Answer:
Guillermo's Oil and Lube Company
Calculating the Direct Labor Rate Variance and the Direct Labor Efficiency Variance
a1. Direct labor rate variance (LRV) = Actual Labor Rate minus Standard Labor Rate multiplied by Actual hours worked
= $16 - $15 x 291
= $291 U
a2. Direct labor efficiency variance (LEV) = Standard hours minus Actual hours x Standard hourly rate
= 297 - 291 x $15
= $90 F
b1. Direct labor rate variance (LRV) = the difference between the actual wages paid and the standard wages
= (Actual labour rate x actual hours) - (standard rate x actual hours)
= ($16 x 291) - ($15 x 291)
= $4,656 - $4,365
= $291 U
b2. Direct labor efficiency variance = the difference between the actual number of direct labor hours worked and budgeted direct labor hours that should have been worked based on the standards
(291 x $15) - (297 x $15)
4,365 - 4,455
= $90 F
c. Total Direct labor rate variance (LRV) = Actual Wages minus Standard Wages
= (Actual labor rate x Actual hours) - (Standard labor rate x Standard hours)
= ($16 x 291) - ($15 x 297)
= $4,656 - $4,455
= $201 U
d. If actual wage rate paid in June was $14.00:
d1. Direct labor rate variance (LRV) = Actual Labor Rate minus Standard Labor Rate multiplied by Actual hours worked
= $14 - $15 x 291
= $291 F
d2. Direct labor efficiency variance (LEV) = Standard hours minus Actual hours x Standard hourly rate
= 297 - 291 x $15
= $90 F
d3. Total Direct labor rate variance (LRV) = Actual Wages minus Standard Wages
= (Actual labor rate x Actual hours) - (Standard labor rate x Standard hours)
= ($14 x 291) - ($15 x 297)
= $4,074 - $4,455
= $381 F
Explanation:
a) Data and Calculations
Actual number of oil changes performed: 990
Standard number of direct labor hours to for 990 oil changes = 990 x 0.3 hours (since 18 minutes = 0.3 hours or 18/60) = 297 hours
Actual number of direct labor hours worked: 291 hours
Actual rate paid per direct labor hour: $16.00
Standard rate per direct labor hour: $15.00
b) The impact on direct labor rate variance if the actual wage rate paid in June was $14 was to turn the unfavorable labor rate variance into a favorable variance of $291 and the total direct labor variance would have been a favorable variance $381 instead of an unfavorable variance of $201.
Compute the new national income given MPC = 0.9, and an autonomous injection of $100B from federal government stimulus spending.
Answer:1200
Explanation:
The new national income is given MPC = 0.9, and an autonomous injection of $100B from federal government stimulus spending will be 1000.
What is stimulus spending?To stimulate a market and pull it out of an economic downturn or depression, the government will boost expenditure while lowering taxes as asset prices. This is known as a stimulus package.
The term "economic stimulus" refers to focused monetary and financial actions designed to spur business activity in the private sector. To compensate for the decline in aggregate demand, fiscal recovery focuses on promoting private sector expenditure.
The MPC is given as 0.9
The MPS will be
1 = MPC + MPS
1 - 0.9
MPS = 0.1
The stimulus spending will be
= 1000 / 0.1
= $10000
The federal government has spent of $10000.
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Which strategy is considered a timeout? captive company rebirth pause/proceed-with-caution contraction concentration
Answer: Pause/Proceed-with-caution
Explanation:
A timeout strategy refers to when a company decides to scale down a certain or certain operations for a time to effectively rest. The Pause/Proceed with caution strategy is a timeout strategy because it involves the company pausing operations to enable it assess the market before it can launch a bigger grand strategy.
This strategy is also employed when a company has gone through changes such as a serious expansion. They take a pause to enable the changes brought by the expansion to seep through the organization to give employees the chance to get acquainted with the changes so that moving forward, everyone is more or less on the same page.
Suppose the firms in a perfectly competitive industry merge to form a monopoly. Which of the following would NOT occur?
a. A rise in total consumer plus producer surplus
b. A deadweight loss
c. A rise in producer surplus
d. A fall in consumer surplus
Answer: a. A rise in total consumer plus producer surplus
Explanation:
When a Monopoly is formed, the Producer surplus will increase but the Consumer surplus will decrease. This is because a Monopoly will charge a higher price than a Competitive firm to get more profit as well reduce output as well.
This will result in the transfer of some Consumer surplus to the Producer as well as a Dead-weight loss being formed thereby reducing the Consumer surplus. The total surplus will therefore fall as a result of this merger.
The profit-maximizing monopolist produces _____________ units and charges a price of _____________.
Answer: Q0; P3
Explanation:
The profit-maximizing monopolist produces Q0 units and charges a price of P3.
According to the exhibit graph, the monopolist will produce Q0 units. This is because a monopoly maximises profit at the point where Marginal Revenue equals Marginal Cost. Looking at the chart, the quantity of output where this happens is Q0.
The Monopolist will then charge a price of P3. After the profit-maximising output is realized, the way to find out the price the monopolist will sell at is the point where the output produced intersects with the Demand curve. At this point, the price listed is what people are willing to buy that amount of quantity for and so the Monopoly will sell at that price.
Penne Pharmaceuticals sold 2 million shares of its $5 par common stock to provide funds for research and development. If the issue price is $16 per share, what is the journal entry to record the sale of the shares
Answer:
Please see the journal entry below.
Explanation:
Cash account Dr
(2m shares × $16 per share) $32,000,000
Common stock account Cr
(2m shares × $5 per common stock) $10,000,000
APIC - Common stock account Cr
[($16 - $5) × 2m shares]
$22,000,000
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:
Puget Sound Divers
Planning Budget
For the Month Ended May 31
Budgeted diving-hours (q) 300
Revenue ($440.00q) $ 132,000
Expenses:
Wages and salaries ($11,400 + $128.00q) 49,800
Supplies ($5.00q) 1,500
Equipment rental ($2,400 + $25.00q) 9,900
Insurance ($3,800) 3,800
Miscellaneous ($510 + $1.48q) 954
Total expense 65,954
Net operating income $ 66,046
During May, the company’s actual activity was 290 diving-hours.
prepare a flexible budget for May.
Answer:
$63,240.8
Explanation:
Preparation for a flexible budget for May
Actual diving hours 290
Revenue (290*$440) $127,600
Expenses:
Wages and salaries 48,520
(11,400+290*128)
Supplies 1,450
(290*5)
Equipment rental 9,650
(2400+290*25)
Insurance 3,800
Miscellaneous 939.2
(510+290*1.48)
Total expense $64,359.2
Net Operating income $63,240.8
($127,600-$64,359.2)
Therefore the Net Operating income for the flexible budget for May will be $63,240.8.
In October, Novak Company reports 20,100 actual direct labor hours, and it incurs $198,000 of manufacturing overhead costs. Standard hours allowed for the work done is 22,000 hours. The predetermined overhead rate is $9.10 per direct labor hour. In addition, the flexible manufacturing overhead budget shows that budgeted costs are $7.40 variable per direct labor hour and $42,400 fixed. Compute the overhead controllable variance.
Answer:
The answer is $7,200U
Explanation:
The formula for computing the overhead controllable variance is:
Actual overhead - budgeted overhead
We need to first calculate the budgeted overhead from the question.
Budgeted overhead = (budgeted cost x standard hours) + fixed labor cost
($7.40 x 22,000 hours) + $42,400
= $205,200
Actual overhead incurred is $198,000
Therefore we have:
$198,000 - $205,200
= $7,200U
The U means unfavorable, meaning actual overhead incurred is less than budgeted overhead
Your teammates, Sara and Juan, are having difficulty cooperating with one another even though their individual assignments are highly related. Which of the following actions is least likely to improve their cooperation?
1) Ask them to make suggestions to each another about ways to possibly improve each person’s assignment.
2) Have them work on their own and only meet with the rest of the team when absolutely necessary.
3) As a team, discuss how each member’s contributions are linked and contribute to the team’s goals.
4) Re-assign their tasks so that they are working on very different aspects of the team’s project.
Answer: Have them work on their own and only meet with the rest of the team when absolutely necessary.
Explanation:
From the question, we are informed that Sara and Juan, are having difficulty cooperating with one another even though their individual assignments are highly related.
To improve their cooperation, the best thing to do is to have them work on their own and only meet with the rest of the team when absolutely necessary.
You are considering buying a perpetuity contract from your insurance company that will pay you $500 annually where the payment will grow by 3% each year. Using a discount rate of 9%, the most you should be willing to pay for this contract is closest to:
Answer:
Maximum Amount Payable = $8333.33
Explanation:
Perpetual Annuity Payment = $500
Growth Rate = 3%
Discount Rate = 9%
Maximum Amount Payable = Present Value of Perpetual Annuity
Present Value of Perpetual Annuity = Perpetual Annuity Payment / (Discount rate - Growth rate)
Maximum Amount Payable = $500 / (0.09 - 0.03)
Maximum Amount Payable = $500 / 0.06
Maximum Amount Payable = $8333.33
The Chinese government chooses to control the value of its currency so that it is consistently worth some fixed amount of U.S. dollars. Which of the following terms would relate to what the Chinese government would be doing?
a. floating exchange rate
b. flexible exchange rate
c. exchange rate freedom
d. pegged exchange rate
Answer: pegged exchange rate
Explanation:
A pegged exchange rate also referred to as the fixed exchange rate, sometimes is an exchange rate regime type whereby the value of a currency is fixed by the monetary authority of a particular country against the value of the currency of another country.
This is the type of exchange rate used by the Chinese government in the question above.
Suppose the following financial data were reported by 3M Company for 2019 and 2020 (dollars in millions). 3M Company Balance Sheets (partial) 2020 2019 Current assets Cash and cash equivalents $ 3,008 $1,899 Accounts receivable, net 3,110 3,065 Inventories 2,675 3,017 Other current assets 1,890 1,542 Total current assets $10,683 $9,523 Current liabilities $ 4,974 $5,821 (a) Calculate the current ratio and working capital for 3M for 2019 and 2020.
Answer:
Current ratio = Current Assets / Current Liability
Current ratio 2019 = 9,523 / 5,821
Current ratio 2019 = 1.64 : 1
Current ratio 2020 = 10,683 / 4,974
Current ratio 2020 = 2.15 : 1
Working Capital = Current asset - Current liability
Working capital 2019 = $9,523 - $5,821
Working capital 2019 = $3,702
Working capital 2020 = $10,683 - $4,974
Working capital 2020 = $5,709
Do you think that customers are impressed with the effort that Gap has made to respond to the need to have more worker friendly suppliers? Explain your answer.
Answer:
Yes, I think that customers are very impressed with their customer service
Explanation:
I'm impressed.
Parilo Company acquired $170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold $50,000 of the bonds for 96.
Journalize entries to record the following (refer to the Chart of Accounts for exact wording of account titles):
May 1 Initial acquisition of the bonds
Nov. 1 Semiannual interest received
1 Sale of the bonds
Dec. 31 Accrual of $1,000 interest
Answer:
May 1, 2016
DR Investments Bonds.................................$170,000
CR Cash ...........................................................................$170,000
(To record acquisition of bonds)
Nov 1, 2016
DR Cash............................................................$4,250
CR Interest Revenue......................................................$4,250
(To record interest received)
Working
Cash = $170,000*5%*6/12
= $4,250
Nov 1, 2016
DR Cash........................................................... $48,000
DR Loss on sale of investment...................... $2,000
CR Investment Bonds .....................................................$50,000
(To record sales of bonds)
Working
Cash = $50,000*0.96
= $48,000
Loss on investment = 50,000 - 48,000
= $2,000
Dec 31, 2016
DR Interest receivable........................................$1,000
CR Interest revenue...........................................................$1,000
The standard deviation of a portfolio: Multiple Choice is a measure of that portfolio's systematic risk. is a weighted average of the standard deviations of the individual securities held in that portfolio. measures the amount of diversifiable risk inherent in the portfolio. serves as the basis for computing the appropriate risk premium for that portfolio. can be less than the weighted average of the standard deviations of the individual securities held in that portfolio.
Answer:
sorry i forgot
Explanation:
Companies whose stock is traded in a public market must report EPS in the notes of their financial statements. must report EPS on their income statement. must report EPS on their balance sheet. are not required to report EPS.
Answer:
The answer is B. must report EPS on their income statement
Explanation:
If a company's share is being traded publicly, its Earnings Per Share (EPS) must be shown on its income statement(Statement of profit or loss and other comprehensive income).
Earnings Per Share (EPS) is calculated as follows:
Earnings (profit after tax) ÷ total number of shares outstanding.
Note: EPS does not recognize/consider discontinue operations.
Between 1953 and 2015, rising labor productivity contributed more to U.S. economic growth than did increases in inputs.
A. True
B. False
Answer: True
Explanation:
Labor productivity has to do with the amount of products and services which are produce at a particular time by the workers.
It should be noted that between 1953 and 2015, rising labor productivity contributed more to U.S. economic growth than did increases in inputs. This brought about increase in the available goods and services in the country.
TB MC Qu. 9-336 Puvo, Inc., manufactures a single product in which ...
Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
Standard Quantity Standard Price or Rate Standard Cost
Direct materials 6.10 pounds $0.90 per pound $5.49
Direct labor 0.50 hours $36.50 per hour $18.25
Variable manufacturing
overhead 0.50 hours $8.80 per hour $4.40
During March, the following activity was recorded by the company:
• The company produced 3,500 units during the month.
• A total of 20,500 pounds of material were purchased at a cost of $14,680.
• There was no beginning inventory of materials on hand to start the month; at the end of the month, 4,720 pounds of material remained in the warehouse.
• During March, 1,200 direct labor-hours were worked at a rate of $41.50 per hour.
• Variable manufacturing overhead costs during March totaled $15,161.
The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for March is:_______.
a. $3,641 F.
b. $4,355 U.
c. $4,355 F.
d. $3,641 U.
Answer:
Variable manufacturing overhead rate variance= $4,596 unfavorable
Explanation:
Giving the following information:
Variable manufacturing overhead 0.50 hours $8.80 per hour $4.40
Actual direct labor hours= 1,200
Variable manufacturing overhead costs during March totaled $15,161.
To calculate the variable overhead rate variance, we need to use the following formula:
Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity
Actual rate= 15,161/1,200= $12.63
Variable manufacturing overhead rate variance= (8.8 - 12.63)*1,200
Variable manufacturing overhead rate variance= $4,596 unfavorable
"A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to:"
Answer: sell covered calls
Explanation:
A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to sell covered calls.
It should be noted that a covered call is a financial transaction that takes place when a call option is sold by an investor even though the investor still owns part of the security based on what's sold.
To determine cash payments for operating expenses for the statement of cash flows using the direct method, a decrease in accrued expenses is added to operating expenses other than depreciation.
a. True
b. False
Answer:
True
Explanation:
To determine cash payments under direct method the decrease in accrued expenses is added to the operating expenses payable . Accrued expense mean expenses incurred but not yet paid. A decrease in accrued expenses would suggest that accrued expenses have been paid therefore there has been an outflow of cash which will be added to cash paid for operating expenses.
Nature's Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in a chef's salad selling for $7. Daily fixed costs are $1,710, and variable costs are $4 per meal. With a capacity of 950 meals per day, the restaurant serves an average of 900 meals each day.Requried:a. Determine the current average cost per meal.b. A busload of 30 Girl Scouts stops on its way home from the San Bernardino National Forest. The leader offers to bring them in if the scouts can all be served a meal for a total of $150. The owner refuses, saying he would lose $0.60 per meal if he accepted this offer. How do you think the owner arrived at the $0.60 figure? Comment on the owner's reasoning.c. A local businessman on a break overhears the conversation with the leader and offers the owner a one-year contract to feed 300 of the businessman's employees one meal each day at a special price of $4.50 per meal. Should the restaurant owner accept this offer? Why or why not?
Answer:
Nature's Garden
a. Determination of the current average cost per meal:
Variable cost per meal = $3,800 ($4 x 950) based on full capacity
Fixed costs per day = $1,710
Total costs = $5,510
Average cost per meal = $5,510/950 = $5.80
b. Girl Scouts' offer of $150 for 30 girls:
Offered price per person = $5 ($150/30)
Projecting a loss of $0.60 per meal, this gives a total loss of $18 ($0.60 x 30)
Projected revenue from the offer = $150 + $18 = $168
Projected revenue per meal = $168/30 = $5.60
Actual revenue to be received per meal = $5.00
Loss of $0.60
The owner arrived at the $0.60 loss because his total costs per meal was $5.60.
c. Since the variable cost per meal is $4, the restaurant owner could accept the offer if the additional 300 meals will not increase his daily fixed costs due to lack of capacity. If the fixed costs increase with this addition, then it may not be reasonable to accept the offer. Based on this offer, the contribution to defraying fixed costs, given present capacity, is only $0.50 ($4.50 - $4) per meal.
Explanation:
Selling price of chef's salad = $7
Daily fixed costs = $1,710
Variable costs per meal = $4
Meals capacity per day = 950
Average meals = 900
Nature's Garden has a fixed cost of $1,710 based on current capacity of 950 meals per day. The fixed cost may increase with increasing capacity. This fact must be borne in mind when making decisions.
Which of the following is an example of an oligopolistic market with a standardized product?
A) The market for breakfast cereal.
B) The market for aluminum.
C) The market for jewelry.
D) The market for automobiles.
Answer:
B) The market for aluminum.
Explanation:
An oligopoly is a market form in which the market or industry is dominated by a small group of large sellers. Oligopolies can result from various forms of collusion that reduce market competition which then majorly leads to higher prices for consumers. They have their own market structure.
Oligopolistic market with standardised product is an homogeneous oligopoly that is an oligopoly in which firm produce a standardised product. And a good example of that is the Aluminum market.
A corporation declared a stock dividend on November 1 and issued 9,000 shares of stock to its stockholders. Prior to the dividend, the balance in Retained Earnings was $850,000, the number of shares of $5 par value stock issued and outstanding was 60,000, and the market value of the stock was $12. This stock dividend will cause total stockholders' equity to:
a. decrease by $63,000.
b. remain unchanged.
c. increase by $45,000.
d. decrease by $108,000.
Answer:
b. remain unchanged.
Explanation:
The computation is shown below:
The Decrease in retained earnings would be
= 9,000 shares × $12
= $108,000
Increase in common stock is
= 9,000 shares × $5
= $45,000
Therefore the Paid up capital in excess of par is
= $108,000 - $45,000
= $63,000
Now
Effect on stockholder’s equity is
= -$108,000 + $45,000 + $63,000
= $0
hence, the correct option is b.
Emeril is the owner of a restaurant. He decides to raise the wages of his workers even though he faces an excess supply of labor. His decision:__________
Complete Question:
Emeril is the owner of a restaurant. He decides to raise the wages of his workers even though he faces an excess supply of labor. His decision:
Group of answer choices.
a. might increase profits if it attracts a better pool of workers to apply for jobs at his restaurant.
b. will reduce the excess supply of labor.
c. is an example of the benefits of a minimum-wage law.
d. All of the above are correct.
Answer:
a. might increase profits if it attracts a better pool of workers to apply for jobs.
Explanation:
Emeril is the owner of a restaurant. He decides to raise the wages of his workers even though he faces an excess supply of labor. His decision might increase profits if it attracts a better pool of workers to apply for jobs.
An excess supply of labor refers to the situation where there are too many number of people working in an organization at a particular period of time.
However, Emeril's decision to raise the wages of his workers might increase profits if he's able to recruit better pool of workers who will be willing and able to work more hours effectively and efficiently. As a result, this would help to boost the level of production and increase the rate at which the consumer's needs or wants are meet.
An agent who accepts a bribe to purchase goods for a principal from a seller who is a personal friend breaches his ________ duty by taking the money, since it is the agent's duty to work only for the best interests of the principal. Group of answer choices
Answer: fiduciary
Explanation:
An agent who accepts a bribe to purchase goods for a principal from a seller who is a personal friend breaches his fiduciary duty by taking the money, since it is the agent's duty to work only for the best interests of the principal.
Fiduciary has to do with trust which exists between a beneficiary and a trustee or an agent and the principal.
Quantitative Problem 2: Carlysle Corporation has perpetual preferred stock outstanding that pays a constant annual dividend of $1.90 at the end of each year. If investors require an 7% return on the preferred stock, what is the price of the firm's perpetual preferred stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
$27.14
Explanation:
Calculation for the price of the firm's perpetual preferred stock
Using this formula
Price of the firm perpetual preferred stock = Annual dividend / Required return
Where,
Annual dividend =$1.90
Required return=7% or 0.07
Let plug in the formula
Price of the firm perpetual preferred stock = $1.90 / 0.07
Price of the firm perpetual preferred stock=$27.14
Therefore the Price of the firm perpetual preferred stock will be $27.14
Shoe stores A and B are considering selling two new styles of designer shoes resulting in the values below. A moves first and selects which style to sell first, and then B makes its selection (the payoffs at the bottom represent (Payoff A , Payoff B).
What is the equilibrium path of this game?
A. A will choose Black and B will choose Pink
B. A will choose Pink and B will choose Pink
C. A will choose Black and B will choose Black
D. A will choose Pink and B will choose Black
Answer:
B. A will choose Pink and B will choose Pink
Explanation:
Answer: it is b because of
Explanation:
If the budget deficit increases then a. saving and the interest rate rise. b. saving rises and the interest rate falls. c. saving falls and the interest rate rises. d. saving and the interest rate fall.
Answer:
c. saving falls and the interest rate rises.
Explanation:
If Country A runs a budget deficit, it forces the government to issue bonds at reduced prices in order to raise funds to shore up the decreased government revenue. When bonds are issued, the government is mopping up the savings, thus reducing the available savings. With this increased budget deficit, interest rates will rise as the cost of funding increases to match the inflationary effect of the deficit. And the vicious circle starts.
assume that autonomous consumption is $1610 billion and disposable income is $11,200 billion. Using the consumption function, calculate consumption expenditure
Answer: $9,226
Explanation;
The consumption function is;
Consumption = Autonomous consumption + (Marginal Propensity to consume * Disposable income)
Marginal Propensity to Consume;
=Increase in consumption expenditure/ Increase in Disposable income
= 680/1,000
= 0.68
Consumption = Autonomous consumption + (Marginal Propensity to consume * Disposable income)
= 1,610 + ( 0.68 * 11,200)
= $9,226
It is January 2nd and senior management of Digby meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7. Which of the following statements are true? Select all that apply.a. Working capital will remain the same at $18,964,118b.Total Assets will rise to $235,535,291c. Chesters' long-term debt will rise by $9,000,000d.The total investment for Chester will be $217,192,866e.Total liabilities will be $139,957,573
Answer:
Statements (b) and (e) are true.
Explanation:
According to the above, computation of the data given are shown below;
According to the statement (b), Total assets will rise to = $235,535,291
According to the statement (e) , Total liabilities will be $139,957,573
Also, according to the question, new liability amounts to = $10,000,000
Therefore,
Total Stockholder's Equity = Total assets - Total Liabilities
= $235,535,291 - $139,957,573 - $10,000,000
= $85,577,718
Leverage = Total Assets ÷ Total Stockholder's Equity
= $235,535,291 ÷ $85,577,718
= 2.7
According to the above analysis, statements (b) and (e) are true.
Answer :
b.Total Assets will rise to $235,535,291.
e.Total liabilities will be $139,957,573.
Explanation:
The following statements are true :
Working notes :
Total Assets = $235,535,291 Total Liabilities =$139,957,573 New Liability = $10,000,000Formula:
Total Stockholder's Equity = Total assets - Total Liabilities
Total Stockholder's Equity = $235,535,291 - $139,957,573 - $10,000,000
Total Stockholder's Equity = $85,577,718
Leverage = Total Assets ÷ Total Stockholder's Equity Leverage= $235,535,291 ÷ $85,577,718 Leverage= 2.7
According to the above scenario the correct answer is B and E.
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Suppose a monopolist's costs and revenues are as follows: ATC = $50.00; MC = $35.00; MR = $45.00; P = $55.00. The firm should
Answer:
The firm should increase output and reduce price
Explanation:
For a monopolist, there can be one of the following three scenarios at a time point in time:
Scenario one, MR = MC: For a monopolist, profit is maximized at the point where marginal revenue (MR) is equal to to marginal cost (MC), i.e. where MR = MC.
Scenario two, MR < MC: But when the MR < MC, it indicates that the monopolist is currently producing a higher quantity of output and it is not maximizing profit. In order to maximize profit, the monopolist has to reduce output until MR = MC.
Scenario three , MR > MC: But when the MR > MC, it indicates that the monopolist is currently producing a lower quantity of output and it is not maximizing profit. In order to maximize profit, the monopolist has to increase output until MR = MC. Also, the monopolist has to reduce price in order to sell the increased quantity of output.
From the question, the monopolist falls into scenerio three as MR > MC, i.e. $45 > $35. Therefore, the monopolist should increase output until MR = MC and reduce price in order to maximize profit.
