer has a patent on its vaccine. The vaccine sells for $40 per dose and the marginal cost is estimated to be constant at $8. Assuming a linear demand function (of the form Q = a − bp), estimate the deadweight loss of the monopoly if the firm currently sells 2,560 doses. (Don’t panic (!), follow the steps below and refer to the appropriate formulas in the slides): (a) Calculate the Lerner Index. Focus on the fact that you were given the price and the marginal cost.
(b) Calculate is the price elasticity of demand implied by your calculated Lerner Index. (Recall that p−mc p = 1 |ϵ| )
(c) Using the formula for the price elasticity of demand, ϵ = dQ dp p Q, solve for the slope parameter of the demand function. (By this point, you should have ϵ, and you were given one price and quantity combination. So really, you just want to solve for dQ dp . That’s b in Q = a − bp.)
(d) Write out the (linear) demand function. (You solved for b in the previous subitem. Since you already have a p and Q combination, you can plug all three of those numbers to solve for the constant term, a. That gives you a demand function.)
(e) Calcualte the competitive quantity.
(f) Calculate deadweight loss.
Deadweight loss of the monopolyA deadweight loss of a monopoly occurs when a monopolist restricts output to increase the price above the competitive level and decrease consumer surplus. In a monopoly market, deadweight loss occurs when there is a lack of allocative efficiency due to the fact that the price is greater than the marginal cost (MC) of production.
This causes a reduction in the total welfare of the economy. Deadweight loss can be calculated using the following formula:
DWL = 1/2 (Pm - Pc) (Qm - Qc)
Where:
Pm is the monopoly pricePc is the competitive price
Qm is the monopoly quantityQc is the competitive quantity
(a) The Lerner Index is given by:L = (P - MC)/PMCL = ($40 - $8)/$40L = 0.8
The Lerner index measures market power and pricing discretion, with a higher index indicating a greater market power.
This suggests that the firm has a large degree of control over the market price.(b) The formula for the price elasticity of demand is given by:ε = (p - mc)/p x (1/|E|)
Where:ε is the price elasticity of demandp is the price of the goodmc is the marginal cost of the good|
E| is the absolute value of the price elasticity of demand
Given the Lerner index, we can calculate the price elasticity of demand as:0.8 = (40 - 8)/40 x (1/|E|)|E| = 0.6(c) The formula for the price elasticity of demand is given by:
ε = dQ/dp x (p/Q)We have calculated the price elasticity of demand to be 0.6. We can use this to calculate the slope of the demand curve as follows:0.6 = dQ/dp x (40/Q)dQ/dp = 24/Q
(d) The demand curve is linear and has the form:
Q = a - bp
We can use the given information that the firm sells 2,560 doses at a price of $40 to solve for a and b as follows:
2,560 = a - b x 40Q = a - bp2,560 = a - 40ba = 2,560 + 40bQ = (2,560 + 40b) - b p
We can substitute the expression we derived for dQ/dp in terms of Q into the demand equation to get:
0.6 = 24/Q x (40/Q)Q^2 = 240Q = 15.49Therefore:b = (2,560 - 15.49 x 40)/15.49 = -85.37a = 2,560 + 40b = 1,235.20
Therefore, the demand curve is:Q = 1,235.20 - 85.37p(e)
The competitive quantity can be found by setting the price equal to the marginal cost:$40 - 8 = -85.37Q + 1,235.20Q = 17.55Therefore, the competitive quantity is 17.55 doses.
(f) Deadweight loss can be calculated using the formula:
DWL = 1/2 (Pm - Pc) (Qm - Qc)DWL = 1/2 ($40 - $10.49) (2,560 - 17.55)DWL = $26,004.97
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The market demand and supply curves for private schools in suburban Connecticut are given by QD = 6000 - P and QS = 30P, where P is price and Q is the number of students in the district who choose to go to private school.
1. Assume prices are in dollars. Now imagine that the government places a $300 tax on every student who goes to private school. Draw a graph showing the supply and demand curves and the equilibrium both prior to the introduction to this tax and the subsequent equilibrium resulting from this tax. Highlight the deadweight loss.
2. Calculate the loss of consumer surplus resulting from introduction of this tax. Show your work.
3. Calculate the loss of producer surplus resulting from introduction of this tax.
1. Initially, the supply and demand curves intersect at an equilibrium point, with
P = 2000 and Q = 4000.
After the $300 tax on each student in private school, the supply curve shifts to the left by $300,
making the new supply curve be Qs = 30(P - $300).
Therefore, the new supply curve is given by Qs = 30P - 9000.
The new equilibrium price is found by solving the two curves when they intersect. 30P - 9000 = 6000 - P.
This results in P = $2400, and Q = 3600.
Below is the graphical representation.
Figure 1:
Equilibrium before the tax
Figure 2:
Equilibrium after the tax The deadweight loss is shown in the following figure.
Figure 3:
Deadweight loss
2. The initial equilibrium price was $2000 and the quantity was 4000 students.
Using the initial demand curve, consumer surplus is calculated as shown below.
CS = 0.5(2000 - 0)(4000) = $4,000,000
After the tax is imposed, the new equilibrium price is $2400 and the quantity is 3600 students.
The consumer surplus can be calculated as shown below.
CS = 0.5(2000 - 2400)(3600) = $810,000
The loss of consumer surplus is given by the difference between the two, as follows.
Loss of CS = $4,000,000 - $810,000 = $3,190,000 3.
The loss of producer surplus can be calculated as follows.
Initially, PS was $4,000,000, and after the tax, the PS is $2,808,000.
Therefore, the loss of PS is $1,192,000.
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Calculating the price elasticity of demand - A step-by-stepguide
Suppose that during the past year, the price of a laptop computer fell from $2,350 to $1,930. During the same time period, consumer sales increased from 436,000 to 537,000 laptops.
Calculate the elasticity of demand between these two price
Price elasticity of demand is a useful metric that enables organizations to ascertain how responsive customers are to price changes. It is calculated as the percentage change in the quantity demanded of a good divided by the percentage change in its price. It provides the elasticity or responsiveness of demand for a particular product.
The formula for price elasticity of demand is given as:
Ed = (% Change in Quantity Demanded) / (% Change in Price)
Suppose that during the past year, the price of a laptop computer fell from $2,350 to $1,930. During the same time period, consumer sales increased from 436,000 to 537,000 laptops.
Calculation of elasticity of demand between these two prices:
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded × 100
% Change in Quantity Demanded = (537,000 - 436,000) / 436,000 × 100
% Change in Quantity Demanded = 23.16%
% Change in Price = (New Price - Old Price) / Old Price × 100
% Change in Price = ($1,930 - $2,350) / $2,350 × 100
% Change in Price = -18%
The formula for calculating elasticity of demand is:
Ed = (% Change in Quantity Demanded) / (% Change in Price)
Ed = (23.16) / (-18)
Ed = -1.287
The price elasticity of demand of laptop computers is calculated to be -1.287. It means that if the price of laptop computers is reduced by 1%, there will be a 1.287% increase in demand for laptops.
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Discussions with the company accountant reveal the following: 1. Sunland received goods costing $50.900 on January 2 that were shipped FOB destination on December 29 . The shipment was a rush order that was supposed to arrive on December 31 . This purchase was included in the ending ifventory of $327,900
The accountant should adjust the ending inventory by adding the cost of the goods received after the expected delivery date ($50,900) to reflect the accurate inventory value.
Based on the information provided, it appears that Sunland received goods costing $50,900 on January 2. These goods were shipped FOB (Free on Board) destination on December 29. However, due to a delay in transit, the goods arrived after the expected delivery date of December 31. As a result, these goods were not included in the ending inventory of $327,900.
It is important to note that FOB destination terms mean that the seller is responsible for the goods until they reach the buyer's specified destination. In this case, since the goods were shipped FOB destination, the responsibility for the goods and their inclusion in the inventory would typically transfer to Sunland once the goods arrived at their destination.
Therefore, since the goods arrived on January 2 and were not included in the ending inventory, the accountant should adjust the inventory by including the cost of the goods received after the expected delivery date. The cost of the goods, amounting to $50,900, should be added to the ending inventory to reflect the accurate value of the inventory at the end of the accounting period.
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