Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 47
Variable costs per unit $ 17
Fixed costs per unit (based on capacity) $ 8
Capacity in units 56,000

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 9,000 speakers per year. It has received a quote of $35 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.Assume that the Audio Division is now selling only 49,000 speakers per year to outside customers. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

Answers

Answer 1

Answer:

Answer:

The lower acceptable transfer price by Audio Division is variable cost of producing the extra unit which is $17. Producing to capacity will have no effect on the fixed cost because it will not change regardless on increase in production.

Explanation:

Answer 2

Answer:

Answer:

Explanation:

The lowest acceptable movement price by Audio Division is shifting cost of making the more parts which are 17 dollars. making to capacity will have no effect on the fixed cost because it will not change regardless on increase in production.

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Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answers

Answer:

The price of the stock today or the price at which the stock should sell today is $61.30

Explanation:

The price of the stock today can be calculated using the Dividend Discount Model approach which values a stock based on the present value of the expected future dividends from the stock. The price of this stock will be,

P0 = 3.15 * (1+0.2) / (1+0.12) + 3.15 * (1+0.2) * (1+0.15) / (1+0.12)^2 +

3.15 * (1+0.2) * (1+0.15) * (1+0.1) / (1+0.12)^3 +

[(3.15 * (1+0.2) * (1+0.15) * (1+0.1) * (1+0.05) / (0.12 - 0.05)) / (1+0.12)^3]

P0 = $61.296 rounded off to $61.30

In the initial Cournot duopoly equilibrium, both firms have constant marginal costs, m, and no fixed costs, and there is a barrier to entry. Show what happens to the best-response function of firms if both firms now face a fixed cost of F Let market demand be p-a -bQ, where a and b are positive parameters with 2 firms. Let q1 and q2 be the amount produced by firm 1 and firm 2, respectively. Assuming it is optimal for the firm one to produce, its best-response function is I. (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. Eg., a subscript can be created with the- q1 = character.)

Answers

Answer:

The best response functions are given by

$q_1=(a-m)/(2b)-(q_2)/(2)$

$q_2=(a-m)/(2b)-(q_1)/(2)$

Explanation:

Under no fixed costs the total costs is

$CT_i= mq_i$

for i=1,2. The market demand is given by

$p=a-bQ$

where $Q=q_1+q_2$ is the total production

Firm 1 and 2 will maximize its own profits. Since this firms are symmetric the problems are too

$max\,\Pi_1=p=(a-b(q_1+q_2))q_1-mq_1$

The first order conditions (take derivative of the profit with respect to $q_1$ are given by

$a-2 b q_1-b q_2-m=0$

Then the best-response function for Firm 1 will be

$q_1=(a-m)/(2b)-(q_2)/(2)$

and the solution for Firm 2 would be the symmetric

$q_2=(a-m)/(2b)-(q_1)/(2)$

Now we can add fixed costs, so total costs now look

$CT_i= F+mq_i$ for i=1,2

the profit maximization problem for firm 1 looks now

$max\,\Pi_1=p=(a-b(q_1+q_2))q_1-F-mq_1$

The first order conditions are given by

$a-2 b q_1-b q_2-m=0$

note that this equation is the same as in the absence of Fixed Costs. So the solutions would be the same. Fixed costs don't change the optimal level of production of these firms.

Note that Total Costs are given by fixed costs (F) and marginal costs (m) that depend on the production level of the firm

$CT_i=F+mq_i$

for i=1,2. The market demand is given by

$p=a-bQ$

where $Q=q_1+q_2$ is the total production, so it's the sum of each firms production

Firm 1 will maximize it's own profits

$max\,\Pi_1=p=(a-b(q_1+q_2))q_1-F-mq_1$

The first order conditions (take derivative of the profit with respect to $q_1$ are given by

$a-2 b q_1-b q_2-m=0$

Then the best-response function for Firm 1 will be

$q_1=(a-m)/(2b)-(q_2)/(2)$

and the solution for Firm 2 would be symmetric.

Note that only marginal costs are relevant for getting the best-response function, so adding fixed costs (F) don't change the results

Explanation:

Two methods can be used to produce expansion anchors. Method A costs $65,000 initially and will have a $18,000 salvage value after 3 years. The operating cost with this method will be $28,000 in year 1, increasing by $3600 each year. Method B will have a first cost of $108,000, an operating cost of $8000 in year 1, increasing by $8000 each year, and a $38,000 salvage value after its 3-year life. At an interest rate of 8% per year, which method should be used on the basis of a present worth analysis

Answers

Answer:

Method B should be used

Explanation:

Note: See the attached excel file for the calculation of the present worth of Method A and Method B.

From the attached excel file, we have:

Present worth of Method A = –$210,889.85

Present worth of Method B = –$118,011.18

Since the present worth of Method A and B above imply Method A costs more than Method B, Method B should be used.

On December 31, 2015, Waterway Industries is in financial difficulty and cannot pay a note due that day. It is a $2900000 note with $290000 accrued interest payable to Carla Vista, Inc. Carla Vista agrees to accept from Waterway equipment that has a fair value of $1440000, an original cost of $2400000, and accumulated depreciation of $1160000. Carla Vista also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1230000, and reduces the interest rate to 5%, with interest payable at the end of each year.Nolte should recognize a gain or loss on the transfer of the equipment of

a. $0.

b. $120,000 gain.

c. $180,000 gain.

d. $570,000 loss.

Nolte should recognize a gain on the partial settlement and restructure of the debt of

a. $0.

b. $45,000.

c. $165,000.

d. $225,000.

Answers

Answer:

(a) $210,000

(b) $351,500

Explanation:

(a) Given that,

Fair value of equipment = $1,440,000

Face Amount of the note = $1,230,000

Gain on sale:

= Fair value of equipment - Face Amount of the note

= $1,440,000 - $1,230,000

= $210,000

(b) Given that,

Accrued Interest Payable = $290,000

Interest rate = 5%

Gain on the partial settlement and restructure of the debt:

= Accrued Interest Payable + (Face amount of note × Interest rate)

= $290,000 + ($1,230,000 × 5%)

= $290,000 + $61,500

= $351,500

Which phrase would be most characteristic of pure monoply

Answers

the price at which that unit is sold less the price reductions that apply to all other units of output.

Bramble Corp. has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Bramble incurs $6750000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The weighted-average contribution margin ratio is

Answers

Answer:

37%

Explanation:

The computation of the weighted average contribution margin ratio is shown below:

= Contribution margin ratio × weightage

= 30 × 65% + 50 × 35%

= 37%

We simply multiplied the contribution margin ratio with the weightage so that the weighted-average contribution margin ratio could come and the same to be considered

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