Answer: interactive marketing
Explanation:
Interactive marketing is also referred to as event-driven marketing or trigger based marketing and it simply has to do with using an effective communication which is two-ways to enable the consumers connect directly with a company.
Interactive marketing means service quality depends on the quality of buyer-seller interaction during the service encounter.
Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 280 employees and occupies 55,200 square feet; Painting has 120 employees and occupies 36,800 square feet. Indirect factory expenses for the current period are as follows: Administration $ 86,000 Maintenance $ 102,000 Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is:
Answer:
$61,200
Explanation:
Maintenance expenses allocated to assembly department
Allocation base = Square footage
= $102,000 * $55,200 / ($55,200 + $36,800)
= $102,000 * $55,200 / $92,000
= $61,200
The break-even point is a.the maximum possible operating loss. b.where the total sales line intersects the total costs line on a cost-volume-profit chart. c.the total fixed costs. d.the maximum possible operating income.
Answer:
The answer is B.
Explanation:
To a layman, break-even point is the point where an entity neither make profit nor loss. It is the point where total revenue equals total cost(where the total sales line intersects the total costs line on a cost-volume-profit chart).
Points greater or above this intersection or point mean the firm is making profit and points lesser or below this intersection or point mean the firm is making loss.
Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?
a. Discretionary policy
b. An eclectic approach
c. Fixed rules
d. Fiscal policy
Answer:
C. Fixed rules.
Explanation:
This is simply a policy that is seen to be a monetary or in some cases fiscal; they are said to be automated in most of its cases and are based on the criteria that are predetermined.
In most cases, these policies are seen to be binding and also categorically constrain officials' policy choices based on certain predetermined criteria to direct them toward serving the public interest.
Many cases by policymakers made this policy to be put in place because most of them generally cannot bind their own future choices, also fixed policy rules usually have to be enforced by some kind of higher authority in order to be binding etc.
Backus Inc. makes and sells many consumer products. The firm’s average contribution margin ratio is 35%. Management is considering adding a new product that will require an additional $15,000 per month of fixed expenses and will have variable expenses of $7.80 per unit.
Required:
A. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 35%.
B. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $6,000.
Answer:
a) $12 per unit
b) $2,693 units
Explanation:
contribution margin ratio formula = contribution margin / total revenue
contribution margin = total revenue - variable costs
0.35 = (revenue - 7.80) / revenue
0.35revenue = revenue - 7.80
7.80 = 0.65revenue
revenue = 7.80/.65
revenue = 12
number of units required to increase revenue by $6,000:
= (fixed costs + desired profits) / contribution margin
= ($15,000 + $6,000) / $7.80 = $21,000 / $7.80 = 2,692.31 ≈ we must round up to $2,693 units
A regulated Natural Monopoly is more likely to advertise freely under which of the following types of regulation?
a) price regulation
b) profit regulation
c) output regulation
d) social regulation
Answer:
A
I took the quiz
Explanation:
The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity? B) 6.92 percent D) 7.22 percent A) 6.97 percent C) 6.88 percent E) 7.43 percent
Answer:
The answer is D. 7.22 percent
Explanation:
Interest payments are being made semiannually, this means it is being paid twice in a year
N(Number of periods) = 16 periods ( 8 years x 2)
I/Y(Yield to maturity) = ?
PV(present value or market price) = $987
PMT( coupon payment) = $35 ( [7 percent÷ 2] x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 16; PV = -987 ; PMT = 35; FV= $1,000; CPT I/Y= 3.61
3.61 percent is the Yield-to-maturity for semiannual
Therefore, the Yield-to-maturity of the bond annually is 7.22 percent (3.61 percent x 2)
On March 15, 20X7, Barrel Company paid property taxes of $120,000 on its factory building for calendar year 20X7. On July 1, 20X7, Barrel made $20,000 in unanticipated repairs to its machinery. The repairs will benefit operations for the remainder of the calendar year. What total amount of these expenses should be included in Barrel's quarterly income statement for the three months ended September 30, 20X7?
Answer:
Total expenses = $40,000
Explanation:
Total expenses for the quarterly income statement for the three months can be calculated as follows
Data
Property taxes paid = $120,000
Unanticipated repairs = $20,000
Expenses for quarterly income statement =?
Solution
Total expenses = Property taxes paid + Unanticipated repairs
Total expenses = ($120,000 x 3/12) + ($20,000 x 3/6)
Total expenses = $30,000 + $10,000
Total expenses = $40,000
Total expenses of $40,000 should be included in Barrel's quarterly income statement for the three months ended September 30, 20X7
Which third-party conflict resolution strategy manages the process and context of interaction between the disputing parties but does not impose a solution on the parties
Answer: Mediation
Explanation:
Mediation is a conflict resolution procedure whereby the parties that are involved will discuss their disputes and a third person who is impartial and also trained assists them in settling the dispute.
Meditation manages the process and context of interaction between the disputing parties but does not impose a solution on the parties.
Steel Tariffs Appear to Have Backfired on Bush
President Bush set aside his free-trade principles last year and imposed heavy tariffs on imported steel to help out struggling mills in Pennsylvania and West Virginia. Some economists say the tariffs may have cost more jobs than they saved, by driving up costs for automakers and other steel users.
Source: The Washington Post, September 19, 2003
Explain how a high tariff on steel imports can help domestic steel producers.
Explain how a high tariff on steel imports can harm steel users.
When a high tariff is placed on steel imports, U.S. steel producers produce______steel and they pay a ________price.
A. less; higher
B. more; lower
C. less; lower
D. more; higher
Answer:
Steel industry in the United States of America has had its up and down over the years. this is especially going by the fact that it is cheaper to import steel from outside America than to buy those produced in U.S. However, high tariff on steel import would enable the domestic steel producers to meet their obligation as well as recoup their investments in the steel industry in U.S.
For example, most construction based organisation would prefer to buy from domestic steel producer if the price and tariff of imported ones makes it extremely difficult to purchase.
On the other-hand, the high tariff placed on steel import could also harm steel users due to the fact that, the quality of steel which they buy from outside U.S would no longer be available to them.
Also, they would be forced to buy at whatever price from domestic producers whether they had need for the steel or not due to high tariff on imported ones.
When a high tariff is placed on steel imports, U.S. steel producers produce more steel and they pay a higher price.
Answer: D. more; higher
Explanation:
Which of the following refers to how companies remain in business? sustainability corporate social responsibility carbon footprint closed-loop supply chains economic sustainability
Answer:
Economic sustainability
Explanation:
In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.
A. True
B. False
Answer:
True
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.
There are low barriers to entry r exit of firms. So, if a firm is earning economic profit in the short run, in the long run, more firms would enter into the industry.
examples of monopolistic competition are restaurants
Which of the following items would be a way to manipulate the cash flow from operating activities amount on the statement of cash flows?
a.
Adding depreciation back to net income to determine cash flow from operating activities.
b.
Including interest expense and tax expense in the calculation of cash flow from operating activities.
c.
Recording an item that should be recorded as an operating activity as an investing activity.
d.
The cash flow statement cannot be manipulated.
Answer:
C. Recording an item that should be recorded as an operating activity as an investing activity.
Explanation:
Hope it helped
consider a bond that matures in 10 years it pay9% annual coupons and $100 at maturity is the required annual rate of return on the bond i s 8% then the bond will sell today for
Answer:
Bond Price today = $106.71008 rounded off to $106.71
Explanation:
To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and r or YTM will be,
Coupon Payment (C) = 0.09 * 100 = $9
Total periods (n)= 10
r or YTM = 8% or 0.08
The formula to calculate the price of the bonds today is attached.
Bond Price = 9 * [( 1 - (1+0.08)^-10) / 0.08] + 100 / (1+0.08)^10
Bond Price = $106.71008 rounded off to $106.71
Terry Dactel is considering the purchase of an asset having the following cash flows (in 000's):CF Prob.5 20%12 30%18 30%20 20%What is the asset’s standard deviation (in 000's)?
Answer: b. $5.4
Explanation:
First calculate the Expected return;
Expected cashflow = ∑ (Probability of cashflow * cashflow)
Expected cashflow = (5 * 0.2) + (12*0.3) + (18*0.3) +(20*0.2)
=$14
Standard deviation = √∑ [Probability * (CF - Expected CF)^2]
Standard deviation= √[(0.2*(5 - 14)^2) + (0.3*(12-14)^2) + (0.3*(18-14)^2) + (0.2*(20-14)^2)
Standard deviation = $5.4
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $15.90 for each of the 25 million shares sold. The initial offering price was $17.50 per share, and the stock rose to $19.40 per share in the first few minutes of trading. Raven paid $860,000 in direct legal and other costs and $330,000 in indirect costs.What was the flotation cost as a percentage of funds raised?
Answer:
22.38%
Explanation:
Raven corporation has just gone public
They received $15.90 for each 25 million shares that was sold
The first step is to calculate the net amount raised
Net amount that was raised= 15.90×25,000,000 = 397,500,000
397,500,000-860,000-330,000
= 396,310,000
Underwriter spread= 17.50-15.90
= 1.6 per shares
Total underwriter spread= per share spread× number of shares that were offered
= 1.6×25,000,000
= 40,000,000
Total direct costs= 40,000,000+860,000
=40,860,000
Indirect flotation cost= indirect cost+price appreciation
= 330,000+(19.40-17.50)×25,000,000
= 330,000+1.9×25,000,000
=330,000+47,500,000
= 47,830,000
Total flotation cost= 47,830,000+40,860,000
= 88,690,000
Therefore, the flotation cost as a percentage of funds raised can be calculated as follows
= 88,690,000/396,310,000 × 100
= 0.2238×100
= 22.38%
Hence the flotation costs as a percentage of funds raised is 22.38%
A firm hires labor in a perfectly competitive labor market. Its current profit-maximizing hourly output is 100 units, which the firm sells at a price of $5 per unit. The Marginal Physical product (MPP) of the last unit of labor employed is 5 units per hour. The firm pays each worker an hourly wage of $15. a)What Marginal Revenue (MR) does the firm earn from sale of the output produced by the last worker employed? b)Does this firm sell its output in a perfectly competitive market?
Answer:
A.Marginal Revenue $3
B. No
Explanation:
A.Calculation for the Marginal Revenue (MR) that the firm earn from sale of the output produced by the last worker employed
Based on the information given we were told that the Marginal Physical product of the last unit of labor was 5 units per hour in which the firm pays each worker an hourly wage of $15. Now let calculate the Marginal Revenue using this formula
Marginal Revenue = Employees hourly wages/Marginal Physical product unit of labor
Where,
Employees hourly wages=$15
Marginal Physical product unit of labor =5 units per hour
Let plug in the formula
Marginal Revenue =$15/5
Marginal Revenue =$3
B. No reason been that the current profit-maximizing hourly output was 100 units in which we were told that the firm sells at a price of $5 per unit. While the Marginal Revenue gotten in (A) above was $3 which is lesser or lower than $5 per unit which simply means that the firm does NOT sell its output in a well perfectly competitive market .
The wage rate for all units of labor is $10/hr. You have spent $160,000 on developing a production process (Process X) that will allow you to produce 8 units for every unit of labor. If you use this production process, the accounting profits will cover the initial investment within 6 months. If you use your normal production process (not Process X), you can produce 10 units for every unit of labor. Both processes are fully scalable, so the marginal product of labor is fixed for any reasonable amount of labor you could hire. Based on this information, what should you do?
Answer:
The normal production process should be followed.
Explanation:
The normal process should be used because when it uses the process “X” then the marginal productivity of labor (MPL) is 8 units and the wage of labor is $10 per hour. Secondly, when it uses a normal production process then the marginal productivity of labor is 10 units and the wage rate is the same that is $10 per hour. Therefore, the normal production process is giving the greater marginal productivity of labor, accordingly this process should be followed.
Carlos wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $1,299, and the vacation is priced at $750. He has only $1,537 in his checking account, so he cannot afford to purchase both. After much thought, Carlos buys the computer and writes a check for $1,299. Identify what role mo
The complete question is:
Carlos wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $1,299, and the vacation is priced at $750. He has only $1,537 in his checking account, so he cannot afford to purchase both. After much thought, Brian buys the computer and writes a check for $1,299.
Identify what role money plays in each of the following parts of the story.
Carlos can easily determine that the price of the computer is more than the price of the vacation.
Carlos has $1,537 in his checking account.
Carlos writes a check for $1,299.
Answer:
Carlos can easily determine that the price of the computer is more than the price of the vacation.= Unit of Account
Carlos has $1,537 in his checking account.= Store of value
Carlos writes a check for $1,299.= Medium of Exchange
Explanation:
In this scenario the different functions of money are exhibited. The 3 functions of money are as unit of account, store of value and medium of exchange.
When Carlos determines that the price of the computer is larger than that of price of a vacation money functions as a unit of account. The amount for a computer is $1,299 which is larger than the cost of a vacation ($750)
The money in his account is a store of value from which he can make pitches in the present or in the future.
When he writes the check for the computer, he is exchanging money for the computer. Money acts as a medium of exchange
Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500 Actual hours used 4,200 Standard hours allowed 4,000 Standard variable overhead rate $3.75 per hour
Answer:
Rate variance = $250 favorable
Explanation:
The variable overhead rate variance is the difference between the actual variable cost and the standard variable overhead cost the actual actual hours used.
We would compare the actual cost to the standard cost of the actual hours used . This is done below as follows:
$
4,200 hours should have cost (4200 × 3.75 ) 15,750
but did cost 15,500
Rate variance 250 Favorable
Note the actual hours of 4,200 cost $250 less than it should be have cost . Hence the variance is favorable
Rate variance = $250
At the beginning of the meeting Kira does not properly lead the team during the ______ stage of team development. Therefore; the team was stuck in the ______ stage.
Answer:
forming; storming
Explanation:
The forming is the first stage in group development. At this stage, the members of the group reveal their expectations with respect to the work and share their that skils in which they are perfect so that the work could be allocated easily.
After this finishing this step, the next step is storming in which the members give their suggestions to accomplish a task that has assigned to each member of the group
Therefore as per the given situation, the forming and storming are the correct options.
Team development is the ultimate word for the teamwork or the entire growth of the firm with the team as well. The team works as a group in the firm and accomplishes the tasks within the set target in order to accomplish the organization target as well as the individual targets.
The answer to the blanks are forming; storming
The forming is the first stage in group development. At this stage, the members of the group reveal their expectations with respect to the work and share their skills in which they are perfect so that the work could be allocated easily.
After this step, the next step is storming in which the members give their suggestions to accomplish a task that has been assigned to each member of the group
To know more about the options of the stage of team development, refer to the link below:
https://brainly.com/question/14449327
Looking forward to next year, if Baldwin’s current cash balance is $20,201 (000) and cash flows from operations next period are unchanged from this period and Baldwin takes ONLY the following actions relating to cash flows from investing and financing activities: Issues 100 (000) shares of stock at the current stock price Issues $200 (000) of long-term debt Pays $40 (000) in dividends Which of the following activities will expose Baldwin to the most risk of needing an emergency loan?a. Retires $20,000 (000) in long-term debtb. Liquidates the entire inventoryc. Sells $5,000 (000) of their Long-term assetsd. Purchases assets at a cost of $15,000 (000)
Answer: Purchases assets at a cost of $15,000 (000)
Explanation:
Out of the 4 options presented, 2 involves cash coming into the company which are; Sells $5,000 (000) of their Long-term assets and Liquidates the entire inventory. As these 2 bring cash into the company, they will not make Baldwin need an emergency loan.
The other 2 however, take money from the company being; Retires $20,000 (000) in long-term debt and Purchases assets at a cost of $15,000 (000). Retirement of long-term debt will have been in the budget for a long time so there would be no need for emergency funding.
The Purchase of the assets on the other hand has a less chance of being budgeted for than the long term debt retirement and being such a significant outflow, could expose Baldwin to the risk of needing to seek emergency loans.
Palmer Corp. owned 20,000 shares of Dixon Corp. purchased in 2006 for $240,000. On December 15, 2009, Palmer declared a property dividend of all of its Dixon Corp. shares on the basis of one share of Dixon for every 10 shares of Palmer common stock held by its stockholders. The property dividend was distributed on January 15, 2010. On the declaration date, the aggregate market price of the Dixon shares held by Palmer was $400,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of
Answer:
Debit to Retained Earnings of $400,000
Explanation:
Based on the information given we were told that on the declaration date, the market price or the market value of the Dixon Corp shares that was been held by Palmer Corp was the amount of $400,000 which means that the entry to record the declaration of the dividend would include a debit to Retained Earnings of the amount of $400,000 which is the market value.
The entry to record the declaration of the dividend would include a debit to Retained Earnings of $400,000.
The following information should be considered:
Since the aggregate market price of the Eaten shares on the declaration date is $400,000.Therefore, at the time of recording the declaration of the dividend it should debited to the retained earning for $400,000Learn more: https://brainly.com/question/3617478?referrer=searchResults
Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?
A) Benchmarking
B) Motivating unit managers
C) Promoting goal congruence
D) Providing feedback
Answer:
A) Benchmarking
Explanation:
Benchmarking refers to a process in which the performance of the company could be measured with respect to the product, services, processes as compared with the industry performance
Here in the given situation, when an actual result is compared with the industry standards than we called as a benchmarking and the same is to be used for the evaluation of the performance system
Which of the following is not a reason for a direct materials quantity variance? a.purchasing of inferior raw materials
Answer: d. increased material cost per unit
Explanation:
Direct materials quantity variance has to do with the difference between the budgeted quantity of materials and the actual quantity of materials used. It speaks to only the quantity used and nothing else.
An increased cost of the material is not relevant to the quantity of material used because whilst for instance it measures if there was a price change in the material, the materials quantity variance checks if there has been a change in quantity.
Question 2 options: Assume that in short-run equilibrium, a particular monopolistically competitive restaurant (Applebee's) charges $12 for each order of Chicken Parmesan and sells 52 orders per day. The average total cost (ATC) for those 52 orders is $10. Enter your answers below to the nearest whole number. How much revenue will the firm take in each day
Answer:
104
Explanation:
Charlie is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Charlie consider while choosing his strategy?A) He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.B) He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally.C) He should remember that he has only one framework at his disposal to make global strategy decisions.D) He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.
Answer: A) He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.
Explanation:
Charlie must consider that despite the fact that the internet and technology have made globalization more accessible, the location of a business remains very important hence the old saying "its all about location location location".
The firm's geographical location has an effect on stakeholders in the company such as customers, employees and suppliers. For the customers, even if the business was to rely on the internet and delivering goods, the location needs to be convenient enough to ship goods from.
The Suppliers as well need to be able to send the goods ordered for in a timely fashion and an improper location can hamper that. Even employees need a place to work in that is conducive for them in terms of logistics and a safe working environment. Charlie should definitely not forget about the importance of location.
A friend wants to borrow money from you. He stated that he will pay you $2500 every 6 months for 7 years with the first payments exactly 3 years and six months from today. The interest rate is 4.8 percent compounded semiannually. What is the value of the payments today?
Answer:
The value of the payments today is $35.00.
Explanation:
The Value of Payments today is known as the Present Value (PV) and is calculated as follows :
Pmt = - $2,500
P/yr = 2
n = 7 × 2 = 14
Fv = 0
Pv = ?
Using a Financial Calculator, the Present Value (PV) of the payments would be $35.00
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $345,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:Product Selling Price Quarterly OutputA $ 19.00 per pound 12,800 poundsB $ 13.00 per pound 20,000 poundsC $ 25.00 per gallon 4,000 gallonsEach product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:Product Additional Selling Processing Costs PriceA $ 68,500 $ 24.00 per poundB $ 98,250 $ 19.00 per poundC $ 41,600 $ 33.00 per gallonRequired:1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?
Answer and Explanation:
1. The computation of financial advantage (disadvantage) of further processing is shown below:-
Particulars Product A Product B Product C
Selling price after further
processing a 24.00 19.00 33.00
Selling price at the
split-off point b 19.00 13.00 25.00
Incremental revenue per
pound or gallon 5.00 6.00 8.00
(c = a - b)
Total quarterly output in
pounds or gallons d 12,800 20,000 4,000
Total incremental
revenue $64,000 $120,000 $32,000
(e = c × d)
Total incremental
processing costs f $68,500 $98,250 $41,600
Financial advantage (disadvantage)
of further
processing ($4,500) $21,750 ($9,600)
(g = e - f)
2. Product A and Product C will be sold at the split-off point
Therefore, Product B will be processed further
Match the product cost variance with the manager most probably responsible. Some answers may be used more than once. Some answers may not be used.
1. Variable overhead cost variance
2. Direct matierals efficiency variance
3. Direct labor cost variance
4. Fixed overhead cost variance
5. Direct materials cost variance
CHOICES:
a. Human resources
b. Purchasing
c. Production
Answer:
1 = A
2 = C
3 = C
4 = C
5 = B
Explanation:
This would actually depend on how the organization is set up and what type of business it is, but I believe these would be the most likely centers responsible for the difference
Funday Park competes with Fun World by providing a variety of rides.
Funday sells tickets at $85 per person as a one-day entrance fee.
Variable costs are $17 per person and fixed costs are $428,400 per month.
Required:
1. Supposed Funday Park cuts its ticket price from $85 to $68 to increase the number of tickets sold. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is? _
b. The new breakeven point in sales dollars is? $_
2. Ignore the information in question 1. Instead assume that Funday Park increases the variable cost from $17 to $34 per ticket. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is?
b. The new breakeven point in sales dollars is? $_
3. Ignore questions 1 and 2. Supposed Funday Park reduces fixed costs from $428,400 per month to $319,600 per month. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is?
b. The new breakeven point in sales dollars is? $_
4. Ignore information in questions 1 - 3. If Funday Park expects to sell 6,400 tickets, compute the margin of safety in tickets and in sales dollars.
a.
- = Margin of safety in units
- =
b.
- = Margin of safety in dollars
- =
5. Ignore information in questions 1 - 4. If Funday Park expects to sell 6,400 tickets, compute the operating leverage. Estimate the operating income if sales increase by 20%.
a.
/ = Degree of operating leverage
/ =
b. Estimate the new operating income if total sales increase by 20%?
The estimated operating income will be? $
Answer:
1. Supposed Funday Park cuts its ticket price from $85 to $68 to increase the number of tickets sold. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $428,400 / ($68 - $17) = 8,400 tickets
b. The new break even point in sales dollars is?
8,400 x $68 = $571,200
2. Ignore the information in question 1. Instead assume that Funday Park increases the variable cost from $17 to $34 per ticket. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $428,400 / ($85 - $34) = 8,400 tickets
b. The new break even point in sales dollars is?
8,400 x $85 = $714,000
3. Ignore questions 1 and 2. Supposed Funday Park reduces fixed costs from $428,400 per month to $319,600 per month. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $319,600 / ($85 - $17) = 4,7400 tickets
b. The new break even point in sales dollars is?
4,700 x $85 = $399,500
4. Ignore information in questions 1 - 3. If Funday Park expects to sell 6,400 tickets, compute the margin of safety in tickets and in sales dollars.
break even point = $428,400 / ($85 - $17) = 6,300
a. Margin of safety in units = (6,400 - 6,300) / 6,400 = 1.56%
b. Margin of safety in dollars = ($544,000 - $535,500) / $544,000 = 1.56%
5. Ignore information in questions 1 - 4. If Funday Park expects to sell 6,400 tickets, compute the operating leverage. Estimate the operating income if sales increase by 20%.
EBIT₀ = [6,400 x ($85 -$17)] - $428,400 = $435,200 - $428,400 = $6,800
EBIT₁ = [7,680 x ($85 -$17)] - $428,400 = $522,240 - $428,400 = $93,840
% change in EBIT = ($93,840 - $6,800) / $6,800 = 12.8 x 100 = 1280%
a. Degree of operating leverage = 1280% / 20% = 64
b. Estimate the new operating income if total sales increase by 20%?
The estimated operating income will be $93,840
