Answer:
Straight-line method: $5,350 yearly depreciation expense for 4 yearsDouble-declining method: Year 1 - $11,750, Year 2 - $5,875, Year 3 - $2,938, Year 4 - $837Activity-based method: Year 1 - $4,845, Year 2 - $5,249, Year 3 - $4,442, Year 4 - $5,047Explanation:
(A) Under straight-line method, depreciation expense is (cost - residual value) / Estimated useful life = ($23,500 - $2,100) / 4 years = $5,350 yearly depreciation expense.
Accumulated depreciation for 4 years is $5,350 x 4 years is $21,400.
(B) The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/4 years = 25%, then 25% multiplied by 2 to give 50% or 1/2
At Year 1, 50% X $23,500 = $11,750
At Year 2, 50% X $11,750 ($23,500 - $11,750) = $5,875
At Year 3, 50% X $5,875 ($11,750 - $5,875) = $2,938
The depreciation for Year 4 $1,469 [50% X ($5,875 - $2,938)] will decrease the book value of the asset below its salvage value $2,100. Depreciation will only be allowed up to the point where the book value = salvage value. Consequently the depreciation for Year 4 will be $837.
Accumulated depreciation for 4 years is $11,750 + $5,875 + $2,938 + $837 = $21,400.
(C) The activity-based method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($23,500 - $2,100) / 106,000 miles x 24,000 miles = $4,845
At Year 2, depreciation expense (DE) is: ($23,500 - $2,100) / 106,000 miles x 26,000 miles = $5,249
At Year 3, depreciation expense (DE) is: ($23,500 - $2,100) / 106,000 miles x 22,000 miles = $4,442
At Year 4, depreciation expense (DE) is: ($23,500 - $2,100) / 106,000 miles x 25,000 miles = $5,047
Accumulated depreciation for 4 years is $4,845 + $5,249 + $4,442 + $5,047 = $19,583.
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Year 2.
The 8,000 miles fallen short expectation can be recognized as a loss.
CDB stock is currently priced at $80. The company will pay a dividend of $4.57 next year and investors require a return of 10.8 percent on similar stocks. What is the dividend growth rate on this stock
Answer:
The answer is 5.09%
Explanation:
The model used in this question is the Dividend Discount Model and it is one of the methods used in determining the price of stock. Here, the price of stock had already been determined. We are looking for one of the variables (growth rate) used in determining the price.
The formula for determining price of stock is:
Po = D1/r - g
Where Po is the price of stock
D1 is the dividend for next year
r is the rate of return
g is the dividend growth rate
$80 = $4.57/0.108 - g
Cross multiply:
8.64 - 80g = 4.57
80g = 8.64 - 4.57
80g = 4.07
g = 4.07/80
g =0.05088
g = 5.09%
Minor Electric has received a special one-time order for 1,200 light fixtures (units) at $18 per unit. Minor currently produces and sells 6,000 units at $19.00 each. This level represents 75% of its capacity. Production costs for these units are $24.00 per unit, which includes $16.00 variable cost and $8.00 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $800 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Minor wishes to earn $1,600 on the special order, the size of the order would need to be:
Answer:
the size of the special order should be 1,200 in order to generate profits of $1,600
Explanation:
special order 1,200 units at $18 per unit = $21,600
current spare capacity 2,000 units
relevant production costs:
variable costs $16 per unitadditional fixed costs $800total relevant costs = ($16 x 1,200) + $800 = $20,000
profits generated by special order = $21,600 - $20,000 = $1,600
with this special order (1,200 units) you can make $1,600 in profits
Consider Country (Z) with a GDP level of 210,000 and a growth rate of 5% in 2019 (i.e. calculated at the end of year 2019). The experts predict that the growth of the economy of Country (Z) wills gradually slowdown in the coming years. More precisely, they foresee the following growth rates for the future: 2019 – 2022 (5%), 2022 – 2025 (3%). Hint: The list above should be read as saying that, for instance, `the growth rate from the end of 2019 until the end of 2022 will be 5%, then from the end of 2022 until the end of 2025 it will be 3%’ and so on. Requirement a) Assuming that the predictions of the experts listed above are accurate, when in the future will Country Z’s GDP double compared to the GDP level of 2019? [10 marks] b) What would Country Z’s GDP growth rate be from 2025 and so on at 1%? Explain your reasoning carefully. [5 marks] c) Consider now the more optimistic scenario in which the economy does not slow down and the current growth rate of 5% remains constant in the coming years. How long will it take for the GDP level to double in this scenario? Express your answer in two forms: i) In number of years [5 marks] ii) As a fraction of your answer in part a.
Answer:
Please help me, l can not answer it
Explanation:
You just won a prize that will pay you $800 today and $500 a year for the next three years. Which is the correct formula for computing the present value as of today at 6 percent?
a. PV = $500/1.06 + $500/1.062+ $500/1.063
b. PV = $800 PV $800/1.06$500/1.06+$500/1.06 $500/1.06
c. PV =$800+ $500/1.06 $500/1.06+ $500/1.061
d. PV = $800(1.06)+ $500 +$500/1.06 $500/1.06
Answer:
Total PV= 800 + 500/1.06^1 + 500/1.06^2 + 500/1.06^3
Explanation:
Giving the following information:
Cash flows:
Cf0= $800
Cf1= $500
Cf2= $500
Cf3= $500
Discount rate= 6%
The $800 is received today, therefore, it is already its present value.
For the cash flow for the next three years, we need to use the following formula on each cash flow.
PV= FV/(1+i)^n
Total PV= 800 + 500/1.06 + 500/1.06^2 + 500/1.06^3
We have the following data for a hypothetical open economy: GNP = $12 comma 00012,000 Consumption (C) = $7 comma 2007,200 Investment (I) = $1 comma 0001,000 Government Purchases (G) = $1 comma 6001,600 Tax Collections (T) = $1 comma 2001,200 What is the value of private savings plus public savings? $nothing (Enter your answer as an integer. Include a minus sign if necessary.) What is the value of the current account balance CA? $nothing (Enter your answer as an integer. Include a minus sign if necessary.)
Answer:
The value of private savings plus public savings is $3,200
The value of the current account balance CA is $2,200
Explanation:
In order to calculate the value of private savings plus public savings we would have to make the following calculation:
Total saving = private saving+public saving
Total saving =GNP-Tax Collections-Consumption+Tax Collections-Government Purchases
Total saving =$12,000-$1,200-$7,200+$1,200-$1,600
Total saving =$3,200
To calculate the value of the current account balance CA we would have to make the following calculation:
value of the current account balance CA=GNP-Consumption-Investment-Government Purchases
value of the current account balance CA= $12,000 - $7,200 -$1,000-$1,600
value of the current account balance CA= $2,200
. Business Source Premier (EBSCO) and Lexis Nexis Academic are examples of research ________. a. periodicals b. indexes c. databases d. reports
Answer:
C.
Explanation:
These are all research databases
In calculating a predetermined overhead rate, a recent trend in automated manufacturing operations is to choose an activity base related to
Answer: c. machine hours.
Explanation:
In reference to Automated Operations, the Activity base that is usually used to in determining a pre-determined overhead rate are Machine hours.
It is standard practice to relate overhead to the Direct Labor involved in the production of a commodity and since in this case the direct Labor mostly consists of Machines (Automated) then it is best to relate activities to the Machine hours involved instead.
Ken works in a U.S. based pharmaceutical company that sells antibiotics at a low cost to several African countries. He later learns that most of these drugs are expired antibiotics that have been repackaged by the company. Ken immediately informs one of his friends, a federal agent, regarding his company’s illegal activities. Which of the following statements is true of the given scenario?A) There are no implications because the shelf-life of pharmaceuticals is typically much longer than as dated.B) Ken’s constitutional right to freedom of speech would protect him from any form of retaliation by his employer.C) Ken would receive no protection since no comprehensive whistle-blowing law protects the right to free speech.D) Ken would be protected by law from retaliation by his employer.
Answer: D) Ken would be protected by law from retaliation by his employer.
Explanation:
Ken would be protected from any retaliation from his employer by the Sarbanes-Oxley Act under section §1514A of the act that protects Whistleblowers.
The act directly prohibits the discharging, demotion, suspension, harassment, or in any other type discriminate against a a whistleblower.
Ken in his actions acted as a Whistleblower and as such would be afforded due protection by the law.
E6-23 (similar to) Aunt Betty Bakery reported net sales revenue of $ 59 comma 000 and cost of goods sold of $ 17 comma 000. Compute Aunt Betty's correct gross profit if the company made either of the following independent accounting errors. a. Ending merchandise inventory is overstated by $ 4 comma 000. b. Ending merchandise inventory is understated by $ 4 comma 000.
Answer:
a. Ending merchandise inventory is overstated by $4,000.
net sales revenue of $59,000
cost of goods sold of $17,000 + $4,000 = $21,000
gross profit = $38,000
Since ending inventory was overstated, it means that COGS were understated.
b. Ending merchandise inventory is understated by $4,000.
net sales revenue of $59,000
cost of goods sold of $17,000 - $4,000 = $13,000
gross profit = $46,000
Since ending inventory was understated, it means that COGS were overstated.
Dora Inc. reported the following on the company's cash flow statement: Sales $3,500,000 Net cash flow from operating activities 350,000 Net cash flow used for investing activities (100,000) Net cash flow used for financing activities (200,000) Free cash flow 290,000 What is the ratio of free cash flow to sales
Answer:
8.3%
Explanation:
Dora Inc. reported a sales of $3,500,000
The net cash flow from operating activities is $350,000
The net cash flow used for investing activities is $100,000
The net cash flow used for financial activities is $200,000
The free cash flow is $290,000
Therefore, the free cash flow to sales ratio can be calculated as follows
Free cash flow to sales ratio= Free cash flow/Sales × 100%
= $290,000/$3,500,000 × 100
= 0.0828×100
= 8.3%
Hence the ratio of the free cash flow to sales is 8.3%
Obama drives up miles-per-gallon requirements Emissions from all new vehicles must be cut from 354 grams to 250 grams. To meet this new standard, the price of a new vehicle will rise by $1,300. Source: USA Today, May 20, 2009 What is the opportunity cost of reducing the emission level by 1 gram?
Answer:
$12.5 per gram
Explanation:
Opportunity cost is the cost which is:
Future related costCash flow in natureIncremental Cost or DifferentialIn simple words, opportunity cost is the benefit lost due to given up another best alternative.
To reduce the pollution level from 354 to 250 gram, the price of new vehicle will increase by $1300.
Hence
The increase in price per gram = $1,300 / (354 - 250) = $12.5 per gram
This is the opportunity cost per gram increase in Carbon dioxide emission which the companies will have to bear if they don't opt to environmental free vehicles.
The market basket approach is intended to isolate changes in consumption level by holding constant the cost of goods and services purchased in two or more periods of interest.
Answer:
The market basket approach is intended to isolate changes in price level by holding constant the quantity of goods and services purchased in two or more periods of interest.
The Market Basket Approach is a method of measuring price changes in the Economy and is usually used to track changes in an individual market segment. It works by constantly buying a certain amount of goods and services overtime. The changes in price for those exact same goods will give an indication of just how much price is changing by in the Economy.
The Consumer Price Index (CPI) is a type of CPI.
Granfield Company has a piece of manufacturing equipment with a book value of $45,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $23,000. Granfield can purchase a new machine for $130,000 and receive $23,000 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $20,000 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
Answer:
i think the answer is 115
Explanation:
if you add 45.000+23.000+23.000+20.000+4 =115 there your answer
thank you i love to help people i am only a 7th grade almost 8th grader
In October of the current year, Jasmine received a $15,520 payment from a client for 32 months of rent. The rental period begins on September 1 of this year. This amounts to $485 per month. Jasmine is a calendar-year taxpayer. What amount of the $15,520 payment, if any, must Jasmine recognize this year if she uses the accrual method of accounting
Answer:
Jasmine recognize $1,940 this year if she uses the accrual method of accounting.
Explanation:
The Accrual or Matching Concept in accounting requires revenues and expenses to be recorded in the period i which they occur or incur.
The entry to record the receipt of payment is :
Cash $15,520 (debit)
Unearned Rental Income $15,520 (credit)
By the end of the year on 31 December, 4 months rent income starting September will have been earned and entries are as follows :
Unearned Rental Income $1,940 (debit)
Rental Income $1,940 (credit)
Rental Income calculation = $15,520 × 4 / 32
= $1,940
Classical economists contend that official measures of unemployment: Multiple Choice understate the problem due to the existence of discouraged workers. overstate the problem because most unemployment is voluntary. understate the problem due to involuntary part-time employment. overstate the problem because most unemployment is cyclical.
Answer: overstate the problem because most unemployment is voluntary.
Explanation:
Unemployment is a term that is used to refer to individuals who are looking for job but can not find a job.
Classical economists contend that official measures of unemployment
overstate the problem because most unemployment is voluntary.
According to the Classical economists, there is increase in employment because those seeking employment do not want to work for lower wages but will rather wait for high paying jobs and this therefore leads to overstating of the unemployment rate.
Keidis Industries will pay a dividend of $5.15, $6.25, and $7.45 per share for each of the next three years, respectively. In four years, you believe that the company will be acquired for $69.00 per share. The return on similar stocks is 11.4 percent. What is the current stock price
Answer:
The answer is $59.85
Explanation:
This question will be solved using the Dividend Discount Model. It is one of the valuation methods used in valuing price of Equity/stock.
Po = D1 + (1 + r)^n + D2 + (1 + r)^n + D2 + (1 + r)^n + CF4 /(1 + r)^n
Po is the current worth of stocks
D1, D2, D3 is the dividend paid in year 1, 2 and 3
CF4 is the price of the company in year 4
r is the discount rate
n is the number of years
$5.15 /1.114^1 + $6.25 /1.114^2 +$7.45/1.114^3 + $69/1.114^4
$4.62 + $5.04 + $5.39 + $44.80
Current price of the stock = $59.85
An advertising agency is estimating costs for advertising a music festival. The job will require 230 direct labor hours at a cost of $56 per hour. Overhead costs are applied at a rate of $68 per direct labor hour. What is the total estimated cost for this job?
Answer:
The total estimated cost for this job is $28,520
Explanation:
In order to calculate the total estimated cost for this job we would have to make the following calculation:
Total estimated cost=Total direct labor cost+Actual overhead applied cost
Total direct labor cost=total required labour hours*cost per direct labour hour
hence, Total direct labor cost=230*$56
Total direct labor cost=$12,880
Actual overhead applied cost=total required labour hours*Appliead overhead cost
hence, Actual overhead applied cost=230*$68
Actual overhead applied cost=$15,640
Therefore, Total estimated cost=$12,880+$15,640
Total estimated cost=$28,520
The total estimated cost for this job is $28,520
Super Carpeting Inc. (SCI) just paid a dividend (D₀) of $3.12 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return (r s ) on SCI’s stock is 16.25%, then the intrinsic value of SCI’s shares is
Answer:
Intrinsic Value = $33.23
Explanation:
The intrinsic value of a stock using the dividend valuation model is the present value of the the future dividend expected from the stock discounted at the required rate of return.
This model is represented as follows
D(1+g)/(r-g) = P
Price, D- dividend payable in now, ke- required rate of return, g- growth rate
D- 3.12 , g-6.50% r-6.25%
Intrinsic value = (3.12× 1.065)/(0.1625-0.065)= $33.228
Intrinsic Value = $33.23
Trak Corporation incurred the following costs while manufacturing its bicycles.
Bicycle components $100,000
Advertising expense $45,000
Depreciation on plant 60,000
Property taxes on plant 14,000
Property taxes on store 7,500
Delivery expense 21,000
Labor costs of assembly-line workers 110,000
Sales commissions 35,000
Factory supplies used 13,000
Salaries paid to sales clerks 50,000
Required:
Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs.
Please find the answer below.
Explanation:
Bicycle components $100,000 - Direct materials
Advertising Expense $45,000 - Period costs
Depreciation on plant $14,000 - manufacturing overhead
Property taxes on plant $14,000 - manufacturing overhead
Property taxes on store $7,500 - manufacturing overhead
Delivery expense $21,000 - period costs
Labor costs of assembly-line workers $110,000 - Direct labor
Sales commissions $35,000 - Period costs
Factory supplies used $13,000 - Period costs
Salaries paid to sales clerks $50,000 - period costs
Cheers.
As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneous liabilities that reduce AFN arise from transactions brought on by sales increases. True or false?
Answer: True
Explanation:
Current assets are the assets that a company had and which are expected to be either used or sold over the next year. Examples of current assets are cash, cash equivalents, stock inventory, accounts receivable, marketable securities, and other liquid assets.
It should be noted that when the sales of a from continue to grow, the current assets of such company also increases. An example is when there is an increase in the sales increase, this.will also have an impact on the firm's inventories as there will be an increase.
2. Why is defining activities a process of project schedule management instead of project scope management
Answer:
Explanation:
Project schedule management is the allocation of timeframe to the task s to be done for a project to be successful while project scope management show the work that needs to be done.
Defining activities is a process of project schedule management, because it simply concentrates on how and when a task will be carried out while in project scope management l, the focus is on the work that will be performed on a project.
railway cabooses just paid its annual dividend of 1.70 per share. The company has been reducing the dividends by 11.3 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 12 percent?
Answer:
8.24
Explanation:
According to the given situation, the computation of purchase stock is shown below:-
Purchase price = Dividend in paid in next year ÷ (required rate of return - Growth rate)
= (1.70 ÷ (1 - 0.113)) ÷ (0.12 - (-0.113))
= 1.92 ÷ 0.233
= 8.24
Therefore for computing the purchase price we simply applied the above formula.
McHale Company does business in two customer segments, Retail and Wholesale. The following annual revenue information was determined from the accounting system's invoice information:
20Y5
Retail $249,570
Wholesale $366,685
Total Revenue $616,255
20Y4
Retail $265,500
Wholesale $324,500
Total Revenue $590,000
Prepare a horizontal analysis of the segments. Round percentages to one decimal place. Enter negative values as negative numbers
Answer:
McHale Company
Horizontal Analysis of the segments
For the years 20Y4 and 20Y5
20Y5 20Y4 Difference amount Difference Percent
Retail $249,570 $265,500 $15,930 6.0%
Wholesale $366,685 $324,500 $42,185 13.0%
Total revenue $616,255 $590,000 $58,115 3.85%
Difference Percent Working
Retail= $15,930 / $265,500 * 100 = 6%
Wholesales = $42,185 / $324,500 * 100 = 13%
Total revenue = $58,115 / $590,000 * 100 = 3.85%
Weatherwear estimates that every unit sold and returned due to defect costs the company $200 in profits. Approximately what would Weatherwear’s total profits have been in Year 5 if all units sold and returned due to defect had been eliminated?
Answer: С. $9.5 million
Explanation:
The units that were sold and later returned due to defect in Year 5 total;
= 688 + 124 + 536 + 28 + 101 + 8 + 206 + 28 + 120 + 1,050 + 30
= 2,919 units were sold and later returned
Each unit costs the company $200 in profits so;
= 2,919 * 200
= $583,800
Weatherwear made a total profit of $8.9 million in Year 5.
If the defective units had been eliminated then the loss as a result of the units would have been added to the profits as;
= 8,900,000 + 583,800
= $9,483,800
= $9.5 million
Divine Apparel has 2,300 shares of common stock outstanding. On October 1, the company declares a $0.25 per share dividend to stockholders of record on October 15. The dividend is paid on October 31.
Record all transactions on the appropriate dates for cash dividends. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Record the declaration of cash dividends.
2. Record the entry on date of record.
3. Record the payment of cash dividends.
Answer:
1. Record the declaration of cash dividends.
October 1, cash dividends are declared.
Dr Retained earnings 575
Cr Dividends payable 575
A liability is formed on the date of declaration.
2. Record the entry on date of record.
No journal entry is required
3. Record the payment of cash dividends.
October 31, dividends are paid.
Dr Dividends payable 575
Cr Cash 575
Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario.
Exclusive
Ownership Government-
of a Key Created Economies
Resource Monopolies of Sale
Patents are granted to inventors of a product
or process for a certain number of years. The
reason for this is to encourage innovation in the
economy. Without the existence of patents, it is
argued, research and development for improved
electronics is unlikely to take place, since there’s
nothing preventing another firm from stealing the
idea, copying the product, and producing it without
incurring the development costs.
Throughout much of the 20th century, many people
viewed South Africa’s De Beers Group as a monopoly
because it controlled a large percentage of diamond
production and sales.
In the electricity industry, low average total costs are
obtained only through large-scale production. In other
words, the initial cost of setting up all the necessary
wiring makes it risky and, most likely, unprofitable for
competitors to enter the market.
Answer:
1. Patents are granted to inventors of a product or process for a certain number of years. The reason for this is to encourage innovation in the economy. Without the existence of patents, it is argued, research and development for improved electronics is unlikely to take place, since there’s nothing preventing another firm from stealing the idea, copying the product, and producing it without incurring the development costs.
Government Created Monopoly.
Patents protect the intellectual property of a person or entity and prevent others from taking it and using it without rewarding the people who came up with it. The owners of the parents are able to dictate the selling of the resource and as such have a monopoly over it. Patents are granted by the government which makes this a Government created Monopoly.
2. Throughout much of the 20th century, many people viewed South Africa’s De Beers Group as a monopoly because it controlled a large percentage of diamond production and sales.
Ownership of Key Economic Resource.
As early as 1902, De Beers controlled 90% of the world's diamond production and under the leadership of J P Morgan, consolidated control over the diamond industry. They controlled many mines and also bought diamonds from other producers allowing them to control the diamond trade. Even though their control has waned of late, they still control around 35% of the world's diamond production which is a very significant percentage.
3. In the electricity industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary wiring makes it risky and, most likely, unprofitable for competitors to enter the market.
Economies of Scale
To survive in the Electricity industry the company would need to have an extensive network to permit them to benefit from Economies of Scale. This can be very difficult to set up so companies stay away from the industry thereby creating a monopoly for those already in it.
A mandatory seatbelt law ends up raising the number of traffic fatalities if it lowers fatalities per accident from 0.10 to 0.07 while raising the number of accidents per period from 35,000 to any more than:_______
Answer: 50,000
Explanation:
The question shows that at the current number of accident per period which is 35,000, 0.1 fatalities are recorded.
If the new seat belt law reduces the fatality rate from 0.1 to 0.07, how many accidents would have to occur for the new law to match the previous fatality rate given the previous number of accidents.
Let the new number of accidents be x;
35,000 * 0.1 = 0.07 * x
3,500 = 0.07x
x = 3,500/0.07
= 50,000
At 50,000 accidents, the new law will cause the same amount of fatalities than before. Anything more than 50,000 would lead to more fatalities than before.
It is ethical for Joe Martin, the Chief Design Engineer, to be concerned that the design specifications set by management for the new plant have safety standards well below those for similar plants in his home country since local safety regulations do not address his concerns.
a. True
b. False
The RTP Corporation has the following call option information. You are interested in purchasing four contracts for the July Call. How much will be the cost of the transactio?
RTP (RTP) Stock Price $100 Call
Expiration Strike Last Volume Open Interest
June 90 4 120 400July 90 4.50 40 200Aug 90 6 70 600
Answer: $1,800
Explanation:
The Cost of Transaction for purchasing contracts is calculated by the formula;
= Option Premium per Call * Lot Size * No. of contracts
When the Lot size is not specified, always use 100.
The Option Premium per call is $4.50.
Number of contracts required for July is potentially 4;
= 4.5 * 100 * 4
= $1,800
Suppose that during the past year, the price of a laptop computer fell from $2,500 to $2,300. During the same time period, consumer sales increased from 403,000 to 549,000 laptops. Calculate the elasticity of demand between these two price-quantity combinations by using the following steps.
original new Average Change Percentage
Quantity
Price
Answer:
Elasticity of Demand = 4.5
Demand is very elastic, because a small percentage change in price brought about a bigger percentage change in quantity demanded.
Explanation:
Data and Calculations:
Original Average New Average Change Percentage
Quantity 403,000 549,000 +146,000 36.23%
Price $2,500 $2,300 -$200 8%
b) Elasticity of demand: The elasticity of demand is calculated by dividing the % change in quantity by the % change in price which brought it about.
Percentage change in Quantity/Percentage change in price
= 36.23%/8% = 4.5
c) The elasticity of demand is the responsiveness of demand (consumers) to a change in price. If the responsiveness is less than 1, then demand is inelastic. If it is equal to 1, then demand elasticity is unitary. If it is more than 1, then demand is elastic.
Decision, since Elasticity is more than 1, the demand is very elastic.