Answer:
economies of scale
Explanation:
Here are the options
control of a key raw material
a perfectly inelastic demand curve
legal monopoly
economies of scale
A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.
An example of a monopoly is a utility company
A natural monopoly occurs due to the high start-up costs or a large economies of scale.
Natural monopolies are usually the only company providing a service in a particular region
Characteristics of natural monopolies
1. they have a large fixed cost
2. The firms have a low marginal cost
3. They occur naturally through the free market. It does not occur by government regulation or any other force
For local electricity-generating companies, as output increases, cost per unit falls. This is known as economies of scale
The Perfect Rose Co. has earnings of $2.30 per share. The benchmark PE for the company is 16. a. What stock price would you consider appropriate
Answer:
a.$36.80
b. $43.70
Explanation:
a. Calculation to determine What stock price would you consider appropriate
Using this formula
P= Benchmark PE ration x EPS
Let plug in the formula
P=16($2.30)
P=$36.80
Therefore What stock price would you consider appropriate is $36.80
b. Calculation to determine the stock price if the benchmark PE were 19
Using this formula
P= Benchmark PE ration x EPS
Let plug in the formula
P=19($2.30)
P= $43.70
Therefore the stock price if the benchmark PE were 19 will be $43.70
A seller's opportunity cost measures the a. value of everything she must give up to produce a good. b. amount she is paid for a good minus her cost of providing it. c. out-of-pocket expenses to produce a good but not the value of her time. d. consumer surplus.
Answer:
a. value of everything she must give up to produce a good.
Explanation:
The opportunity cost of the seller determines the value of each and every thing in which the seller gives up the production of the a good in order to generating an output
So as per the given situation, the option a is correct
And, the rest of the options seems incorrect
Trudeau’s Body Shop incurs total costs given by TC = 2,400 + 100 Q. If the price it charges for a paint job is $120, what is its break-even level of output?
Answer:
The break-even level of output is 120 units.
Explanation:
Since Total Cost formula is provided, we can use elements contained in the formulae to determine the break-even level of output.
The break-even level of output is the level of activity where a firm makes neither a Profit nor a Loss. In other words, Profit = $0
Step 1 : Collect data
So given :
TC = 2,400 + 100 Q
This means :
Fixed Costs = $2,400
Variable Costs = $100 per unit
Additional Information gives :
Selling Price per unit = $120
Step 2 : Determine the break-even level of output
Break even (units) = Fixed Costs ÷ Contribution per unit
where,
Contribution per unit = Selling Price - Variable Cost
= $20
thus,
Break even (units) = $2,400 ÷ $20
= 120 units
Conclusion :
The break-even level of output is 120 units.
The risk free rate currently have a return of 2.5% and the market risk premium is 5.77%. If a firm has a beta of 1.42, what is its cost of equity
Answer:
10.69%
Explanation:
Market risk premium = 5.77% or 0.0577
The beta = 1.42
Risk free rate = 2.5% or 0.025
Cost of equity = Risk free rate + Beta*Market risk premium
Cost of equity = 0.025 + 1.42*0.0577
Cost of equity = 0.025 + 0.081934
Cost of equity = 0.106934
Cost of equity = 10.69%
Calculate the annual coupon payment if the semi-annual coupon paying bond price is $920, the yield for the bond is 6%, the bond's face value is $1,000 and matures in 9 years.
The annual coupon payment is $48.40.
Annual coupon paymentYield = 6%
Rate = Yield/2 = 6%/2 = 3%
YTM = 9
Nper = YTM×2 = 9×2 = 18
Face value = $1,000
Price(PV) = $920
Monthly payment = PMT(0.03, 18, -920, 1000)
Monthly payment = $24.1833
Coupon rate = (PMT/Face value) ×2
Coupon rate = (24.1833/1000) × 2
Coupon rate = 0.0241833 × 2
Coupon rate = 0.0483666×100
Coupon rate = 4.84%
Annual coupon payment = Face value ×Coupon rate
Annual coupon payment = $1000 ×4.84%
Annual coupon payment = $48.40
Inconclusion the annual coupon payment is $48.40.
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5.
Stay at least feet behind any fire apparatus vehicle displaying flashing warning
lights and sounding a siren.
a. 27
b. 99
c. 312
d. 500
The declaration, record, and payment dates in connection with a cash dividend of $54,000 on a corporation's common stock are October 1, November 7, and December 15.
Journalize the entries required on each date. If no entry is required, choose "No Entry Required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.
Answer:
October 1
Dr Cash Dividend $54,000
Cr Dividend payable $54,000
November 7
No entry
December 15
Dr Dividend payable $54,000
Cr Cash $54,000
Explanation:
Preparation of the amount journal entries
October 1
Dr Cash $54,000
Cr Dividend payable $54,000
November 7
No entry
December 15
Dr Dividend payable $54,000
Cr Cash $54,000
Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of
Answer: b. Getting financial advice
Explanation:
As the number of banks in the world increases, banks are having to offer more products and services apart from their traditional roles as lenders in order to remain relevant and competitive. One such product is giving financial advice.
Banks now offer advice on how to make better investment decisions, develop financial plans and even organize your estate. This is what Drew Davis was taking advantage of here.
What is the IRR of a project that costs $74,361.78 and provides cash-inflows of $25,000 annually for four years
Answer:
13%
Explanation:
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-74,361.78
Cash flow in year 1 - 4 = 25,000
IRR = 13%
Describe the five factors that may limit how fast a project can be completed. Give an example of each.
Answer:
Logical order, activity duration, resource availability, imposed dates, and cash flow are the five factors that may slow down the completion of a project.
Explanation:
The order in which activities should be completed is known as logical order. You wouldn't put down new carpet before removing the old one. As a result, the logical order is for the predecessor activity to come first, followed by the successor activity.The total number of work periods required to complete a scheduled activity (excluding holidays and other nonwork periods) is known as activity duration. By identifying the right people for the job and discussing the time frame of each activity with them, you can figure out how long each activity should take.The availability of resources, such as workers, to complete a project is referred to as resource availability. Obtaining commitments for equipment and workers in a project prevents days of no work from occurring. It is necessary to stick to a strict schedule.Imposed dates are deadlines for completing specific parts of a project. Perhaps your permit is only valid for 30 days. If this is the case, you must complete your project within the specified time frame. This date was not chosen; it was imposed by the permit.The term "cash flow" refers to the money that comes in from the financial backer as well as the money that goes out to the employees and subcontractors. If there is a cash flow problem on either end of the transaction, it can affect the entire project. Workers will not continue to work if they are not paid on time, and a project may be abandoned.Source:
Describe the five factors that may limit how fast a project can be completed. Give an example of each (Course Hero).The five factors that may limit how fast a project can be completed are:
Logical orderAvailability of resourcesCash flow rateActivity durationImposed dateExplanation:
The order of arrangement in which activities should be completed is known as logical order. If the logical order isn't right, this may limit how fast the project can be completed.The total number of work hours required to complete a scheduled activity is known as activity duration. Upon identifying the right people for the job and discussing the time frame of each activity with them, you can figure out how long each activity should take.The availability of resources, such as skilled and unskilled labour, to complete a project is referred to as resource availability.Imposed dates are deadlines for completing specific parts of a project. At times, the permit is only valid for 20 days.Cash flow otherwise known as working capital refers to the money that comes in from the source of finances as well as the money that goes out to the employees and subcontractors. If there is a cash flow problem on either end of the transaction, the entire project may be affected.Read more on project limiting factors:
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You are considering a stock that is expected to pay dividends during the next five years of $0.50, $0,52, $0,54, $0,56 and $0.58. You estimate that you can sell the stock for $100 at the end of five years. Your required rate of return is 15% and the stock is currently selling for $65. If you purchase the stock, what rate of return do you expect to earn
Answer:
9.7%
Explanation:
The rate of return can be determined using a financial calculator
Cash flow in year 0 = -65
Cash flow in year 1 = $0.50
Cash flow in year 2 = $0.52
Cash flow in year 3 = $0.54
Cash flow in year 4 = $0.56
Cash flow in year 5 = $0.58 + $100
Rate of return = 9.7%
To find the rate of return using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Dake Corporation's relevant range of activity is 2,300 units to 5,500 units. When it produces and sells 3,900 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials $ 6.80
Direct labor $ 4.00
Variable manufacturing overhead $ 1.55
Fixed manufacturing overhead $ 2.50
Fixed selling expense $ 1.15
Fixed administrative expense $ 0.85
Sales commissions $ 0.95
Variable administrative expense $ 0.85
If 2,900 units are produced, the total amount of direct manufacturing cost incurred is closest to:
a. $39,875
b. $31,320
c. $35,815
d. $43,065
The managing director of top dog companies
Answer:
What???
Explanation:
Jens-Peter Clausen. Managing Director and DE GmbH Partner.
Katrin Clausen. Manager.
Im not sure if my answer is right ▪_▪
When an organization assigns a new employee a mentor and takes an employee out to lunch to meet other members of the organization during their first week on the job, this would most strongly be an example of:
Answer:
Connection.
Explanation:
An employee can be defined as an individual who is employed by an employer of labor to perform specific tasks, duties or functions in an organization.
Basically, an employee is saddled with the responsibility of providing specific services to the organization or company where he is currently employed while being paid a certain amount of money hourly, daily, weekly, or monthly depending on the contractual agreement between the two parties (employer and employee).
Generally, when a new employee working for an organization is assigned a mentor and given the opportunity to go out on a lunch to meet other members working in the organization during their first week on the job, this would most strongly be an example of connection.
Connection simply means creating a favorable and mutually beneficial meetings between two or more individuals such as the employees working in an organization. Thus, it avails the employees the opportunity to socialize and know each other better while stimulating a good work relationship.
Journalizing transactions using the direct write-off method versus the allowance method During August 2018, Lima Company recorded the following
. Sales of $133,300 ($122,000 on account $11,300 for cash). Ignore Cost of Goods Sold.
. Collections on account, $106,400.
. Write-offs of uncollectible receivables, $990.
. Recovery of receivable previously written off, $800.
Requirements
1. Journalize Lima's transactions during August 2018, assuming Lima uses the direct write-off method
2. Journalize Lima's transactions during August 2018, assuming Lima uses the allowance method.
Answer:
Lima Company
Journal Entries during August 2018:
1. Direct write-off method:
Debit Accounts Receivable $122,000
Debit Cash $11,300
Credit Sales Revenue $133,300
To record the sale of goods on credit and for cash.
Debit Cash $106,400
Credit Accounts Receivable $106,400
To record the cash receipts on account.
Debit Bad Debts Expense $990
Credit Accounts Receivable $990
To write-off uncollectible accounts.
Debit Cash $800
Credit Bad Debts Expense $800
To record the recovery of previously written off accounts.
2. Allowance Method:
Debit Accounts Receivable $122,000
Debit Cash $11,300
Credit Sales Revenue $133,300
To record the sale of goods on credit and for cash.
Debit Cash $106,400
Credit Accounts Receivable $106,400
To record the cash receipts on account.
Debit Allowance for Uncollectible Accounts $990
Credit Accounts Receivable $990
To record the write-off of uncollectible accounts.
Debit Accounts Receivable $800
Credit Allowance for Uncollectible Accounts $800
To reinstate the recovery of previously written off accounts.
Debit Cash $800
Credit Accounts Receivable $800
To record the recovery of previously written off accounts.
Explanation:
a) Data and Analysis:
1. Direct write-off method:
Accounts Receivable $122,000 Cash $11,300 Sales Revenue $133,300
Cash $106,400 Accounts Receivable $106,400
Bad Debts Expense $990 Accounts Receivable $990
Cash $800 Bad Debts $800
2. Allowance Method:
Accounts Receivable $122,000 Cash $11,300 Sales Revenue $133,300
Cash $106,400 Accounts Receivable $106,400
Allowance for Uncollectible Accounts $990 Accounts Receivable $990
Accounts Receivable $800 Allowance for Uncollectible Accounts $800
Cash $800 Accounts Receivable $800
The Dulac Box plant works two 8-hour shifts each day. In the past, 1000 cypress packing boxes were produced by the end of each day. The use of new technology has enabled them to increase productivity by 20%. Productivity is now approximately:____.
A) 32.5 boxes/hr.B) 40.6 boxes/hr.C) 62.5 boxes/hr.D) 81.25 boxes/hr.E) 300 boxes/hr.
Answer:
The Dulac Box
Productivity is now approximately:____.
= 75 boxes/hr
Explanation:
a) Data and Calculations:
Number of shifts per day = 2
Each shift works 8 hours
Total hours worked each day = 16 hours
Number of cypress packing boxes produced each day = 1,000
Productivity per hour = 62.5 boxes/hr (1,000 boxes/16 hours)
Increase in productivity from the use of new technology = 20%
Therefore, the number of cypress packing boxes produced each day will increase by 20% to 1,200 boxes (1,000 * 1.2)
New Productivity per hour = 75 boxes/hr
If a company can implement cash management systems and save three days by reducing remittance time and one day by increasing disbursement time based on $2,000,000 in average daily remittances and $2,500,000 in average daily disbursements and its return on freed-up funds is 10%, what is the maximum that it should spend on the system
Answer: $850,000
Explanation:
The maximum amount that'll be spent on the system goes thus:
Additional collections will be:
= $2,000,000 × 3 days
= $6,000,000
Delayed disbursements will be,:
= $2,500,000 × 1 day
= $2,500,000
Then, the increment on funds will be:
= Additional collection + Delayed disbursement
= $6,000,000 + $2,500,000
= $8,500,000
Hence, maximum amount will be:
= 10% × $8,500,000
= $850,000
The tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized is called a:
Answer:
Pareto chart
Explanation:
A Pareto chart can be regarded as bar graph, The lengths of the bars are been arranged having longest bars on the left, on the right is the shortest bar, with this arrangement the chart visually gives a depiction about which situations are more significant. The lengths of the bars gives a representation of frequency or representation of cost i.e time or money. It should be noted that Pareto chart is the tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized.
The tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized is called a Pereto chart
A Pareto chart is simply known to be a type of chart that has bars and a line graph. It is the point where individual values are shown in descending order by bars, and the cumulative total is shown by the line.
It serves mainly to show the most important among a said large amount or set of factors.Pareto charts show the step by step frequency counts of data.Conclusively, the charts are used to show areas to focus on first in process improvement.
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Later, the teaching assistant in Yvette’s economics course gives her some advice. "Based on past experience," the teaching assistant says, "working on 30 problems raises a student’s exam score by about the same amount as reading the textbook for 1 hour." For simplicity, assume students always cover the same number of pages during each hour they spend reading. Given this information, in order to use her 4 hours of study time to get the best exam score possible, how many hours should she have spent working on problems, and how many should she have spent reading?
Answer:
Yvette
To get the best exam score possible, Yvette should spend 2 hours working on problems and 2 hours reading.
Explanation:
a) Data and Calculations:
Total study time = 4 hours
Number of problems solved = 30
Hours reading textbook = 1 hour
Score obtained from problem solving = 50%
Score obtained from reading textbook = 50%
Therefore, number of hours to spend working on problems = 2 (4 * 50%)
Number of hours to spend reading - 2 (4 * 50%)
Frans paid R9600 as interest on a loan he took 5 years ago at 16% rate. What's was the amount he took as loan?
[tex]\bold{{Answer}}[/tex]
Any choices?
The amount he took as loan was Rs.7680
What is loan?The term loan refers to a type of credit vehicle in which a sum of money is lent to another party in exchange for future repayment of the value or principal amount. In many cases, the lender also adds interest and/or finance charges to the principal value which the borrower must repay in addition to the principal balance. Loans may be for a specific, one-time amount, or they may be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial, and personal loans.
A loan is a form of debt incurred by an individual or other entity. The lender—usually a corporation, financial institution, or government—advances a sum of money to the borrower. In return, the borrower agrees to a certain set of terms including any finance charges, interest, repayment date, and other conditions. In some cases, the lender may require collateral to secure the loan and ensure repayment.
What are methods of calculating interest on loan?"The interest rate on loans can be set at simple or compound interest. Simple interest is interest on the principal loan. Banks almost never charge borrowers simple interest. For example, let's say an individual takes out a $300,000 mortgage from the bank, and the loan agreement stipulates that the interest rate on the loan is 15% annually. As a result, the borrower will have to pay the bank a total of $345,000 or $300,000 x 1.15. Compound interest is interest on interest and means more money in interest has to be paid by the borrower. The interest is not only applied to the principal but also the accumulated interest of previous periods. The bank assumes that at the end of the first year, the borrower owes it the principal plus interest for that year. At the end of the second year, the borrower owes it the principal and the interest for the first year plus the interest on interest for the first year."
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Calculate the company's breakeven point revenue based on the information below: Total fixed cost 2000 Total variable cost 5000 Sales price/unit 15 Contribution margin 65% 2836 4500 3250 3077
Answer: 3077
Explanation:
Based on the information given, the company's breakeven point revenue based on the information below will be calculated as:
Breakeven point = Fixed cost / Contribution margin ratio
= 2000/65%
= 2000/0.65
= 3077
Therefore, the answer is 3077
The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 11,000 Property, plant and equipment 210,000 Total Assets $291,000 Liabilities and Stockholders' Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders' equity—common 151,000 Total Liabilities and Stockholders' Equity $291,000 Income Statement Sales $ 120,000 Cost of goods sold 55,000 Gross profit 65,000 Operating expenses 30,000 Net income $ 35,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the inventory turnover for Sampson? Group of answer choices 3,2 times 5 times 10.9 times 0.20 times
Answer:
Sampson Company
The inventory turnover for Sampson is:
5 times.
Explanation:
a) Data and Calculations:
Assets
Cash and short-term investments $ 45,000
Accounts receivable (net) 25,000
Inventory 11,000
Property, plant and equipment 210,000
Total Assets $291,000
Liabilities and Stockholders' Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
Stockholders' equity—common 151,000
Total Liabilities and Stockholders' Equity $291,000
Income Statement Sales $ 120,000
Cost of goods sold 55,000
Gross profit 65,000
Operating expenses 30,000
Net income $ 35,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share $0.50
Inventory Turnover = Cost of goods sold/Average Inventory
= $55,000/$11,000
= 5 times
On January 1, DogMart Company purchased a two-year liability insurance policy for $32400 cash. The purchase was recorded to Prepaid Insurance. How much would be the January 31 amount recorded to expense (use two decimals)?
Answer: $1,350
Explanation:
The insurance is for 2 years but has to be apportioned monthly on account of the Accrual basis in Accounting where expenses will only be recognized when they are incurred.
The expense to be recorded for the first month will therefore be:
= 32,400 / 24 months
= $1,350
Cor-Eng Partnership was formed on January 2, 20X1. Under the partnership agreement, each partner has a 50/50 capital balance with a true up a payment required to equal the initial capital accounts. Partnership net income or loss is allocated 50/50. To form the partnership, Cor originally contributed assets costing $30,000 with a fair value of $80,000 on January 2, 20X1, while Eng contributed $20,000 in cash. Drawings by the partners during 20X1 totaled $3,000 by Cor and $9,000 by Eng. Cor-Eng's 20X1 net income was $25,000. Eng's initial capital balance (after the true up payment) in Cor-Eng is:______.
a. $25,000
b. $20,000
c. $50,000
d. $40,000
Answer:
Cash (Dr.) $20,000
Other Assets (Dr.) $80,000
Goodwill (Dr.) $60,000
Cor capital (Cr.) $80,000
Eng Capital (Cr.) $80,000
Explanation:
Goodwill is a firms excess asset value than its original cost. It is an intangible asset of a company. Eng and Cor both invested equal amount of value in the business. The fair value of assets is 80,000 which is 60,000 in excess of its cost.
Exercise 4-11 Computing net sales for multiple-step income statement LO P4 A company reports the following sales-related information. Sales, gross $ 245,000 Sales returns and allowances $ 20,000 Sales discounts 4,900 Sales salaries expense 10,900 Prepare the net sales portion only of this company’s multiple-step income statement.
Answer:
Net sales revenue= 220,100
Explanation:
Giving the following information:
Sales, gross $ 245,000
Sales returns and allowances $ 20,000
Sales discounts 4,900
Sales salaries expense 10,900
Sales salaries expense is not a part of the net sales in a multiple-step income statement. The net sales are as follow:
Sales= 245,000
Sales returns and allowances= (20,000)
Sales discounts= (4,900)
Net sales revenue= 220,100
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 19,000 defective units that cost $5.20 per unit to manufacture. The units can be a) sold as is for $2.50 each, or b) reworked for $4.80 each and then sold for the full price of $7.70 each.
What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
Answer:
If the company reworks the units, income will increase by $7,600 (55,100 - 47,500).
Explanation:
Giving the following information:
Number of units= 19,000
Sold as-is:
Selling price= $2.5
Rework:
Selling price= $7.7
Incremental income= $4.8
First, we will calculate the effect on income of both options:
Sold as-is:
Effect on income= 2.5*19,000= $47,500
Rework:
Effect on income= 19,000*(7.7 - 4.8)
Effect on income= $55,100
If the company reworks the units, income will increase by $7,600 (55,100 - 47,500).
U.S. companies moving into the international market need to be sensitive to the need for local country or regional responsiveness because of Group of answer choices
Answer: consumer needs, political and legal structures, and social norms vary by country.
Explanation:
It should be noted that different countries have different customer needs, values and social norms with regards to how business is done.
Therefore, it's vital for any company that's moving into the international market to always have this in mind and therefore should be sensitive to these needs in order to achieve its goals.
Ride N Style Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Ride N Styles pursue instead?
a. Close the business until the cost of us decreases.
b. Pursue a diferented strategy.
c. Compete based on intergroup rivalry, not in group rivalry
d. Create a strateg group through mergers
Answer:
b. Pursue a diferented strategy.
Explanation:
A differentiation strategy permits that the product or service should be different in the market also it provides the edge over your rivalrs. Here you can select various kinds of offering that attaching with the service in which you permit to charge more from your clients
So as per the given situation, the option b is correct
The following data represents number of customers arriving at Quick Lube for an oil change between 9 and 11 AM over the past 6 days.
Day 1 2 3 4 5 6
Customers 34 33 35 36 36 37
Required:
Using the Naive Method, how many customers would you forecast for Day 7?
Answer:
37
Explanation:
The naïve technique of forecasting is a simple forecasting technique that is used among time series data. in this type of forecasting, we use the actual figure in the last period to make a forecast for the next period that follows it.
In this question, the last day is day 6, and the number of customer on this day is 37. With the explanation in the paragraph above, the forecast for day 7 is still going to be 37 customers, given that day 7 follows day 6, which was the last period.
1. Sharon, a newly engaged woman, saw an advertisement in a bridal magazine for a beautiful pearl necklace priced at $69.99 from Precious Jewelry. She thought the necklace would be a wonderful present for her bridesmaids, so she ordered 5 necklaces from Precious Jewelry. After a few weeks, Sharon received a letter, along with her returned check from Precious Jewelry. The letter stated that the jeweler was sorry they could not fill her order because they had been overwhelmed with so many requests that their supply of necklaces ran out very quickly.
a. List the 3 elements of an offer and describe each (in your own words).
b. Did Precious Jewelry make an offer when they placed the ad in the magazine? Did Sharon make an offer when she placed the order? Why or why not?
c. What will be the likely outcome if Sharon sues Precious Jewelry to force them to fill her order? Explain your answer.
Answer:
a. The three elements which make an offer valid are communication, commitment, and definite terms. The communication of an offer happens between the offeror and the offeree and not with the general public, as depicted by the ad. Commitment in an offer requires that Sharon and Precious Jewelry are identified as the involved parties and are committed to enter a valid contract. Definite terms require no ambiguity.
b. Precious Jewelry did not make an offer when it placed the ad in the magazine. The ad was an invitation to treat. Sharon initiated the offer when she ordered for the jewelries. At this point, Precious Jewelry could accept or reject the offer, depending on its capacity.
c. If Sharon sues Precious Jewelry to force it to fill her order, she does not have the good standing required to enforce specific performance of a contract because there is no basis for the existence of a contract between her and Precious Jewelry. Moreover, Sharon’s offer was never accepted by Precious Jewelry and there was no consideration.
Explanation:
A valid contract will exist between Sharon and Precious Jewelry when the five elements of a contract are present. These include valid offer, acceptance, mutual consent (or assent), consideration, and legality (including the capacity of the contracting parties).
