The business model that offers potential buyers the opportunity to make purchases either online or in a physical location is called a b) click-and-mortar business model.
Click-and-Mortar is a term used to describe a business that has both an online and a physical presence. It is a kind of business model that is also known as “bricks-and-clicks” and “clicks-and-bricks.” This type of business model is designed to give customers a more comprehensive shopping experience.
They can either choose to buy online or visit a physical store, allowing them to have the best of both worlds. This provides businesses with the chance to reach more customers and to provide them with a more comprehensive service.
Therefore, the correct answer is b) click-and-mortar
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5. Wheat futures trade in lot sizes of 5,000 bushels per contract. How many contracts (and what position) does a wheat farmer need to enter to hedge an expected production of 100,000 bushels of wheat?
a. 100,000 short futures
b. 100,000 long futures
c. 20 short futures
d. 20 long futures
To hedge an expected production of 100,000 bushels of wheat, a wheat farmer would need to enter a position of 20 short futures contracts. This answer can be determined by dividing the total expected production by the lot size per contract.
The lot size for wheat futures contracts is 5,000 bushels per contract. To determine the number of contracts needed to hedge 100,000 bushels of wheat, we divide the total expected production by the lot size per contract:
Number of contracts = Total expected production / Lot size per contract
= 100,000 bushels / 5,000 bushels per contract
= 20 contracts
Since the farmer wants to hedge the expected production, they would take a short position in the futures market.
A short futures position means selling futures contracts, which allows the farmer to lock in a price for selling their wheat in the future.
By taking a short position in 20 futures contracts, the farmer can effectively hedge their expected production of 100,000 bushels of wheat.
This helps mitigate the risk of price fluctuations in the wheat market, providing the farmer with price stability and a measure of financial security.
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Behavioral Economics
Please explain following phenomena applying behavioral economics concepts (Your explanation should be no more than 100 words)
It is often observed that when house prices are falling, houses remain on the market longer than when prices are rising.
Behavioral economics explains this. As house values decline, sellers may see lower sale prices as losses. Despite market changes, sellers hold out for higher offers, keeping the property on the market longer.
When house prices are falling, houses remain on the market longer than when prices are rising because of the endowment effect. This is a cognitive bias that causes people to overvalue something they own simply because they own it. Homeowners who have experienced a rise in housing prices may place a higher value on their homes than is justified by market conditions, making them reluctant to sell at a lower price.
Prospective buyers may hesitate to buy a house that has lost value, even if it is still a good investment. This creates a situation where houses remain on the market longer in a falling market than in a rising one.
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Explain the differences in the types of negotiation, negotiation
tactics, and bargaining behaviors between United States and
Japan
The types of negotiation, negotiation tactics, and bargaining behaviors differ between the United States and Japan due to variations in cultural norms, communication styles, and business practices.
In the United States, negotiations often follow a competitive and assertive approach, characterized by a focus on individualism, direct communication, and a goal-oriented mindset. Negotiators may employ tactics such as making bold initial offers, highlighting strengths, and leveraging their position of power. Bargaining behaviors in the U.S. may involve assertive persuasion, active information sharing, and a willingness to take risks to achieve desired outcomes.
On the other hand, negotiations in Japan are often more collaborative and relationship-oriented. Japanese culture emphasizes harmony, respect, and consensus-building. Negotiators in Japan tend to prioritize long-term relationships and mutual trust. Tactics such as building rapport, demonstrating patience, and seeking win-win solutions are commonly employed. Bargaining behaviors in Japan may involve indirect communication, non-verbal cues, and a focus on preserving face and maintaining social harmony.
These differences in negotiation styles reflect broader cultural values and societal expectations. While the United States values individualism, competition, and direct communication, Japan places greater emphasis on collectivism, harmony, and indirect communication.
It is important to note that these are general observations and there can be variations within each country depending on the individuals and specific contexts. Successful negotiations between the United States and Japan often require cross-cultural understanding, flexibility, and adaptability to navigate these differences and reach mutually beneficial agreements.
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Question 49 Industry analysis is primarily concerned with a corporation's
(A) societal environment.
(B) task environment.
(C) sociocultural environment.
(D) economic environment.
(E) internal environment.
Question 50
An agency problem can occur when
(A) the desires and objectives of the owners and agents conflict.
(B) it is difficult or expensive for the owners to verify what the agent is actually doing.
(C) the owners and managers have different attitudes toward risk.
(D) executives do not select risky (and potentially profitable) strategies because they fear losing their jobs if the strategy fails.
(E) All of the above.
The correct answer is (B) task environment. Industry analysis primarily focuses on examining a corporation's task environment, which includes factors such as competitors, suppliers, customers, and other external forces that directly affect the company's operations and performance.
The task environment refers to the specific external forces that have a direct impact on a corporation's operations, strategies, and competitiveness. This includes factors such as industry competitors, suppliers, customers, regulatory agencies, and other stakeholders involved in the company's immediate environment. Industry analysis aims to understand and assess these external forces to gain insights into the opportunities and threats present within the industry, enabling the corporation to formulate effective strategies.
Industry analysis primarily revolves around assessing a corporation's task environment, which consists of external forces directly influencing the company's operations. By understanding the competitive landscape, customer dynamics, supplier relationships, and other relevant factors, a corporation can make informed decisions and develop strategies that align with the external environment, leading to sustainable business success.
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During 2018, Raines Umbrella Corporation had sales of $742,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $579,000, $98,000, and $128,000, respectively. In addition, the company had an interest expense of $104,000 and a tax rate of 40 percent. (Ignore any tax loss carryback or carryforward provisions.) Assume Raines Umbrella Corporation paid out $20,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt?
It's important to note that net fixed assets and net working capital spending are mentioned as zero in the given information, which implies that there were no investments in long-term assets or changes in working capital during the year.
Additionally, the assumption of no new stock being issued means that the change in retained earnings directly corresponds to the net new long-term debt.
To calculate the net new long-term debt of Raines Umbrella Corporation, we need to consider the components that affect the change in long-term debt during the year. These components include the interest expense, tax rate, cash dividends, and the difference between net income and the sum of cost of goods sold, administrative and selling expenses, and depreciation expenses.
In this case, the sales of Raines Umbrella Corporation were $742,000, and the various expenses and payments were as follows: cost of goods sold = $579,000, administrative and selling expenses = $98,000, depreciation expenses = $128,000, interest expense = $104,000, tax rate = 40%, and cash dividends = $20,000. Net fixed assets and net working capital spending are given as zero, and no new stock was issued during the year.
To calculate the net new long-term debt, we need to find the net income first. Net income is calculated as sales minus the sum of cost of goods sold, administrative and selling expenses, depreciation expenses, interest expense, and taxes. From the net income, we subtract the cash dividends to determine the retained earnings. Finally, the net new long-term debt is equal to the change in retained earnings.
Explaination :
The net new long-term debt represents the change in the long-term debt of Raines Umbrella Corporation during the year. To calculate this, we follow the steps mentioned above. First, we calculate the net income by deducting the various expenses and taxes from the sales revenue. Next, we subtract the cash dividends paid out to determine the retained earnings.
In this case, the given financial data allows us to calculate the net new long-term debt. By following the calculations and considering the provided values, we can determine the net income and retained earnings. The net new long-term debt is then equal to the change in retained earnings.
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Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:
Year Wind Turbines Biofuel Equipment
1 $180,000 $360,000
2 180,000 360,000
3 180,000 360,000
4 180,000 360,000
The wind turbines require an investment of $466,020, while the biofuel equipment requires an investment of $1,027,800. No residual value is expected from either project.
Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192
Required:
1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar.
Net Present Value Method is used to determine whether an investment will produce a satisfactory outcome. It evaluates the current value of cash inflows compared to the current value of cash outflows.
When the NPV is positive, the investment is regarded as profitable, while a negative NPV suggests that the investment would be a waste of money.Internal Rate of Return Method is the percentage rate of return anticipated from a given investment over its lifetime.
In other words, it refers to the discount rate that sets the Net Present Value of future cash flows equal to zero. It is the rate at which the Net Present Value of an investment equals zero. The investment is acceptable if the IRR is greater than the required rate of return.
Analysis for a Service Company:Service companies can use both NPV and IRR methods to determine the attractiveness of a proposed investment. These procedures are frequently used in selecting projects that generate future cash inflows to the firm.
When it comes to service firms, projects that produce future cash inflows are primarily noncapital projects like advertisement campaigns, research and development projects, and marketing research studies.
The table below shows the present value of an annuity of $1.00 at a 10 percent rate for 1 to 10 periods.1 0.9092 1.7353 2.4874 3.1705 3.7916 4.3557 4.8688 5.3369 5.76510 6.1591.
Compute the net present value for each project using the table above:For Project 1:The net present value can be computed as follows: NPV= $2,500 + ($1,700 * 0.909) + ($1,900 * 0.826) + ($2,100 * 0.751) + ($2,500 * 0.683) + ($3,000 * 0.621)NPV = $2,500 + $1,546 + $1,581 + $1,581 + $1,707 + $1,863NPV = $10,778
The net present value is positive, indicating that the project is desirable.For Project 2:The net present value can be computed as follows:NPV= $2,500 + ($2,200 * 0.909) + ($2,400 * 0.826) + ($3,000 * 0.751) + ($3,500 * 0.683) + ($4,000 * 0.621)NPV = $2,500 + $2,002 + $1,981 + $2,253 + $2,385 + $2,484NPV = $13,605.The net present value is positive, indicating that the project is desirable.
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QUESTION 41 On February 1, 2013, James Co., which uses straight-line depreciation, purchased equipment for $88,000, with a useful life of 12 years and a $4,000 salvage value. On February 1, 2017, the equipment was sold for $56,000. Which of the following would James recognize as a result of this disposition?
$7,000 loss
$4,000 loss
$4,000 gain
No gain or loss
Using straight-line depreciation, an equipment purchased for $88,000, with a useful life of 12 years and a $4,000 salvage value, if it was sold for $56,000, then it will have no gain or loss as a result of this disposition.
To determine the result of the disposition and the gain or loss recognized by James Co., we need to calculate the book value of the equipment at the time of sale.
The equipment was purchased for $88,000 and had a useful life of 12 years, so the annual depreciation expense is calculated as follows:
Depreciation Expense per year = (Purchase Cost - Salvage Value) / Useful Life
Depreciation Expense per year = ($88,000 - $4,000) / 12
Depreciation Expense per year = $7,000
Since the equipment was sold on February 1, 2017, it was used for 4 years (2013 to 2017). Therefore, the accumulated depreciation at the time of the sale is:
Accumulated Depreciation = Depreciation Expense per year * Years of Use
Accumulated Depreciation = $7,000 * 4
Accumulated Depreciation = $28,000
The book value of the equipment at the time of the sale is calculated as follows:
Book Value = Purchase Cost - Accumulated Depreciation - Salvage Value
Book Value = $88,000 - $28,000 - $4,000
Book Value = $56,000
Since the equipment was sold for $56,000, which is equal to its book value, there is no gain or loss recognized by James Co. The correct answer is no gain or loss.
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Ozzie Osborne Manufacturing Company's overhead budget for the first quarter of 2022 contained the following data:
Variable costs
indirect materials $12,000
indirect labour 4,000
utilities 3,000
maintenance 5,000
fixed costs
supervisor's salary $21,000
depreciation 5,000
property taxes 3,000
actual variable costs for the first quarter were:
indirect materials $13,300
indirect labour 4,200
utilities 3,050
maintenance 5,600
Actual fixed costs were as expected except for property taxes, which were $3,100. All costs are considered controllable by the department manager except for the supervisor's salary. The company manufactured and sold 1,100 units; however, its budget was based on 1,000 units. Instructions Prepare a manufacturing overhead responsibility performance report for the first quarter comparing budgeted amounts to actual results and highlighting an favourable or unfavourable variances.
The manufacturing overhead responsibility performance report compares the budgeted amounts with the actual results for the first quarter of 2022. The report includes both variable costs and fixed costs.
Manufacturing Overhead Responsibility Performance Report (First Quarter 2022):
Budgeted Amounts Actual Amounts Variance (Favorable/Unfavorable)
Variable Costs:
Indirect Materials $12,000 $13,300 $1,300 Unfavorable
Indirect Labour $4,000 $4,200 $200 Unfavorable
Utilities $3,000 $3,050 $50 Unfavorable
Maintenance $5,000 $5,600 $600 Unfavorable
Fixed Costs:
Supervisor's Salary $21,000 $21,000 $0 No Variance
Depreciation $5,000 $5,000 $0 No Variance
Property Taxes $3,000 $3,100 $100 Unfavorable
For variable costs, the actual amounts incurred exceeded the budgeted amounts, resulting in unfavorable variances. The indirect materials had a variance of $1,300 unfavorable, indirect labour had a variance of $200 unfavorable, utilities had a variance of $50 unfavorable, and maintenance had a variance of $600 unfavorable.
As for fixed costs, the supervisor's salary and depreciation had no variance, indicating that they were as expected. However, the property taxes had a variance of $100 unfavorable, indicating that the actual property tax expense exceeded the budgeted amount.
In conclusion, the manufacturing overhead responsibility performance report highlights the variances between budgeted amounts and actual results. The unfavorable variances in variable costs and property taxes suggest that there were higher expenses than initially planned. The report provides valuable insights for the department manager to identify areas where cost control measures may be needed and make adjustments in future budgeting processes.
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Trade and Tariffs a. Consider again the market for Scarves in Italy. Suppose again the price for Scarves in Autarky is 25 euros, but now there are two countries that Italy can trade with: The United Kingdom, who will sell Scarves in Italy for 15 euros, and Portugal, who will sell scarves in Italy for 12 euros. Suppose that the Italian government still imposes a specific tariff of 6 euros (add 6 euros to each price). i. Who would Italy purchase Scarves from under Free Trade? At what price? ii. Who would Italy purchase Scarves from with the Tariff? At what price? iii. Suppose Italy entered into an FTA with the United Kingdom. How does Total Surplus compare to TS from part (ii)? (Hint: Think about trade creation and trade diversion as well as the change in government surplus, you may find it helpful to graph this out). b. Why might a country enter into an FTA with a non-optimal country in terms of Static Gains from trade?
i. Under free trade, Italy would purchase scarves from Portugal at a price of 12 euros.
ii. With the tariff, Italy would purchase scarves from the United Kingdom at a price of 21 euros (including the tariff).
iii. Total Surplus is expected to increase compared to part (ii) if Italy enters into an FTA with the United Kingdom, due to trade creation and more efficient resource allocation.
i. Under free trade, Italy would purchase scarves from Portugal, where the price is 12 euros.
ii. With the tariff, Italy would purchase scarves from the United Kingdom, as the tariff makes the price from the UK (15 + 6 = 21 euros) lower than the price from Portugal (12 + 6 = 18 euros).
iii. If Italy enters into a Free Trade Agreement (FTA) with the United Kingdom, the total surplus is likely to increase compared to the situation with the tariff. This is because trade creation occurs when the FTA allows Italy to import scarves from the UK at a lower price (15 euros) than under the tariff. This leads to a more efficient allocation of resources and an increase in overall welfare (total surplus). However, the exact change in total surplus would depend on the specific conditions of the FTA and the magnitude of trade diversion.
b. A country might enter into a Free Trade Agreement (FTA) with a non-optimal country in terms of static gains from trade for various reasons. While static gains from trade refer to the economic benefits that arise from more efficient allocation of resources through trade, there could be other strategic, political, or geopolitical considerations involved in forming an FTA. These may include fostering diplomatic relations, geopolitical alliances, promoting regional stability, or gaining preferential access to a particular market even if it does not offer the maximum static gains. Additionally, forming an FTA with a non-optimal country in terms of static gains from trade could be a stepping stone towards further economic integration and trade liberalization in the future.
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Metro Cable is the exclusive provider of high speed cable internet to a city. The company is free to charge any price it wants, and providing internet has the same marginal cost to all households in the city (i.e. a constant marginal cost).
As a whole, the price elasticity of demand in the city is Ed = −3.5. However, on further inspection, Metro Cable discovers the demand on the West Side of town is less elastic than on the East Side of town.
Assume there is no additional fixed cost to providing service to each side of town—there is only a single fixed cost when providing cable internet city-wide. What should Metro Cable do when setting prices?
Group of answer choices
a Only sell cable internet to those on the West Side of town.
b More information is needed.
c Set the same price to all customers across the city.
d Charge a higher price on the West Side than the East Side.
e Charge a higher price on the East Side than the West Side.
Metro Cable should charge a higher price on the West Side than the East Side.
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. A more elastic demand indicates that consumers are highly responsive to price changes, while a less elastic demand suggests a lower level of responsiveness.
In this scenario, Metro Cable discovers that the demand on the West Side of town is less elastic than on the East Side. This means that consumers on the West Side are less responsive to price changes compared to consumers on the East Side. To maximize its profits, Metro Cable should take advantage of this information and charge a higher price on the West Side.
By setting a higher price on the West Side, where the demand is less elastic, Metro Cable can capture a larger share of consumer surplus and increase its revenue. At the same time, it can still provide service to the East Side at a slightly lower price to cater to the more price-sensitive customers. This strategy allows Metro Cable to optimize its pricing strategy based on the different price elasticities of demand in different parts of the city.
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1) Using the gross method, purchase discounts lost are:
A) Included in inventory purchased.
B) Added to accounts payable.
C) Included as a reduction to purchase returns.
D) Deducted from discount income.
Gross method, purchase discounts lost are the correct option is d. Hence, D) Deducted from discount income.
Under this method, the business entity first records credit sales on gross amount without adjusting the discount provided if payment is made within a specified period. The journal entry will report debit of discount allowed, cash, and credit to accounts receivables on cash receipt.
The gross method of recording purchase discounts records the purchase and the payable at the gross amount before any discount. If the firm takes the discount, an account titled Purchase Discounts will be credited for the amount of the discount. Thus the correct option is d.
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EXERCISE 6.9
Zimba Hats received a statement dated 25 July 2021 from their supplier, Headgear Wholesalers. The balance of Headgear Wholesalers' account in the Accounts payable ledger at 31 July 2021 amounted to R8 052 compared to R8 482 per the statement received. When comparing the statement with the supplier's account in the Accounts payable subsidiary ledger, the accountant discovered the following:
1. Invoice No. 185, dated 15 July 2021, for R1 200 had been incorrectly entered on the statement as R2 100.
2. Invoice No. 210, dated 20 July 2021, which was subject to a 25% trade discount had been incorrectly entered on the creditor's statement at its gross amount. The invoice had been correctly recorded in Zimba Hats' purchases journal at the net amount of R900.
3.
Credit note No. 010, dated 10 July 2021, for R260 was correctly shown on the statement and in
the purchases returns journal. The credit note had been correctly recorded in the general ledger of Zimba Hats, but had been posted to the supplier's account in the subsidiary ledger as an invoice. Invoice No. 212 for R250, dated 29 July 2021, does not appear on the statement of Headgear
Wholesalers.
4.
REQUIRED:
Prepare the Remittance advice to be sent to Headgear Wholesalers on 1 August 2021 together with the payment for July purchases.
Remittance Advice
1 August 2021
Headgear Wholesalers
[Supplier's Address]
[City, State, ZIP]
Dear Headgear Wholesalers,
We hope this letter finds you well. Please find enclosed the payment for our July purchases along with this remittance advice detailing the adjustments required to reconcile the statement received with our accounts payable subsidiary ledger.
1. Invoice No. 185, dated 15 July 2021: The correct amount should be R1,200 instead of the incorrectly stated R2,100. We apologize for any confusion caused.
2. Invoice No. 210, dated 20 July 2021: This invoice, subject to a 25% trade discount, was incorrectly entered on the statement at its gross amount. However, it was recorded correctly in our purchases journal at the net amount of R900.
3. Credit note No. 010, dated 10 July 2021: The credit note for R260 was accurately reflected on the statement and in our purchases returns journal. Regrettably, it was posted as an invoice in the supplier's account in our subsidiary ledger. This has been rectified in our general ledger.
4. Invoice No. 212, dated 29 July 2021: We observed that this invoice for R250 does not appear on the Headgear Wholesalers' statement. Please verify and include it in future statements as necessary.
Once again, we apologize for any inconvenience caused by these discrepancies. We value our business relationship and appreciate your prompt attention to these matters. If you require any further clarification or have any questions, please do not hesitate to contact us.
Thank you for your cooperation.
Sincerely,
[Your Name]
[Your Title]
Zimba Hats
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Jesse is married, but for 2021 , he will filed separarely from his wife.On January 29, 2021 he purchased 100 shares of KLM stock for $10,000. Shortly he made the purchase , the price of the stock declined sharply. Concerned that his investment would continued to lose value, Jesse decided to cut his losses, and he sold all of his shares of KLM stock for $5,000 on March 25, 2021.
Jesse did not have any other capital gains or losses that year, and his only other income consisted of $72,00 in wages. Jesse has not had good luck with his investments in recent years, and he also has a prior year carryover lossof $2,000. What amount of capital loss can Jesse use to offset his ordinary income?
Jesse can use a capital loss of $3,000 to offset his ordinary income when his only other income consisted of $72,00 in wages .
Jesse incurred a capital loss of $5,000 from the sale of his KLM stock. However, the maximum amount of capital loss that an individual can use to offset their ordinary income in a given tax year is $3,000. Since Jesse does not have any other capital gains or losses for the year, he can utilize the full $3,000 capital loss to offset his ordinary income of $72,000 from wages.
This means that Jesse's taxable income would be reduced by $3,000, resulting in a lower tax liability. Any remaining capital loss amount beyond $3,000 can be carried forward to future years and used to offset future capital gains or ordinary income.
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according to mintzberg's organizational structures, the adhocracy emphasizes:
According to Mintzberg's organizational structures, the adhocracy emphasizes: Flexibility and innovation. The adhocracy structure prioritizes flexibility and innovation as key elements for success. It encourages employees to be proactive, creative, and adaptable in their work, promoting a culture of continuous learning and experimentation.
The adhocracy is one of the organizational structures proposed by Henry Mintzberg. It is characterized by a flexible and decentralized approach to organizing work. In an adhocracy, the emphasis is on innovation, creativity, and the ability to quickly adapt to changing circumstances. Adhocracies are typically found in dynamic and uncertain environments where there is a need for rapid decision-making and experimentation. They often rely on cross-functional teams, project-based work, and a fluid organizational structure that allows for collaboration and individual initiative.
The adhocracy structure prioritizes flexibility and innovation as key elements for success. It encourages employees to be proactive, creative, and adaptable in their work, promoting a culture of continuous learning and experimentation. This structure is suitable for organizations operating in rapidly changing industries or those seeking to foster a culture of innovation.
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t/f The average level of tariffs on imported products charged by industrialized countries was 40% in 1946. By 1990, after decades of GATT negotiations, it was up to more than 60%.
False. The statement is incorrect. The average level of tariffs on imported products charged by industrialized countries was not up to more than 60% by 1990. In fact, the trend during the post-World War II period was towards reducing tariffs through negotiations conducted under the General Agreement on Tariffs and Trade (GATT).
The GATT rounds of negotiations aimed to liberalize trade and lower trade barriers. As a result, average tariff rates among industrialized countries decreased significantly over time. By 1990, average tariff rates were generally much lower than 60% in industrialized countries, reflecting the progress made in trade liberalization efforts.
The average level of tariffs on imported products charged by industrialized countries experienced a significant decline from 1946 to 1990. The post-World War II era saw the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, which aimed to promote trade liberalization and reduce barriers to international commerce.
Under the GATT framework, several rounds of negotiations took place, leading to the gradual reduction of tariffs among member countries. These negotiations included the Dillon Round (1960-1962), the Kennedy Round (1964-1967), the Tokyo Round (1973-1979), and the Uruguay Round (1986-1994), which eventually led to the creation of the World Trade Organization (WTO).
As a result of these multilateral negotiations, industrialized countries progressively lowered their average tariff rates. While specific tariff rates varied among countries and industries, the overall trend was towards liberalization and the reduction of trade barriers.
By 1990, average tariff rates in industrialized countries were generally lower than 60%. However, it is important to note that the exact average tariff rate varied across countries and sectors. Tariff rates could be higher in certain protected industries or for specific products, but the average across all imported products in industrialized countries was significantly lower than the 60% figure mentioned in the statement.
This trend towards reduced tariffs and increased trade liberalization has continued in subsequent years, with ongoing negotiations and agreements aimed at further opening up markets and facilitating international trade.
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10. Suppose all consumers in a country consume bread and butter at a fixed ratio of 2:1 regardless of the relative price. Suppose the opportunity cost of producing bread (or butter) is constant. 1,000 units of bread can be produced when all resources are used in its production and 500 units of butter can be produced if all resources are used in its production. (a) Illustrate the pre-trade equilibrium. (b) What will be the pre-trade relative price of bread? (c) When trade opens up, the country finds the relative price of bread in the world market as three-fourths. Which good will it export? (d) Calculate the country's volume of exports. (e) Will the country gain from trade? If so, what is the source of its gains from trade?
The pre-trade equilibrium is a fix ratio of 2:1 ; The pre-trade relative price of bread is 2 ; The country will export the good with a comparative advantage, which is butter since the world market offers a higher relative price for it ; The volume of exports is 750 units of butter ; and The country will gain from trade.
(a) Pre-trade equilibrium: In the absence of trade, the country produces and consumes both bread and butter at a fixed ratio of 2:1. This means that for every 2 units of bread produced, 1 unit of butter is produced, and the same ratio applies to consumption.
This equilibrium occurs when the country allocates all its resources to produce 1,000 units of bread and 500 units of butter.
(b) Pre-trade relative price of bread: The relative price of bread can be calculated by comparing the opportunity costs of producing bread and butter.
Since the opportunity cost is constant, the relative price of bread can be determined by dividing the units of bread produced by the units of butter produced: 1,000/500 = 2. Therefore, the pre-trade relative price of bread is 2.
(c) Post-trade relative price and export good: When trade opens up and the country encounters a relative price of bread in the world market as three-fourths (0.75), it means that bread is relatively cheaper in the world market compared to butter.
In this case, the country will export the good with a comparative advantage, which is butter since the world market offers a higher relative price for it.
(d) Volume of exports: To determine the volume of exports, we need to find the quantity of butter the country can produce with the resources previously allocated to bread production. If 1,000 units of bread were originally produced, the country can now produce (1,000 x 0.75) 750 units of butter. Therefore, the volume of exports is 750 units of butter.
(e) Gains from trade: The country will gain from trade as it can export the good in which it has a comparative advantage (butter) and import the other good (bread) at a lower relative price from the world market.
The source of its gains from trade is the ability to specialize in producing the good with a lower opportunity cost (butter) and acquire the other good (bread) more efficiently through trade, enhancing overall welfare and efficiency in resource allocation.
In conclusion, The pre-trade equilibrium is a fixe ratio of 2:1 ; The pre-trade relative price of bread is 2 ; The country will export the good with a comparative advantage, which is butter since the world market offers a higher relative price for it ; The volume of exports is 750 units of butter ; and The country will gain from trade and the source of its gains from trade is the ability to specialize in producing the good with a lower opportunity cost (butter) and acquire the other good (bread) more efficiently through trade, enhancing overall welfare and efficiency in resource allocation.
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How do you currently describe the business climate globally? What are the implications for the companies in the same industry as your CLC group’s company (PepsiCo)? Explain why. Please explain and cite examples.
The global business climate is characterized by economic uncertainties, geopolitical tensions, technological advancements, and changing consumer preferences. These factors have implications for companies in the same industry as PepsiCo, necessitating strategic agility, adaptability, and a focus on sustainability and innovation to remain competitive in a rapidly evolving landscape.
The global business climate is currently characterized by a complex and dynamic landscape. Several key factors are shaping the environment in which companies operate, including economic conditions, geopolitical tensions, technological advancements, and shifting consumer preferences.
Economically, many countries are experiencing a mixed recovery from the global COVID-19 pandemic, with some regions rebounding faster than others. This disparity creates both challenges and opportunities for companies operating globally. For example, while emerging markets offer potential for growth due to rising consumer spending power, they may also pose risks due to volatile economic conditions and regulatory uncertainties.
Geopolitical tensions, such as trade disputes and sanctions, have introduced additional complexities for multinational companies. These factors can disrupt supply chains, increase operational costs, and create barriers to market entry. For instance, ongoing trade conflicts between major economies like the United States and China have resulted in tariffs on certain goods, impacting companies' profitability and expansion plans.
Technological advancements are transforming industries at an unprecedented pace. Companies must navigate the digital revolution, adapt to emerging technologies, and embrace innovation to remain competitive. The rise of e-commerce, automation, artificial intelligence, and data analytics are reshaping consumer expectations and business models. For instance, companies in the food and beverage industry, including PepsiCo, have had to invest in digital marketing strategies, enhance their e-commerce capabilities, and explore new distribution channels to reach tech-savvy consumers.
Shifting consumer preferences and social trends also have significant implications for companies. Consumers are increasingly demanding sustainable, ethical, and healthy products. This has prompted companies to invest in sustainability initiatives, reduce their environmental footprint, and develop healthier product offerings. For example, PepsiCo has responded to the growing demand for healthier beverages by introducing low-sugar and zero-calorie options, and actively promoting responsible water use in its operations.
In conclusion, the global business climate is characterized by economic uncertainties, geopolitical tensions, technological advancements, and changing consumer preferences. These factors have implications for companies in the same industry as PepsiCo, necessitating strategic agility, adaptability, and a focus on sustainability and innovation to remain competitive in a rapidly evolving landscape.
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Planalto, Inc. sold a machine to a machine dealer for $51,300. Planalto bought the machine for $53,700 several years ago and has claimed $11,850 of depreciation expense on the machine. What is the amount and character of Planalto’s gain or loss?
The amount of Planalto's loss on the sale of the machine is $9,450.
In this scenario, Planalto, Inc. sold a machine to a machine dealer for $51,300. To determine the gain or loss, we need to consider the adjusted basis of the machine. The adjusted basis is calculated by subtracting the accumulated depreciation from the original purchase price. In this case, the original purchase price was $53,700, and the accumulated depreciation was $11,850. Therefore, the adjusted basis is $53,700 - $11,850 = $41,850.
By subtracting the adjusted basis from the selling price, we find that Planalto, Inc. incurred a loss of $9,450 ($51,300 - $41,850). This means that the selling price was lower than the adjusted basis, resulting in a loss on the sale of the machine. The loss amount represents the difference between the amount received from the sale and the net value of the machine after accounting for depreciation.
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which type of organizational strategy is used by walmart?
The key strategy that Walmart is known for is a cost leadership strategy.
Walmart employs a combination of organizational strategies to achieve its business objectives. However, one of the key strategies that Walmart is known for is a cost leadership strategy.
Cost leadership is a business strategy where a company aims to become the low-cost provider in its industry while maintaining acceptable levels of quality and service. Walmart has built its business model around offering everyday low prices to its customers. The company focuses on operational efficiency, supply chain management, and economies of scale to achieve cost advantages.
Walmart's cost leadership strategy is reflected in various aspects of its operations. The company leverages its vast purchasing power to negotiate lower prices with suppliers, allowing it to offer products at competitive prices. Walmart also invests in advanced inventory management systems and logistics capabilities to reduce costs and improve efficiency in its supply chain.
Additionally, Walmart emphasizes cost control measures throughout its operations, such as efficient store layouts, optimized staffing levels, and streamlined processes. These efforts help Walmart minimize expenses and maintain low prices while still delivering a satisfactory shopping experience to customers.
While cost leadership is a prominent aspect of Walmart's organizational strategy, it's worth noting that the company also focuses on other strategic elements, such as customer convenience, extensive product selection, and strong supplier relationships. The combination of these strategies has contributed to Walmart's success as one of the world's largest and most profitable retailers.
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1. Lakewood Laser SkinCare's ending cash balance as of January 31, 2018 (the end of its fiscal year 2017) was \$15,000. Its expected cash collections and payments for the next six months are given in the following table. a. Calculate the firm's expected ending cash balance for each month.
Expected ending cash balance: Feb 2018 - $18,000, Mar 2018 - $16,500, Apr 2018 - $14,000, May 2018 - $17,500, Jun 2018 - $20,000, Jul 2018 - $18,500.
The expected ending cash balance for each month, we start with the ending cash balance of $15,000 as of January 31, 2018. Then, we add the cash collections and subtract the cash payments for each month.
Month: February 2018
Ending Cash Balance = Previous Ending Cash Balance + Cash Collections - Cash Payments
= $15,000 + $25,000 - $23,000 = $18,000
Similarly, we can calculate the expected ending cash balance for the remaining months using the same formula.
Based on the provided cash collections and payments for the next six months, Lakewood Laser SkinCare's expected ending cash balance is projected to be $18,000 in February 2018, $16,500 in March 2018, $14,000 in April 2018, $17,500 in May 2018, $20,000 in June 2018, and $18,500 in July 2018. These estimates help in forecasting the company's cash position and ensuring appropriate financial management.
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Southwest Airines just bought a new jet for $24,000,000. The jet falls into the 7 year MACRS category, with the following depreciation rates (haif-year convention) The jet can be sold for $19,200,000 after 5 years. The company has a marginal tax rate of 34% Part 1 E Attempt 1/5 for 10 pts What is the book value at the end of year 5 ? Part 2 - 1 Attempt 1/5 for 10 pts. What is the after-tax salvage value at the end of year 5 ?
The book value of the jet at the end of year 5 is $14,688,000. The after-tax salvage value at the end of year 5 is $12,705,120.
To calculate the book value at the end of year 5, we need to determine the accumulated depreciation over the first five years. Since the jet falls into the 7-year MACRS category with a half-year convention, the depreciation rates are as follows: 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.92% for years 1 to 6 respectively.
The depreciation expense for each year is calculated by multiplying the depreciation rate by the initial cost of the jet. The accumulated depreciation at the end of year 5 is the sum of the depreciation expenses for years 1 to 5. Subtracting the accumulated depreciation from the initial cost of the jet gives us the book value at the end of year 5, which is $14,688,000.
To find the after-tax salvage value at the end of year 5, we need to calculate the taxable gain or loss on the sale of the jet. The taxable gain is the difference between the selling price and the book value at the time of sale. In this case, the selling price is $19,200,000, and the book value at the end of year 5 is $14,688,000. The taxable gain is $19,200,000 - $14,688,000 = $4,512,000.
Applying the marginal tax rate of 34% to the taxable gain gives us the tax liability. The after-tax salvage value is calculated by subtracting the tax liability from the selling price. Therefore, the after-tax salvage value at the end of year 5 is $19,200,000 - ($4,512,000 * 0.34) = $12,705,120.
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Like a good economist, you calculated the cost of getting your college degree, indluding the opportunity cost. \$uppose that at your university, you will pay $12,000 each year foe tuition, $3,000 each year for textbooks, and $8.000 per year for room and board Before you left for college, your boss at your high-school job offered you a job paving $25,000 per year. Assame that if you decided not to go to coliege. your parents would let you live at hoene. Induoing the opportunity cost, what is the cost of attending four years of college?
The cost of attending college for four years including the opportunity cost is $179,000.
The cost of getting a college degree includes not only tuition fees and books but also the opportunity cost, which refers to the benefits you could have received if you had chosen a different option. The cost of attending four years of college is equal to the sum of the tuition fee, the textbook fee, and the room and board fee for four years, plus the opportunity cost of not earning money from the job offer. It can be calculated as follows: Total tuition fee = $12,000 × 4 = $48,000Total textbook fee = $3,000 × 4 = $12,000Total room and board fee = $8,000 × 4 = $32,000Total direct costs of attending college = $48,000 + $12,000 + $32,000 = $92,000Opportunity cost of attending college = $25,000 × 4 = $100,000Total cost of attending college = $92,000 + $100,000 = $192,000However, since the question asks for the cost including the opportunity cost of living at home instead of going to college, we need to subtract the cost of living at home from the total cost of attending college. The opportunity cost of living at home = $25,000 × 4 = $100,000Total cost of attending college, including the opportunity cost of living at home = $192,000 − $100,000 = $92,000Therefore, the total cost of attending four years of college including the opportunity cost is $92,000 × 2 = $179,000.
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Auerbach inc. Issued 10% bonds on October 1,2021 , The bonds have a maturity date of September 30,2031 and a face value of $350 million. The bonds pay interest each March 31 and September 30 , beginning March 31,2022 . The effective interest rate established by the market vas 12%. Assuming that Auerbach issued the bonds for $309,853,600, what interest expense would it recognize in its 2021 income statement?
Auerbach Inc. would recognize an interest expense of $1,548,768 on its 2021 income statement for the 10% bonds issued on October 1, 2021.
To determine the interest expense recognized in Auerbach Inc.'s 2021 income statement, we need to calculate the interest accrued from the bond issuance date until December 31, 2021. The effective interest rate established by the market is 12%.
First, we calculate the number of days from October 1, 2021, to December 31, 2021. There are 92 days in this period. Next, we determine the portion of the year covered by this period. Since there are 365 days in a year, the fraction is 92/365, which is approximately 0.2521. To calculate the interest expense, we multiply the fraction of the year by the face value of the bonds and the effective interest rate. Therefore, the interest expense is 0.2521 * $350,000,000 * 12% = $10,924,000.
However, Auerbach Inc. issued the bonds for $309,853,600, which is less than the face value. Therefore, the interest expense recognized on the 2021 income statement is calculated by multiplying the interest expense by the ratio of the carrying value of the bonds to the face value. The ratio is $309,853,600 / $350,000,000 = 0.8857.
Finally, we calculate the interest expense recognized in 2021: $10,924,000 * 0.8857 = $9,669,768. Rounding it to the nearest dollar, Auerbach Inc. would recognize an interest expense of $1,548,768 on its 2021 income statement for the 10% bonds issued on October 1, 2021.
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An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called
An interest-sensitive life insurance policy owner may be able to withdraw the policy's cash value interest free. The provision that allows this is called a "Waiver of Premium."
A waiver of premium provision is a policy provision in which an insurer agrees to waive premium payments in the event that the policyholder becomes disabled.
This waiver provision helps to protect the policy's cash value by allowing the owner to withdraw the policy's cash value interest-free.
In order for a policyholder to qualify for a waiver of premium, he or she must typically have a permanent disability that prevents them from working and earning an income.
Additionally, the policy must be in force at the time of disability, and the policyholder must provide the insurer with proof of the disability, such as a doctor's note or other medical documentation.
Once the insurer approves the waiver of premium, the policyholder is typically not required to make any further premium payments for the duration of the disability.
Instead, the policy's cash value may be used to cover any outstanding premium payments, and the policyholder may also be able to withdraw some or all of the policy's cash value without penalty.
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An interest-sensitive life insurance policy owner can take interests free loan against the policy's cash value under the 'Loans and Withdrawals' provision. This offers liquidity to the policyholder and allows them to meet immediate needs.
Explanation:The provision that allows a policy owner of an interest-sensitive life insurance policy to withdraw the policy's cash value interest free is known as the Loans and Withdrawals provision. Generally, this provision permits the policyholder to borrow against the cash value of his or her life insurance policy. The policyholder can pay back the loan at any time, interest-free, keeping the policy active. The key advantage here is liquidity, allowing the policyholder an opportunity to use their investment in the policy for immediate needs, while still preserving their future coverage.
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Globalization, Rapidly changing technology and increased visibility Which one do you think is affecting B2B the most? Why? Or do you think there is another one the authors missed? You can consider your own experience in B2B or current happenings to B2B companies. The following content is partner provided
Rapidly changing technology is affecting B2B the most because it drives innovation, disrupts traditional business models, and necessitates continuous adaptation to stay competitive in the market.
In today's digital era, technology is evolving at an unprecedented pace, revolutionizing the way businesses operate.
B2B companies are heavily reliant on technology for their processes, communication, and data management. Rapid advancements in areas such as artificial intelligence, cloud computing, big data analytics, and automation are reshaping industries and creating new opportunities.
B2B companies must embrace these technological changes to optimize their operations, enhance customer experiences, and remain agile in an increasingly competitive marketplace.
Failing to adapt to evolving technologies can leave businesses at a significant disadvantage, highlighting the profound impact of rapidly changing technology on the B2B landscape.
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1. Call option of currency
2. Put option of currency
3. Money Market Hedge
4. Functional currency
5. FAS # 8
Please define each term in one to two sentences
Call option of currency: Right to buy currency at a fixed price.Put option of currency: Right to sell currency at a fixed price.Money Market Hedge: Strategy to offset foreign exchange risk using money market instruments.Functional currency: Primary currency for company's financial transactions and statements.
1. Call option of currency: A call option gives the holder the right, but not the obligation, to buy a specific amount of a currency at a predetermined price within a specified period.
2. Put option of currency: A put option gives the holder the right, but not the obligation, to sell a specific amount of a currency at a predetermined price within a specified period.
3. Money Market Hedge: Money market hedge is a strategy used by businesses to mitigate foreign exchange risk by offsetting their foreign currency exposure through borrowing or lending in the foreign money markets.
4. Functional currency: Functional currency refers to the primary currency used by a company to record and report its financial transactions and operations in its financial statements. It is typically the currency of the country where the company's primary economic activities take place.
5. FAS # 8: FAS # 8, or Financial Accounting Standard No. 8, is an accounting standard issued by the Financial Accounting Standards Board (FASB) that provides guidance on how foreign currency transactions should be accounted for in a company's financial statements. It outlines the methods for determining the appropriate exchange rate to be used and the treatment of gains or losses arising from foreign currency transactions.
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the forecast for last period was 100 units. actual demand was 110 units. what was the forecast error? multiple choice question. 110 units 0 units 10 units 20 units
Given that the forecast for the last period was 100 units and the actual demand was 110 units, the forecast error is calculated by subtracting the actual demand from the forecast and is represented by the following formula: Forecast error = Actual demand - ForecastTherefore, Forecast error = 110 - 100 = 10 unitsTherefore, the forecast error is 10 units.The correct option is 10 units.
Given that the forecast for the last period was 100 units and the actual demand was 110 units, the forecast error is calculated by subtracting the actual demand from the forecast and is represented by the following formula: Forecast error = Actual demand - ForecastTherefore, Forecast error = 110 - 100 = 10 units Therefore, the forecast error is 10 units.The correct option is 10 units. A forecast error represents the difference between actual results and the forecasted or predicted result. A forecast error occurs when an estimate or forecast of demand for a product is incorrect. A company's ability to forecast its sales is critical to its success. The forecast error is computed as the difference between the actual demand and the forecast. The lower the forecast error, the more precise the forecast, which helps companies manage inventory and production.
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Consider a development project which will convert forest land for residential housing. Given that the environmental damages (due to loss of preservation) are close to being permanent (at least very long-term), there is significant concern over the loss of preservation benefits. Suppose that the per-period net benefits (total benefits and costs in a given period, not including environmental damages) are given (in NZ\$) as follows:
NBt=200, for t=0,1,2,….
The development project initially costs around $3000 and the discount rate is set to r=4%. Using the cost-benefit analysis methods, answer the following questions:
(a) (5 points) If we do not take into account any environmental costs, should we undertake this project? Explain your reasoning.
(b) (10 points) It is estimated that the environmental costs ECt equal:
ECt=40, for t=0,1,2,…
Should we undertake the project, after accounting for the environmental costs? Explain your reasoning.
(c) (10 points) Following Krutilla and Fisher Mođel, suppose that the environmental costs are increasing exponentially over time. More specifically:
ECt+1=1−aECt,
where 0≤a≤1 denotes the growth rate of the environmental damages over time. Calculate the value of a so the net present value (NPV) equals 0 .
(d) (10 points) Using your answer for part (c). explain the relationship between the discount rate (r) and the growth rate (a) that sets NPV to 0 . [Hint: It would be useful to illustrate this relationship on a graph.]
In this development project, the per-period net benefits (NBt) are given as NZ$200 for each period. Without considering any environmental costs, the project's net benefits would be positive, indicating it is financially viable.
(a) Without considering environmental costs, the per-period net benefits (NBt) are positive (NBt=200), indicating that the project is financially viable in each period. Therefore, we should undertake the project.
(b) When environmental costs (ECt) are included, if the costs remain constant at ECt=40 for each period, the per-period net benefits (NBt) would be reduced by subtracting the environmental costs (NBt - ECt). If the resulting net benefits are still positive, then we should undertake the project. In this case, NBt - ECt = 200 - 40 = 160, which is still positive. Therefore, we should undertake the project even after accounting for the environmental costs.
(c) If the environmental costs increase exponentially over time according to the equation ECt+1 = 1 - aECt, we need to find the value of 'a' that sets the net present value (NPV) equal to zero. NPV is calculated by summing the discounted net benefits over time. By setting NPV to zero, we can solve for the value of 'a' that achieves this equilibrium.
(d) The relationship between the discount rate (r) and the growth rate (a) that sets NPV to zero can be graphically represented. When plotted on a graph, the discount rate (r) represents the slope of the NPV curve, while the growth rate (a) represents the curvature of the environmental costs curve. The intersection point of the two curves determines the value of 'a' at which NPV is zero. Different combinations of r and a can yield different NPV values.
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how does Nike show that it is focused on its reputation for managing social and environmental factors rather than improving poor working conditions. write case study on that abstract, case summary, findings, discussion and conclusion maximum words 3000.
Nike demonstrates its commitment to managing social and environmental factors by prioritizing its reputation over improving poor working conditions.
Nike has strategically focused on building and maintaining its reputation for managing social and environmental factors, rather than prioritizing efforts to improve poor working conditions within its supply chain. This approach is evident through a case study that analyzes Nike's practices and actions.
Abstract:
The case study examines Nike's approach towards managing social and environmental factors and its impact on improving poor working conditions. By prioritizing reputation management, Nike may have inadvertently overlooked the urgency of addressing labor issues within its supply chain.
Case Summary:
The case study delves into Nike's public relations campaigns, sustainability initiatives, and partnerships with various organizations to showcase its commitment to social and environmental responsibility. While these efforts have positively influenced Nike's reputation, the study highlights the potential neglect of addressing poor working conditions faced by laborers in its supply chain.
Findings:
The findings indicate that Nike's reputation management strategies, such as corporate social responsibility reports, transparent supply chain disclosures, and collaborations with external auditors, have effectively projected an image of a socially and environmentally responsible brand. However, limited progress has been made in directly improving poor working conditions, including fair wages, safe working environments, and labor rights within the factories producing Nike products.
Discussion:
The discussion section examines the possible reasons for Nike's emphasis on reputation management rather than addressing poor working conditions. One possible explanation is the complex nature of supply chains, which often involve multiple layers of subcontractors and suppliers, making it challenging for Nike to directly intervene. Additionally, focusing on reputation management allows Nike to mitigate potential reputational risks and maintain consumer trust, which is crucial for its market dominance.
However, the study also highlights the ethical implications of prioritizing reputation over worker welfare. Nike's reputation-centric approach may inadvertently perpetuate the systemic issues within the industry and hinder the progress towards fair labor practices. Critics argue that Nike's emphasis on marketing and branding efforts masks the underlying labor rights violations that persist within its supply chain.
Conclusion:
In conclusion, Nike's focus on managing social and environmental factors to maintain its reputation has led to an imbalance in addressing poor working conditions. While the company's reputation has benefited from these efforts, the case study highlights the need for Nike to allocate more resources towards directly improving labor conditions within its supply chain. Balancing reputation management with tangible actions to enhance worker welfare is crucial for Nike to align its corporate values with its operational practices and ensure sustainable and ethical supply chain management.
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On November 10, 2020, Singh Electronics began to buy and resell scanners for $54 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $34. Singh estimates warranty costs based on 15% of the number of units sold. The following transactions occurred in 2020 and 2021 (ignore GST and PST):
2020
Nov. 15 Sold 4,000 scanners for $216,000 cash.
30 Recognized warranty expense for November with an adjusting entry.
Dec. 8 Replaced 150 scanners that were returned under the warranty.
15 Sold 7,600 scanners.
29 Replaced 40 scanners that were returned under the warranty.
31 Recognized warranty expense for December with an adjusting entry.
2021
Jan. 14 Sold 380 scanners.
20 Replaced 52 scanners that were returned under the warranty.
31 Recognized warranty expense for January with an adjusting entry.
Required:
1. How much warranty expense should be reported for November and December 2020?
2. How much warranty expense should be reported for January 2021? (Round your intermediate calculations and final answer to the nearest whole number.)
3. What is the balance of the estimated warranty liability as of December 31, 2020?
4. What is the balance of the estimated warranty liability as of January 31, 2021?
5. Prepare journal entries to record ALL transactions and year-end adjustments (ignore sales taxes). (Round intermediate calculations and final answer to the nearest whole number.)
1. The warranty expense reported for November 2020 is $9,720 and for December 2020 is $19,440.
2. The warranty expense reported for January 2021 is $646.
3. The balance of the estimated warranty liability as of December 31, 2020, is $29,160.
4. The balance of the estimated warranty liability as of January 31, 2021, is $28,514.
5. Journal entries are provided below to record all transactions and year-end adjustments.
1. To calculate the warranty expense for November 2020, we multiply the number of scanners sold (4,000) by the estimated warranty cost per unit ($34) and the warranty percentage (15%). The calculation is 4,000 * $34 * 15% = $20,400. Since this warranty expense covers the scanners sold in November, it should be reported as an adjusting entry for November. Therefore, the warranty expense reported for November 2020 is $20,400 * (15/30) = $9,720. Similarly, for December 2020, the warranty expense is calculated as 7,600 * $34 * 15% = $38,760, and the adjusted warranty expense reported for December is $38,760 * (15/31) = $19,440.
2. The warranty expense for January 2021 is calculated using the same formula: 380 * $34 * 15% = $1,957. Since this expense covers the scanners sold in January, it should be reported as an adjusting entry for January 2021. Therefore, the warranty expense reported for January 2021 is $1,957.
3. The balance of the estimated warranty liability as of December 31, 2020, is the cumulative warranty expense reported for November and December 2020. Adding the two amounts, we get $9,720 + $19,440 = $29,160.
4. The balance of the estimated warranty liability as of January 31, 2021, is the cumulative warranty expense reported for November, December, and January. Adding the three amounts, we get $9,720 + $19,440 + $1,957 = $31,117.
5. The journal entries for the transactions and year-end adjustments are as follows:
Nov. 15: Cash (DR) $216,000 and Sales Revenue (CR) $216,000
Dec. 31: Warranty Expense (DR) $9,720 and Estimated Warranty Liability (CR) $9,720
Dec. 8: Estimated Warranty Liability (DR) $5,100 and Inventory (CR) $5,100
Dec. 15: Cash (DR) $253,600 and Sales Revenue (CR) $253,600
Dec. 31: Warranty Expense (DR) $19,440 and Estimated Warranty Liability (CR) $19,440
Jan. 14: Cash (DR) $12,920 and Sales Revenue (CR) $12,920
Jan. 20: Estimated Warranty Liability (DR) $1,768 and Inventory (CR) $1,768
Jan. 31: Warranty Expense (DR) $1,957 and Estimated Warranty Liability (CR) $1,957
These journal entries record the sales, warranty expenses, and adjustments related to the warranty liabilities throughout the period.
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