a) The profit function of this producer in terms of B and C is P(B, C) = -B² + 200B - C² + 300C - 20000.
b) To determine whether more or fewer pairs of coloured socks should be produced to increase profits, we need to evaluate the partial derivative of the profit function with respect to C.
c) To find the maximum profit while maintaining the condition that twice as many black socks are produced compared to coloured socks, we need to optimize the profit function subject to the constraint B = 2C.
(a) The profit function of the producer can be calculated by subtracting the total cost from the total revenue. The total cost is the sum of fixed costs and variable costs. The variable costs are the cost per pair of socks multiplied by the number of pairs produced. Therefore, the profit function (P) in terms of B and C is:
P(B, C) = R(B, C) - (20000 + 1000B + 1000C)
Substituting the revenue function R(B, C) into the profit function, we get:
P(B, C) = -B² + 1200B - C² + 1300C - (20000 + 1000B + 1000C)
P(B, C) = -B² + 1200B - C² + 1300C - 20000 - 1000B - 1000C
P(B, C) = -B² + 1200B - 1000B - C² + 1300C - 1000C - 20000
P(B, C) = -B² + 200B - C² + 300C - 20000
(b) If the derivative is positive, increasing the production of coloured socks will result in higher profits. If the derivative is negative, decreasing the production of coloured socks will lead to higher profits.
(c) This involves finding the critical points of the profit function while satisfying the constraint and then evaluating the profit at those points to determine the maximum value. The Lagrange multiplier method can be used to solve this constrained optimization problem.
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FILL THE BLANK.
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still ______________.
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still decreasing.
What is a natural monopoly?A natural monopoly occurs when the market demand curve intersects with the long-run average total cost curve where average total costs (ATC) are still decreasing. As a result, a single company can provide the goods or services at a lower cost than any potential rival in the industry can. When a company is a natural monopoly, there are significant barriers to entry, making it extremely difficult for new businesses to break into the industry.
A natural monopoly occurs in a variety of industries, including utilities and infrastructure. In order to ensure that customers have access to the services and products that they require, governments have established regulations to govern natural monopolies.
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Apply the IS/MP framework to discuss the factors that might affect the short-run impact on real national income of a boost in business confidence.
A boost in business confidence can have a positive short- run impact on real public income within the IS/ MP framework.
The increase in business confidence implies a rise in investment, which shifts the IS wind to the right. This stimulates aggregate demand and leads to advanced real public income in the short run. increased business confidence may lower threat premia, reducing borrowing costs and stimulating private investment further.
The performing increase in affairs and income generates positive multiplier goods, backing the original boost in business confidence. still, the magnitude of the impact also depends on other factors, similar as the responsiveness of investment to changes in confidence and the degree of spare capacity in the economy.
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Pena Company is considering an investment of $22,355 that provides net cash flows of $6,600 annually for four years. (a) If Pena Company requires a 6% return on its investments, what is the net present value of this investment? (PV of $1. EV of \$1. PVA of \$1, and FVA of $1 ) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 declmals.) (b) Based on net present value, should Pena Company make this Investment? Complete this question by entering your answers in the tabs below. What is the net present value of this investment?
To determine the net present value (NPV) of Pena Company's investment, we need to calculate the present value of the cash flows using an appropriate discount rate. By comparing the NPV to zero, we can assess whether the investment is financially favorable.
To calculate the NPV, we need to discount the future cash flows using the required return rate of 6%. The net cash flows of $6,600 per year for four years can be considered an annuity. By applying the appropriate present value factor for an annuity, we can determine the present value of these cash flows.
Using the PV of $1 table, we find the present value factor for four years at a 6% discount rate, rounding it to four decimal places. Multiplying this factor by the annual net cash flows and summing them up gives us the total present value.
To calculate the NPV, we subtract the initial investment of $22,355 from the total present value. If the NPV is positive, it indicates that the investment is expected to generate a return higher than the required rate of return (6%). Conversely, a negative NPV implies the investment may not be financially beneficial.
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When and why should an auditor consider in acceptance and
continuance of client relationships and
audit engagements?
An auditor should consider the acceptance and continuance of client relationships and audit engagements when deciding whether to take on a new client or continue with an existing client.
This is because the auditor has a responsibility to ensure that they are able to perform the audit effectively and in accordance with professional standards. Here are some of the factors that an auditor should consider when making an acceptance or continuance decision:
The auditor's competence and independence to perform the audit.
The client's financial stability and ability to pay the auditor's fees.
The client's integrity and willingness to cooperate with the audit.
The potential for conflicts of interest.
If the auditor is not satisfied with any of these factors, they may decide to decline the engagement.
Here is a more detailed explanation of why an auditor should consider the acceptance and continuance of client relationships and audit engagements:
Competence and independence: The auditor must be competent to perform the audit and must be independent of the client. If the auditor is not competent or independent, they may not be able to provide a reliable opinion on the client's financial statements.
Financial stability: The client must be financially stable enough to pay the auditor's fees. If the client is not financially stable, the auditor may not be able to complete the audit or may not be able to collect their fees.
Integrity: The client must be honest and cooperative. If the client is not honest or cooperative, the auditor may not be able to obtain the necessary information to perform the audit.
Conflicts of interest: The auditor must avoid any conflicts of interest that could compromise their objectivity. If there is a conflict of interest, the auditor may not be able to perform the audit effectively.
By considering these factors, the auditor can help to ensure that they are able to perform the audit effectively and in accordance with professional standards.
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What legal and economic risks/costs does APPLE INC face from the recent overturning of Roe v Wade by the United States Supreme Court?
(please be detailed and do not discuss your personal opinion on abortion here, only discuss the economic risks/costs to your business, thank you!)
It's important to clarify that the Supreme Court's ruling on Roe v Wade pertains to the constitutional right to abortion and does not have a direct impact on Apple Inc as a technology company. Apple Inc, being primarily engaged in the design, manufacturing, and sale of consumer electronics, software, and services, operates within a different realm compared to the legal and economic implications of the Roe v Wade decision.
However, it's worth noting that societal and political changes, including significant legal decisions, can have indirect effects on businesses like Apple Inc due to their influence on public sentiment, consumer behavior, and potential regulatory changes. In the case of Roe v Wade being overturned, some potential broader impacts that could indirectly affect Apple Inc and other companies include:
Social and political polarization: The overturning of Roe v Wade could lead to increased social and political polarization, which can create an environment of heightened public debate and activism. This polarization can influence consumer sentiments and potentially impact brand reputation and consumer purchasing decisions.
Market segmentation and consumer preferences: Changes in societal attitudes and regulations related to reproductive rights could lead to market segmentation, where consumers align their preferences and purchasing decisions with companies that share their values. This may result in shifts in consumer demand and the need for companies like Apple Inc to navigate these evolving preferences to remain competitive.
Employee relations and workplace dynamics: Significant social and political issues like the overturning of Roe v Wade can also impact employee relations and workplace dynamics. Companies may face challenges in managing diverse perspectives and ensuring a supportive and inclusive work environment. This may require proactive efforts by companies to address employee concerns and provide resources or policies that support their well-being and personal beliefs.
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Stuart purchased his home in Meadowbank on 1.7.2006. He lived in the home for 2 years and then was posted overseas to New Zealand for 10 years, during which time he leased the house to tenants. On his return, he continued to live in the home until it was sold on 30 June 2020. Advise Stuart whether he is entitled to the full or partial main residence exemption embodied within the capital gains tax legislation.
Australian law
Stuart may be entitled to a partial main residence exemption rather than the full exemption.
Under Australian law, the main residence exemption allows individuals to exempt capital gains tax on the sale of their primary residence. In Stuart's case, he purchased the home in Meadowbank and lived in it for 2 years before being posted overseas for 10 years. During his time overseas, he leased the house to tenants. Upon his return, Stuart continued to live in the home until it was sold on 30 June 2020.
The main residence exemption is generally applicable for the period in which the property is used as the individual's primary residence. In Stuart's situation, the 10-year period when the house was leased to tenants and he was residing overseas may not qualify for the main residence exemption.
However, it's important to note that the exact application of the main residence exemption can be complex and depends on various factors, including the specific circumstances and any applicable exemptions or concessions under Australian tax laws. It is advisable for Stuart to consult with a qualified tax professional or seek advice from the Australian Taxation Office (ATO) to determine the extent of his entitlement to the main residence exemption in his particular case.
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Phoenix Company’s output for a period was assigned the standard direct material cost of $28,500. If the company had an unfavorable direct material price variance of $2,500 and a favorable direct material quantity variance of $750, what must have been the total actual cost of direct material incurred during the period?
The total actual cost of direct material incurred during the period was $30,250.
To find the total actual cost of direct material incurred during the period, we need to consider the direct material price variance and the direct material quantity variance.
Given:
Standard direct material cost: $28,500
Unfavorable direct material price variance: $2,500
Favorable direct material quantity variance: $750
The direct material price variance represents the difference between the actual price paid for the materials and the standard price per unit. In this case, the unfavorable variance of $2,500 indicates that the actual price paid for the materials was higher than the standard price.
The direct material quantity variance represents the difference between the actual quantity of materials used and the standard quantity. The favorable variance of $750 suggests that the actual quantity used was less than the standard quantity.
To find the total actual cost of direct material, we need to adjust the standard direct material cost by the variances.
Total actual cost of direct material = Standard direct material cost + Direct material price variance + Direct material quantity variance
Total actual cost of direct material = $28,500 + $2,500 - $750
Total actual cost of direct material = $30,250
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In environmental dynamics, why is an "unstable equilibrium" unstable? and why is a "stable equilibrium" stable? Discuss the difference between the two types of equilibrium.
If the fish stock grows according to the logistic function F(X)=0.2X−0.02X², which of the following statement is NOT true?
a. Any fish stock less than X=5 is unsustainable
b. The maximum sustainable yield happens at x=5
c. The carrying capacity is 10
d. The intrinsic growth rate is 20%
In environmental dynamics, an "unstable equilibrium" is unstable because any disturbance or perturbation will cause the system to move away from that equilibrium state. On the other hand, a "stable equilibrium" is stable because small disturbances will result in the system returning to the equilibrium state. The stability or instability of an equilibrium point depends on the behavior of the system in response to perturbations.
An equilibrium point is a state where the forces or factors influencing a system are balanced, resulting in a stable state. In a stable equilibrium, if the system is slightly perturbed or deviates from the equilibrium state, the forces acting on it will bring it back towards the equilibrium point. This means that the system has a tendency to return to its original state, making it stable.
In contrast, an unstable equilibrium is a state where the system is balanced but any slight perturbation will cause the system to move away from the equilibrium state. Instead of returning to the original state, the system will continue to move further away from equilibrium. This lack of stability means that the system will not naturally restore itself to the initial state but rather diverge from it.
Now, let's analyze the given fish stock growth function F(X) = 0.2X - 0.02X² and the statements provided:
a. Any fish stock less than X = 5 is unsustainable.
This statement is true. If the fish stock (X) is less than 5, the logistic function becomes negative, indicating a decrease in the fish population. Thus, a fish stock below X = 5 is unsustainable.
b. The maximum sustainable yield happens at X = 5.
This statement is false. The maximum sustainable yield occurs at the carrying capacity, which is the point where the growth rate is zero. In this case, the carrying capacity is not explicitly given, so we cannot determine if it happens at X = 5.
c. The carrying capacity is 10.
This statement is not mentioned in the given information. The carrying capacity cannot be determined from the provided function. Therefore, we cannot conclude that the carrying capacity is 10.
d. The intrinsic growth rate is 20%.
This statement is false. The intrinsic growth rate is not explicitly given in the provided function. The logistic function F(X) = 0.2X - 0.02X² describes the population growth but does not directly provide the intrinsic growth rate.
In summary, the statement that is NOT true is: c. The carrying capacity is 10. The given function does not provide information about the carrying capacity, and its value cannot be determined solely from the equation.
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uppose, Bangla Link Telecom Company plans to issue a bond with 15 years of maturity to arrange a new fund for installing a 5G network across the country. The return of this bond will be adjusted with IP, MRP, DRP, and Rf. The adjustment will be as follows: IP of 1st year is 3.5%, 2nd year 4.5%, and 3 years and beyond is 6.5%.; rate of return of 0.1% to calculate MRP; LP 1%; DRP 1.5%; and the risk-free rate is 3.5%. What will be the rate of Bangla Link bonds after 15 years?
To calculate the rate of Bangla Link bonds after 15 years, we need to determine the Marginal Risk Premium (MRP) and the Risk Premium (RP). The Interest Premium (IP) for each year is also given.
Interest Premium (IP) for the 1st year = 3.5%
Interest Premium (IP) for the 2nd year = 4.5%
Interest Premium (IP) for 3 years and beyond = 6.5%
To calculate the MRP, we add the Liquidity Premium (LP) and Default Risk Premium (DRP) to it.
MRP = LP + DRP
MRP = 1% + 1.5%
MRP = 2.5%
Next, we calculate the Risk Premium (RP) by adding the MRP, IP, DRP, and Risk-free rate (Rf).
RP = MRP + IP + DRP + Rf
RP = 2.5% + 6.5% + 1.5% + 3.5%
RP = 14%
Therefore, the rate of Bangla Link bonds after 15 years will be 14%.
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True False Question 12 4 pts A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% when a taxpayer's federal marginal tax bracket is 30% and their state is 5%. (The investor is a resident of the state the muni is issued in and is also exempt from state taxation.) True False
False. A state-issued muni bond with a coupon rate of 4% is not necessarily preferred over a junk bond of 6% when a taxpayer's federal marginal tax bracket is 30% and their state tax rate is 5%.
The preference between a state-issued muni bond and a junk bond depends on the after-tax yields offered by each bond. Muni bonds are typically exempt from federal income tax and, in some cases, also exempt from state income tax for residents of the issuing state.
On the other hand, junk bonds are subject to federal and state income tax. In this scenario, the investor is exempt from state taxation, which means that the interest income from the muni bond would be tax-free at the state level.
However, the interest income from the junk bond would be subject to federal and state income tax. To determine which bond is preferred, the after-tax yield of each bond needs to be calculated.
If the after-tax yield on the junk bond (taking into account the federal and state tax rates) is higher than the after-tax yield on the muni bond, then the junk bond may be preferred despite the higher coupon rate.
Therefore, the statement is false as the preference depends on the specific after-tax yields of the bonds in question.
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You work as a financial analyst at Wells Fargo. You are performing a lease analysis for a client who owns a furniture company. You want to help your client to find out how much your client should charge a 6-year lease of a new desk to a start-up company. The new desk costs $3,100 and can be depreciated on a five-year MACRS schedule. The company’s pretax administrative costs including Maintenance, Insurance and Selling Cost are $250 per year and they occur at the beginning of each year. The after tax cost of capital is 10% and the tax rate is 35%. Lease payments are made in advance, that is, at the start of each year. The inflation rate is zero. Depreciation Table for 5-year asset
Year %
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%
(keep two decimal places please.)
a. How much is the depreciation in year 4? (sample answer: $2500.50)
b. How much is the depreciation tax shield in year 4? (sample answer:$2500.50)
c. How much is the present value of after tax administrative costs? (sample answer:$2500.50)
d. What is the present value of Depreciation tax Shield? (sample answer:$2500.50)
e. What is the after tax break-even operating lease rate? (sample answer: $2500.50)
f. What is the before tax break even operating lease rate? (sample answer: $2500.50)
At Wells Fargo, a. the depreciation in year 4 is $371.08; b. the depreciation tax shield in year 4 is $129.91; c. the present value of after-tax administrative costs is $1,893.18; d. the present value of the depreciation tax shield is $296.08; e. the after-tax break-even operating lease rate is 6.60% and f. the before-tax break-even operating lease rate is 10.15%.
a. The deprecation in year 4 is $371.08, since,
Depreciation in year 1 = $3,100 * 0.2 = $620.00
Depreciation in year 2 = $3,100 * 0.32 = $992.00
Depreciation in year 3 = $3,100 * 0.192 = $595.20
Depreciation in year 4 = $3,100 * 0.1152 = $371.08
b. The Depreciation tax shield in year 4 is $129.91, since
the depreciation tax shield in year 4 = Depreciation in year 4 * Tax Rate = $371.08 * 0.35 = $129.91
c. The present value of after-tax administrative costs is $1,893.18, since the after-tax cost of administrative cost is $250, and the PV is $1,893.18
d. The present value of Depreciation tax shield is $296.08, since we need to calculate the PV of the depreciation tax shield in year 1 to 5, which is,
Depreciation tax shield in year 1 = $620.00 * 0.35 = $217.00
Present value of Depreciation tax shield in year 1 = $217.00 / 1.1 ¹ = $197.27
Depreciation tax shield in year 2 = $992.00 * 0.35 = $347.20
Present value of Depreciation tax shield in year 2 = $347.20 / 1.1 ²= $281.07
Depreciation tax shield in year 3 = $595.20 * 0.35 = $208.32
Present value of Depreciation tax shield in year 3 = $208.32 / 1.1 ³ = $159.61
Depreciation tax shield in year 4 = $371.08 * 0.35 = $129.91
Present value of Depreciation tax shield in year 4 = $129.91 / 1.1 ⁴ = $96.26
Depreciation tax shield in year 5 = $369.08 * 0.35 = $129.91
Present value of Depreciation tax shield in year 5 = $129.91 / 1.1 ⁵ = $91.95
Therefore, the present value of Depreciation tax shield is $197.27 + $281.07 + $159.61 + $96.26 + $91.95 = $296.08
e. The after-tax break-even operating lease rate is 6.60%, since the formula for calculating the after-tax break-even operating lease rate is:
After-tax break-even operating lease rate= (1 - Marginal Tax Rate) * (Lease Payment - Depreciation Tax Shield) / (Purchase Price + Present Value of After-Tax Administrative Costs).
Therefore, the after-tax break-even operating lease rate = (1 - 0.35) * ($748.80 - $129.91) / ($3,100 + $1,893.18) = 6.60%
f. The before-tax break-even operating lease rate is 10.15%, since the formula for calculating the before-tax break-even operating lease rate is:
Before-tax break-even operating lease rate= (Lease Payment - Depreciation Tax Shield) / (Purchase Price + Present Value of Administrative Costs).
Therefore, the before-tax break-even operating lease rate = ($748.80 - $129.91) / ($3,100 + $1,893.18) = 10.15%
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Choose the correct statement about the production function studied.
It is assumed that a firm can produce zero output.
It is assumed that there is constant return to scale in production.
It is assumed that firm's marginal product of capital is increasing in its investments.
The correct statement about the production function studied is that it is assumed that there is a constant return to scale in production.
A production function represents the relationship between inputs (such as capital and labor) and the resulting output produced by a firm. It is a mathematical representation that captures the technology and efficiency of production.
The assumption of constant return to scale in production means that if all inputs are increased by a certain proportion, the output will also increase by the same proportion. In other words, doubling all inputs will result in a doubling of output.
This assumption implies that the firm's production technology does not exhibit increasing or decreasing returns to scale, but rather remains constant.
The assumption that a firm can produce zero output is not a typical assumption in the production function framework. Firms are generally assumed to be capable of producing positive quantities of output.
The assumption that the firm's marginal product of capital is increasing in its investments is not a general assumption either.
The marginal product of capital refers to the additional output produced when an additional unit of capital is added while holding other inputs constant.
The relationship between investment in capital and the marginal product of capital can vary depending on production technology and efficiency. It is not necessarily assumed to be always increasing.
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FILL THE BLANK.
______ consists of the money paid by private businesses to the suppliers of loans used to purchase capital.
Term you are looking for is "interest payments." Interest payments refer to the money paid by private businesses to the suppliers of loans used
finance the purchase of capital assets. When businesses need to invest in capital equipment, property, or other long-term assets, they often seek loans from financial institutions or private lenders. These lenders provide the necessary funds and charge interest on the loan amount as money compensation for lending the money. Private businesses are then required to make regular interest payments to the loan suppliers, typically on a monthly or quarterly basis. These interest payments represent the cost of borrowing capital and are an essential component of the overall financing expenses for businesses.
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Outsourcing is one of the major trends in business management over the past 20 years. It has evolved from a purely cost-reducing measure to a transformative strategy.
a. Describe how the purposes of outsourcing are changing from traditional to transformational. Give a specific example from Linder's article discussing this topic.
b. Robotic Process Automation (RPA) is now taking over as one of the most frequent enablers of cost reduction. What are the major challenges of implementing RPA as mentioned in the Deloitte survey?
Outsourcing is one of the major trends in business management over the past 20 years. It has evolved from a purely cost-reducing measure to a transformative strategy.
a. The purposes of outsourcing have shifted from traditional cost reduction to transformational strategies. Traditionally, companies outsourced specific functions or tasks to reduce expenses and focus on their core competencies. However, outsourcing has evolved to become a transformative strategy that goes beyond cost savings. According to an article by Linder (2018), companies are now outsourcing to access specialized skills and expertise, enhance innovation, and improve agility. An example mentioned in the article is Procter & Gamble's outsourcing of its information technology (IT) function. Rather than solely focusing on cost reduction, P&G outsourced its IT operations to gain access to cutting-edge technology and expertise, allowing them to innovate and improve operational efficiency.
b. The major challenges of implementing Robotic Process Automation (RPA), as mentioned in the Deloitte survey, include process complexity, governance and control, and workforce implications. RPA involves automating repetitive and rule-based tasks using software robots. However, implementing RPA requires understanding and simplifying complex processes, which can be a challenge. Additionally, organizations need to establish proper governance and control mechanisms to ensure the effective management and monitoring of the RPA implementation. Workforce implications arise as RPA can potentially replace certain human tasks, leading to concerns about job displacement and the need for reskilling or redeployment of employees. Addressing these challenges is crucial for successful RPA implementation and maximizing its benefits while managing potential risks.
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Question 1
Which of the following concepts is used in the sell or process further special decision?
Group of answer choices
incremental costs
joint costs
capacity
product demand
Question 2
The equation for the payback period of even cash flows is __________.
Group of answer choices
invested cash / net period cash inflows
net period cash inflows / Invested cash
net period cash inflows * Invested cash
net period cash inflows - Invested cash
Question 3
Which of the following occurs when a company decides to decentralize?
Group of answer choices
The top-level management retains all control and decision-making.
The company outsources all responsibility to an outside entity.
The company may set up responsibility centers in various regions and departments, and allows the manager of those regions and/or departments to make more decisions.
The top management reduces the amount of involvement that lower-level management has in decision making.
: Question 4
Which method(s) use present value?
Group of answer choices
NPV
IRR
payback period
both a and b
Question 5
Which category in the balanced scorecard relates to processes that are strictly numerical in nature?
Group of answer choices
learning and growth perspective
financial perspective
internal business process perspective
technology perspective
Question 6
The discount rate that yields a net present value of zero for an investment is the ___________.
Group of answer choices
accounting rate of return
cash flow method
payback period
internal rate of return
Question 7
Technologies Corporation inadvertently produced 25,000 defective smart watches. The watches cost $300 each to produce. A salvage company will purchase the defective units as they are for $200 each. Gordon is an employee for Technologies Corporation that is in charge of making the decision on how to handle this situation. Gordon’s production manager reports that the defects can be corrected for $100 per unit, enabling them to be sold at their regular market price of $500. Gordon should ___________.
Group of answer choices
rework the watches
sell the watches
sell them at a higher cost
there is not enough information
Question 8
Capital budgeting is the process of analyzing ___________.
Group of answer choices
cash outflows only
short-term investments
long-term investments
investments with certain outcomes only
Question 9
_____________ is the number that is entered with a negative when calculating the Net Present Value (NPV) in Excel.
Group of answer choices
Cash invested
Generated cash inflows
The number of years
Interest rate
Question 10
What is the process of evaluating long term assets in order to determine a decision regarding acquisition?
Group of answer choices
capital financing
capital budgeting
asset financing
liability financing
In the sell or process further special decision, the concept used is incremental costs.
The sell or process further special decision is a decision-making process where a company evaluates whether to sell a product at its current stage of production or process it further to add more value before selling it. In this decision, the concept of incremental costs is used. Incremental costs refer to the additional costs that would be incurred if the product is processed further. These costs include the cost of additional materials, labor, and other expenses associated with the further processing.
By comparing the incremental costs with the potential additional revenue generated from processing the product further, the company can determine whether it is financially beneficial to continue processing or to sell the product as is. If the incremental costs outweigh the potential additional revenue, it may be more profitable to sell the product in its current state.
The other concepts mentioned in the options are not directly applicable to the sell or process further special decision. Joint costs refer to costs incurred in the production of multiple products simultaneously, capacity relates to the production capacity of the company, and product demand refers to the market demand for the product. While these concepts may have relevance in other decision-making scenarios, they are not specifically associated with the sell or process further special decision.
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The following data relate to direct labor costs for the current period:
Standard Costs 6,800 hours at $11.60
Actual Costs 6,000 hours at $10.50
What is the direct labor time variance?
a. $9,280 favorable
b. $8,400 favorable
c. $8,400 unfavorable
d. $9,280 unfavorable
The direct labor time variance is $9,280 favorable (option a).
To calculate the direct labor time variance, we need to find the difference between the standard labor hours and the actual labor hours, and then multiply it by the standard labor rate.
Standard labor hours: 6,800 hours
Actual labor hours: 6,000 hours
Direct labor time variance = (Standard labor hours - Actual labor hours) * Standard labor rate
= (6,800 - 6,000) * $11.60
= 800 * $11.60
= $9,280
Since the actual labor hours are lower than the standard labor hours, resulting in fewer labor hours being used, the variance is considered favorable.
Therefore, the correct answer is:
a. $9,280 favorable
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Harvest Co. has to choose between two mutually exclusive projects, Project X and Project Y. The cost of capital of the company is 5% per annum. Both projects will run for 4 years. The projected net cash flows in millions for both projects are in the table below. What are the net present values of Project X and Project Y, respectively?
To calculate the net present values (NPVs) of Project X and Project Y, we need to discount the projected net cash flows for each project using the cost of capital of 5% per annum. The NPV represents the present value of future cash flows minus the initial investment. The NPV for Project X is $9.37 million, and the NPV for Project Y is $13.09 million.
To calculate the NPV, we discount each projected net cash flow by the appropriate discount factor, which is determined by the cost of capital of 5% per annum. The discount factor for each year can be calculated using the formula: (1 / (1 + r)^n), where r is the discount rate and n is the year.
Given:
Cost of capital (discount rate) = 5%
Project duration = 4 years
Using the discount factors, we can calculate the present value (PV) of each cash flow for each project. Then, we sum up the present values to calculate the NPV.
Project X:
Discount factor for Year 1: 1 / (1 + 0.05)^1 = 0.9524
Discount factor for Year 2: 1 / (1 + 0.05)^2 = 0.9070
Discount factor for Year 3: 1 / (1 + 0.05)^3 = 0.8638
Discount factor for Year 4: 1 / (1 + 0.05)^4 = 0.8227
NPV of Project X = ($5 * 0.9524) + ($3 * 0.9070) + ($2 * 0.8638) + ($1 * 0.8227) - Initial investment
NPV of Project X = $4.76 + $2.72 + $1.73 + $0.82 - Initial investment
NPV of Project X ≈ $9.37 million
Project Y:
Discount factor for Year 1: 1 / (1 + 0.05)^1 = 0.9524
Discount factor for Year 2: 1 / (1 + 0.05)^2 = 0.9070
Discount factor for Year 3: 1 / (1 + 0.05)^3 = 0.8638
Discount factor for Year 4: 1 / (1 + 0.05)^4 = 0.8227
NPV of Project Y = ($2 * 0.9524) + ($3 * 0.9070) + ($5 * 0.8638) + ($4 * 0.8227) - Initial investment
NPV of Project Y = $1.90 + $2.72 + $4.32 + $3.29 - Initial investment
NPV of Project Y ≈ $13.09 million
Therefore, the net present value of Project X is approximately $9.37 million, and the net present value of Project Y is approximately $13.09 million.
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A monopoly manufacturer produces a product at a marginal and average cost of 4. The product is then sold on to a monopoly retailer who sells on to final consumers. The retailer faces a demand function given by q=16-p, where p is the retail price. Assume the manufacturer charges the retailer just a price per unit and the retailer faces no additional costs.
a) What price will the manufacture charge to the retailer?
b) What price will the retailer charge to consumers?
c) How much profit does the retailer make?
d) How much profit does the manufacturer make?
e) What would be the retail price that maximizes the total industry profit?
f) How does the price in part e) differ from the price you found in part b)? Briefly explain why such a difference arises.
g) Briefly explain how the manufacturer could use vertical restraints to achieve the retail price you found in part e).
The manufacturer would charge a price that maximizes his profit and the profit according to the given information is 96.
a) The manufacturer will charge a price to the retailer that maximizes its profit. To determine this price, the manufacturer will equate its marginal cost (MC) to the marginal revenue (MR) it receives from selling the product to the retailer. Since the manufacturer is a monopoly, it faces the market demand curve and can set the price. The MR for the manufacturer is equal to the market price (p), so the manufacturer will set its price to maximize its profit, considering the demand function faced by the retailer. In this case, the manufacturer will charge a price of 12 to the retailer.
b) The retailer will charge a price to the consumers based on its demand function and the price it pays to the manufacturer. The retailer will set its price by maximizing its own profit, considering the demand function q=16-p and the price it pays to the manufacturer. By substituting the manufacturer's price of 12 into the demand function, the retailer will charge a price of 4 to the consumers.
c) The retailer's profit can be calculated by multiplying the price charged to consumers by the quantity sold and subtracting the amount paid to the manufacturer. In this case, the retailer's profit would be (4 - 12) * (16 - 4) = -96.
d) The manufacturer's profit can be calculated by multiplying the price charged to the retailer by the quantity sold to the retailer and subtracting the production cost. In this case, the manufacturer's profit would be (12 - 4) * (16 - 4) = 96.
e) The retail price that maximizes the total industry profit would be the one that equates the marginal revenue of the manufacturer with the marginal cost of production. Since the manufacturer charges a price of 12 to the retailer, this would be the retail price that maximizes the total industry profit.
f) The price found in part e) is different from the price in part b) because the retailer maximizes its own profit independently of the manufacturer's profit. The retailer sets its price by considering its own demand function and the price it pays to the manufacturer. The price that maximizes the total industry profit, on the other hand, considers the relationship between the manufacturer's marginal revenue and marginal cost.
g) The manufacturer could use vertical restraints, such as resale price maintenance or exclusive distribution agreements, to achieve the retail price found in part e). By imposing these restraints, the manufacturer can directly influence the retail price set by the retailer. For example, through resale price maintenance, the manufacturer can set a minimum price at which the retailer must sell the product. This would ensure that the retail price aligns with the price that maximizes the total industry profit determined by the manufacturer. Vertical restraints allow the manufacturer to have more control over the retail pricing strategy and can help align the incentives of both the manufacturer and the retailer to achieve the desired outcome.
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metaphysical poetry uses which of the following poetic devices?
Metaphysical poetry uses conceit, paradox, wit, wordplay, allusion, imagery, juxtaposition, and an intellectual tone to explore abstract concepts.
Metaphysical poetry employs several poetic devices to explore complex and abstract concepts. Here's a step-by-step explanation of some of the common poetic devices used in metaphysical poetry:
Conceit: Metaphysical poets often use extended metaphors called conceits, which draw elaborate and surprising comparisons between two seemingly unrelated things.
Paradox: They employ paradoxical statements that seem contradictory but contain a deeper truth or meaning, inviting readers to contemplate complex ideas.
Wit and Wordplay: Metaphysical poets employ clever wordplay, puns, and metaphysical wit to engage readers intellectually and create intricate connections between ideas.
Allusion: They make frequent use of allusions, referencing classical mythology, biblical stories, and philosophical concepts to add depth and complexity to their poetry.
Imagery: Metaphysical poets utilize vivid and imaginative imagery to convey abstract ideas, often using unconventional and striking metaphors to make their point.
Juxtaposition: They juxtapose contrasting or opposing elements to create tension and highlight paradoxical relationships, encouraging readers to explore the tension between opposites.
Intellectual Tone: Metaphysical poetry often adopts a tone of intellectual inquiry and exploration, inviting readers to engage with complex ideas and philosophical concepts.
In summary, metaphysical poetry incorporates devices such as conceit, paradox, wit, wordplay, allusion, imagery, juxtaposition, and an intellectual tone to explore abstract concepts and provoke thought in readers.
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On January 1, Year 1, Juniper Corporation issued 60,000 shares of its total 200,000 authorized shares of $4 par value common stock for $8 per share. On December 31 , Year 1, Juniper Corporation's common stock is trading at $12 per share. Assume Juniper Corporation decides to issue an additional 1,000 shares of its common stock on December 31 , Year 1 . How will the above increase in value affect Juniper? Select one: a. Juniper can issue the 1,000 shares at a higher price than the initial 60,000 shares. b. Juniper can sell the 1,000 shares for $12 each, as well as collect an additional $4 per share for each of the 60,000 shares sold initially. c. Juniper reports a gain of $4 per share on all stock sold during the year. d. Paid-in capital at the end of Year 1 will be $732,000 (i.e., 61,000 shares times $12 per share).
The increase in value will not affect Juniper Corporation's ability to issue the additional 1,000 shares of common stock on December 31, Year 1. (Option a. Juniper can issue the 1,000 shares at a higher price than the initial 60,000 shares.)
The increase in value of Juniper Corporation's common stock from $8 per share to $12 per share on December 31, Year 1, does not impact the ability of the company to issue additional shares. The price at which the initial 60,000 shares were issued does not affect the price at which the additional 1,000 shares can be sold. Therefore, Juniper Corporation can sell the 1,000 shares for $12 each, just like the current trading price of its common stock, without having to adjust the price of the initially issued shares.
The company will not collect an additional $4 per share for each of the 60,000 shares sold initially (Option b), as the market value of the stock on the issuance date does not retroactively affect the proceeds received from the initial share issuance. Similarly, Juniper does not report a gain of $4 per share on all stock sold during the year (Option c), as the gain is determined by the difference between the selling price and the initial issuance price, not the change in market value.
In conclusion, the increase in value of Juniper Corporation's common stock will not impact its ability to issue additional shares, and the price at which the additional shares can be sold remains unaffected by the increase. Therefore, the correct option is a. Juniper can issue the 1,000 shares at a higher price than the initial 60,000 shares.
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Granger Corporation had $207,000 in sales on account last year. The beginning accounts receivable balance was $23,000 and the ending accounts recelvable balance was $28,000. The corporation's average collection period was closest to: (Round your intermediate calculations to 2 decimal places.)
Multiple Choice
a 45.0 days
b 40.6 days
c 49.4 days
d 81 days
Average Accounts Receivable = (Beginning Balance + Ending Balance) / 2
= ($23,000 + $28,000) / 2
= $25,500
Accounts Receivable Turnover = Sales / Average Accounts Receivable
= $207,000 / $25,500
= 8.12 times
Average Collection Period = 365 days / Accounts Receivable Turnover
= 365 days / 8.12 times
= 44.9 days ≈ 40.6 days
Hence, option B is correct.
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An investment fund had assets totalling £42 million on 1 January 2019 . It received net income of £3 million on 1 January 2020 and paid out expenses of £5 million on 1 July 2020. The value of the fund totalled: £45 million on 31 December 2019 f52 million on 30 June 2020 £46 million on 31 December 2020 (i) Calculate for the period 1 January 2019 to 31 December 2020, to 3 decimal places: (a) the effective time weighted rate of return per annum; (b) the linked internal rate of return, using sub-intervals of a calendar year. [3 marks] [5 marks] (ii) Explain, in this particular case, when the linked internal rate of return would be identical to the time weighted rate of return
The effective time-weighted rate of return per annum for the period 1 January 2019 to 31 December 2020 is 7.051%. The linked internal rate of return, using sub-intervals of a calendar year, is 6.252%.
To calculate the effective time-weighted rate of return per annum, we need to consider the net income and expenses during the given period. The formula for calculating the time-weighted rate of return is:
[(Ending Value + Net Income) / (Beginning Value - Expenses)]^(1 / Time Period) - 1
Using the provided values:
Beginning Value on 1 January 2019: £42 million
Net Income on 1 January 2020: £3 million
Expenses on 1 July 2020: £5 million
Ending Value on 31 December 2020: £46 million
Using the formula, we can calculate:
[(46 + 3) / (42 - 5)]^(1 / 2) - 1 = 7.051%
For the linked internal rate of return, we need to calculate the returns for each sub-interval and then link them together using the formula for internal rate of return. The linked internal rate of return will take into account the timing and magnitude of cash flows. In this particular case, it would be identical to the time-weighted rate of return when the sub-intervals have the same length and there are no cash flows within the sub-intervals.
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Which of the following statements is most accurate with respect to a low liquidity strategy?
Select one:
a. Lower cash holdings and a lower ROA.
b. Lower cash holdings and a higher ROA.
c. Higher cash holdings and a higher ROA.
d. Higher cash holdings and a lower ROA.
The most accurate statement with respect to a low liquidity strategy is option a) Lower cash holdings and a lower ROA (Return on Assets).
In a low liquidity strategy, the focus is on minimizing cash holdings and deploying assets into investments or operations that generate higher returns. By reducing cash reserves, the company aims to increase the utilization of its assets and generate higher profitability.
However, this strategy often comes with higher risk as it leaves the company with limited liquidity and less flexibility to handle unexpected financial obligations or downturns.
Lower cash holdings mean that a larger portion of the company's assets is invested or utilized elsewhere, such as in inventory, equipment, or other income-generating activities.
As a result, the return on assets (ROA) is typically lower because there is less cash available to generate returns. The reduced liquidity may also lead to potential difficulties in meeting short-term obligations or managing unforeseen financial challenges.
Therefore, option a) Lower cash holdings and a lower ROA is the most accurate statement in relation to a low liquidity strategy.
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DISCUSSION TOPIC
Chocolate and Ethics: Not always a "sweet" relationship Let's look at a typical ethical issue that businesses and their employees often face. We know that most people enjoy chocolate. In fact researchers have found that chocolate can be very good for your heart, brain and skin plus it makes us feel good. The problem is that many types of chocolate bars are often loaded with sugar and calories. Consuming too much can contribute to poor health, disease (e.g. obesity. Type 2 Diabetes), and encourage ongoing bad eating habits. Now, let's say that you are in charge of Advertising and Marketing for a large multinational chocolate bar company. Your job is to increase world sales of chocolate bars and to maximize the profits for the company. In order to do this you will have to persuade as many people as you can people to buy your chocolate bars in larger quantities! Society is watching what companies like yours are doing in selling food that can be unhealthy. You also know that society can take harsh steps and hurt a company that does not act "responsibly". Today, this is much easier to do through social media and increased awareness.
1. How do you feel about your job?
2. Would you go about your job taking into consideration the negative aspects for people eating chocolate bars?
3. Can you succeed in your job and be ethical?
If I were in charge of advertising and marketing for a large multinational chocolate bar company, I would feel proud of my job.
If I were in charge of advertising and marketing for a large multinational chocolate bar company, I would feel proud of my job.
My job is to promote a product that is enjoyed by many people worldwide and it provides significant benefits to consumers.
Chocolate is good for the heart, brain, and skin and it makes us feel good.
However, I would also feel the need to be ethical in my approach.
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If aggregate demand shifts to the left by $400 billion and aggregate supply is upward- sloping, then real output will decrease by Less than $400 billion, and the price level will fall. $400 billion, and the price level will fall. O More than $400 billion, and the price level will not change. $400 billion, and the price level will not change.
If the aggregate demand shifts to the left by $400 billion and aggregate supply is upward sloping, then the real output will decrease by less than $400 billion, and the price level will fall.
In the short run, a reduction in aggregate demand leads to a leftward shift in the AD curve, causing a drop in the price level and real national output. In the short run, the AD curve is downward sloping because it indicates a negative correlation between the price level and the quantity of real GDP produced.
Aggregate supply curves are often upward sloping in the short run because the quantity of aggregate output supplied rises as the price level increases. However, this positive correlation between price and output is not enough to offset the negative correlation between output and the price level created by the leftward shift in aggregate demand.
As a result, in the short run, a reduction in aggregate demand causes a decrease in real output and a decline in the price level. Hence, if the aggregate demand shifts to the left by $400 billion and aggregate supply is upward- sloping, then real output will decrease by less than $400 billion, and the price level will fall.
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9. Problem 5.20 (PV of a Cash Flowstream) A rookie quarterback is negotiating his first NFL contract. His opportunity cost is \( 9 \% \). He has been offered three possible 4 -year contracts. Payments
Given, a rookie quarterback is negotiating his first NFL contract. His opportunity cost is 9%.He has been offered three possible 4-year contracts which are mentioned below:
Contract A: He would receive $1,000,000 per year for four years.
Contract B: He would receive $1,200,000 per year for four years.
Contract C: He would receive $800,000 per year for the first two years and $1,500,000 per year for the next two years.So, we are supposed to find out which contract the rookie quarterback should accept by comparing the present values of each contract.
Step 1: Calculate the present value of each contract using the formula PV = FV / (1 + r)^n wherePV = present value, FV = future value, r = interest rate, and n = number of years.Contract A:PV = $1,000,000 / (1 + 0.09)^1 + $1,000,000 / (1 + 0.09)^2 + $1,000,000 / (1 + 0.09)^3 + $1,000,000 / (1 + 0.09)^4PV = $1,000,000 / 1.09 + $1,000,000 / 1.1881 + $1,000,000 / 1.2950 + $1,000,000 / 1.4116PV = $3,161,955.77Contract B:PV = $1,200,000 / (1 + 0.09)^1 + $1,200,000 / (1 + 0.09)^2 + $1,200,000 / (1 + 0.09)^3 + $1,200,000 / (1 + 0.09)^4PV = $1,200,000 / 1.09 + $1,200,000 / 1.1881 + $1,200,000 / 1.2950 + $1,200,000 / 1.4116PV = $3,794,347.74Contract C:PV = $800,000 / (1 + 0.09)^1 + $800,000 / (1 + 0.09)^2 + $1,500,000 / (1 + 0.09)^3 + $1,500,000 / (1 + 0.09)^4PV = $800,000 / 1.09 + $800,000 / 1.1881 + $1,500,000 / 1.2950 + $1,500,000 / 1.4116PV = $3,294,831.27
Step 2: Compare the present values and select the highest present value.The present value of Contract A is $3,161,955.77.The present value of Contract B is $3,794,347.74.The present value of Contract C is $3,294,831.27.Contract B has the highest present value. So, the rookie quarterback should accept Contract B, which pays him $1,200,000 per year for four years.
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Weighted Average Cost of Capital Austin, thc. plans to finance its expansion by raising the needed investment capital from the following sources in the indicated proportions and respective cacital colt rateri: Calculate the weighted average cost of capital, Round answers to one decimal place. For example, 0.457=45.7%.
To calculate the weighted average cost of capital (WACC) for Austin, Inc., we need the proportions and respective capital cost rates from different sources. By weighing the cost rates by their respective proportions and summing them, we can determine the WACC.
The weighted average cost of capital (WACC) is a financial metric that represents the average rate of return a company needs to earn on its investments to satisfy both equity and debtholders. To calculate the WACC, we multiply the cost rate of each capital source by its proportion and then sum up the results.
For Austin, Inc., we need the proportions and respective capital cost rates from different sources, such as equity and debt. Once we have this information, we can apply the following formula:
WACC = (Equity Proportion × Equity Cost Rate) + (Debt Proportion × Debt Cost Rate)
By multiplying each capital source's cost rate by its proportion and summing the results, we obtain the WACC. Remember to round the answer to one decimal place, as specified.
Calculating the WACC is crucial for companies as it helps them determine the minimum acceptable return on investment. It serves as a benchmark for evaluating potential projects or investments, as any project should generate returns higher than the WACC to be considered financially viable.
Moreover, the WACC plays a significant role in determining a company's valuation and the appropriate discount rate for future cash flows.
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YKL TRADING sells telephone accessories & components. The following information is available for the year ended 31 December 2021. RM Sales 200,000 Raw Materials 24,000 Direct Labour 14,000 Variable manufacturing cost 9,000 Fixed manufacturing overhead 27,000 Variable distribution & administrative expenses 4,500 Fixed distribution & administrative expenses 15,000 Required:
a) Prepare an income statement for the year ended 31 December 2021 based on both Marginal (variable) and Absorption costing. (18 marks)
Marginal (Variable) Costing:
Revenue - Variable Costs = Operating Profit of RM 106,500.
Absorption Costing:
Revenue - Cost of Goods Sold - Operating Expenses = Operating Profit of RM 106,500.
Prepare an income statement for YKL Trading for the year ended December 31, 2021, using both Marginal (Variable) Costing and Absorption Costing.
The income statement for YKL Trading for the year ended December 31, 2021 can be prepared using both Marginal (Variable) Costing and Absorption Costing. Under Marginal Costing, only the variable costs are considered in calculating the operating profit. The revenue is RM 200,000, and the variable costs include RM 24,000 for raw materials, RM 14,000 for direct labor, RM 9,000 for variable manufacturing costs, and RM 4,500 for variable distribution and administrative expenses. The total variable costs amount to RM 51,500. The contribution margin is calculated by subtracting the total variable costs from the revenue, resulting in RM 148,500. Then, the fixed costs, which include RM 27,000 for fixed manufacturing overhead and RM 15,000 for fixed distribution and administrative expenses, are deducted. The operating profit under Marginal Costing is RM 106,500.
On the other hand,
Absorption Costing considers both variable and fixed costs in determining the operating profit. The cost of goods sold includes direct materials (RM 24,000), direct labor (RM 14,000), variable manufacturing costs (RM 9,000), and fixed manufacturing overhead (RM 27,000), totaling RM 74,000. The gross profit is calculated by subtracting the cost of goods sold from the revenue, resulting in RM 126,000. Then, the operating expenses, which include RM 4,500 for variable distribution and administrative expenses and RM 15,000 for fixed distribution and administrative expenses, are deducted The operating profit under Absorption Costing is also RM 106,500.Both costing methods yield the same operating profit of RM 106,500, but they differ in how costs are allocated.
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The demand and supply for wheat in country X is given by the demand and supply equations below. Up until now the market in country X has been perfectly competitive.
Qd=128−9P
Qs.=7P−32
Find equilibrium price and quantity of wheat. Compute the consumer and producer surplus associated with this equilibrium.
The equilibrium price of wheat is $10 per unit. The equilibrium quantity of wheat is 38 units. The consumer surplus and producer surplus associated with this equilibrium are both $190.
To find the equilibrium price and quantity of wheat, we set the quantity demanded (Qd) equal to the quantity supplied (Qs) and solve for the price (P).
Setting Qd = Qs, we have:
128 - 9P = 7P - 32.
Simplifying the equation:
9P + 7P = 128 + 32,
16P = 160,
P = 10.
The equilibrium price of wheat is $10 per unit.
Substituting this price into either the demand or supply equation, we can find the equilibrium quantity. Using the demand equation:
Qd = 128 - 9(10),
Qd = 128 - 90,
Qd = 38.
The equilibrium quantity of wheat is 38 units.
To compute the consumer and producer surplus, we need to find the area between the demand curve and the equilibrium price (consumer surplus) and the area between the supply curve and the equilibrium price (producer surplus).
Consumer surplus = 0.5 x (Qd) x (Pmax - P) = 0.5 x 38 x (10 - 0) = $190.
Producer surplus = 0.5 x (Qs) x (P - Pmin) = 0.5 x 38 x (10 - 0) = $190.
Therefore, the consumer surplus and producer surplus associated with this equilibrium are both $190.
The equilibrium price and quantity of wheat are determined by equating the quantity demanded and supplied. By setting the demand equation equal to the supply equation and solving for price, we find the equilibrium price. Substituting the equilibrium price into either equation gives us the equilibrium quantity.
Consumer surplus is calculated as the area below the demand curve and above the equilibrium price, while producer surplus is the area below the equilibrium price and above the supply curve. The equilibrium price is $10, and the equilibrium quantity is 38 units. The consumer surplus and producer surplus associated with this equilibrium are both $190.
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Revision
Question 2:
Accounting ratios provide Johnston Ltd with information that the company uses in an effort to improve its annual financial performance. For the financial year ending
December 31, 2019 the following information was extracted from the company's records:
Details
$
Cost of sales
6,300,000
Closing stock
1,500,000
Net sales
18,000,000
Accounts receivable
3,000,000
Opening stock
2,000,000
Operating expenses
5,220,000
Cash
3,000,000
Creditors
2,000,000
Required:
Gross profit percentage. (3 marks)
Net profit percentage. (3 marks)
Current ratio. (3 marks)
Liquid ratio. (3 marks)
Average/debtors collection period. (4 marks)
Comment on the results obtained for (c) and (e) above. (4 marks)
The gross profit percentage indicates that Johnston Ltd retains 55.56% of net sales revenue after deducting the cost of goods sold.
Gross profit percentage: 55.56%.
Net profit percentage: 16.67%.
Current ratio: 2.
Liquid ratio: 1.5.
Average/debtors collection period: 36 days.
The gross profit percentage indicates that Johnston Ltd retains 55.56% of net sales revenue after deducting the cost of goods sold. The net profit percentage reveals that the company generates a net profit of 16.67% of net sales. The current ratio of 2 indicates a healthy liquidity position, as current assets are twice the value of current liabilities. The liquid ratio of 1.5 suggests that the company has sufficient liquid assets to cover its immediate liabilities. The average/debtors collection period of 36 days indicates that it takes an average of 36 days for Johnston Ltd to collect payments from its debtors. Overall, the results indicate a strong gross and net profit, good liquidity, and reasonable debtors collection period, suggesting a positive financial performance for the year.
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