Answers
Answer:
The correct answer is b. Total revenue will fall.
Explanation:
The equation for the price elasticity of demand (PED) is ε =
where Q represents the quantity, P represents the price and d represents variation.
If the demand for a product is highly elastic, mathematically it means that the PED in absolute value is greater than 1.
|ε| > ⇒ |ε| > 1
Economically that means that the quantity demanded of that product will decrease more than proportionally to the increase in price of that same product. In other words, the company will experience that a increase in price of its product raises the revenue for each unit sold, but given that the PED is highly elastice an increase in price reduces the number of units actually sold to the extent the company's total revenue actually falls.
Related Questions
Analysts estimate the cost of debt capital for Abbott Laboratories (NYSE: ABT) is 3.0% and that its cost of equity capital is 5.0%. Assume that ABT's statutory tax rate is 37%, the risk-free rate is 2.5%, the market risk premium is 5.0%, the ABT market price is $65.60 per common share, and its dividends are $0.88 per common share. (a) Compute ABT's average pretax borrowing rate and its market beta. (Round your answers to one decimal place.) Average borrowing rate = Answer 1.3 % Market beta =
Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $28 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares are expected to be zero, and the company's cost of capital is 9%. By how much would the value of the company increase if it accepted the better project (plane)
Mary signed up and paid $660 for a 6 month ceramics course on June 1st with Choplet Ceramics. As of August 1st, Choplet’s accounting records would indicate:
A category of assets that typically has zero in the Free Assets column in a Statement of Affairs is:
Answers
Answer:
Income statement is prepared below.
Explanation:
Partial income statement
income from continuing operations = 978,750
Discontinued operations:
income from operations of discontinued component = 200,000
income tax expenses 25% of 200,000 = -50000
income from operations of discontinued component =150000
Net income = 1,128,750
Income from continuing operations
income before additional items = 1,400,000
less: restructuring cost -95000
Income before tax = 1305,000
less: tax 25% = -326,250
Income from continuing operations = 978,750
Answers
The correct entry to record the transaction concerning the company's sale of 10,000 shares of previously authorized stock is a debit to Cash of $100,000 and a credit to Common Stock $100,000.
Data Analysis:
Number of shares sold = 10,000
Par value =$10 per share
Cash $100,000 Common Stock $100,000
Thus, the correct entry to record this stock sale is a debit to Cash of $100,000 and a credit to Common Stock $100,000.
Learn more about recording the issuance of stock here: brainly.com/question/25562729
Final answer:
The correct journal entry to record the transaction would be to debit Cash for $100,000 and credit Common Stock for $100,000 in line with the number of shares sold and their par value.
Explanation:
When a company sells shares of its authorized stock at par value, the funds received are recorded in the company's financial accounts. The correct journal entry would be to debit (increase) Cash, and credit (increase) Common Stock. In this scenario, where 10,000 shares of stock are sold at a par value of $10 per share, this would result in a $100,000 increase in both the company's Cash and Common Stock accounts. The journal entry would look like this:
- Debit Cash $100,000
- Credit Common Stock $100,000
It is crucial to understand the stock issuing process, such as rate of return, in the business world. Investors purchase stock with an expectation either to receive dividends or to experience a capital gain- an increase in the stock value.
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Answers
Answer:
True.
Explanation:
The cable company will not have any incentive to cut costs. This is because it knows that its costs will be averaged to determine the average cost to which a certain percentage is then added to arrive at the selling price. Having the cost averaged in this way will not motivate the cable company to seek cost minimization strategies that it could use to increase its income.
Final answer:
The statement is false. Under the average-cost pricing policy, the cable company has the incentive to cut costs to potentially lower prices and increase market share.
Explanation:
False, under the average-cost pricing policy, the cable company does have incentives to cut costs. The average-cost pricing policy allows the firm to set the price equal to the average cost of production. If the cable company can lower its cost of production, it will be able to lower the price it charges, which could potentially increase its market share and profits. Consider an example where economies of scale come into play: if each firm produced at a higher average cost due to building their own power lines, they would raise prices to cover this cost. However, if a firm found a way to reduce the cost of power lines or production in general, they could lower their prices in comparison to other firms. This demonstrates the incentive for cost-cutting under average-cost pricing.
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Answers
Answer:
The correct answer is 3.
Explanation:
According to the scenario, the computation of the given data are as follows:
Variable cost = Cost of goods sold (variable) + Supplies
= $50,000 + $10,000 = $60,000
Fixed cost = Cost of goods sold (fixed) + Administrative salaries + Depreciation
= $8,000 + $42,000 +$10,000 = $60,000
So, we can calculate the operating leverage by using following formula:
Operating leverage = Contribution margin ÷ Net operating income
Where, Contribution Margin = Sales revenue - Variable cost
= $150,000 - $60,000 = $90,000
And Net operating income = Contribution Margin - Fixed Cost
= $90,000 - $60,000 = $30,000
By putting the value, we get
Operating leverage = $90,000 ÷ $30,000
= 3
Answers
Answer and Explanation:
The computation is shown below:
1.
Selling Price = Sales ÷ Units Sold
Current Selling Price = $385,000 ÷ 5500
= $70
Now
Expected Selling Price per unit = $70 + ($70× 10%)
= $77
Now
Expected Sales = 5500 × $77
= $423,500
Now
Net Income = Sales - Variable Cost - Fixed Cost
= $423,500 - $250,000 - $94,000
2.
Sales = $385000
Variable cost = $385,000 × 56% = $215,600
Sales $385,000
Less: variable cost -$215,600
Contribution Margin $169,400
Les: fixed cost -$94,000
Net Income $75,400
As we can see that if there is an increase in Selling Price by 10% so it would produce highest Net Income.
Comparing two scenarios for Carla Vista Company: one of increasing the selling price by 10%, and the other of reducing the variable costs to 56% of sales, the former scenario of increasing the selling price provides a higher net income and is the better strategy.
The question asks us to calculate the net income under two different scenarios for Carla Vista Company, and then determine which option produces the higher net income.
To do this, we first need to understand the company's current situation.
Its current net income is calculated as follows: Sales ($385,000) - Variable Costs ($250,000) - Fixed Costs ($94,000) = $41,000.
Under the first alternative, management plans to increase the selling price by 10% without any changes in total variable costs or units sold.
So the new sales figure will be $385,000 + 10% of $385,000 = $423,500.
The net income then becomes: New Sales ($423,500) - Variable Costs ($250,000) - Fixed Costs ($94,000) = $79,500.
Under the second alternative, management plans to reduce variable costs to 56% of sales.
So, the new variable costs will be 56% of $385,000 = $215,600.
The net income then becomes: Sales ($385,000) - New Variable Costs ($215,600) - Fixed Costs ($94,000) = $75,400.
Comparing the two alternatives, we see that the first alternative, increasing the selling price by 10%, gives a higher net income and should thus be the advisable course of action.
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Answers
Answer:
Explanation:
The arrival rate (λ) = 20 customers per hour. Since the service times at the pump have an exponential distribution with a mean of 2 minutes, therefore the service rate (μ) = 60 / 2 = 30 customers per hour.
The probability of the no customers being in the system(P₀) is given as:
If no customer is in the system we can sell gasoline for $4/gallon to the next customer. The expected price p of gasoline is given by:
P = $3.665 per gallon