Answer:
Philbrick Company
Performance Obligation Fulfilled Over Time
Computation of the revenue, expense, and gross profit:
Year Number of Development Sales Gross
Employees /Training Cost Value Profit
2019 150 $ 55,000 $165,000 $110,000
2020 250 70,000 275,000 205,000
2021 100 20,000 110,000 90,000
Total 500 $145,000 $550,000 $405,000
Explanation:
a) Data and Calculations:
Contract price = $1,100 per employee
No. of employees to be trained = 500
Total contract value = $550,000 ($1,100 * 500)
Expected Development and Training Costs:
Year Number of Development
Employees /Training Cost
2019 150 $ 55,000
2020 250 70,000
2021 100 20,000
Total 500 $145,000
Lemon Corporation generated $324,600 of income from ordinary business operations. It also sold several assets during the year. Compute Lemon’s taxable income under each of the following alternative assumptions about the tax consequences of the asset sales.
a. Lemon recognized a $5,500 capital gain and a $7,400 net Section 1231 loss.
b. Lemon recognized a $6,500 capital loss and a $4,700 net Section 1231 gain.
c. Lemon recognized a $2,500 capital gain, a $3,900 capital loss, and a $3,000 net Section 1231 gain.
d.Lemon recognized $4,000 of depreciation recapture, a $2,000 Section 1231 gain, and a $4,200 Section 1231 loss.
Answer:
a. Lemon’s taxable income = $322,700
b. Lemon’s taxable income = $324,600
c. Lemon’s taxable income = $326,200
d. Lemon’s taxable income = $326,400
Explanation:
Before the questions are answered, the provisions of section 1231 of the Internal Revenue Service (IRS) rules are quoted as follows:
- If you have a net section 1231 loss, it is an ordinary loss.
- If you have a net section 1231 gain, it is ordinary income up to the amount of your unrecaptured section 1231 losses from previous years. The rest, if any, is a long-term capital gain.
Therefore, net section 1231 loss which is an ordinary loss is deducted from ordinary business operations to obtain taxable income.
Also, we describe the following:
Taxable income can be described as the amount of income that is employed to calculated the amount of tax that is payable to the government by an individual or a company in a particular tax year. It is obtained after making all required additions and allowable deductions.
Capital gain can be described as an increase in the value of a capital asset which is realized when the asset is sold. For tax purposes, capital gain is added to the income from ordinary business operations to obtain taxable income.
Capital loss can be described as a decrease in the value of a capital asset which is recognised when the asset is sold. For tax purposes, capital loss is deducted from the income from ordinary business operations to obtain taxable income.
We therefore proceed as follows:
a. Lemon recognized a $5,500 capital gain and a $7,400 net Section 1231 loss.
From the question, we have the following:
Income from ordinary business operations = $324,600
Capital gain recognised = $5,500
Net Section 1231 loss recognised = $7,400
Based on the explanation provided above, Lemon’s taxable income under this scenario is therefore calculated as follows:
Lemon’s taxable income = Income from ordinary business operations + Capital gain recognised - Net Section 1231 loss recognised = $324,600 + $5,500 - $7,400 = $322,700
b. Lemon recognized a $6,500 capital loss and a $4,700 net Section 1231 gain.
From the question, there is nothing related past five years stated and it is therefore assumed that there is no net section 1231 loss in the past five years.
As result, the total of $4,700 net Section 1231 gain is regarded as a capital gain and it is set-off against the $6,500 capital loss as follows to obtain the non-deductible expense as follows:
Non-deductible expense = $6,500 - $4,700 = $1,800
Since there is nothing deductible again, Lemon’s taxable income under this scenario is therefore equal to the income from ordinary business operations of $324,600. That is,
Lemon’s taxable income = $324,600
c. Lemon recognized a $2,500 capital gain, a $3,900 capital loss, and a $3,000 net Section 1231 gain.
Since no net section 1231 loss in the past five years is indicated here, the $3,000 net Section 1231 gain will be treated as a long-term capital gain.
Based on the provisions of section 1231 of the Internal Revenue Service (IRS) rules quoted above, non-deductible expense is calculated by deducting the $3,900 capital loss to the extent of the $2,500 capital gain as follows:
Non-deductible expense = $3,900 - $2,500 = $1,400
Since the $3,000 net Section 1231 gain has to be treated as a long-term capital gain, the $1,400 will be deducted from it obtain the net capital gain as follows:
Net capital gain = $3000 - $1400 = $1600
Lemon’s taxable income under this scenario is therefore calculated by adding the $1,600 net capital gain to the $324,600 income from ordinary business operations as follows:
Lemon’s taxable income = $324,600 + $1600 = $326,200
d. Lemon recognized $4,000 of depreciation recapture, a $2,000 Section 1231 gain, and a $4,200 Section 1231 loss.
We have the following:
Section 1231 loss = $4,200
Section 1231 gain = $2,000
Therefore, we have:
Net section 1231 loss = Section 1231 loss - Section 1231 gain = $4,200 - 2,000 = $2,200
This net section 1231 loss of $2,200 is therefore treated as ordinary loss as already stated in the provisions of section 1231 of the Internal Revenue Service (IRS) rules quoted above and deducted from the $324,600 income from ordinary business operations.
In addition, the depreciation recapture of $4,000 will be treated as ordinary income and it will be added to the $324,600 income from ordinary business operations.
Lemon’s taxable income under this scenario is therefore calculated as follows:
Lemon’s taxable income = Income from ordinary business operations + Depreciation recapture - Net section 1231 loss = $324,600 + $4,000 - $2,200 = $326,400
All of the following are threats to a sustainable, long-term competitive advantage EXCEPT ________. Group of answer choices
Answer:
The answer is "market stability".
Explanation:
Instability, emerging innovations as well as an evolving industry also will function and eradicate the advantages so, the corporation does and put its competitiveness as the advantage at risk.
"Market stability" is the only choice, which is not a hazard to a fixed edge. So, well as circumstances wouldn't change, its edge will appear to become the right response.
financial statement information and additional data for Stanislaus Co. is presented below. Prepare a statement of cash flows for the year ending December 31, 2014December 31 2013 2014Cash $42,000 $75,000Accounts receivable (net) 84,000 144,200Inventory 168,000 206,600Land 58,800 21,000Equipment 504,000 789,600TOTAL $856,800 $1,236,400Accumulated depreciation $84,000 $115,600Accounts payable 50,400 86,000Notes payable - short-term 67,200 29,400Notes payable - long-term 168,000 302,400Common stock 420,000 487,200Retained earnings 67,200 215,800TOTAL $856,800 $1,236,400Additional data for 2014:1. Net income was $240,000, see income statement below.2. Depreciation was $31,600.3. Land was sold at its original cost.4. Dividends were paid.5. Equipment was purchased for $184,000 cash.6. A long-term note for $101,000 was used to pay for an equipment purchase.7. Common stock was issued8. Company issued $33,400 long-term note payable. Income Statement For the year ended December 31, 2014Sales revenue…………….. $1,200,000Cost of goods sold……… .......480,000Gross profit .............................720,000Selling and administrative expenses….. 360,000Pre-tax operating income .......................340,000Income taxes ..........................................120,000Net income……………………………… $240,0001. Prepare the statement of cash flow using the indirect method2. Prepare the statement of cash flow using the direct method
Answer:
Statement of cash flow for the year ended December 31, 2014
Cash flow from Operating Activities
Cash Receipts from Customers $1,139,800
Cash Paid to Suppliers and Employees ($811,600)
Cash Generated from operations $328,200
Income tax paid ($120,000)
Net Cash from Operating Activities $208,200
Cash flow from Investing Activities
Purchase of Equipment ($101,000)
Proceeds from Sale of Land $37,800
Net Cash from Investing Activities $63,200
Cash flow from Financing Activities
Issue of Note Payables $33,400
Repayment of Note Payables ($37,800)
Issue of Common Stock $67,200
Dividends Paid ($91,400)
Net Cash from Financing Activities ($28,600)
Movement during the year $33,000
Beginning Cash and Cash Equivalents $42,000
Ending Cash and Cash Equivalents $75,000
Explanation:
The Direct Method has been used to to prepare Cash flow Statement. See also calculation of the respective line items done below.
Cash Receipts from Customers calculation :
Total Trade Receivables T - Account
Debit :
Beginning Balance $84,000
Sales Revenue $1,200,000
Totals $1,284,000
Credit :
Cash Receipts from Customers $1,139,800
Ending Balance $144,200
Totals $1,284,000
Cash Paid to Suppliers and Employees calculation :
Cost of goods sold $480,000
Add Selling and administrative expenses $360,000
Adjustment for Non -Cash Items :
Depreciation ($31,600)
Adjustment for Working Capital Items :
Increase in Inventory $38,800
Increase in Accounts Payables ($35,600)
Cash Paid to Suppliers and Employees $811,600
Note payable T - Account
Debit :
Ending (29,400 + 302,400) $331,800
Cash (Balancing figure) $37,800
Totals $369,600
Credit :
Beginning (67,200 + 168,000) $235,200
Equipment $101,000
Cash $33,400
Totals $369,600
Equipment T - Account
Debit :
Beginning Balance $504,000
Note Payable $101,000
Cash $184,000
Totals $789,000
Credit :
Ending Balance $789,600
Disposal $0
Totals $789,000
Calculation of Dividends
Beginning Retained Earnings Balance $67,200
Add Income for the year $240,000
Less Ending Retained Earnings Balance $215,800
Dividends Paid $91,400
The following is a partial trial balance for General Lighting Corporation as of December 31, 2021:
Account Title Debits Credits
Sales revenue 3,100,000
Interest revenue 95,000
Loss on sale of investments 30,000
Cost of goods sold 1,340,000
Loss on inventory write-down (obsolescence) 350,000
Selling expense 450,000
General and administrative expense 225,000
Interest expense 94,000
There were 300,000 shares of common stock outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25%.
Required:
1. Prepare a single-step income statement for 2021, including EPS disclosures.
2. Prepare a multiple-step income statement for 2021, including EPS disclosures.
Answer:
1. single-step income statement for 2021
Sales revenue 3,100,000
Less Cost of goods sold (1,340,000)
Gross Profit 1,760,000
Less Expenses :
Loss on inventory write-down (obsolescence) 350,000
Selling expense 450,000
General and administrative expense 225,000
Interest revenue (95,000)
Loss on sale of investments 30,000
Interest expense 94,000 (1,054,000)
Net Income before tax 706,000
Income tax expense (176,500)
Net Income after tax 529,500
Earnings per share (EPS) $1.77
2. multiple-step income statement for 2021
Sales revenue 3,100,000
Less Cost of goods sold (1,340,000)
Gross Profit 1,760,000
Less Operating Expenses :
Loss on inventory write-down (obsolescence) 350,000
Selling expense 450,000
General and administrative expense 225,000 (1,025,000)
Operating Income 735,000
Less Non-Operating Expenses :
Interest revenue (95,000)
Loss on sale of investments 30,000
Interest expense 94,000 (29,000)
Net Income before tax 706,000
Income tax expense (176,500)
Net Income after tax 529,500
Earnings per share (EPS) $1.77
Explanation:
The difference in these Income statements is that, the Multi-step statement clearly shows income derived from Primary Activities (Operating) whist the Single step statement does not.
Additional Notes :
Earnings per share (EPS) = Earnings Attributable to holders of common stock ÷ Weighted Average Number of Common Stocks
Therefore,
Earnings per share (EPS) = $529,500 ÷ 300,000
= $1.77
MGM Grand announces plans to open a new casino with a hotel. Workers hired for this new business would
specialize in
O Food Services and Travel and Tourism
O Lodging and Recreation and Amusement
O Lodging and Travel and Tourism
O Food Services and Recreation and Amusement.
Answer:
Answer is B Goodluck that is the answer
I think
Answer:
B.Lodging and Recreation and Amusement.
Explanation:
Assume the perpetual inventory; system is used unless stated otherwise. Round all numbers to the nearest whole dollar unless stated otherwise.
Journalizing purchase transactions
Howie Jewelers had the following purchase transactions. Journalize all necessary trans—actions. Explanations are not required.
Jun. 20 Purchased inventory of $5,000 on account from Silk Diamonds, a jewelry importer. Terms were 2/15, n/45, FOB shipping point.
Jun. 20 Paid freight charges, $400.
Jul. 4 Returned $600 of inventory to Silk.
Jul. 14 Paid Silk Diamonds, less return.
Jul. 16 Purchased inventory of $4,400 on account from Shanley Diamonds, a jewelry importer. Terms were 2/10, n/EOM, FOB destination.
Jul. 18 Received a $300 allowance from Shanley Diamonds for damaged but usable goods.
Jul. 24 Paid Shanley Diamonds, less allowance and discount.
Answer: Check attachment
Explanation:
In the attachment, note that:
On July 14:
Account payable was calculated as:
= $4400 - $300
= $4100
Merchandise Inventory = $4100 × 2%
= $4100 × 2/100
= $4100 × 0.02
= $82
Cash = $4100 - $82 = $4018.
Check attachment for further explanation.
Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2014, is as follows.
BONITA BEAUTY CORPORATION
Income Statement For the Year Ended December 31, 2014
Sales $75,000,000
Cost of goods sold
Variable $31,500,000
Fixed 8,610,000 40,110,000
Gross margin $34,890,000
Selling and marketing expenses
Commissions $13,500,000
Fixed costs 10,260,000 23,760,000
Operating income $11,130,000
The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8% and incur additional fixed costs of $7,500,000.
Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation
Answer: $56,040,000
Explanation:
Here is the question:
1.Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation's break-even point in sales dollars for the year.
Sales = $75,000,000
Less: variable cost = $75,000,000 + ($75,000,000 × 8%) = $31,500,000 + $6,000,000 = $37,500,000
Contribution margin = $37,500,000
Fixed cost = 10,260,000 + 10,260,000 + 7,500,000 = $28,020,000
Operating income = $11,130,000
Contribution margin = 0.5
Break even point in sales will now be:
= Fixed cost/contribution margin ratio
= $28,020,000/0.5
= $56,040,000
a worker produced four components during an 8-hour shift in which he earned $96. What is his labor cost per unit?
Answer:
$24
Explanation:
Labor cost per unit is the ratio of total labor expense for a period of time divided by the total number of units produced during that period of time. It is given by the formula:
Labor cost per unit = Total money earned during a specified period / number of components produced.
Hence using the formula above, the labor cost per unit of the worker is gotten to be:
Labor cost per unit = $96 / 4 components = $24
The CEO of Jaquar Consultancy Corp. informs Amy's supervisor that she has performed extremely well in her last project. Amy's supervisor sends an e-mail to the entire team about the good review received from the CEO. Jaquar is known for its regular performance-driven incentives that it awards to employees performing exceptionally well. This implies that Jaquar Consultancy Corp. operates by implementing:
a. internal marketing.
b. empathy marketing.
c.customer profiling.
d. benchmarking.
Answer: Internal marketing
Explanation:
Jaquar Consultancy Corp. operates by implementing internal marketing. Internal marketing is when the objectives, and products of a company are promoted within the particular company.
The purpose of Internal marketing is to increase workers engagement with the goals and objectives of f the company and help foster its brand. The needs of the workers are satisfied in order to attain company's goals.
A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company’s strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company’s performance to that of its competitors, or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Most decision makers and analysts use five groups of ratios to examine the different aspects of a company’s performance. Indicate whether each of the following statements regarding financial ratios are true or false?
a. The ratios provide an accurate and thorough representation of the Chinese company’s performance.b. The analysis likely includes incorrect and misleading conclusions.
Answer:
a. False
b. True
Explanation:
Ratio analysis is a very useful method of analyzing a company however it is not necessarily very in-depth. If a company seems to be performing below the industrial average, it would be prudent to check the reasons why the company is doing so.
The advantage of ratio analysis in this instance is that it would help point you in the right direction to know what accounts to analyze more intensely to find out why the Chinese company is not performing up to standard.
Ratio analysis are good but they do not always provide an accurate and thorough representation of a company’s performance therefore relying solely on ratios will lead to an analysis that likely includes incorrect and misleading conclusions.
A company has the following ratios:
Current ratio: 2.1 to 1.0
Accounts receivable turnover ratio. 350 to 1 Debt/ equity ratio. 20.0 to 1 Interest coverage ratio 7.0 to 1 Inventory turnover ratio 9.0 to 1 The industry averages are: A company has the following ratios: Current ratio: 4.1 to 1.0 Accounts receivable turnover ratio. 8 to 1 Debt/ equity ratio. 4.0 to 1 Interest coverage ratio 9.0 to 1 Inventory turnover ratio 8.0 to 1. Based on the above items, please compare and contrast the ratios between the company and the industry.
Required:
Analyze reasons why there could be differences and the overall financial position of the company. Also, what of the ways the company could finance the company without significant negative changes to the above financial metrics (ratios)?
Answer:
The company has current ratio almost half than the industry average. This is an indication that the company has lesser current assets than industry average. The ability of the company to meet its short term obligations is not suitable as the other companies in the industry are maintaining double current ratio. The ratio should never go below 1 as if it does the company may face its operational financing and working capital management issues.
The debt to equity ratio is significantly higher than the other companies of the same industry. The industry average is 4 whereas the company has ratio 20. This is significantly higher which indicates that there is heavy burden of debt on the company. High debt/ equity ratio indicates high risks. Investors avoid investing in such companies which have high debt/ equity ratio.
Explanation:
The company can go for equity financing as it will also help reduce its debt / equity ratio. The company will become less riskier and financing will be divided in debt and equity. The debt burden on assets will be reduced. There can be reduction in certain debt covenants. The company can use equity financing to fund its operations as well as purchase of non current assets to increase production and ultimately profitability of the company could rise.
5. Calculate sales revenue and gross profit under each of the four methods. (Round weighted-average cost amounts to 2 decimal places.)
Complete Question:
The Company has the following transactions related to its top-selling Mongoose mountain bike for the month of March. The Company uses a periodic inventory system.
Date Transactions Units Unit Cost Total Cost
March 1 Beginning inventory 20 $230 $4,600
March 5 Sale ($360 each) 15
March 9 Purchase 10 250 2,500
March 17 Sale ($410 each) 8
March 22 Purchase 10 260 2,600
March 27 Sale ($435 each) 12
March 30 Purchase 8 280 2,240
For the specific identification method, the March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes from beginning inventory and eight bikes from the March 22 purchase.
Required:
a. Calculate ending inventory and cost of goods sold at March 31, 2015, using the specific identification method. The March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes
from beginning inventory and eight bikes from the March 22 purchase.
b. Using FIFO, calculate ending inventory and cost of goods sold at March 31, 2015.
c. Using LIFO, calculate ending inventory and cost of goods sold at March 31, 2015.
d. Using weighted-average cost, calculate ending inventory and cost of goods sold at March 31, 2015.(Round your intermediate and final answers to 2 decimal places.)
e. Calculate sales revenue and gross profit under each of the four methods.
Answer:
The Company
Ending Inventory:
a. Specific Identification:
Beginning inventory 1 * $230 = $230
March 9 purchase 2 * $250 = 500
March 22 purchase 2 * $260 = 520
March 30 Purchase 8 * $280 =2,240
Total value of inventory 13 units = $3,490
Cost of goods sold = Cost of goods available for sale Minus Ending Inventory
= $11,940 - $3,490
= $8,450
b. FIFO:
March 22 Purchase 5 260 1,300
March 30 Purchase 8 280 2,240
Ending Inventory 13 $3,540
Cost of goods sold = Goods available for sale Minus Ending Inventory
= $11,940 - $3,540
= $8,400
c. LIFO:
Ending Inventory:
March 1 Inventory 13 $230 $2,990
Cost of goods sold = Goods available for sale Minus Ending Inventory
= $11,940 - $2,990
= $8,950
d) Weighted -Average Cost:
Ending Inventory = $248.75 * 13 = $3,233.75
Cost of Goods Sold = $248.75 * 35 = $8,706.25
Specific FIFO LIFO Weighted
Identification Average
Sales $13,900 $13,900 $13,900 $13,900.00
Cost of goods sold 8,450 8,400 8,950 $8,706.25
Gross profit $5,450 $5,500 $4,950 $5,193.75
Explanation:
Dat and Calculations:
Shop uses periodic inventory system
Date Transactions Units Unit Cost Total Cost Total
March 1 Beginning inventory 20 $230 $4,600 Sales
March 5 Sale ($360 each) 15 $360 $5,400
March 9 Purchase 10 250 2,500
March 17 Sale ($410 each) 8 $410 $3,280
March 22 Purchase 10 260 2,600
March 27 Sale ($435 each) 12 $435 $5,220
March 30 Purchase 8 280 2,240
Total Goods available for sale 48 35 $11,940 $13,900
Ending Inventory = 13 (48 - 35)
Weighted average cost = Cost of goods available for sale/Units of Goods available for sale
= $11,940/48 = $248.75
Specific Identification:
March 5 sale 15 consists of bikes from 15 beginning inventory Bal 5 - 4 = 1
March 17 sale 8 consists of bikes from the March 9 purchase Bal = 2
March 27 sale 12 consists of four bikes from beginning inventory and eight bikes from the March 22 purchase Bal = 2
Ending Inventory:
Specific Identification:
Beginning inventory 1 * $230 = $230
March 9 purchase 2 * $250 = 500
March 22 purchase 2 * $260 = 520
March 30 Purchase 8 * $280 =2,240
Total value of inventory 13 units = $3,490
FIFO:
March 22 Purchase 5 260 1,300
March 30 Purchase 8 280 2,240
Ending Inventory 13 $3,540
LIFO:
March 1 Beginning inventory 13 $230 $2,990
Weighted-Average Costs:
Ending Inventory = $248.75 * 13 = $3,233.75
Cost of Goods Sold = $248.75 * 35 = $8,706.25
Calloway Company recorded a right-of-use asset of $790,000 in a 10-year finance lease. The interest rate charged by the lessor was 10%. The balance in the right-of-use asset after two years will be:
Answer:
$632,000
Explanation:
The computation of the amount of balance in the right of use asset after two years is shown below:
Balance in right of use asset after 2 years is
= Recorded value - ((Recorded value × rate of interest) × number of years)
= $790,000 - (($790,000 × 10%) × 2)
= $790,000 - ($79,000 × 2)
= $790,000 - $158,000
= $632,000
hence, the balance is $632,000
Fields Company has two manufacturing departments, forming and painting. The company uses the weighted-average method of process costing. At the beginning of the month, the forming department has 36,000 units in inventory, 70% complete as to materials and 30% complete as to conversion costs. The beginning inventory cost of $82,100 consisted of $58,000 of direct materials costs and $24,100 of conversion costs.
During the month, the forming department started 520,000 units. At the end of the month, the forming department had 40,000 units in ending inventory, 85% complete as to materials and 35% complete as to conversion. Units completed in the forming department are transferred to the painting department. Cost information for the forming department is as follows:
Beginning work in process inventory $82,100
Direct materials added during the month 1,942,930
Conversion added during the month 1,359,730
1A. Calculate the equivalent units of production for the forming department.
1B. Calculate the costs per equivalent unit of production for the forming department.
1C. Using the weighted-average method, assign costs to the forming department’s output—specifically, its units transferred to painting and its ending work in process inventory.
Answer:
beginning WIP 36,000
$58,000 of direct materials costs
$24,100 of conversion costs
units started 520,000
units finished 516,000
materials added during the month $1,942,930
conversion added during the month $1,359,730
ending WIP 40,000
materials 85% complete, EU = 34,000
conversion 35%, EU = 14,000
total equivalent units
materials = 516,000 + 34,000 = 550,000
conversion = 516,000 + 14,000 = 530,000
cost per equivalent unit
materials = ($58,000 + $1,942,930) / 550,000 = $3.63805
conversion = ($24,100 + $1,359,730) / 530,000 = $2.611
total = $6.24905
costs assigned to
units transferred out = $6.24905 x 516,000 = $3,224,511
ending WIP = (34,000 x $3.63805) + (14,000 x $2.611) = $160,249
You are in the business of producing and selling snow shovels, and you need to determine how many shovels should be produced during each of the next four quarters to meet the following demands: 11,000 shovels in quarter 1; 48,000 shovels in quarter 2; 64,000 shovels in quarter 3; and 15,000 shovels in quarter 4.
Due to labor limitations, at most 65,000 shovels can be produced in any one quarter at a cost of $5/shovel. Additionally, a fixed cost of $30,000 must be paid for any quarter in which shovels are produced. You may assume that any shovels produced during a quarter can be used to satisfy demand for that quarter. At the end of the quarter, a holding cost of $0.50 per shovel in inventory is incurred. Currently, you have no shovels in inventory.
Required:
Formulate an integer-linear program to determine a production schedule that minimizes the sum of production and inventory costs over the next four quarters.
Answer:
Quarter Production
Q1 11000
Q2 62000
Q3 65000
Q4 0
This will generate lower production and inventory cost as it savesthe fixed cost of 30,000 if we produce in the fourth quarter.
Explanation:
First, we construct the formula for the relevant cost:
Holding Cost: $0.50 per shovel
$0.50 x 2 x (Q2-48,000) + $0.50 x (Q1-11,000) = Holding Cost Q2
$0.50 x 1 x (Q3-64,000) = Holding Cost Q3
First, the restrictions:
P1 P2 P3 P4 are Integer
P1 < 65,000
P2 < 65,000
P3 < 65,000
P4 < 65,000
Then, we have the inventory formulas:
I1 = P1 - S1
I2 = P2 + I1 -S2
I3 = P3 + I2 - S3
I4 = P4 + I3 - S4
The holding cost
H1 = I1 x 0.50
H2 = I2 x 0.50
H3 = I3 x 0.50
H4 = I4 x 0.50
The fixed cost
if P1> 0 then FC1 = 30,000
if P2> 0 then FC2 = 30,000
if P3> 0 then FC3 = 30,000
if P4> 0 then FC4 = 30,000
And last,the total cost:
FC1 + H1 +FC2 + H2 +FC3 + H3 +FC4 + H4 = Total Cost
This is the formula we want to minimize
We place this into excel solver and get the answer:
Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process. Required: You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $22,000; Work in Process Inventory, $9,690 ($2,810 of direct materials and $6,880 of conversion); Finished Goods Inventory, $140,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. Purchased raw materials for $130,000 cash (the company uses a perpetual inventory system). Used raw materials as follows: direct materials, $52,540; and indirect materials, $11,500. Recorded factory payroll payable costs as follows: direct labor, $206,000; and indirect labor, $26,500. Paid factory payroll cost of $232,500 with cash (ignore taxes). Incurred additional factory overhead costs of $83,000 paid in cash. Allocated factory overhead to production at 50% of direct labor costs. 2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round "Cost per EUP" to 2 decimal places.) Units Beginning inventory 6,500 units Started 14,000 units Ending inventory 8,000 units Beginning inventory Materials—Percent complete 100 % Conversion—Percent complete 80 % Ending inventory Materials—Percent complete 100 % Conversion—Percent complete 30 % 3.
Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash.Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash.
Answer:
Major League Bat Company
1. Journal Entries:
a. Debit Raw Materials Inventory $130,000
Credit Cash Account $130,000
To record the purchase of raw materials.
b. Debit Work in Process $52,540
Debit Manufacturing Overhead $11,500
Credit Raw Materials $64,040
To record materials used.
c. Debit Factory Wages $232,500
Credit Cash Account $232,500
To record factory payroll paid in cash.
d. Debit Work in Process $206,000
Debit Manufacturing Overhead $26,500
Credit Factory Wages $232,500
To record factory payroll costs.
e. Debit Manufacturing Overhead $83,000
Credit Cash Account $83,000
To record additional factory overhead costs.
f. Debit Work In Process $103,000
Credit Manufacturing Overhead $103,000
To allocate factory overhead to production at 50% of direct labor costs.
2. Computation of Equivalent Units of Production:
Materials Conversion Total
Beginning inventory 6,500 units 6,500 5,200
Started 14,000 units 14,000 14,000
Ending inventory 8,000 units 8,000 2,400
Total equivalent unit 22,000 16,400
3. Costs of Production:
Beginning Inventory $2,810 $6,880
Raw materials 52,540 309,000
Total costs $55,350 $315,880
Total equivalent unit 22,000 16,400
Cost per equivalent unit $2.52 $19.26
Total costs:
Started 14,000 $35,280 14,000 $269,640 $304,920
Ending inventory 8,000 20,160 2,400 46,224 $66,384
Total 22,000 $55,440 16,400 $315,864 $371,304
4. Journal Entries:
Debit Finished Goods Inventory $304,920
Credit Work In Process $ 304,920
To record the transfer of goods.
Debit Cost of Goods Sold $273,200
Credit Finished Goods Inventory $273,200
To record the cost of goods sold.
Debit Cash Account $640,000
Credit Sales Revenue $640,000
To record the sale of goods for cash.
5. Ledger accounts:
Raw Materials Inventory
Accounts Titles Debit Credit
Balance $22,000
Cash Account 130,000
Work in Process $52,540
Manufacturing Overhead 11,500
Work In Process
Accounts Titles Debit Credit
Balance $9,690
Raw materials 52,540
Factory Wages 206,000
Manufacturing
Overhead 103,000
Finished Goods Inventory $ 304,920
Balance 66,384
Manufacturing Overhead
Accounts Titles Debit Credit
Raw materials $11,500
Factory wages 26,500
Other overheads 83,000
Work in Process applied $103,000
Underapplied overhead 18,000
6. Income Statement:
For July
Sales Revenue $640,000
Cost of goods sold 273,200
Underapplied overhead 18,000 $291,200
Gross profit $348,800
Explanation:
a) Data and Calculations:
June 30 Balances:
Raw Materials Inventory, $22,000;
Work in Process Inventory, $9,690 ($2,810 of direct materials and $6,880 of conversion);
Finished Goods Inventory, $140,000;
Sales, $0;
Cost of Goods Sold, $0;
Factory Payroll Payable, $0; and
Factory Overhead, $0. 1.
Shannon’s Brewery is a newly opened micro-brewery of craft beers located about a mile from Samantha Springs in Keller, Texas. According to Shannon Carter, (owner, founder, and brew master) Samantha Springs "is an exceptional water source." "It’s surrounded by a very unique rock formation that has very, very hard compressed rocks that have been hollowed out with this very fine sand. The water travels for miles, and the end product is this filtered water that is just phenomenal." Shannon Carter crafts what the brew master calls "wholesome beers" made with the highest quality, non-GMO grains and malts available and brewed using techniques garnered from his Irish heritage. Shannon’s mission statement closely reflects this philosophy. According to Shannon Carter:
Our award-winning beer is brewed with the best stuff on earth: pure spring water, whole grain, whole flower hops and a whole lotta love! For us, "brewed with the best stuff on earth," is much more than a saying. it’s a guiding principle. Paramount to this commitment is our multi-step fire-brewed process.
Required:
What makes Shannon’s beer great?
Answer:
Marketing Mix
Explanation:
What makes Shannon's beer great is basically her Marketing Mix. This combination of aspects is what ultimately makes Shannon's beer unique and attracts a large number of customers which makes it very profitable. This includes a combination of a unique beer recipe with high-quality ingredients, a top-notch mission statement, dedicated marketing that focuses on the organic and wholesome features of the product, and lastly a dedicated customer base that loves all of these features and purchases the product. This marketing mix sets Shannon's Beer apart from the competition and makes it great.
Store A charges $20 per t-shirt. They're having a limited "buy 2, get one free"
promotion. You could buy similar t-shirts at Store B, where each shirt is $20 but you have
a coupon for $5 off every shirt. Give one good reason to buy from Store A and one
good reason to buy from Store B.
Answer:
Both Stores give a discount for buying their shirts
The two principle methods of measuring Gross Domestic Product are the A. expenditures approach and the income approach. B. flow approach and the stock approach. C. intermediate approach and the valueadded approach. D. domestic approach and the international approach.
Answer:
A. expenditures approach and the income approach.
Explanation:
GDP known as gross domestic product, is the dollar value of all final output produced within the borders of the nation during a specific period of time. Under a nominal gross domestic product (GDP) calculation for an economy, the current dollar value of the finished goods and services within the country is used. Since it is a measure that uses the current dollar value, it also include changes in price due to inflation or an increase in price in the economy
The GDP is important because it is a measure of the economy’s overall economic performance.
Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country. The Gross Domestic Products (GDP) of a country's economy gives an insight to it's social well-being, these includes;
The two principle methods of measuring Gross Domestic Product are the expenditures approach and the income approach.
Presented below is the trial balance of Pina Corporation at December 31, 2017. Debit CreditCash $ 198,550Sales $ 8,103,580Debt Investments (trading) (cost, $145,000) 156,580Cost of Goods Sold 4,800,000Debt Investments (long-term) 300,550Equity Investments (long-term) 278,550Notes Payable (short-term) 93,580Accounts Payable 458,580Selling Expenses 2,003,580Investment Revenue 67,440Land 263,580Buildings 1,041,550Dividends Payable 137,550Accrued Liabilities 99,580Accounts Receivable 438,580Accumulated Depreciation-Buildings 152,000Allowance for Doubtful Accounts 28,580Administrative Expenses 904,440Interest Expense 215,440Inventory 598,550Gain (extraordinary) 84,440Notes Payable (long-term) 901,550Equipment 603,580Bonds Payable 1,001,550Accumulated Depreciation-Equipment 60,000Franchises 160,000Common Stock ($5 par) 1,003,580Treasury Stock 194,580Patents 195,000Retained Earnings 79,550Paid-in Capital in Excess of Par 81,550 Totals $12,353,110 $12,353,110 Prepare a balance sheet at December 31, 2017, for Pina Corporation. (Ignore income taxes).
Answer:
Pina Corporation
Balance Sheet at December 31, 2017
Non - Current Assets
Land $263,580
Buildings $1,041,550
Accumulated Depreciation-Buildings ($152,000) $889,550
Equipment $603,580
Accumulated Depreciation-Equipment ($60,000) $543,580
Debt Investments (long-term) $300,550
Equity Investments (long-term) $278,550
Franchises $160,000
Patents $195,000
Total Non-Current Assets $2,630,810
Current Assets
Inventory $598,550
Debt Investments (trading) (cost, $145,000) $156,580
Accounts Receivable $438,580
Allowance for Doubtful Accounts ($28,580) $410,000
Cash $ 198,550
Total Current Assets $1,363,680
Total Assets $4,051,650
Equity and Liabilities
Equity
Common Stock ($5 par) $1,003,580
Treasury Stock $194,580
Retained Earnings $79,550
Paid-in Capital in Excess of Par $81,550
Total Equity $1,359,260
Liabilities
Non-Current Liabilities
Notes Payable (long-term) $901,550
Bonds Payable $1,001,550
Total Non-Current Liabilities $1,903,100
Current Liabilities
Notes Payable (short-term) $93,580
Accounts Payable $458,580
Dividends Payable $137,550
Accrued Liabilities $99,580
Total Current Liabilities $789,290
Total Liabilities $2,692,390
Total Equity and Liabilities $4,051,650
Explanation:
A Balance Sheet shows the Balance of Assets, Liabilities and Equity as at the Reporting date.
See the Balance Sheet for Pina Corporation prepared above.
The Wod Chemical Company produces a chemical compound that is used as a lawn fertilizer. The compound can be produced at a rate of 10,000 pounds per day. Annual demand for the compound is 0.6 million pounds per year. The fixed cost of setting up for a production run of the chemical is $1,500, and the variable cost of production is $3.50 per pound. The company uses an interest rate of 22 percent to account for the cost of capital, and the costs of storage and handling of the chemical amount to 12 percent of the value. Assume that there are 250 working days in a year.
A. What is the optimal size of the production run for this particular compound?
B. What proportion of each production cycle consists of uptime and what proportion consists of downtime?
C. What is the average annual cost of holding and setup attributed to this item? If the compound sells for $3.90 per pound, what is the annual profit the company is realizing from this item?
Answer:
A. What is the optimal size of the production run for this particular compound?
first we have to determine the holding cost per unit = h = (22% + 012%) x ($3.5) = $1.19 per unit, per year
then we have to calculate the modified holding cost per year = h' = h x [1 / (D/P)] = $1.19 x [1 / (600,000/2,500,000)] = $0.9044 per unit, per year
now we have to substitute h for h' in the EOQ formula:
Q' = √ [(2 x S x D) / h'] = √ [(2 x $1,500 x 600,000) / $0.9044] = 44,612.44 ≈ 44,612 units
B. What proportion of each production cycle consists of uptime and what proportion consists of downtime?
Time between production runs = Q' / D = 44,612 / 600,000 = 0.07435333
Uptime = Q' / P = 44,612 / 2,500,000 = 0.0178448
Downtime = total time - uptime = 0.07435333 - 0.0178448 = 0.05650853
uptime = 0.0178448 / 0.07435333 = 24% of total time
downtime = 0.05650853 / 0.07435333 = 76% of total time
C. What is the average annual cost of holding and setup attributed to this item? If the compound sells for $3.90 per pound, what is the annual profit the company is realizing from this item?
average annual holding cost and setup costs = (AD/Q') + (h'Q'/2) = [($1,500 x 600,000) / 44,612] + [($0.9044 x 44,612) / 2] = $40,144
profit per unit = $3.90 - $3.50 = $0.40 per pound
total annual profit = ($0.40 x 600,000) - $40,144 = $199,856
Skidmore Music Company had the following transactions in March:
a. Sold instruments to customers for $16, 700, received $10, 700 in cash and the rest on account. The cost of the instruments was $7, 100.
b. Purchased $4, 900 of new instruments inventory; paid $1, 700 in cash and owed the rest on account.
c. Paid $720 in wages for the month.
d. Received $3, 100 from customers as deposits on orders of new instruments to be sold to the customers in April.
e. Received a $280 bill for March utilities that will be paid in April.
Required:
Complete the following statements:
1. Cash basis Income Statement
2. Accrual basis Income Statement
Answer:
Please sew below
Explanation:
Skidmore Music Company.
1. Cash basis income statement
Sales
$13,800
Less: cost of goods sold
$1,700
Gross income
$12,100
Wages expense
$720
Operating income
$11,380
2. Accrual basis income statement
Sales.
$16,700
Less: cost of goods sold
$4,900
Gross income
$11,800
Wages expense
($720)
Utility expense
($280)
Operating income
$10,800
A government-owned company may have an unfair advantage over a privately owned company because it could:
Answer:
Government companies may have unfair advantage over private companies, as - financial support from government, public confidence & public capital raise ease
Explanation:
A government-owned company may have an unfair advantage over a private owned company because -
Have financial assistance from government in case of less or non profitability, inefficiency, non performing assets
On the other hand, having more public confidence, public companies are likely to get publically raised capital (through shares, debentures) etc more easily.
Grand Lips produces a lip balm used for cold-weather sports. The balm is manufactured in a single processing department. No lip balm was in process on May 31, and Grand started production on 20,500 lip balm tubes during June. Direct materials are added at the beginning of the process, but conversion costs are incurred evenly throughout the process. Completed production for June totaled 15,300 units. The June 30 work in process was 30% of the way through the production process. Direct materials costing $4,305 were placed in production during June, and direct labor of $3,320 and manufacturing overhead of $1,738 were assigned to the process.
Required:
a. Draw a time line for Great Lips.
b. use the time line to help you compute the total equivalent units and the cost per equivalent unit for June.
c. Assign total costs to (a) units completed and transferred to Finished Goods and (b) units still in process at June 30.
d. Prepare a T-account for Work in Process Inventory to show activity during June, including the June 30 balance.
Answer:
a. see attachment
b.
total equivalent units : Materials = 30,500 units and Conversion Costs = 16,860
cost per equivalent unit : Materials = $0.14 and Conversion Costs = $0.30
c.
(a) units completed and transferred to Finished Goods = $6,732
(b) units still in process at June 30 = $1,196
d.
Journals
Work In Process :Direct Materials $4,305 (debit)
Raw Materials $4,305 (credit)
Being Raw Materials used in Production
Work In Process :Direct Labor $3,320 (debit)
Salaries Payable $3,320 (credit)
Being Labor used in Production
Work In Process ; Overheads $1,738 (debit)
Overheads $1,738 (credit)
Being Overheads Assigned to Production
Finished Goods $6,732 (debit)
Work In Process $6,732 (credit)
Being Units transferred to Finished Goods
Explanation:
Calculation of Equivalent units of Production in respect with Raw Materials and Conversion Costs
1. Materials
Ending Work In Process (5,200 × 100%) 5,200
Completed and Transferred Out (15,300 × 100%) 15,300
Equivalent units of Production in respect with Raw Materials 30,500
2. Conversion Costs
Ending Work In Process (5,200 × 30%) 1,560
Completed and Transferred Out (15,300 × 100%) 15,300
Equivalent units of Production in respect with Conversion Cost 16,860
Calculation of Cost per Equivalent unit of production in respect with Raw Materials and Conversion Costs
Unit Cost = Total Cost ÷ Total Equivalent units
1. Materials
Unit Cost = $4,305 ÷ 30,500
= $0.14
2. Conversion Costs
Unit Cost = ($3,320 + $1,738) ÷ 16,860
= $0.30
3. Total unit cost
Total unit cost = Material Cost + Conversion Cost
= $0.14 + $0.30
= $0.44
Calculation of costs assigned to (a) units completed and transferred to Finished Goods and (b) units still in process at June 30.
(a) units completed and transferred to Finished Goods
Total Cost = units completed and transferred out × total unit cost
= 15,300 × $0.44
= $6,732
(b) units still in process at June 30.
Total Cost = Materials Cost + Conversion Cost
= $0.14 × 5,200 + $0.30 × 1,560
= $1,196
Consider a second-price, sealed-bid auction with a seller who has one unit of the object which he values at s and two buyers 1, 2 who have values of v1 and v2 for the object. The values s, v1, v2 are all independent, private values. Suppose that both buyers know that the seller will submit his own sealed bid of s (and will keep the item if bid s wins), but they do not know the value of s. The buyers know that the seller must submit his bid before seeing the buyer’s bids and they know that the seller will actually run a second price auction with the three bids he has: his own bid and the two buyer’s bids. Each buyer knows his own value but not the other buyer’s value.
Now suppose that the seller opens the bids from the buyers and then submits his own bid after seeing the bids from the two buyers. The seller runs a second price auction with these bids in the sense that the object is awarded to the highests bidder (one of the two buyers or the seller) and that bidder pays the second highest bid. Now is it optimal for the buyers to bid truthfully; that is, should they each bid their true value? Give a brief explanation for your answer.
Answer and Explanation:
Given that this is a second price bid auction whereby the second highest bid is the price that the highest bidder pays for the item up for auction sale, so that b1>b2 then b1 gets item for the price of b2.
Truthfulness of true value is the dominant strategy here which means each player should aim to be truthful with their bid regarding their true value regardless of what other bidders are bidding. Therefore truthfulness of value is the optimal strategy with the best payoff for bidders
According to the video, what are some things that Human Resources Managers do? Check all that apply.
oversee hiring and firing
purchase computers
distribute office supplies
develop training programs
develop personnel policies
develop pricing strategies
develop recruiting programs
Answer:
1 4 5 7
Explaination:
Answer:
1 4 5 7
Explanation:
Suppose that Brazil imports semiconductors from the United States. The free market price is $23.00 per semiconductor. If the tariff on imports in Brazil is initially 12%, Brazilians pay $_____per semiconductor. One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial countries, as well as many developing countries. Suppose that as a result of the Uruguay Round, Brazil reduces its import tariffs to 6%.
Assuming the price of semiconductors is still $23.00 per semiconductor, consumers now pay the price of $_____per semiconductor. Based on the calculations and the scenarios presented, the Uruguay Round most likely_____in Brazil and______in the United States.
Answer:
Suppose that Brazil imports semiconductors from the United States. The free market price is $23.00 per semiconductor. If the tariff on imports in Brazil is initially 12%, Brazilians pay $25.76 per semiconductor.
= 23 * ( 1 + 12%) = $25.76
One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial countries, as well as many developing countries.
Suppose that as a result of the Uruguay Round, Brazil reduces its import tariffs to 6%.
Assuming the price of semiconductors is still $23.00 per semiconductor, consumers now pay the price of $24.38 per semiconductor.
= 23 * ( 1 + 6%) = $24.38
Based on the calculations and the scenarios presented, the Uruguay Round most likely hurts Producers in Brazil and benefits producers in the United States.
The Uruguay Round reduced the tariff and made the semiconductor cheaper for Brazilians which means they will now import more. This will benefit producers in the US who will now be able to sell more but will hurt producers in Brazil who will sell less if their prices are higher than $24.38.
For each transaction,
1. Analyze the transaction using the accounting equation.
2. Record the transaction in journal entry form
3. Post the entry using T-accounts to represent ledger accounts.
Use the following (partial) chart of accounts—account numbers in parentheses: Cash (101); Accounts Receivable (106); Office Supplies (124); Trucks (153); Equipment (167); Accounts Payable (201); Unearned Landscaping Revenue (236); D. Tyler, Capital (301); D. Tyler, Withdrawals (302); Landscaping Revenue (403); Wages Expense (601), and Landscaping Expense (696).
a. On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $7,000 in cash along with equipment having a $3,000 value.
b. On May 21, Elegant Lawns purchases office supplies on credit for $500.
c. On May 25, Elegant Lawns receives $4,000 cash for performing landscaping services.
d. On May 30, Elegant Lawns receives $1,000 cash in advance of providing landscaping services to a customer.
Answer:
1) I used an excel spreadsheet
2) a. On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $7,000 in cash along with equipment having a $3,000 value.
Dr Cash 7,000
Dr Equipment 3,000
Cr DeShawn Tyler, capital 10,000
b. On May 21, Elegant Lawns purchases office supplies on credit for $500.
Dr Office supplies 500
Cr Accounts payable 500
c. On May 25, Elegant Lawns receives $4,000 cash for performing landscaping services.
Dr Cash 4,000
Cr Landscaping Revenue 4,000
d. On May 30, Elegant Lawns receives $1,000 cash in advance of providing landscaping services to a customer.
Dr Cash 1,000
Cr Unearned Landscaping Revenue 1,000
3)
Cash (101)
debit credit
7,000
4,000
1,000
12,000
Office Supplies (124)
debit credit
500
Equipment (167)
debit credit
3,000
Accounts Payable (201)
debit credit
500
Unearned Landscaping Revenue (236)
debit credit
1,000
D. Tyler, Capital (301)
debit credit
10,000
Landscaping Revenue (403)
debit credit
4,000
Question 6 of 10
Which economic tool would most likely be used as part of a contractionary
monetary policy?
A. Lowering interest on reserves
B. Reducing the discount rate
C. Raising the reserve requirement
D. Buying treasury securities
Answer:
C. Raising the reserve requirement
Explanation:
Contractionary monetary policy refers to the Fed's action of reducing money supply in the economy. Reducing the money supply slows down the economy, thereby countering expansion and inflationary pressures. Raising the reserve requirement is one tool that the Fed uses as a contractionary monetary policy.
Reserve requirements refer to the percentage of customer deposits that the Fed requires commercial banks to maintain at all times. An increase in reserve requirement decreases the money available for banks to lend out. Reduced lending means a decrease in the money supply, which results in a decline in the inflation rate.
Consider the markets for three products below. Indicate which characteristics of a competitive market are met by these markets.
Market: gasoline
a. Large number of buyers unanswered
b. Standardized good unanswered
c. Full information unanswered
d. No transaction cost unanswered
e. Participants are price takers unanswered
Market: barbershop haircuts
a. Large number of buyers unanswered
b. Standardized good unanswered
c. Full information unanswered
d. No transaction cost unanswered
e. Participants are price takers unanswered
Market: bicycles
a. Large number of buyers unanswered
b. Standardized good unanswered
c. Full information unanswered
d. No transaction cost unanswered
e. Participants are price takers
Answer:
Market: gasoline (monopolistic competition with few sellers and many buyers)
a. Large number of buyers
b. Standardized good
c. Full information (not all participants know all the information, but most is available if they search for it)
d. No transaction cost
e. Participants are price takers
Market: barbershop haircuts (monopolistic competition with a lot of sellers and many buyers, but differentiated service)
a. Large number of buyers
d. No transaction cost
e. Participants are price takers
Market: bicycles (resembles a perfect competition market)
a. Large number of buyers
b. Standardized good
c. Full information (not all participants know all the information, but most is available if they search for it)
d. No transaction cost
e. Participants are price takers
Explanation:
No market provides full information to all participants. The closest you can get are some markets where commodities are traded and the price is set be certain exchange institutions. E.g. the Chicago Mercantile Exchange sets the price of agricultural commodities in the US, and most trading companies follow that price but variations still exist (even though they are minimum).
It is not possible for all the consumers of gasoline, haircuts or bicycles to know the exact price of all the goods the services since the price varies from one seller to another. Even if they are part of a retail chain, the price varies. Full information only exists in theoretical models, it doesn't exist in the real world.
Market: gasoline (monopolistic competition with few sellers and many buyers)
a. Large number of buyers
b. Standardized good
c. Full information (not all participants know all the information, but most is available if they search for it)
d. No transaction cost
e. Participants are price takers
Market: barbershop haircuts (monopolistic competition with a lot of sellers and many buyers, but differentiated service)
a. Large number of buyers
d. No transaction cost
e. Participants are price takers
Market: bicycles (resembles a perfect competition market)
a. Large number of buyers
b. Standardized good
c. Full information (not all participants know all the information, but most is available if they search for it)
d. No transaction cost
e. Participants are price takers
Explanation:
No market provides full information to all participants. The closest you can get are some markets where commodities are traded and the price is set be certain exchange institutions. E.g. the Chicago Mercantile Exchange sets the price of agricultural commodities in the US, and most trading companies follow that price but variations still exist (even though they are minimum).
It is not possible for all the consumers of gasoline, haircuts or bicycles to know the exact price of all the goods the services since the price varies from one seller to another. Even if they are part of a retail chain, the price varies. Full information only exists in theoretical models, it doesn't exist in the real world.