If the price of corn differs by $1 per bushel then the price of ribeye differs by $1.7071.
The price of corn differs by $0.35 per bushel the price of ribeye differs by $1.7071.* 0.35 = 0.595595
= $0.60.
Corned beef is a slice of processed lean meat made by soaking brisket in a solution of salt and spices to season and soften it. Corned beef provides proteins and nutrients such as iron and vitamin B12, but fat. And relatively high in sodium. It is also a source of certain compounds that may increase the risk of cancer.
Corned beef is made from relatively inexpensive parts of brisket. Meat undergoes a long aging process with large grains of rock salt, or "salt grains" and salt water. By simmering it slowly, it transforms hard beef into a very soft and flavorful part.
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Decision making is often a biased and flawed process. This activity is important because a person who can identify and be aware of their biases may be able to make better decisions for themselves and may be able to diagnose flawed decisions that affect their workplace.The goal of this exercise is to test your knowledge of the nine fundamental decision-making biases.Availability BiasRepresentativeness BiasSunk-Cost BiasAnchoring and Adjustment BiasConfirmation BiasOverconfidence BiasHindsight BiasFraming BiasEscalation of Commitment BiasFirst, hover over each name and read the scenario. Next, click and drag each name into the appropriate area in the chart to correspond with the decision-making bias its scenario best represents.
Answer:
Availability Bias(Amber)
Representativeness Bias(Logan)
Sunk-Cost Bias(Katrina)
Anchoring and Adjustment Bias(Sue)
Confirmation Bias(Mike)
Overconfidence Bias(Bill)
Hindsight Bias(Kathy)
Framing Bias(Allison)
Escalation of Commitment Bias(Patrick)
Explanation:
Bias can as well be regarded as cognitive bias, it can be explained as tendency that comes in when making decisions or taking actions in ways that are illogical.It should be noted Decision making can often be biased as well as flawed process.
The fundamental decision making bias are been listed below as;
1)Availability Bias
2)Representativeness Bias
3)Sunk-Cost BiasAnchoring
3)Adjustment Bias
4)Confirmation Bias
5)Overconfidence Bias
6)Hindsight Bias
7)Framing Bias
8)Escalation of Commitment Bias
On January 1, 2021, Tiny Tim Industries had outstanding $1,000,000 of 12% bonds with a book value of $967,000. The indenture specified a call price of $983,500. The bonds were issued previously at a price to yield 14% and interest payable semi-annually on July 1 and January 1. Tiny Tim called the bonds (retired them) on July 1, 2021. What is the amount of the loss on early extinguishment
Answer:
$8,810
Explanation:
Calculation for What is the amount of the loss on early extinguishment
First step is to calculate the Call price of bond
Call price of bond=$967,000 + ($967,000*(14%/2)) - ($1,000,000*(12%/2))
Call price of bond= $967,000 + ($967,000*7%) - ($1,000,000*6%)
Call price of bond=$967,000+$67,690+$60,000
Call price of bond= $974,690
Now let calculate the Amount of loss on early extinguishment
Amount of loss on early extinguishment = $983,500 - $974,690
Amount of loss on early extinguishment = $8,810
Therefore Amount of loss on early extinguishment will be $8,810
It's & called
2. When one organism benefits while the other is not affected. It is
known as
Melissa Shallowford contributed a patent, accounts receivable, and $22,340 cash to a partnership. The patent had a book value of $8,650. However, the technology covered by the patent appeared to have significant market potential. Thus, the patent was appraised at $92,840. The accounts receivable control account was $34,300, with an allowance for doubtful accounts of $2,200. The partnership also assumed a $9,010 account payable owed to a Shallowford supplier.
Required:
On December 31, provide the journal entry for Shallowford's contribution to the partnership Rotor to the chart of accounts for the exact wordino of the account titles ONOW journals do not use ines for journal explanations. Every Ave on a journal page is used for debitor credil entries CNOW journals wol automatically indont a credit entry when a credit amount is entered.
Answer:
Date General Journal Debit Credit
Dec. 31 Cash $22,340
Patent $92,840
Accounts receivable $34,300
Allowance for doubtful accounts $2,200
Accounts payable $9,010
Holly Shallowford's , Capital $138,270
(To record capital brought in by Shallowford's)
Assuming that turkey chicken pork and beef are substitues supppose that the price of turkey had fallen. This will, other things being equal
wait where did the turkey fall?
On October 31 of the current year, Bell Sports received a bank statement dated October 30. Information has been obtained from the bank statement and from the records of the business. Prepare a bank statement reconciliation. Use Oct. 31 of the current year as the date.
Answer and Explanation:
The preparation of the bank reconciliation is presented below:
For company books
Balance $4,226
Less: service charges -$16
Adjusted balance $4,210
For bank statement
Balance $4,461
Add: outstanding deposits $448
Less: outstanding checks
Number 110 $37
Number 111 $75
Number 114 $587
Adjusted balance $4,210
Match each variable with the best representation of where it appears in the financial accounting statements. Each is only matched once and some responses might not have a match. - Accounts payable - Change in Accounts Receivable - Change in Notes Payable - Property Plant and Equipment - Revenue - Change in long term debt A. Long Term Liabilities on the Balance Sheet B. The Income Statement C. Current Liabilities on the Balance Sheet D. Financing Segment Statement of Cash flows E. Financing Segment on the Statement of Cash Flows F. Fixed Assets on the Balance Sheet G. Operating Segment on the Statement of Cash Flow
Answer:
Variable Financial accounting statements.
Accounts payable Current liabilities in the balance sheet.
Change in accounts receivable Operating segment on the statement of
Cash flows.
Change in note payable Financing segment on the statement of
cash flows.
Property, Plant and Equipment Fixed assets on the balance sheet.
Revenue The income statement.
Change in long term debt Investing segment on the statement of
cash flows.
Cost of goods manufactured in a manufacturing company is analogous to
The outstanding capital stock of Coronado Corporation consists of 1,900 shares of $100 par value, 9% preferred, and 5,400 shares of $50 par value common. Assuming that the company has retained earnings of $87,500, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.
a. The preferred stock is noncumulative and nonparticipating.
b. The preferred stock is cumulative and nonparticipating.
c. The preferred stock is cumulative and participating.
Answer:
preferred stock dividends = 1,900 x $100 x 9% = $17,100
common stocks = 5,400 stocks
a) distribution of dividends:
preferred stocks = $17,100
common stocks = $70,400
b) distribution of dividends:
preferred stocks = $17,100 x 3 = $51,300
common stocks = $36,200
c) distribution of dividends:
preferred stocks = $51,300 + (1,900/7,300 x $19,100) = $56,271
common stocks = $17,100 + (5,400/7,300 x $19,100) = $29,429
Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $17,000 during the year for experimental purposes in connection with the development of a new product. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $10,000. In March, the Cleanway Laundromat bought equipment. Cleanway paid $11,000 down and signed a noninterest-bearing note requiring the payment of $20,500 in nine months. The cash price for this equipment was $28,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $33,000. The Mayer Company, plaintiff, paid $17,000 in legal fees in November, in connection with a successful infringement suit on its patent. The Johnson Company traded its old machine with an original cost of $9,900 and a book value of $4,500 plus cash of $9,000 for a new one that had a fair value of $11,500. The exchange has commercial substance. Required: Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
1. Dr Research and development expense $17,000
Cr Cash $17,000
2. Dr Legal fees expense $10,000
Cr Cash $10,000
3. Dr Equipment $28,000
Dr Discount on note payable $3,500
Cr Cash $11,000
Cr Notes payable $20,500
4. Dr Building—sprinkler system $33,000
Cr Cash $33,000
5. Dr Patent $17,000
Cr Cash $17,000
6. Dr Equipment—new $11,500
Dr Loss on trade-in $1,900
Dr Accumulated depreciation—old asset $5,400
Cr Equipment—old $9,900
Cr Cash $9,000
Explanation:
Preparation of journal entries to record each of the transactions
1. Dr Research and development expense $17,000
Cr Cash $17,000
2. Dr Legal fees expense $10,000
Cr Cash $10,000
3. Dr Equipment $28,000
($20,500+$11,000-$28,000)
Dr Discount on note payable $3,500
Cr Cash $11,000
Cr Notes payable $20,500
4. Dr Building—sprinkler system $33,000
Cr Cash $33,000
5. Dr Patent $17,000
Cr Cash $17,000
6. Dr Equipment—new $11,500
Dr Loss on trade-in $1,900
($9,900+$9,000-$11,500-$5,400)
Dr Accumulated depreciation—old asset $5,400 ($9,900-$4,500)
Cr Equipment—old $9,900
Cr Cash $9,000
Write down the following scenarios as examples of elastic, inelastic, or unit elastic demand.
a. When Ruko, a device used to stream movies at home, increases prices by 39 %, total revenue decreases by 55 %.
b. When Cinema Supreme decreases ticket prices by 5 %, total revenue does not change.
c. When Bluebox, a DVD rental kiosk, increases its prices by 44 %, total revenue increases by 31 %.
Answer and Explanation:
The classification is as follows:
a. In the case when the quantity demanded is more than the price so it is a price elastic demand
b. In the case when the change in price of 1% lower than the change in quantity demanded so it is price inelastic demand
c. And, in the case where there is a change of 1% in a price that generated the 1% change in quantity demanded is unit elastic demand
When manager Mariah Pitner delivered the company's financial report to local bankers and analysts, she was acting in a(n) _____ role.
Answer:
When manager Mariah Pitner delivered the company's financial report to local bankers and analysts, she was acting in a(n) _assistant secretary_ role.is it right to kick someone out just because they are not on the lease and or had been evicted in the past?
Which type of marketing intermediary are sales representatives of manufacturers and wholesalers?
A. Industrial distributors
B. Service providers
C. Agents
D. Brokers
Answer:
C. Agents
Explanation:
They are sales representatives for manufacturers or wholesalers and usually are hired on a commission basis.
A consulting engineer has been engaged to advise a town how best to proceed with the construction of a 200,000 water supply reservoir. Since only 120,000 of storage will be required for the next 25 years, an alternative to building the full capacity now is to build the reservoir in two stages. Initially, the reservoir could be built with 120,000 of capacity and then, 25 years hence, the additional 80,000 of capacity could be added by increasing the height of the reservoir. Estimated costs are as follows construction cost, and annual maintenance cost, build in 2 stages first stage 120,000 reservoir $14'200,000 $75,000; second stage add 80,000 of capacity $120600,000 and $25,000 additional construction cost build in full capacity now 200,000 reservoir $22'400,000 and $100,000 if the interest is computed at 4%, which construction plan is preferred?
Answer:
Single stage construction
PW of Cost = $22,400,000 + 100,000(P/A, 4%, 25)
PW of Cost = $22,400,000 + 100,000(15.622)
PW of Cost = $22,400,000 + $1,562,200
PW of Cost = $23,962,200
Tow stage construction
PW of cots = $14,200,000 + $75,000(P/A, 4%, 25) + $12,600,000(P/F, 4%, 25)
PW of cost = $14,200,000 + $75,000(15.622) + $12,600,000(0.3751)
PW of cost = $14,200,000 + $1,171,650 + $4,726,260
PW of cost = $20,097,910
Conclusion: We should choose two stage construction as it has lesser Present worth of cost.
Here we preferred two stage construction as it has lesser Present worth of cost.
Calculation of the selection of the construction plan:For Single stage construction
PW of Cost = $22,400,000 + 100,000(P/A, 4%, 25)
= $22,400,000 + 100,000(15.622)
= $22,400,000 + $1,562,200
= $23,962,200
Now
For Tow stage construction
PW of cots = $14,200,000 + $75,000(P/A, 4%, 25) + $12,600,000(P/F, 4%, 25)
= $14,200,000 + $75,000(15.622) + $12,600,000(0.3751)
= $14,200,000 + $1,171,650 + $4,726,260
= $20,097,910
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Taher, an employee with Wilco Plumbing, has been transferred to a different division within the company. To facilitate a smooth transition, the company has initiated a program for Taher that will provide him with the knowledge and skills required to perform the new role effectively. Which of the following human resource management practices did Wilco Plumbing perform?a) trainingb) job analysisc) performance managementd) selectione) recruitment
Answer: training
Explanation:
From the question, we are informed that Taher, is an employee for Wilco Plumbing, and was sent to a different segment in the company and that the company initiated a program that will provide him with the knowledge and skills which is necessary to perform the new role effectively. The human resource management practices performed here is training.
Training simply refers to the learning that one undergoes in a company so that the person can have the required knowledge and skills to perform well in the role that he or she is assigned in the he company and also so that organizational goals can be attained.
Mercedes-Benz runs a TV commercial advertisement that displays one of its top-of-the-line cars. As the driver pulls up to a valet, people turn their heads and stare at the car. Mercedes-Benz has effectively leveraged which need in Maslow’s hierarchy?
Answer:
esteem
Explanation:
esteem
Makers Corp. had additions to retained earnings for the year just ended of $194,000. The firm paid out $184,000 in cash dividends, and it has ending total equity of $4.89 million. The company currently has 120,000 shares of common stock outstanding. a. What are earnings per share
Answer:
Makers Corp.
The Earnings Per Share are:
= $3.15.
Explanation:
a) Data and Calculations:
Additions to retained earnings for the year = $194,000
Cash dividends paid out = 184,000
Net income = $378,000
Total equity = $4.89 million
Outstanding shares = 120,000
Earnings per share = Net Income/Outstanding shares
= $378,000/120,000
= $3.15
b) The earnings per share (EPS) is a financial metric that is widely used to corporate value. It indicates the amount of money that a company makes for its stockholders per share. It is computed by dividing the net income by the number of outstanding shares.
What is the future of discussion of fourms?
Answer:
Improve communication. ...
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Better engagement. ...
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For each of the following scenarios, show how each market is affected. Label the initial equilibrium price P1, and the original quantity Q1. Label the new equilibrium price P2 and the quantity Q2.Due to perfect weather conditions, there is a larger than expected crop of oranges this year. The weather conditions do not affect the crop of tangerines. Citrus juice is made from either oranges or tangerines and consumers have no preference for one or the other. Lastly, citrus juice and oatmeal are complements and oats are required to make oatmeal.a. Market for oranges,b. Market for citrus juice,c. Market for tangerines,d. Market for oatmeal,e. Market for oats.
Answer:
See answers below; in details.
Explanation:
A rephrase of the question:
Consider the following conditions and describe what happens to equilibrium price and quantity in each of the listed markets.
(A) MARKET FOR ORANGES
- There are better (or perfect) weather conditions this year
- This will bring about a larger harvest of oranges
- Q2 > Q1
- P2 < P1 , owing to the law of demand and supply. Truly, in this case, 'all other things' such as consumer taste are constant and the weather conditions didn't increase or reduce the turnout of tangerines.
(B) MARKET FOR CITRUS JUICE
- The information given (where consumer taste is constant) shows that the law of rationality applies. Customers/Consumers are rational. They'll go for the cheaper type of citrus juice and this price depends on the magnitude of raw materials such as the tangerines or oranges themselves.
- Given a higher output of oranges, the market for citrus juice will boom. Hence Q2 of citrus juice > Q1 of citrus juice
- P2 of citrus juice < P1 of citrus juice
(C) MARKET FOR TANGERINES
- The information given about absence of consumer preference shows that oranges & tangerines are perfect substitutes.
- Substitution here means that one can perfectly replace the other and/or both fruits give the same value to end users.
- This means that there'll be less purchase of tangerines (either raw or juice) owing to the increased availability of oranges. Keep in mind that the quantity of tangerines harvested or produced did not fall in the year.
- So Q2 = Q1
- There is less purchase of tangerines this year and tangerine is a perishable good (it spoils or loses value with time) so, to encourage consumer purchase, producers in the market for tangerine will reduce the price. So P2 < P1
(D) MARKET FOR OATMEAL & (E) MARKET FOR OATS
- Citrus juice and oatmeal are complements. This means that they go together; in consumption. Just like the consumption of PMS is complementary to the consumption of car tires.
- The markets for oats and oatmeal will boom because the market for citrus juice is booming.
- As people consume more citrus juice, they'll purchase and consume more oatmeal.
- The output of oats under this weather condition isn't given so, we'll assume it to be constant.
- So the quantity of oats is constant but the price of oats will rise because its demand will rise or has risen. Q2 = Q1 ; P2 > P1
- In the market for oatmeal, quantity will increase and price will rise, due to higher demand. Q2 > Q1 ; P2 > P1
Consider the market for widgets. Widgets are produced in the United States, unless producers aren’t willing to meet the quantity demanded at a particular price. In that case, widgets are imported.
Suppose that the price with free trade is $7. If lawmakers want to ensure that U.S. widget producers can sell at least 8,000 widgets, what might they do?
Price
Quantity Demand
Quantity SuppliedDomestically
Quantity Imported
$6 13,000 2,000 8,000
$7 12,000 4,000 8,000
$8 11,000 6,000 5,000
$9 10,000 8,000 2,000
$10 9,000 9,000 0
$11 8,000 10,000 0
impose a tax on imported widgets
provide a subsidy for imported widgets
impose an import quota
Answer:
impose a tax on imported widgets - if the government imposes a tax on imported widgets, imported widgets will become more expensive to consumeres, making consumers flock to domestically produced widgets, prompting domestic firms to increase domestic supply to at least 8,000 widgets.
impose an import quota - the government can also simply impose an import quota of 4,000 widgets, which will oblige consumers to buy at least 8,000 domestic widgets if they want to satisfy their demand of 12,000 widgets.
Profit is only a liability for the business. Can you justify this?
Answer:
A growing company may not be earning any profits yet, but may nevertheless provide a great investment opportunity.
Other times, a lack of profitability can be a huge red flag that something is wrong with the firm.
Explanation:
On January 1, 2019, Cullumber Corporation acquired machinery at a cost of $1650000. Cullumber adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2022, a decision was made to change to the double-declining balance method of depreciation for this machine. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is
Answer:
$0
Explanation:
Since in the given situation there is a depreciation method change i.e. from the straight-line method to double-declining method so there would be no impact restrospectively.
Hence, there would be no cumulative impact as it creates the impact prospectively
So the impact would be zero
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $820,000, and it would cost another $17,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $604,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $338,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.
a. What is the Year 0 net cash flow?
b. What are the net operating cash flows in Years 1, 2, 3?
c. What is the additional Year 3- cash flow (i.e. after tax salvage and the return of working capital)?
d. If the project's cost of capital is 12%, should the machine be purchased?
Answer:
a. What is the Year 0 net cash flow?
-$820,000 - $17,500 - $15,500 = -$853,000
b. What are the net operating cash flows in Years 1, 2, 3?
Operating cash flow year 1 = {[$338,000 - ($837,500 x 1/3)] x (1 - 25%)} + ($837,500 x 1/3) = $323,292
Operating cash flow year 2 = {[$338,000 - ($837,500 x 0.4445)] x (1 - 25%)} + ($837,500 x 0.4445) = $346,567
Operating cash flow year 3 = {[$338,000 - ($837,500 x 0.1481)] x (1 - 25%)} + ($837,500 x 0.1481) = $284,508
c. What is the additional Year 3- cash flow (i.e. after tax salvage and the return of working capital)?
= $62,031 + [($604,000 - $62,031) x 0.75] + $17,500 = $486,008
d. If the project's cost of capital is 12%, should the machine be purchased?
using a financial calculator, NPV = $260,373, so the project should be accepted
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ok so heres your hero customs
try to think of a quirk then look for what you want
more to come just wait
Answer:
ooooooooo I want that whole fit
Explanation:
Aimi Corporation, based in Japan, decides to open a big manufacturing and distribution center in China. It does this by acquiring operating facilities from another company in China. The management at Aimi believes that adopting this approach will provide the company with instant access to new markets. In this context, the HR function at Aimi Corporation will:a.need to extend and expand its scope and operations to provide the appropriate contributions to firm performance.b.need to be extended to include employees of the Chinese company involved in the acquisition.c.need to be extended to include another set of employees but will not change in any other meaningful way.d.become complicated because of the disparate relationship between the staff in Aimi's home-country and the staff of the acquired company.
Answer: a. need to extend and expand its scope and operations to provide the appropriate contributions to firm performance.
Explanation:
The HR function will need to take into account the acquisition of these ew operating facilities and the fact that it will come with new employees and new ways to relate to those employees as they are from another country as the one that Aimi is based in.
The HR function will therefore have to extend and expand its scope and operations to incorporate this new situation and provide the appropriate contribution to the company from it.
The purpose of domains in a typical IT infrastructure is to: a. help organize the roles, responsibilities, and accountabilities for risk management and risk mitigation. b. control the activities and behaviors of employees and limit their accessibility to certain domains. c. define the policies that will eliminate all possibilities and avenues of attack. d. identify the domains most likely to be attacked and the relative cost and impact of potential attacks
Answer:
a. help organize the roles, responsibilities and accountabilities for risk management and risk mitigation.
Explanation:
Domain connects remote users to the organization network. It helps host to define the access to specific user. Domain holds all the critical information and data in the system. It defines the roles and responsibilities for risk mitigation.
The following accounts and account balances are available for Badger Auto Parts at December 31, 2019:
Accounts Payable $8,500 Income Taxes Payable $3,600
Accounts Receivable 40,800 Interest Expense 6,650
Accumulated Depreciation (Furniture) 47,300 Interest Payable 1,800
Advertising Expense 29,200 Inventory 60,500
Cash 3,200 Notes Payable (Long
-Term) 50,000
Common Stock 100,000 Prepaid Rent 15,250
Cost of Goods Sold 184,300 Retained Earnings,
12/31/2018 15,900
Depreciation Expense (Furniture) 10,400 Sales revenue 264,700
Furniture 128,000 Utilities expense 9,700
Income Taxes Expense 3,800
Required:
Prepare a trial balance. Assume that all accounts have normal balances.
Answer:
Answer is solved and explained in the explanation section below.
Explanation:
In this question, we are asked to prepare a trial balance assuming that all accounts have normal balances. And the purpose of making a trial balance is to make sure that the entries in the system are mathematically sound.
So,
Badger Auto Parts Debit Credit
Accounts payable $8,500
Accounts receivable $40,800
Accumulated depreciation (furniture) $47,300
Advertising expense $29,200
Cash $3,200
Common stock $100,000
Cost of goods sold $184,300
Depreciation expense (furniture) $10,400
Furniture $128,000
Income tax expense $3,800
Income tax payable $3,600
Interest expense $6,650
Interest payable $1,800
Inventory $60,500
Notes payable $50,000
Prepaid rent $15,250
Retained earnings $15,900
Sales revenue $264,700
Utilities expense $9,700
Totals $491,800 $491,800
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,700 for direct materials, $9,500 for direct labor, and $6,270 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $4,100 for direct materials and $4,100 for direct labor.
Required:
Calculate the overhead cost be added to Job W at year-end
Answer:
Job W= $2,706
Explanation:
First, we need to calculate the predetermined overhead rate based on allocated overhead to Job V:
Job V:
Direct labor= $9,500
Allocated overhead= $6,270
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
6,270= Estimated manufacturing overhead rate*9,500
6,270/9,500= Estimated manufacturing overhead rate
Estimated manufacturing overhead rate= $0.66 per direct labor dollar.
Now, for Job W:
Job W= 0.66*4,100
Job W= $2,706
A company produces and sells hair dryers in a market where price (p) and demand (D) are related follows: p = $35+ (3,000)/D-(4,800)/D2 The fixed cost (Ct) is $800 per month and the variable cost per hair dryer (c.) is $38. - Add to % E Q
With reference to the company in Question 1, assume price and demand are unrelated. The company sells the hair dryers for $80 each if they spend $8,000 per month on advertising (C.). CF and c, remain as indicated in Question 1. The maximum production capacity is 5,000 hair dryers per month.
a) What is the demand breakeven point?
b) Is the company's demand breakeven point (in %) more sensitive to 10% increase in sales price or 20% reduction in variable costs? Explain your answer.
Answer:
Explanation:
Given that:
[tex]p = 35 + \dfrac{3000}{D}- \dfrac{4800}{D^2}[/tex]
The total revenue = p × D
∴
multiplying both sides by D; we have:
[tex]p\times D = 35 \times D + \dfrac{3000}{D} \times D- \dfrac{4800}{D^2}\times D[/tex]
[tex]= 35 D +3000}{D} - \dfrac{4800}{D}[/tex]
The total cost = (Per unit Variable cost × D) + Advertising cost
The total cost = 38D + 8000
The selling price = 80
From D units, the total revenue = 80D
∴
The break-even will take place when total revenue equals total cost.
So;
8000 + 38D = 80D
8000 = 80 D - 38D
8000 =42D
D = 8000/42
D = 190.48
(b)
Suppose the new sales price
Then;
8000 + 38D = 88D
8000 = 88D - 38D
8000 = 50D
D = 160
Hence, the break-even decreases by:
[tex]\Big(\dfrac{190.48-160}{190.48}\times 100\Big) = 16\%[/tex]
However; suppose the variable cost = 30.4
Then;
8000 + 30.4D = 80D
8000 = 80D - 30.4D
8000 = 49.6D
D = 8000/49.6
D = 161.29
Therefore;
This implies that the break-even decreased by:
[tex]\Big(\dfrac{190.48-161.29}{190.48}\times 100\Big) = 15.32\%[/tex]
Hence, the break-even is more likely to change by 10% in its selling price.