Answer and Explanation:
The computation is given below:
Calculation of Activity Rates
Cost Pool Cost Driver Cost Activity Rate
Machining Machine Hours $5800 $0.58 (5800 ÷ 10000)
Setting Up Batches $4700 $4.70 (4700 ÷ 1000)
Calculation of Overhead Cost to each Product:
Particulars Product Z7 Product K9 Total
Machining $2204 ($0.58 × 3800) $3596 ($0.58 × 6200) $5800
Setting Up $3290 ($4.7 × 700) $1410 ($4.7 × 300) $4700
$5494 $5006 $10500
Your company is estimated to make dividends payments of $2.2 next year, $3.9 the year after, and $4.8 in the year after that. The dividends will then grow at a constant rate of 2% per year. If the discount rate is 9% then what is the current stock price?
Answer:
$63.01
Explanation:
The share price today is the present value of expected future cash flows which in this case are the expected future dividends and the terminal value of dividends beyond the 3rd year.
Year 1 dividend =$2.2
Year 2 dividend =$3.9
Year 3 dividend =$4.8
Terminal value=Year 3 dividend*(1+constant growth rate)/(required rate of return-constant growth rate)
constant growth rate=2%
the required rate of return=9%
Terminal value=$4.80*(1+2%)/(9%-2%)
Terminal value=$69.94
Present value of a future cash flow=cash flow/(1+required rate of return)^n
n is 1 for year 1 dividend, 2 for year 2 dividend , 3 for year 3 dividend, and terminal value(terminal value is stated in year 3 terms)
stock price=$2.2/(1+9%)^1+$3.9/(1+9%)^2+$4.8/(1+9%)^3+$69.94/(1+9%)^3
stock price=$63.01
Exercise 6-10 Petty cash fund accounting LO P2 Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $38 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $29; delivery expenses, $16; and miscellaneous expenses, $43. Palmona uses the perpetual system in accounting for merchandise inventory. Prepare journal entries to (1) establish the fund on January 1, (2) reimburse it on January 8, and (3) both reimburse the fund and increase it to $450 on January 8, assuming no entry in part 2. Hint: Make two separate entries for part 3.
Answer:
1 Jan 01
Dr Petty cash 200
Cr Cash 200
2 Jan 1
Dr Postage expense 74
Cr Merchandise inventory 29
Dr Delivery expense 16
Cr Miscellaneous expenses 43
Cr Cash 162
3 Jan 08
Dr Postage expense 74
Dr Merchandise inventory 29
Dr Delivery expense 16
Dr Miscellaneous expenses 43
C Cash 162
Dr Petty cash 250
Cr Cash 250
Explanation:
1 Preparation of the journal entry to record reimburse the fund
Jan 01
Dr Petty cash 200
Cr Cash 200
2. Preparation of the reimburse it on January 8, and
Jan 08
Dr Postage expense 74
Dr Merchandise inventory 29
Dr Delivery expense 16
Dr Miscellaneous expenses 43
Cr Cash 162
3 Preparation of jourtnal for reimburse the fund and increase it to $450
Jan 08 Postage expense 74
Merchandise inventory 29
Delivery expense 16
Miscellaneous expenses 43
Cash 162
Petty cash 250
Cash 250
Wilturner Company incurs $80,000 of labor related directly to the product in the Assembly Department, and $29,000 of labor related to the Assembly Department as a whole, and $16,000 of labor for services that help production in both the Assembly and Finishing departments. The amount of direct labor and factory overhead respectively are:________
Answer:
Direct labor = $80,000Factory Overhead = $29,000Explanation:
Direct labor is the cost of labor that was involved in the actual production process.
Factory overhead is the labor that was involved in the production but not directly involved.
Direct labor here is therefore the $80,000 that was directly related to the product.
Factory overhead is the $29,000 that was related to the Assembly department as a whole.
Theo sells a stock short with a current price of 25,000 and buys it back forXat the end of 1 year. Governmental regulations require the short seller todeposit margin of 40% at the time of the short sale. No dividends incurred.The prevailing in
Answer:
$23,300
Explanation:
Missing word "The prevailing interest rate is an 8% annual rate, and Theo earns a 25% yield on the transaction. Calculate X."
Stock short sell amount = $25,000
Margin required = 40%
Margin = $25,000 * 40%
Margin = $10,000
Interest = 8%
Interest earned (on margin) = $10,000 * 8%
Interest earned (on margin) = $800
Yield on transaction = 25%
Yield = [(Stock short sell amount - Buyback amount + Interest on margin) / Margin required.] While assuming buyback amount to be X)
0.25 = ($25,000 - X + $800) / $10,000
$2,500 = $25000 - X + $800
X = $25,000 + $800 - $2,500
X = $23,300
Selected accounts with amounts omitted are as follows: Work in Process Aug. 1 Balance 268,300 Aug. 31 Goods finished 168,800 31 Direct materials X 31 Direct labor 43,300 31 Factory overhead X Factory Overhead Aug. 1 – 31 Costs incurred 108,100 Aug. 1 Balance 12,100 31 Applied X If the balance of Work in Process on August 31 is $202,600, what was the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs? a.$12,100 b.$12,990 c.$168,800 d.$108,100
Answer:
b.$12,990
Explanation:
Calculation to determine the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs
Using this formula
Overhead applied = Direct labor cost * Predetermined overhead rate
Let plug in the formula
Overhead applied= 43,300 * 30%
Overhead applied= $12,990
Therefore the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs is $12,990
Assume Plato merchandising business, which was established to purchase and sale of various products to customer. This company is a vat registered company and declares tax to the government. During the current month the business has purchased supplies for br.75, 250 Vat inclusive and sold various products for br.125, 250 before vat to customers and the business has two permanent employers to provide service to customers.
No Name of employers Basic salary Taxable allowance
1 Bulcha Deguna 5000 600
2 Solomon Adugna 6400 400
- Task 1.1 calculate the amount of direct tax for the month
- Task 1.2 determine the amount of indirect tax liability for the month
Task 1.3 list types of direct and indirect taxes
The purpose of the Sarbanes-Oxley Act was to ______. Multiple choice question. provide greater scrutiny in accounting and reporting practices establish procedures for becoming a CPA eliminate accounting firms from having to hire accountants that are certified define generally accepted accounting principles
Answer: provide greater scrutiny in accounting and reporting practices
Explanation:
The Sarbanes-Oxley Act of 2002 is simply a Federal law which was out in place in order to audit and regulate the finances of public companies.
The Act is important as it helps protect employees, shareholders, and the public from fraudulent practices and accounting errors.
Rival is Consumption
Yes No
Excludable Yes A B
No C D
Emma's use of good x does not affect anyone else's use of good x. Neither Emma nor anyone else can be prevented from using the good. Good x is an example of the type of good that belongs in:________
a. Box D, which represents public goods.
b. Box B, which represents common resources.
c. Box C, which represents common resources.
d. Box A, which represents private goods.
Answer: A. Box D, which represents public goods.
Explanation:
A public good is referred to as a good that possesses two main characteristics which are non-rivalrous and non-excludable.
This simply means that individuals nobody can be excluded from using a public good and.itsuse by one individual doesn't affect others from using it too.
Since Emma's use of good x does not affect anyone else's use of good x and neither Emma nor anyone else can be prevented from using the good, then it's a public good.
The risk-free rate of return is 5%, the required rate of return on the market is 15%, and High-Flyer stock has a beta coefficient of 1.4. If the dividend per share expected during the coming year, D1, is $3.92 and = 5%, at what price should a share sell?
Answer:
$28
Explanation:
Calculation to determine at what price should a share sell
First step is calculate the Required return using this formula
Required return=Risk free rate+Beta*(market rate-risk free rate)
Let plug in the formula
Required return=5+1.4*(15-5)
Required return=5+1.4*(10)
Required return=5+14
Required return=19%
Now let determine the Current price using this formula
Current price=D1/(Required return-Growth rate)
Let plug in the formula
Current price=3.92/(0.19-0.05)
Current price=3.92/0.14
Current price=$28
Therefore the price that a share sell is $28
You are going to retire in 43 years. After retirement, you need $80,000 at the end of year for 25 years. How much do you have to save for your retirement every month
Answer:
Results are below.
Explanation:
I will assume an interest rate of 8% per year.
First, we need to calculate the amount required at the moment of retirement:
PV= A*{(1/i) - 1/[i*(1 + i)^n]}
PV= 80,000 * {(1/0.08) - 1/[0.08*(1.08^25)]}
PV= $853,982.1
Now, the monthly deposit required:
i= 0.08/12= 0.0067
n= 43*12= 516
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (853,982.1*0.0067) / [(1.0067^516) - 1]
A= $188.43
Baker Company produced 1,500 units in May at a total cost of $10,000 and 4,000 units in June at a total cost of $18,000. Compute the variable cost per unit and the total fixed cost using the high-low method.
Answer:
Variable cost per unit = 3.2
TFC = 5200
Explanation:
Below is the given values:
Unit of may = 1500 units
Total cost of may = $10000
Unit of June = 4000
Total cost of June = $18000
Use below formula to find the variable cost per unit:
Variable cost per unit = (Tota cost of high activity - Total cost of low activity) / (High activity unit - lowest activity unit)
Variable cost per unit = (18000 - 10000) / (4000 - 1500)
Variable cost per unit = 3.2
Total Cost=(VC×Units Produced)+Total Fixed Cost
18000 = (3.2 x 4000) + TFC
Total fixed cost = 18000 - (3.2 x 4000)
Total fixed cost = $5200
Place a checkmark next to each power that belongs to the federal government.
1)creating post offices
2)approving amendments to the U.S. Constitution
3)regulating marriage
4)printing money
5)creating a U.S. army
6)making treaties with foreign countries
7)issuing licenses
Answer:
The powers that belong to the federal government are:
1) creating post offices
4) printing money
5) creating a U.S. army
6) making treaties with foreign countries
Explanation:
The federal government and states in the United States have some concurrent powers (including regulating elections, taxation, borrowing money, establishing courts, and regulating commercial activities). There are exclusive powers, which the U.S. Constitution empowered the federal government through Congress to manage. Generally, state governments have the power to regulate all matters within their state boundaries. However, the limitation comes when the states make laws that conflict with the laws of the federal government.
Closing entries are: Multiple Choice Made to record events that occurred during the period but have not yet been recorded. Made to transfer the balances of temporary accounts to retained earnings. Made to transfer the balances of permanent accounts to retained earnings. Optional.
Answer:
Made to transfer the balances of temporary accounts to retained earnings.
Explanation:
Financial statements can be defined as a document used for the formal communication or disclosure of financial information and statements to present and potential users such as investors and creditors.
Generally, financial statements are the formally written records of the business and financial activities of a business entity or organization.
There are four (4) main types of financial statements and these are;
1. Balance sheet: it contains financial information about assets, liability, and equity.
2. Cash flow statement: it contains financial information about operating, financial and investing activities.
3. Income statement: it contains financial information about the income and expenses of an organization.
4. Statement of changes in equity: it contains financial information about profits or loss, dividends, etc.
A closing entry can be defined as a journal entry made at the end of an accounting period to transfer all balances in the temporary accounts to a permanent account.
In Financial accounting, there are four (4) main closing entries and these include;
I. Closing expenses to income summary.
II. Closing revenues to income summary.
III. Closing dividends to retained earnings.
IV. Closing income summary to retained earnings.
This ultimately implies that, closing entries are made to transfer the balances of temporary accounts to retained earnings.
Retained earnings also known as accumulated earnings, can be defined as the total amount of net income held by a corporation for its future use after paying out dividends to its shareholders.
The retained earnings statement refers to a financial statement that enumerate changes in retained earnings for an organization over a specific period of time. The retained earnings statement is the statement of owner's equity that outlines details of changes in the amount of retained earnings (profits) over a specified period in an organization.
A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials need in kg. in the first quarter?
A) 90,000 kg.
B) 84,000 kg.
C) 108,000 kg.
D) 102,000 kg.
E) 120,000 kg.
Answer:
B) 84,000 kg.
Explanation:
The computation of the budgeted materials need in kg. in the first quarter is given below:
begnning inventory 18000
required for production (45000 × 2) 90000
Less: closing (30000 × 2 × 20%) - 12000
Raw material needs 84000
hence, the budgeted materials need in kg. in the first quarter is 84,000
Therefore the option b is correct
Quantitative easing is the Question 8 options: gradual release of money into the money supply through open market operations. targeted use of open market operations in which a central bank targets certain markets. strategy of increasing the money supply by buying U.S. Treasury securities on the open market. slow injection of money into the economy by the Federal Reserve.
Answer: targeted use of open market operations in which a central bank targets certain markets
Explanation:
Quantitative easing is referred to as the targeted use of the open market operations whereby a central bank targets certain markets.
Quantitative easing (QE) is a form of monetary policy whereby the central bank buys securities from the open market so as to enable a scenario where there'll be a rise in the money supply and also encourage investment and lending in the economy.
If the Moran Corp. has an ROE of 12 percent and a payout ratio of 20 percent, what is its sustainable growth rate
Answer:
9.6%
Explanation:
The ROE is 12 %
The payout ratio is 20%
The first step is to calculate tnr retention ratio
= 1-(20/100)
= 1-0.2
= 0.8
The sustainable growth can be calculated as follows
= 12×0.8
= 9.6
Hence the sustainable growth rate is 9.6%
The customer service department for a wholesale electronics outlet claims 90% of all customer complaints are resolved to the satisfaction of the customer. In order to test this claim, a random sample of 15 customers who have filed complaints is selected. Part A
Let x = the number of sampled customers whose complaints were solved to the customer’s satisfaction. Assuming the claim is true, write the binomial formula for the situation. Part B Use the binomial tables (see Table A.1in the text) to find each of the following if we assume that the claim is tru:
Answer:
Kindly check explanation
Explanation:
Given
Probability of success, p = 0.9
Number of trials = sample size, n = 15
q = 1 - p
The binomial formula for this situation is written as :
P(x = x) = nCx * p^x * q^(n-x)
P(x = x) = 15Cx * 0.9^x * (1-0.9)^(15-x)
(1) For ; P(x ≤ 13).
P(x = 0) + p(x = 1) +... + p(x = 13)
Using a calculator :
P(x ≤ 13) = 0.451 (3 decimal place)
(2) For ; P(x > 10).
Using calculator :
P(x > 10) = p(x = 11) + p(x = 12) +... + p(x = 15)
P(x > 10) = 0.9873
(3) For P(x ≥ 14).
Using calculator ;
P(x ≥ 14) = [p(x = 14) + p(x = 15)]
P(x ≥ 14) = 0.5490
(4) P(9 ≤ x ≤ 12).
P(9 ≤ x ≤ 12) = p(x = 9) + p(x = 10) + p(x = 11) + p(x = 12)
P(9 ≤ x ≤ 12) = (0.001939 + 0.01047 + 0.042835 + 0.128505) = 0.1837
(5) For P(x ≤ 9) ;
Using calculator ;
P(x ≤ 9) = p(x = 0) + p(x = 1) +... + p(x = 9)
P(x ≤ 9) = 0.00225
Managerial accounting systems report both monetary and nonmonetary information. Examples of nonmonetary information include: Multiple select question. amount of sales per customer percentage of on-time deliveries. employee satisfaction data. employee diversity.
Answer: employee satisfaction data
Explanation:
Managerial accounting helps in the provision of vital information to internal managers. Managerial accounting is useful for making planning and control decisions.
Examples of nonmonetary information include the employee satisfaction data, quality of purchase decisions etc.
n Office Manager uses a Periodic Review Inventory System: they check the inventory in their Office Supply Closet once every 10 days, placing an order with their supplier depending on the inventory level of the office supplies. The manager has set a restocking level of 300 post it notes for their closet. This week, the manager has counted 140 post it notes in the closet. How many post it notes will the manager order from their supplier? In other words, what is the Order Quantity?
Answer: 160
Explanation:
The number of post it notes that the manager will order from their supplier will be the difference between the restocking level and the inventory at the time of review. This will be:
= Restocking level - Inventory at the time of review
= 300 - 140
= 160
Therefore, the order quantity is 160.
what are the good characteristics of an entrepreneur?
Answer:
Enterprises are usually regarded as the start-up of a company. Although this is true, some nuances need to be taken into account.
Entrepreneurs — either as individuals or as a team — find their own personal and professional opportunities. They make hypotheses of ways in which they can give customers value and conduct structured testing to validate their ideas.
Explanation:
Curiosity:-
Successful entrepreneurs feel curious and can constantly search for new opportunities. Curious entrepreneurs ask questions and explore different avenues rather than settling for what they think they know.
Structured Experimentation:-
The Need for structured experimentation is in conjunction with curiosity. An entrepreneur must conduct tests to determine if each new opportunity arises.
Adaptability:-
The company is changing constantly. Entrepreneurship is an iterative process that presents itself at all times with new challenges and opportunities. For every scenario, it is almost impossible to prepare.
Team Building:-
A big businessman knows their weaknesses and strengths. They build well-rounded teams that complement their ability instead of letting weaknesses hold them back.
Risk Tolerance:-
Business is often linked to risk. Although it is true that starting a business requires a contractor to take risks, they also need to do something to minimize it.
Comfortable with Failure:-
Successful entrepreneurs prepare and comfortably confront failure. The possibility of success pushes them forward rather than allow fear to hold them back.
Persistence:-
Although many successful businessmen can comfortably fail, this does not mean that they can abandon quickly. Rather, they regard failures as learning and growing opportunities.
What is the internal rate of return of a project costing $3,000; having after-tax cash flows of $1,500 in each of the two years of its two-year life; and a salvage value of $800at the end of the second year in addition to the $1,500 cash flow?a) 13%.
b) 15%.
c) 16%.
d) 19%.
Gantner Company had the following department information about physical units and percentage of completion: Ch21_Q64 If materials are added at the beginning of the production process, what is the total number of equivalent units for materials during May
Answer:
200,000 units
Explanation:
The computation of the total no of equivalent units for material during may month is given below:
Units added during May is
= 150,000 + 50,000
= 200,000 units.
Hence, the total no of equivalent units for material during may month is 200,000 units
The same should be considered and relevant
Taylor's nominal income is $50,000 per year in Acity where the cost-of-living index is 200. Taylor is considering accepting a similar job and relocating to Becity where the cost-of- living index is 210. For Taylor's income to have the same purchasing power in Becity as $50,000 has in Acity, then Taylor's nominal income per year in Becity must equal:
Answer: $52,500
Explanation:
Taylor's real income in Acity is:
= Nominal income / Cost of living index
= 50,000 / 200
= $250
Taylor needs to be paid a nominal amount that when divided by the cost of living index in Bcity, Taylor's real income would be $250.
Real income = Nominal income / Cost of living index
250 = Income / 210
Income = 210 * 250
= $52,500
When liabilities increase, this means that the firm has borrowed money or received contributions from shareholders. Therefore, increases in liabilities represent increases in cash. Group of answer choices True False
Answer:
The answer is true
Explanation:
Increasing Liabilities is increasing cash inflow. For example, if a firm borrows money from a bank, it increases its liabilities and also increases its cash account because the bank will credit the firm with the borrowed form.
Also, if shareholders contribution increase by way of funding the company, the cash is being injected into the firm, thereby increasing the cash reserves.
Therefore, the answer to the question is true.
View Policies Current Attempt in Progress In January, Dieker Company requisitions raw materials for production as follows: Job 1 $910, Job 2 $1,700, Job 3 $800, and general factory use $650. Prepare a summary journal entry to record raw materials used. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 31 enter an account title for the journal entry on January 31 enter a debit amount enter a credit amount enter an account title for the journal entry on January 31 enter a debit amount enter a credit amount enter an account title for the journal entry on January 31
Answer:
Dieker Company
Journal Entry:
Debit Work in Process $3,410
Debit Manufacturing overhead $650
Credit Raw materials $4,060
To record raw materials used for production.
Explanation:
a) Data and Calculations:
Job 1 $910
Job 2 $1,700
Job 3 $800 $3,410
General factory use $650
Total $4,060
Transaction Analysis:
Work in Process $3,410 Manufacturing overhead $650 Raw materials $4,060
b) While the summary journal entry is made in Work in Process, the detailed entries are made in Job 1, Job 2, and Job 3 cost sheets.
Based on the results in (a), the CFO requested that $22,000 of cash be used to pay off the balance of the accounts payable account on December 31, 2022. Calculate the new current ratio and working capital after the company takes these actions.
Question Completion:
Crane Company
Balance Sheet
December 30, 2022
Current assets
Cash $27,000
Accounts receivable 29,700
Prepaid insurance 6,000
Total current assets $ 62,700
Equipment (net) 201,200
Total assets $263,900
Current liabilities
Accounts payable $ 22,000
Salaries and wages payable 11,000
Total current liabilities $ 33,000
Long-term liabilities
Notes payable 79,700
Total liabilities $112,700
Stockholders' equity
Common stock 100,000
Retained earnings 51,200 $151,200
Total liabilities and
stockholders' equity $263,900
Answer:
Crane Company
Dec. 30 Dec. 31
Current ratio 1.9 3.64
Working capital $29,700 $29,000
Explanation:
a) Data and Calculations:
Crane Company
Balance Sheet
December 30, 2022
Current assets
Cash $27,000
Accounts receivable 29,700
Prepaid insurance 6,000
Total current assets $ 62,700
Equipment (net) 201,200
Total assets $263,900
Current liabilities
Accounts payable $ 22,000
Salaries and wages payable 11,000
Total current liabilities $ 33,000
Long-term liabilities
Notes payable 79,700
Total liabilities $112,700
Stockholders' equity
Common stock 100,000
Retained earnings 51,200 $151,200
Total liabilities and
stockholders' equity $263,900
Dec. 30 Dec. 31
Current assets $62,700 $40,000
Current liabilities $33,000 $11,000
Working capital $29,700 $29,000
Current ratio 1.9 3.64
Working capital = Current assets - Current liabilities
Current ratio = Current assets/Current liabilities
Walbin Corporation uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 15,500 units, 100% complete with respect to materials cost and 20% complete with respect to conversion costs. The total cost in the beginning work in process inventory was $25,200. A total of 53,000 units were transferred out of the department during the month. The costs per equivalent unit were computed to be $1.6 for materials and $3.3 for conversion costs. The total cost of the units completed and transferred out of the department was:
a. $259,700
b. $254,180
c. $189,740
d. $225,380
Answer:
a. $259,700
Explanation:
The computation of the total cost of the units completed and transferred out of the department is given below:
= 53,000 units × $1.6 + 53,000 un$its × $3.3
= $84,800 + $174,900
= $259,700
Hence, the total cost of the units completed and transferred out of the department is $259,700
Larry Bar opened a frame shop and completed these transactions: Larry started the shop by investing $40,700 cash and equipment valued at $18,700. Purchased $140 of office supplies on credit. Paid $1,900 cash for the receptionist's salary. Sold a custom frame service and collected $5,200 cash on the sale. Completed framing services and billed the client $270. What was the balance of the cash account after these transactions were posted
Answer:
$44,000
Explanation:
Computation of Cash account balance
Particulars Amount
Initial investment of cash $40,700
Add: Cash collected from sales $5,200
Less: Salaries paid $1,900
Balance of cash account $44,000
XYZ Manufacturing produces a single product that sells for $105. Variable costs per unit equal $74. The company expects total fixed costs to be $97,000 for the next month at the projected sales level of 3,200 units. To improve performance, management is considering several alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented:__________
a. operating income will decrease by $8,000.
b. operating income will increase by $8,000.
c. operating income will decrease by $16,000.
d. operating income will increase by $16,000.
Answer:
Effect on income= $6,880 increase
Explanation:
First, we need to calculate the new selling price and the increase in the number of units sold:
Selling price= 105 / (1.1)= $95.5
Increase in number of units sold= 3,200*0.1= 320
Now, the effect on the income of the changes:
Effect on income= increase in total contribution margin
Effect on income= 320*(95.5 - 74)
Effect on income= $6,880 increase
Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 128 - 4Q. The total cost function for each firm is TC(Q) = 8Q. The price charged in this market will be
Answer: 48
Explanation:
Since TC(Q) = 8Q, the marginal cost(MC) will be = dC/dQ = 8
P = 128 - 4Q.
P = 128 - 4Q1 - 4Q2
For firm 1, the Total revenue will be:
= 128Q1 - 4Q1²- 4Q1Q2
MR1 = 128 - 8Q1 - 4Q2
Then, we'll set MR1 = MC1,
128 - 8Q1 - 4Q2 = 8
Collect like terms
8Q1 + 4Q2 = 120 .........(1)
For firm 2,
TR2 = 128Q2 - 4Q1Q2 - 4Q2²
MR2 = 128 - 4Q1 - 8Q2
Then we'll set MR2 = MC2,
128 - 4Q1 - 8Q2 = 8
4Q1 + 8Q2 = 120..........(2)
Thenz we'll multiply equation (2) by 2 and this will be:
8Q1 + 16Q2 = 240 ........(3)
8Q1 + 4Q2 = 120.........(1)
Equation (3) - equation (1) will give:
12Q2 = 120
Q2 = 120/12
Q2 = 10
Since the cost function for both firms is identical, then Q1 = 10 as well.
Q = Q1 + Q2
Q = 10 + 10
Q = 20
P = 128 - 4Q
P = 128 - (4 x 20)
P = 128 - 80
P = 48
The price charged in the market is 48.
