Answer with its Explanation:
The first step is to diversify the sample size so that our sample includes every person from different cultures, geographic, religions, genders, etc., which would help in better assessment of the product's future in the market.
Second step is to set a sample size for receiving the feedback of the customers at required confidence interval that is Burger King's goal to achieve. For example, Burger King desires to achieve 93% customer satisfaction and the error rate would determined by using the confidence interval. This sample size would be calculated using the practical approach.
Third step is to ensuring that the errors in prediction are reasonably low by practical approach, confidence interval approach and diversified test samples. All this will help the company to ensure that they have accurate results in hand for decision making.
Based on the information given, the necessary thing to do will be to diversify so that everyone will be taken into consideration.
Also, the feedbacks that are gotten from the customers should be taken into consideration.
It is also important to ensure that the errors that are in the prediction are low by the practical approach, confidence interval approach, and diversified test samples.
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Parton and Sons is a law firm that uses activity-based costing. Classify these activities as value-added or non-value-added:
a. Taking appointments
b. Reception
c. Meeting with clients
d. Bookkeeping
e. Court time
f. Meeting with opposing attorneys
g. Billing
h. Advertising
Answer:
The answer is:
A - Non-value-added
B - Non-value-added
C- Value-added
D- Non-value-added
E - Value-added
F - Value-added
G - Non-value-added
H- Non-value-added
Explanation:
In activity-based costing, Non-value-added activities are activities that add costs to ones product without enhancing the value while value-added is a cost that enhance the quality of a product or service.
A - Non-value-added
B - Non-value-added
C- Value-added
D- Non-value-added
E - Value-added
F - Value-added
G - Non-value-added
H- Non-value-added
Our company sells a product for $150 per unit. Variable costs are $90 per unit and fixed costs are $18,000. The company expects to sell 800 units this year. What is the contribution margin in total dollars
Answer:
$48,000
Explanation:
From the question, we are given the following;
Per unit selling price of the product = $150
Variable costs per unit = $90
Fixed costs = $18,000
Expected units to be sold 800
Therefore,
Contribution margin in dollars = Selling price - Variable costs
= ($150 × 800) -($90 × 800)
= $120,000 - $72,000
=$48,000
Review the Inquirer to determine Chester’s current strategy. Where will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Chester would be most likely to pursue.
Select 5:
a) Increase demand through TQM initiatives
b) Offer attractive credit terms
c) Seek excellent product designs, high awareness, and high accessibility
d) Add additional products
e) Seek the lowest price in their target market while maintaining a competitive contribution margin
f) Accept lower plant utilization and higher capacities to insure sufficient capacity is available to meet demand
g) Reduce labor costs through training and recruitment
h) Seek high automation levels
i) Seek high plant utilization, even if it risks occasional small stockouts
j) Reduce cost of goods through TQM initiatives
Answer:
a) Increase demand through TQM initiatives
b) Offer attractive credit terms
c) Seek excellent product designs, high awareness, and high accessibility
e) Seek the lowest price in their target market while maintaining a competitive contribution margin
g) Reduce labor costs through training and recruitment
Explanation:
Chester by pursuing the top five targets listed above would Have a competitive advantage among it's competitors. First their total quality management strategy(TQM) would increase customer satisfaction and spiral their demand growth. Secondly attractive credit terms would increase demand by encouraging customers that require credit facilities for their purchases. Excellent product designs and more awareness would increase product quality while also bring more awareness to the business. Reducing price would also increase demand and since they'd be able to keep a competitive contribution margin they would be able to stay ahead in the market. Lastly reduction in labour costs will have a ripple effect on the whole business as costs will be reduced and cost of goods will be reduced to ensure lower prices and high demand
A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest dollar, what is the difference between the monthly payments for these two loans?
Answer:
Difference in monthly payment=$407.0339
Explanation:
Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.
The monthly installment is computed as follows:
Monthly installment= Loan amount/annuity factor
Loan amount; =220,000
Annuity factor = (1 - (1+r)^(-n))/r
r -monthly rate of interest, n- number of months
First option
monthly interest rate = 5.5% =0.458 %, n- 15×12
Annuity factor= (1-(1+0.055)^(-180 )/0.055 =122.38
Monthly repayment = 220,000/122.386 = 1797.58
Second option
r- 6.5%/12 = 0.542 % n = 15×12 = 180
Annuity factor = ( 1- (1+0.00542)^(-360))/0.005 42= 158.21
Monthly installment = 220,000/1390.549 = 1390.54
Difference in monthly payment = 1,797.583 - 1390.54 = 407.0339
Difference in monthly payment=407.0339
Mr. Meyers wishes to know how many shares are necessary to elect 6 directors out of 14 directors up for election in the Austin Power Company. There are 74,000 shares outstanding.
Answer: 29,601 shares
Explanation:
When calculating the number of shares required to elect a certain number of directors given the shares outstanding, use the formula;
Shares required = ((Number of directors required)*(Total number of shares outstanding) / (Total number of directors + 1)) + 1
= (6 * 74,000) / ( 14 + 1) + 1
=( 444,000/15) + 1
= 29,600 + 1
= 29,601 shares are needed to elect 6 directors
Suppose you deposit $ cash into your checking account. By how much will the total money supply increase as a result when the required reserve ratio is 0.0?
Answer:
If the required reserve ratio is 0, that means that the money multiplier will be infinite. I guess the question is incomplete.
I looked for similar questions to fill in the blanks:
If you deposit $2,400 and the required reserve ratio is 0.4, then by how much does the money supply increase?
first we must determine the money multiplier = 1 / required reserve ratio = 1 / 0.4 = 2.5
to determine the total effect on the money supply we just multiply the deposit by the multiplier = $2,400 x 2.5 = $6,000 increase.
Brooke and Katie went shopping for cleaning supplies. Brooke chose products from well-known brands. However, Katie compared the price difference between well-known brands and the local store brands. Brooke explained that her mother always used well-known brands and taught her that local store brands just don’t clean as well. Apparently, _____ factors were a major influence on Brooke’s choices.
Answer:
Social
Explanation:
Social defines the status in a society or in a company and where we are living in the society interacts with the people to enhance our status, skills, etc.
Therefore according to the given situation Brooke and Katie went for purchasing to buy cleaning supplies. Here Katie is comparing the products price with local store while Brooke selects well known brands.
In this scenario Brook makes understand to Katie that local product is not good in comparison to well know brand. So, social factors affects on Brooke choice.
bond j has a coupon rate of 3 percent and bond k has a coupon rate of 9 percent. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent. what if rates suddenly fall by 2 percent instesd?
Answer:
if interest rates fall by 2%
price of bond j will increase to $756.83, price change = $756.83 - $663.28 = $93.55 or 14.1%
price of bond k will increase to $1,317.99, price change = $1,317.99 - $1,224.47 = $93.52 or 7.64%
Explanation:
bond j coupon rate 3%, 13 years to maturity, semiannual payments, YTM 6%
bond k coupon rate 9%, 13 years to maturity, semiannual payments, YTM 6%
current market price of bond j:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
0.03 = {15 + [(1,000 - market value)/26]} / [(1,000 + market value)/2]
0.015(1,000 + market value) = 15 + [(1,000 - market value)/26]
15 + 0.015market value = 15 + 35.46 - 0.038market value
0.05346market value = 35.46
market value = 35.46 / 0.05346 = $663.28
current market price of bond k:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
0.03 = {45 + [(1,000 - market value)/26]} / [(1,000 + market value)/2]
0.015(1,000 + market value) = 45 + [(1,000 - market value)/26]
15 + 0.015market value = 15 + 65.46 - 0.038market value
0.05346market value = 65.46
market value = 65.46 / 0.05346 = $1,224.47
if YTM decrease by 2%, then:
new market price of bond j:
0.02 = {15 + [(1,000 - market value)/26]} / [(1,000 + market value)/2]
0.01(1,000 + market value) = 15 + [(1,000 - market value)/26]
10 + 0.01market value = 15 + 35.46 - 0.038market value
0.05346market value = 40.46
market value = 40.46 / 0.05346 = $756.83
new market price of bond k:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
0.02 = {45 + [(1,000 - market value)/26]} / [(1,000 + market value)/2]
0.01(1,000 + market value) = 45 + [(1,000 - market value)/26]
10 + 0.01market value = 15 + 65.46 - 0.038market value
0.05346market value = 70.46
market value = 70.46 / 0.05346 = $1,317.99
The Pieper Corp. recorded the accrual of a revenue by debiting Accounts Receivable and crediting Unearned Revenue. What is the effect of the error on the following?
a. Liabilities Net Income
No error No error
b. Liabilities Net Income
No error Overstated
c. Liabilities Net Income
Understated Overstated
d. Liabilities Net Income
Overstated Understated
e. Liabilities Net Income
Overstated No Error
Answer:
e. Liabilities Net Income
Overstated No Error
Explanation:
Unearned Revenue is a liability account that is used to record revenue that the business has received but not yet earned because the goods and services have not yet been provided. By crediting Accrued revenue to this account, it increases it when it is not supposed to so Liabilities are overstated.
Accrued Revenue go to the Accounts Receivable section of the balance sheet to indicate that the business is owed for goods or services provided and so have nothing to do with Net Income so there is no error there.
Watson consulting, llc is a consultancy to consultants. They have bonds which have a face value of $1,000. The bonds carry a 3.5 percent semi-annual coupon, and mature in 10 years. What is the current price of these bonds if the yield to maturity (the going market rate, rd) is 5 percent
Answer:
The current market price is $ 883.08
Explanation:
The current market price can be ascertained using the pv excel function as follows:
=-pv(rate,nper,pmt,fv)
rate is the semiannual yield to maturity which is 5%/2
nper is the number of semiannual coupons in the bond i.e 10*2=20
pmt is the semiannual coupon=3.5%*1/2*$1000=$17.5
fv is the face value of the bond
=-pv(5%/2,20,17.5,1000)=$ 883.08
Sheffield Corp. had net credit sales of $13011000 and cost of goods sold of $9333000 for the year. The average inventory for the year amounted to $1442000. The average days in inventory during the year was approximately:______
Answer:
56.2
Explanation:
Inventory turnover = Cost of goods sold / Average inventory
= $9,333,000 / $1,442,000
= 6.5 times
Average days in inventory during the year = 365 / 6.5
= 56.2 days
Accounting for pensions receives more attention in the United States (US) than in other countries. Discuss reasons that would explain why pension accounting has less emphasis in many foreign countries than the US.
Answer:
I. Lack of a proper pension system
II. Corruption
III. Lack of interest.
Explanation:
I. Lack of a proper pension system: Some countries especially in the developing countries have no proper pension system which makes them not to put good attention to pension accounting
II. Corruption: This is one of the main reasons why pension accounting is given less accounting in many countries of the world, as some leaders usually wants to create room to loot the funds of the pensioners.
III. Lack of adequate interest: Some countries of the world give less focus and emphasis on the plights of pensioners which makes them not to put good effort to their issues or pension accounting.
All of you have merchants in the area where you live. You may often shop there or perhaps some of you may have even worked in a merchant shop. For this discussion, think of a popular merchant near you. What type of merchandise do they stock
Answer:
A confectionery
Explanation:
Remember, merchandise is the products up for sale in any business.
This shop deals with all products that involves baking, they have operated at our locality for years now and I have come to love going shopping there.
Their merchandise includes; bread, pastries, baking utensils and other related items..
has acquired several other companies. Assume that Patton purchased Kate for $ 6 comma 000 comma 000 cash. The book value of Kate's assets is $ 15 comma 000 comma 000 (market value, $ 17 comma 000 comma 000 ), and it has liabilities of $ 13 comma 000 comma 000 (market value, $ 13 comma 000 comma 000 ). Requirements 1. Compute the cost of goodwill purchased by Patton . 2. Record the purchase of Kate by Patton .
Answer and Explanation:
1. The amount of goodwill is shown below:
= Purchase price - the market value of net assets
= $6,000,000 - ($17,000,000 + $13,000,000)
= $2,000,000
2. Now the journal entry for purchase is
Assets $17,000,000
Goodwill $2,000,000
To Liabilities $13,000,000
To Cash $6,000,000
(Being the purchase is recorded)
For recording this we debited the assets and goodwill as it increased the assets and credited the liabilities and cash as it also increased the liabilities and decreased the assets
Lok Co. reports net sales of $5,856,480 for 2016 and $8,679,690 for 2017. End-of-year balances for total assets are 2015, $1,686,000; 2016, $1,800,000; and 2017, $1,982,000. (a) Compute Lok's total asset turnover for 2016 and 2017.
Answer:
2016 = $3.36
2017 = $4.59
Explanation:
The solution of total assets turnover is shown below:-
Particulars 2016 2017
Total assets in the beginning $1,686,000 $1,800,000
Total assets at the end $1,800,000 $1,982,000
Average assets $1,743,000 $1,891,000
(Assets in the beginning + Assets at end) ÷ 2
Sales revenue $5,856,480 $8,679,690
Total assets turnover $3.36 $4.59
(Sales revenue ÷ Average Total assets)
Here is the capital structure of Microsoft. What part of the $117.67 share price (to the nearest dollar) is represented by cash?
Answer: $17 (to the nearest dollar)
Explanation:
The Cash in the price of the stock price is represented by the formula;
Cash = [tex]\frac{Cash and Cash Equivalents}{Market Capitalisation} *Share Price[/tex]
Cash = [tex]\frac{127,662,000,000}{902,635,911,922} *$117.67[/tex]
Cash = 16.642355
Cash = $17 (to the nearest dollar)
The part of the $117.67 share price that is represented by cash is $17.
It should be noted that the calculation for the part of the $117.67 share price that is represented by cash goes thus:
Cash = [Cash and cash equivalents/Market capitalization] × Share price
Cash = [127662000000/902635911922] × 117.67
Cash = 16.64
Cash = $17 approximately
In conclusion, the cash will be $17
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Suppose that you open your own business and earn an accounting profit of $35,000 per year. When you started your business, you left a job that paid you a $30,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 10 percent, your economic profit is
Answer:
$-2000
Explanation:
Economic profit = accounting profit - opportunity cost
Opportunity cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.
if i hadn't quit my job, i would be earning $30,000. so, $30,000 is one of my opportunity costs.
also, if i hadn't started my business, i would be earning 0.1 x $70,000 = $7,000 on my capital. this is my second opportunity cost.
total opportunity cost = $7,000 + $30,000 = $37,000
economic profit = $35,000 - $37,000 = $-2000
Economist C says all of the following: Expansionary fiscal policy is needed to raise aggregate demand and remove the economy from a recessionary gap. The choice of fiscal policy measures is between ________________ government spending and a _______________ in taxes. Since I am in favor of bigger government, I choose a(n) _________________ in _________________.
Answer:
The choice of fiscal policy measures is between ___increased_____________ government spending and a ____decrease___________ in taxes. Since I am in favor of bigger government, I choose a(n) ____increase_____________ in ____governmental spending_____________.
Explanation:
Government employ two fiscal measures to drive the economy toward stability. They are taxation and government expenditure. Depending on the desired outcome and the prevailing circumstances, an increase in taxation reduces the propensity to consume, thus fueling increased savings and investments. Increased government expenditure galvanizes the economy to grow and the increased expenditure acts as a stimulus to economic activities. But fiscal policy measures are not used in isolation. They are complemented by monetary policies by the Federal Reserve.
Skymont Company wants an ending inventory each month equal to 30% of that month's cost of goods sold. Cost of goods sold for February is projected at $45,000. Ending inventory at the end of January was $12,000. Based on this information, purchases for February would be:
Answer:
Purchases for February would be: $46,500
Explanation:
Prepare a Purchases Budget to find the Purchases for February.
Purchases Budget for February
Budgeted Cost of Sales $45,000
Add Budgeted Closing Inventory ($45,000 × 30%) $13,500
$58,500
Less Budgeted Opening Inventory ($12,000)
Budgeted Purchases $46,500
The common belief among economists is that it is better to embrace _____________, and then deal with the costs and trade offs with other policy tools, than it is to engage in _______________.
Answer: the gains from trade; protectionism
Explanation:
The common belief among economists is that it is better to embrace the gains from trade, and then deal with the costs and trade offs with other policy tools, than it is to engage in protectionism.
Economists believe that when countries engage in trade together, it brings about increase in the world's output, better innovation and better product quality hence, they do not really support protectionism.
Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 9,000 flashing lights per year and has the capacity of producing 60 per day. Setting up the light production costs $49. The holding cost is $0.10 per light per year.
a. What is the optimal size of the production run?
b. What is the average holding cost per year?
c. What is the average setup cost per year?
d. What is the total cost per year, including the cost of the lights?
Answer:
a. 2,970
b. $148.50
c. $148.50
d. $297.00
Explanation:
Optimal size of the production run is the size of the Production run that minimizes set -up costs and holding costs.
Optimal size of the production run = √ (2 × Annual Production Demand × Set-up Cost) / Holding Cost per unit
= √(2 × 9,000 × $49) / $0.10
= 2,969.85 or 2,970 flashing lights
Average holding cost = Optimal size of the production run /2 × Holding Cost per unit
= 2,970/2 × $0.10
= $148.50
Average setup cost = Annual Production Demand / Optimal size of the production run × Cost per set -up
= 9,000 / 2,970 × $49
= $148.50
Total Cost = Average holding cost + Average setup cost
= $148.50 + $148.50
= $297.00
A company manufactures and sells two products: Product A1 and Product C4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product A1 500 2.0 1,000
Product C4 200 1.0 200
Total direct labor-hours 1,200
The direct labor rate is $27.40 per DLH. The direct materials cost per unit is $281 for Product A1 and $267 for Product C4. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected
Activity Cost Pools Activity Measures Overhead Cost Product C1 Product M2 Total
Labor-related DLHs $558,452 7,200 7,700 14,900
Production orders Orders 75,240 500 600 1,100
General factory MHs 886,410 4,400 4,600 9,000
$1,520,102
The total cost per unit of Product C4 under activity-based costing is closest to: ____________
Answer:
Unitary cost= $4,207.85
Explanation:
Giving the following information:
Product C4:
Production= 200 units
Direct labor hours per unit= 1
Total DLH= 200
The direct labor rate is $27.40 per DLH.
The direct materials cost per unit is $267
Activity Cost Pools - Overhead Cost - Product C4 - Total
Labor-related DLHs $558,452 - 7,700 - 14,900
Production orders Orders $75,240 - 600 - 1,100
General factory MHs $886,410 - 4,600 - 9,000
First, we need to calculate the predetermined overhead rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Labor-related= 558,452/14,900= $37.48 per DLH
Production orders= 75,240/1,100= $68.4 per order
General factory= 886,410/9,000= $98.49 per machine hour
Now, we can allocate overhead to C4 as a whole:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Labor-related= 37.48*7,700= $288,596
Production orders= 68.4*600= $41,040
General factory= 98.49*4,600= $453,054
Total= $782,690
Finally, the total cost and cost per unit:
Total cost= 200*267 + 200*27.4 + 782,690
Total cost= $841,570
Unitary cost= 841,570/200= $4,207.85
The exit-voice-loyalty-neglect (EVLN) model Multiple Choice outlines the four consequences of emotional intelligence. is a template for organizing and understanding the consequences of job dissatisfaction. identifies the four ways to manage employee emotions. explains why the psychological contract differs between employees and their employers.
Answer:
is a template for organizing and understanding the consequences of job dissatisfaction.
Explanation:
From it's name, the EVLN tells us four ways that Employees respond when they are dissatisfied with their job.
E stands for Exit which means going elsewhere to look for other job opportunities, it means leaving the organization or transferring to another unit.
V stands for Voice which means trying to change the situation of things rather than escaping from that dissatisfying situation. It can be constructive or destructive.
L stands for Loyalty such Employees in this category respond to dissatisfaction by waiting patiently for the issue to be solved out with time or by other.
N stands for Neglect which means putting in less work, reducing quality and also acts of absenteeism and lateness.
3. When Blackstone investment company borrowed funds to buy out the stockholders of Busch Entertainment, it was participating in a(n)
Answer: c. Leveraged Buyout
Explanation:
A Leveraged buyout as the term suggests, is when a buyout is sponsored mainly by the use of debt. In Business Leveraged Buyouts usually occur when either the management, employees or private investors buys out or attempts to buy out the Shareholders of a company by using debt funding so that they can then own the company. The debt is acquired by using both assets of the company being bought and that of the company buying (unless they do not have any) as collateral.
When Blackstone investment company borrowed funds to buy out the stockholders of Busch Entertainment, it was participating in a Leveraged Buyout.
Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow Selling price per unit $ 9.00 $ 39.00 Variable expenses per unit $ 2.70 $ 14.00 Traceable fixed expenses per year $ 131,000 $ 33,000 Last year the company produced and sold 40,500 units of Weedban and 18,500 units of Greengrow. Its annual common fixed expenses are $101,000. Required: Prepare a contribution format income statement segmented by product lines.
Answer:
Royal Lawncare Company
Income Statement
Total Weedban Greengrow
Sales revenue $1,086,000 $364,500 $721,500
Variable costs $368,350 $109,350 $259,000
Contribution $717,650 $255,150 $462,500
margin
Traceable fixed $164,000 $131,00 $33,000
costs
Segment margin $553,650 $124,150 $429,500
Common fixed $101,000
costs
Net income $452,650
Calvert Corporation expects an EBIT of $25,300 every year forever. The company currently has no debt, and its cost of equity is 15.3 percent. The company can borrow at 10.1 percent and the corporate tax rate is 25 percent. a. What is the current value of the company
Answer:
Value of the company = $124,019.61
Explanation:
The value of then firm is the present value of its expected future cash inflow discounted at its required rate of return.
In this case, the earnings available to ordinary shareholders becomes the annual cash inflow while the appropriate discount rate is the cost of equity.
The absence of debt in the company's capital structure implies that the cost of equity would be the appropriate discount rate.
And the value of the company would be determined as follows
Value of the company = Earnings after tax/Cost of equity
Earnings after tax = EBIT × (1-Tax rate)= 25,300×(1-0.25)=18,975
Cost of equity = 15.3%
Value of the company = 18975 /0.153= 124,019.6078
Value of the company = $124,019.61
Steve goes to Tri-State University and pays $40,000 in tuition. Steve works a part-time job to pay for his schooling and has an AGI of $17,000. How much is his American Opportunity Credit? Group of answer choices
Answer:
$2,500
Explanation:
The calculation of American opportunity tax credit is shown below:-
According to the given situation, Steve's part-time job wouldn't come in between his not applying for the credit as the AGI is lower than the applying number.
Therefore, the credit would be 100% of first is
= $2,000 + 25% (Increased)
= $2,500
"If the regulations for environmental protection were strictly adhered to and industries, cities, and individuals considered the environment crucial for survival and a thriving market, what would be the benefits from this change
Explanation:
The benefits arising from complying with an environmental protection regulation would be diverse for society, for companies and for the environment as a whole.
It is ideal to recognize the scarcity of natural resources, and knowing how to preserve them as citizens is everyone's duty. Environmental awareness and compliance with regulations would lead to significant changes in quality of life, air, water, decrease the greenhouse effect, decrease respiratory diseases, etc.
For the industry, complying with environmental regulation makes it better positioned in the market, attracts more investors, motivates employees more, reduces unnecessary risks and costs in addition to enhancing the continuous improvement of processes as a whole.
If a monopolist in an industry characterized by monopoly features is making economic profit in the short run, which of the following is true for this firm in the long run? (Assume that costs and demand are held constant)
a. The monopolist will be able to sustain economic profits.
b. The monopolist will make normal profit because firms will enter the industry.
c. The monopolist will make normal profit because no firms will enter the industry.
d. The monopolist will make a loss.
Answer: The monopolist will be able to sustain economic profits
Explanation:
If a monopolist in an industry characterized by monopoly features is making economic profit in the short run, then the monopolist will be able to sustain economic profits.
The economic profit is gotten when the explicit cost and the opportunity costs are both deducted from the revenues generated by a business.
Since there is high barrier to entry and the monopoly is the only firm in the market, then the monopolist will be able to sustain economic profits.
O'NeillO'Neill's Products manufactures a single product. Cost, sales, and production information for the company and its single product is as follows:
Selling price per unit is $54
Variable manufacturing costs per unit manufactured includes direct materials DM, direct labor DL, and variable MOH $27.
Variable operating expenses per unit sold $4
Fixed manufacturing overhead (MOH) in total for the year $120,000
Fixed operating expenses in total for the year $92,000
Units manufactured and sold for the year 12,000 units
Required:
a. Prepare an income statement for the upcoming year using variable costing.
b. Prepare an income statement for the upcoming year using absorption costing.
Answer:
Instructions are below.
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
Absorption costing income statement:
Sales= 12,000*54= 648,000
COGS= (12,000*27) + 120,000= (444,000)
Gross profit= 204,000
Total operating expenses= (12,000*4) + 92,000= (140,000)
Net operating income= 64,000
Variable costing income statement:
Sales= 648,000
Total variable cost= 12,000*(27 + 4)= (372,000)
Total contribution margin= 276,000
Fixed manufacturing overhead= (120,000)
Fixed operating expenses= (92,000)
Net operating income= 64,000