Answer:
D) $8.95
Explanation:
Calculation to determine the convertible bond's option value.
First step is to calculate the Straight bond value
Straight bond value = [.08($1,000)/2]PVIFA4.25%, 30 + $1,000/1.042530
Straight bond value = $958.05
Second step is to calculate the Conversion value
Conversion value = 20($47.50)
Conversion value = $950
Now let determine the convertible bond's option value using this formula
Bonds Option value = Bond value – MAX[Straight bond value, Conversion value]
Let plug in the formula
Bond Option value = $967 − MAX[$958.05, 950]
Bond Option value =$967-$958.05
Bond Option value = $8.95
Therefore the convertible bond's option value is $8.95
The process mapping is a
____ diagram.
Answer:
I hope u understand and thank you for your questions
W Corporation uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 19,500 units. The total cost in the beginning work in process inventory was $25,800. A total of 56,000 units were transferred out of the department during the month. The costs per equivalent unit were computed to be $1.90 for materials and $3.60 for conversion costs. The total cost of the units completed and transferred out of the department was:
Answer:
$308,000
Explanation:
Total cost of the units completed and transferred out of the department:
= Materials cost + Conversion Cost
= (Units transferred out*Cost per equivalent for materials) + (Units transferred out*Cost per equivalent for conversion cost)
= (56,000 * $1.90) + (56,000 * $3.60)
= $106,400 + $201,600
= $308,000
1) What are the three primary determinants of behavior in organizations?
Answer:
The three primary determinants of behavior in organizations are employee dynamics, available resources and work environments.
Economists experience difficulties in accurately measuring income inequality because of which of the following? Choose one or more: A. do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market B. Measurements tend to use "before tax" income, not "after tax" income (disposable income), which is the income people actually have available to purchase goods and services. C. The Gini index calculation discriminates against the poor in developed economies. D. in-kind transfers where goods and services are given
Answer:
Economists experience difficulties in accurately measuring income inequality because of the following:
A. do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market
Explanation:
With do-it-yourself production of goods and services, it is very difficult to measure income inequality. Income is measured as the value that is exchanged for goods and services in the marketplace, that is, by the forces of demand and supply. These marketplace forces cannot be objectively measured when goods and services are produced and consumed by the same person.
Reason why the Economists do encounter some difficulty in the process of measuring income inequality is as result of A :do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market
Income inequality can be regarded as a way to measure unevenly income distribution among population. When the distribution is less equal, then the income inequality will be high, however some difficulties are been faced by Economist in taking this measurement such as situation whereby people make the goods they need by themselves instead of getting it from market.Therefore, option A is correct.
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Murphy started putting $100/month into his 401(k) earning 6% APR when he was 22 years old. How much will be in his account when he retires at age 62, if interest is compounded monthly?
Answer:
$199,149.08
Explanation:
a = 100, i=0.06/12=0.005, n=40*12=480, FVA = Future value of annuity
FVA = A*[(1+i)^n - 1/ i]
FVA = 100 * [(1+0.005)^480 - 1 / 0.005]
FVA = 100 * [9.957454/ 0.005]
FVA = 100 * 1991.4908
FVA = $199,149.08
So, the amount that will be in his account when he retires at age 62 is $199,149.08.
Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South Wales Sales $ 1,144,000 $ 2,220,000 Average operating assets $ 520,000 $ 600,000 Net operating income $ 125,840 $ 177,600 Property, plant, and equipment (net) $ 252,000 $ 202,000 Required: 1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job?
Answer:
Outback Brewing, Ltd., of Australia
Queensland New South Wales
1. Rate of return 5% 2.16%
2. Based on the computed Rate of Return, Division Queensland seems to be doing a better job than New South Wales
Explanation:
a) Data and Calculations:
Queensland New South Wales
Sales $ 1,144,000 $ 2,220,000 Average operating assets $ 520,000 $ 600,000
Net operating income $ 125,840 $ 177,600
Property, plant, and equipment (net) $ 252,000 $ 202,000
Sales margin = 11% 8%
Capital turnover ratio = 2.2 3.7
Return on investment (ROI) = 5% 2.16%
Sales margin = Net operating income/Sales * 100
Capital turnover ratio = Sales/Average operating assets
ROI = Sales margins divided by the firm's capital turnover ratio
After a project has been accepted, the decision to lease or buy is determined by the present value of the lease's cash flows when discounted at the project's risk-adjusted cost of capital. Group of answer choices True False
Answer:
True
Explanation:
The present value of the lease's periodic cash flows using the project's risk-adjusted cost of capital discount rate is determined and recorded as the Rights to Use Asset with a corresponding Lease Liability of the same amount, if the lease option is taken. If the buy option is taken, the cost of purchase and installation is recorded as the asset's value with the corresponding credit to the Payable or Cash account. The major difference is that the lessee enjoys greater flexibility in abandoning the project with leased equipment than when equipment is bought and owned.
In 2007, Gillette saw an opportunity to capture the market of 500 million Indians who used double edge razors with no protection between the blade and the skin. Gillette sought to make an inexpensive and safe disposable razor. Their first product, The Vector failed because it always clogs. What do you think went wrong
Answer:
Gillette in India
The failure of the Vector was caused by the fact that Indian men have longer and thicker hair, which the lack of earlier research in the targeted demographic segment did not discover.
Explanation:
Since Indian men have longer and thicker hair than the local consumers of Gillette's razor products in America, an earlier research would have uncovered the fact. Thereafter, the discovery would have been incorporated into the design and production of Vector for the Indian market. No wonder, with its Mach 3 Turbo razor, Gillette overcame its initial inertia and handicap and made a success of the razor business in India.
A manager needs to have summary sales information by product line available to her on a timely basis when purchasing decisions need to be made. The type of information system most likely to provide this type of information would be classified as a
Answer:
Management information
Explanation:
From the question we are informed about instance, whereby A manager needs to have summary sales information by product line available to her on a timely basis when purchasing decisions need to be made. In this case, The type of information system most likely to provide this type of information would be classified as a Management information. Management information system can be regarded as a an information system that is been used in decision-making as well as in the coordination, control and analysis or visualization of information in an organization.
Studing of management information systems encompass the people as well as the processes and technology as regards an organizational context.
a schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time *
Answer: Demand is what the name suggest it is the demand or need for material or merchandise. Supply is the ability to meet the demend or the difinition you just described. Supply and deman is what makes things that should be cheap expensive and the expensive things cheap. [tex]\color{yellow}{}[/tex]
Acme, Inc., incurs the following costs during May:
Sales expense $ 12,100 Administrative expense $ 22,100
Direct labor 26,600 Plant depreciation 6,800
Factory supplies 3,100 Indirect labor 8,600
Advertising 3,400 Utilities 10,600
Raw material used 18,600
80% of this amount relates to the factory.
Required:
Calculate Acme�s total manufacturing costs for May.
Answer:
Particulars Amount
Raw material used $18,600
Add: Direct labor $26,600
Overhead costs
Factory supplies $3,100
Plant depreciation $6,800
Indirect labor $8,600
Utilities ($10,600*80%) $8,480
Total overhead cost $26,980
Total manufacturing costs $72,180
Outsourcing: Question 19 options: Transfers traditional internal activities to outside vendors. Utilizes the efficiency which comes with generalization. Reduces the chances that the outsourcing firm can focus on its key success factors. None of the above are true of outsourcing. All of the above are true of outsourcing.
Answer:
Transfers traditional internal activities to outside vendors.
Utilizes the efficiency which comes with generalization
Explanation:
Outsourcing can be regarded as a business practice which involves hiring a party from outside of the company so that the party can perform particular services as well as creation of goods which traditionally are been performed in-house by the employees and staff of the own company.Outsourcing helps in cost-cutting measure
It should be noted that Outsourcing ;
✓Transfers traditional internal activities to outside vendors.
✓Utilizes the efficiency which comes with generalization.
Changes in the quality of a good a. present a problem in the construction of the consumer price index, and that problem is sometimes referred to as substitution bias. b. do not present a problem in the construction of the consumer price index. c. can lead to either an increase or a decrease in the value of a dollar. d. are not accounted for, as a matter of policy, by the Bureau of Labor Statistics.
Answer:
D
Explanation:
The consumer price index measures the changes in price of a basket of good. It is used to measure inflation. Because the price of price of used cars and trucks in US has increased , the CPI would increase
CPI = (cost of basket of goods in current period / cost of basket of goods in base period) x 100
Changes in the quality of good is not included in the calculation of CPI. This is one of its drawbacks
an investor purchased a stock one year ago for $58.00. it paid an annual cash dividend of $4.38 and is now worth $65.01. what total return did the investor earn? would the investor have experienced a capital gain? explain.
Answer:
its 34
Explanation:
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Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model
Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled.
Number of Number of Number of
Product Setups Components Direct Labor Hours
Standard 22 8 375
Deluxe 28 12 225
Overhead costs $20,000 $40,000
Answer:
Barnes Corporation
The total amount of overhead costs assigned to the deluxe model (using an activity-based costing system) is:
= $35,200.
Explanation:
a) Data and Calculations:
Overhead Costs Standard Deluxe Total Overhead Rate
Setups $20,000 22 28 50 $400 ($20,000/50)
Components $40,000 8 12 20 $2,000 ($40,000/20)
Direct Labor Hours 375 225 600
Total overhead costs $60,000
Amount of overhead costs assigned to the deluxe model:
Set up costs = $11,200 (28 * $400)
Components costs = $24,000 (12 * $2,000)
Total overheads assigned = $35,200
A company claims that 10% of the users of a certain allergy drug experience drowsiness. In clinical studies of this allergy drug, 81 of the 900 subjects experienced drowsiness
a. We want to test their claim and find out whether the actual percentage is not 10%. State the appropriate null and hypotheses.
b. Is there enough evidence at the 5% significance level to infer that the competitor is correct?
c. Compute the p-value of the test.
d. Construct a 95% confidence interval estimate of the population proportion of the users of this allergy drug who experience drowsiness.
e. Explain how to use this confidence interval to test the hypotheses.
Answer:
Answer is D
Explanation:
d. Construct a 95% confidence interval estimate of the population proportion of the users of this allergy drug who experience drowsiness.
A newly formed firm must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $185 in either case. Using the following information, determine which location would produce the greater profit.
Omaha Kansas City
Annual fixed costs ($ millions) $1.2 $1.4
Variable cost per unit $36 $47
Expected annual demand (units)8,000 12,000
Answer: Kansas City with a profit of $256,000
Explanation:
Omaha
Profit = Revenue - Fixed expenses - Variable expense
= Number of units * (Revenue - variable expenses) - Fixed cost
= 8,000 * (185 - 36) - 1,200,000
= -$8,000
Kansas City
= 12,000 * (185 - 47) - 1,400,000
= $256,000
Giorgio had cost of goods sold of $9,505 million, ending inventory of $2,173 million, and average inventory of $2,049 million. Its inventory turnover equals:
Answer:
Inventory turnover = 4.64
Explanation:
Below is the calculation for inventory turnover:
Cost of goods sold = $9505 million
Ending inventory = $2173 million
Average inventory = $2049
Now use the below formula to find the inventory turnover:
Inventory turnover = Cost of good sold / Average inventory
Inventory turnover = $9505 / $2049
Inventory turnover = 4.64
Thus the inventory turnover is 4.64.
Computing Present Values of Single Amounts and Annuities Refer to Tables 1 and 2 in Appendix A near the end of the book to compute the present value for each of the following amounts. Round answers to the nearest dollar. a. $130,000 received 10 years hence if the annual interest rate is: 1. 10% compounded annually. Answer 2. 10% compounded semiannually. Answer b. $3,000 received at the end of each year for the next eight years discounted at 8% compounded annually. $Answer c. $900 received at the end of each six months for the next 15 years if the interest rate is 10% per year compounded semiannually. $Answer d. $260,000 received 10 years hence discounted at 10% per year compounded annually. $Answer
Here are incomplete financial statements for Cullumber Company. Calculate the missing amounts.
CULLUMBER COMPANY
Balance Sheet
Assets
Cash $ 14,000 Inventory 17,000 Buildings 38,000 Total assets $69,000 Liabilities and Stockholders' Equity Liabilities Accounts payable $ 5,600 Stockholders' Equity Common stock enter a dollar amount
(a) Retained earnings enter a dollar amount
(b) Total liabilities and stockholders' equity $69,000 CULLUMBER COMPANY Income Statement Revenues $85,400 Cost of goods sold enter a dollar amount
(c) Salaries and wages expense 10,270 Net income $enter a dollar amount
(d) CULLUMBER COMPANY Retained Earnings Statement Beginning retained earnings $19,000 Add: Net income enter a dollar amount
(e) Less: Dividends 4,770 Ending retained earnings $34,000
Answer:
(a) Common Stock = $29,400. (b) Retained earnings = $34,000, (c) Cost of goods sold = $55,360, (d) Net Income = $19,770, (e) Net Income =$19,770
Explanation:
Note: See organized question as attached below to aid understanding
Net income = Ending retained earnings + Dividends - Beginning retained earnings
Net income = $34,000 + $4,770 - $19,000
Net income = $19,770
Net income = Revenue - Cost of goods sold - Salaries and wages expense
$19,770 = $85,400 - Cost of goods sold - $10,270
Cost of goods sold = $85,400 - $19,770 - $10,270
Cost of goods sold = $55,360
Total liabilities and stockholders equity = Accounts payable + Common stock + Retained earnings
$69,000 = $5,600 + Common stock + $34,000
Common stock = $69,000 - $5,600 - $34,000
Common stock = $29,400
Missing amounts :
Common Stock = $29,400
Retained earnings = $34,000,
Cost of goods sold = $55,360
Net Income = $19,770
Net Income = $19,770
Net income
= Ending retained earnings + Dividends - Beginning retained earnings
= $34,000 + $4,770 - $19,000
= $19,770
Net income
= Revenue - Cost of goods sold - Salaries and wages expense
$19,770 = $85,400 - Cost of goods sold - $10,270
Cost of goods sold
= $85,400 - $19,770 - $10,270
= $55,360
Total liabilities and stockholders equity
= Accounts payable + Common stock + Retained earnings
$69,000 = $5,600 + Common stock + $34,000
= $69,000 - $5,600 - $34,000
= $29,400
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Blue Spruce Corp. gathered the following reconciling information in preparing its June bank reconciliation: Cash balance per books, 6/30 $14600 Deposits in transit 1000 Notes receivable and interest collected by bank 2580 Bank charge for check printing 85 Outstanding checks 5200 NSF check 490 The adjusted cash balance per books on June 30 is:_________.
a. $17585.
b. $17605.
c. $16605.
d. $17180.
Answer:
c. $16605
Explanation:
Calculation to determine what The adjusted cash balance per books on June 30 is:
Using this formula
Adjusted Cash Balance=Cash balance + Notes receivable - Check Printing - NSF Check
Let plug in the formula
Adjusted Cash Balance=$14600 + $2,580 - $85 - $490
Adjusted Cash Balance= $16605
Therefore The adjusted cash balance per books on June 30 is:$16605
The Williams Supply Company sells for $50 one product that it purchases for $20. Budgeted sales in total dollars for the year are $3,000,000. The sales information needed for preparing the July budget follows:
Month Sales Revenue
May $ 175,000
June 240,000
July 295,000
August 320,000
Account balances at July 1 include these:
Cash $ 125,000
Merchandise inventory 47,200
Accounts receivable (sales) 84,530
Accounts payable (purchases) 47,200
The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 40% of the budgeted sales in units for the next month. A 2% cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 60% of the billings will be collected during the month of sale, 25% in the following month, 12% in the second following month, and 3% will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $1,200,000, of which three-fourths is fixed expense (inclusive of a $36,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred.
Part A
Part B
Part C
Part D
(a) Prepare a schedule of estimated cash collections for July.
(b) Prepare a schedule of estimated July cash payments for purchases. Hint: Start by doing a purchase budget.
(c) Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.
(d) Prepare a schedule of cash receipts over disbursements assuming no equipment purchases or loan payments.
Answer:
The Williams Supply Company
a. Estimated Cash Collections for July
58% sales month (60% -2%) $171,100 ($295,000 * 58%) July
25% ffg month 60,000 ($240,000 * 25%) June
12% second month 21,000 ($175,000 * 12%) May
Estimated cash collections = $252,100
b. Estimated July Cash Payments for Purchases:
July
Cost of purchases $122,000
50% purchase month 61,000
50% ffg month 47,200
Total payment for purchases $108,200
c. July Selling and Administrative Expenses:
Monthly fixed expenses $72,000
Variable expenses ($5 * 5,900) 29,500
Total selling and admin expenses $101,500
d. Cash Receipts Over Disbursements for July:
Beginning cash balance $125,000
Total cash receipts 252,100
Total cash available $377,100
Cash Disbursements:
Purchases $108,200
Selling and Admin. 101,500
Total cash disbursements $209,700
Cash balance $167,400
Explanation:
a) Data and Calculations:
Selling price of product = $50 per unit
Purchase cost of product = $20 per unit
Total budgeted sales for the year = $3,000,000
Total budgeted sales for the year (units) = 60,000 units
Month Sales Revenue Unit Sales
May $175,000 3,500 ($175,000/$50)
June 240,000 4,800 ($240,000/$50)
July 295,000 5,900 ($295,000/$50)
August 320,000 6,400 ($320,000/$50)
July 1 Account Balances:
Cash = $125,000
Merchandise inventory = $47,200
Accounts receivable (sales) = $84,530
Accounts payable (purchases) = $47,200
Payment of Purchases:
50% purchase month
50% ffg month
Cash collections from sales:
58% sales month (60% -2%)
25% ffg month
12% second month
Ending inventory = 40% of the budgeted sales in units in the next month
Total budgeted selling and administrative expenses (excluding bad debts) = $1,200,000
Fixed expense = $864,000 ($1,200,000 * 3/4) - $36,000
Monthly fixed expenses = $72,000 ($864,000/12)
Variable selling expenses = $300,000 ($1,200,000 - $900,000)
Variable selling expenses per unit = $5 ($300,000/60,000)
Purchases Budget
June July
Ending inventory 2,360 2,560
Sales 4,800 5,900
Units available for sale 7,160 8,460
Beginning inventory 1,920 2,360
Purchases 5,240 6,100
Cost of purchases $104,800 $122,000 (6,100 * $20)
Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales patterns throughout the year. To plan for thefuture, Mr. Jones wants to determine its cost behavior patterns. He has the following information available about the ice creamstand's operating costs and the number of soft serve cones served
Using the high- low method , the fixed cost for a month are?
MONTH NUMBER OF ICE CREAM CONES TOTAL OPERATING COST
APRIL 800 950
MAY 825 975
JUNE 1125 1000
JULY 2000 1250
AUGUST 1500 1875
SEPTEMBER 900 1500
A) 2,200
B) 750
C) 300
Answer:
B) 750
Explanation:
The computation of the fixed cost using the high-low method is as follows:
But before that the variable cost per unit should be determined
Variable cost is
=[ ($1,250 - $950) ÷ (2000 - 800)]
= $0.25 per ice cream
Now the fixed cost is
= [$1,250 - ($0.25 × 2000)]
= $750
hence, the option b is correct
The principle of establishing responsibility does not include Group of answer choices one person being responsible for one task. authorization of transactions. independent internal verification. approval of transactions.
Answer:
independent internal verification.
Explanation:
Internal controls can be defined as the policies, set of rules, and procedures implemented or put in place by an organization to protect its assets, boost efficiency, enhance financial accountability, enforce adherence to company policies and prevent fraudulent behaviors among the employees.
The main purpose of internal controls is to guarantee that loss is eliminated by ensuring that there is an accurate and reliable accounting system.
One of the essential characteristics of internal control is the principle of establishing responsibility such as assigning responsibility to specific individuals. An internal control is considered to be most effective when an individual is solely responsible for a specific accounting task.
Hence, the principle of establishing responsibility include the following;
I. Only one person or an individual is being responsible for a task.
II. An individual is solely responsible for the authorization of transactions.
III. An individual is solely responsible for the approval of transactions.
One disadvantage to terrorists of using radiological materials in weapons is: Select one: a. numerous difficult steps to assemble device. b. economic impact on affected areas. c. lethal effects depending on type of radiation source. d. the majority of jurisdictions within the United States are unprepared for any type of large incident involving radiological material.
Answer: a. numerous difficult steps to assemble device.
Explanation:
Radiological materials are quite cumbersome to assemble and require rare materials whose sale are intensely watched by various intelligence agencies in the world. Coupled with that is the need for very skilled scientists in order to assemble the device.
All these hurdles make it so that terrorists are not able to assemble radiological devices easily which is a good thing because if they could, it would have been used to devastating effect on many parts of the world by now.
a. The company pays cash toward an account payable. b. The company purchases equipment on credit. c. The owner invests cash in the business. d. The company pays workers for wages earned. e. The company purchases supplies for cash. f. The company provides services for cash.
Answer:
a. The company pays cash toward an account payable. ⇒ Decreases an asset and decreases liability.
Cash is an assets and is reduced by this transaction. Accounts payable is a liability that is also reduced by this.
b. The company purchases equipment on credit. ⇒ Increases an asset and increases a liability.
Equipment is an asset so buying it increases assets. It was bought on credit however so liabilities increased.
c. The owner invests cash in the business. ⇒ Increase in assets and increase in equity.
Money brought into a business by the owner is equity and that increased here so this is an increase in equity. Cash is an asset so when it increases, so do assets.
d. The company pays workers for wages earned. ⇒ Decrease in asset and decrease in equity.
Cash was used to pay the workers so assets reduce. Wages earned are an expense that are reduced from income which is equity so equity reduces as well.
e. The company purchases supplies for cash. ⇒ Increase in asset and decrease in asset.
Purchases bring in inventory which are assets so assets increase. Cash was used to buy the asset and so it will reduce so assets will reduce. There is no net effect as these cancel each other out.
f. The company provides services for cash. ⇒ Increase in assets and increase in equity.
Services bring in income which is an equity transaction so equity increases. Cash increases as well as these services bring more cash so assets increase.
Shelton Enterprises is expecting tremendous growth from its newest boutique store. Next year the store is expected to bring in net cash flows of $675,000. The company expects its earnings to grow annually at a rate of 13 percent for the next 15 years. What is the present value of this growing annuity if the firm uses a discount rate of 18 percent on its investments? (Round to the nearest dollar.)
A. $5,478,320
B. $6,448,519
C. $6,750,000
D. $7,115,449
Answer:
B. $6,448,519
Explanation:
The computation of the present value of this growing annuity is given below:
PVA = [Cash flow at year 1 ÷ (interest rate - growth rate)] × {1 - [(1 + growth rate) ÷ (1 + interest rate)^number of years}
= [$675,000 ÷ (0.18 - 0.13)] × [1 - (1.13 ÷ 1.18)^15]
= $6,448,519
Hence, the correct option is b.
13. Social Entrepreneurs identify social needs such as
a. The arts and education
c. Shipping and operations
b. Internet and technology
d. Profit and loss
Help
A _________ is not a specific security but an arrangement whereby a bank or security dealer sells specific marketable securities to a firm and agrees to repurchase the securities in the future.
A [tex]\sf\purple{repurchase \:agreement}[/tex] is not a specific security but an arrangement whereby a bank or security dealer sells specific marketable securities to a firm and agrees to repurchase the securities in the future.
[tex]\large\mathfrak{{\pmb{\underline{\orange{Happy\:learning }}{\orange{!}}}}}[/tex]
A company sells q ribbon winders per year at $p per\ribbon winder. The demand function for ribbon winders is given by P=300−0.02Q. Find the elasticity of demand when the price is $70 apiece. Will an increase in price lead to an increase in revenue
Answer:
0.30
Demand is inelastic and an increase in price would lead to an increase in total revenue
Explanation:
P=300−0.02Q
Make q the subject of the formula by dividing through by 0.02
50P = 15,000 - Q
Q = 15,000 - 50P
Differentiate the above equation
[tex]\frac{dp}{dq} = -50[/tex]
Determine the value of q when p is 70
Q = 15,000 - 50(70) = 11,500
Elasticity = [tex][\frac{p}{q} . \frac{dp}{dq} ][/tex]
[[tex]\frac{70}{11500} . -50][/tex] = 0.30
Demand is inelastic and an increase in price would lead to an increase in total revenue
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
Elasticity of demand is 0.30
Also, the demand is inelastic which means that an increase in price would lead to an increase revenue.
Given that;
P = 300−0.02Q
We can make Q, subject of the formula.
P = 300−0.02Q
Dividing through by 0.02 we'll have
P = 300−0.02Q
50P = 15,000 - Q
Q = 15,000 - 50P
Using differentials,
[tex]\frac{d}{p} = -50[/tex]
We can then determine the value of q when p is 70
Q = 15,000 - 50(70) = 11,500
Elasticity = [tex]\frac{70}{11,500} . - 50 = 0.30[/tex]
Therefore, Elasticity of demand is 0.30 . Increase in price would lead to an increase in revenue.
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