Consider;

2. Critically examine the theoretical and empirical validity of the profit

maximization hypothesis.

3. The Hot-Bake shop sells only bread made that day. Each loaf

produced has a variable cost of 30p and sells for SOp. Any bread

unsold at the end of each day is thrown away.

At the start of each day, the manager must decide how many loaves

to produce. The table below records sales over the past month:

Daily sales Frequency

1000 6

1200 10

1400 10

1600 4

(a) Fixed costs are estimated at X per day. Find the break even

number of loaves produced and sold, and the number if expected

daily profit was 50.

(b) Find the number of loaves produced to minimize expected

opportunity loss.

(c) Bread is produced by a fully automated machine which mixes the

dough, divides it into 1 lb units, fills each baking tin and passes

them through an oven. Out of each batch, some are rejected for

being underweight or burnt.

The proportion rejected has the probability distribution given

below:

Proportion rejected

0.05

0.10

0.15

Probability

0.25

0.60

0.15

(i) Find the number of loaves produced if the expected number of saleable loaves equals your answer to question (b).

(ii) The services of a maintenance engineer would set the

rejection rate equal to 0.05, but would cost 11 per day.

Advise the manager on whether to engage the engineer or

not, if the desired daily production is 1300.

(d) Comment on the assumptions underlying your answers, and

discuss the relevance of other decision criteria.

4. 'Profit is the maximum value a company can distribute during the

year and still expect to be worth as much at the end of the year as it

was at the beginning.' Discuss this statement, and comment on its

value in measuring profit for decision-making.

5. Cambrian Railways runs a daily container freight train between

Cardiff and Birmingham. Its two major customers are British Steel

and the Welsh Farming Co-operative. The demand for containers by

each customer is given by the equations:

P 1 = 500- 8Q1 for British Steel

P2 = 400-5Q2 for Welsh farming.

P; is the price charged by Cambrian per container, and Q; is the

number of containers used by each customer.

Cambrian's total cost function is given by the equation:

TC = 10 000+20Q

where Q is the number of containers per trip.

(a) What are the necessary conditions for profitable price discrimination by Cambrian?

(b) What profit -maximizing rule will Cambrian use if setting prices as

a discriminator? Determine the profit-maximizing quantity of

freight service Cambrian will supply, show how this will be

divided between steel and agriculture and find the prices charged

in each market. Calculate Cambrian's total profit.

(c) Assume that Cambrian is prevented by law from price discrimination. Determine Cambrian's price and output combination

to maximize profit, and hence estimate the opportunity cost to

Cambrian of the Anti-Price Discrimination law.

6. Define an optimal inventory policy, and assess the impact on that

optimal inventory policy of:

(i) uncertain demand

(ii) uncertain lead times

(iii) customer reactions to product shortages

(iv) an oligopolistic product market.

7. (a) Compare and contrast the explanatory and extrapolatory

approaches to demand estimation. Illustrate your answer with

reference to the problem of estimating demand for a new luxury

food processor.

(b) The Welsh Kitchen Design Company sells its deluxe food processor for 150/unit. Company experience suggests that both price

and consumer incomes affect sales, with an estimated price

elasticity of demand of -3.0, whilst income elasticity is estimated

at 4.0. In 1986 the company sold one million units, whilst total

consumer disposable income was 600 billion. Estimated consumer disposable income for 1987 is 650 billion.

(i) Assuming price remains the same in 1987, estimate total

sales revenue.

(ii) If 1988 consumer income is expected to remain constant at

650 billion, whilst price is expected to fall by 25, estimate

sales revenue in 1988.

(iii) Estimate sales revenue in 1988 if consumer income rises by

10% between 1987/88, whilst price falls by 15%.

(iv) Use the information above to estimate demand as a linear

function of price and income.

8. 'Despite the theoretical advantages of the discounting procedure,

capital investment was either justified in terms of some "need to

have" case presented by lower management or on the basis of some

elementary payback period calculations." Discuss this conclusion

from an empirical survey of investment decision-making.

9. Explain the inability of economic theory to find satisfactory solutions

to the theoretical problem of price and output decision-making in

oligopolistic markets.

10. 'Advertising in the modern economy has entered the state of persuasion as distinct from proclamation or iteration' (Turner). Discuss this

view of advertising in relation to its role in the modern firm, and

explain the determination of an optimal advertising budget.

11. Analyses the effects of an increase in both wage rates and labor

productivity on the costs of the firm.

Problems: Problem 1 - worth 10 points Prepare a bank reconciliation for Wainwright, Martinez, & Garcia, LLC as of August 31 from the following information: (a.) The August 31 cash balance in the general ledger is $2,500. (b.) The August 31 balance shown on the bank statement is $1,967. (c.) Checks issued by the LLC, but not returned with the bank statement were No. 435 for $25 No. 448 for $90, and No. 449 for $60. (d.) A deposit made on August 31 for $750 was included in the general ledger balance but not in the bank statement balance. (e.) Interest credited to the account during August but not recorded on the company's books amounted to $40. (f.) A bank charge of $25 for printing new checks was made to the account during August. Although the company was expecting a charge, the amount was not known until the bank statement arrived. (g.) In the process of reviewing canceled checks, it was determined that a check which cleared the bank was issued to a supplier for the amount of $125 was recorded in the general ledger erroneously as a $152 cash disbursement. P 1.1 The reconciled balance at August 31 is (worth 4 points) a. $2,488 b. $3.425 C. $2,592 d. $2,542 e. $2,500 f. None of the above P 1.2 As a result of the reconciliation, the journal entry necessary to post into the general ledger would include (worth 2 points). a. A credit of $175 to accounts payable b. A credit of $40 cash c. A debit of $125 to accounts payable d. All of the above e. None of the above a. True 1.3 The error noted in letter g does not need to be posted into the general ledger. (worth 2 pointsk b. False5. Prepare the following bank reconciliation Balance per bank statement, Oct. 31 $10,410 Cash balance per general ledger (books) $11,200 Deposit made on Oct 31, not found on bank statement $1,865 Outstanding checks (total) $1,252 Check error: written for $152 but recorded for $125 Bank Service Charge $50 NSF check $100 Bank Side: Book Side: 6. What is the transaction on the accounting equation to record $40 in bank service charges? Assets Liabilities EquityQuestion 2 The following information relates to SADAGYADA LTD. for the month ended 3ist August, 2013. The following were the balances in the books of SADAGYADA LTD. in the beginning o the monthwere; Dr. Cr. Sales Ledger GHe 40,660 GHe 240 Purchases Ledger GHe 520 GHe 27,800 GHe Cash purchases 12,735 Returns inwards 1,938 Bad debts written off 853 Cheque payments to suppliers 64,320 Discount received 1,717 Cash sales 76,321 Debtor's chequesdishonoured 2,639 Purchases Returns 1,222 Credit sales 132,845 Discount allowed 3,699 Credit purchases 70,394 Set off between Sales Ledger and Purchases Ledger 2,850 Cheques received from debtors 144,820 Debit balances in Purchases Ledger at 315 December, 2013 563 Credit balances in Sales Ledger at 315t December, 2013 2,154 Provision for Doubtful debts 4,500 Required: (a) Prepare the Purchases Ledger Control Account and Sales Ledger Control Accounts as the December 2013. would appear in the General Ledger of SADAGYADA LTD.for the year ended 31 st10. The following bank reconciliation is presented for BRAVE Company for the month of October 2020. Balance per bank statement , Oct. 31, 2020 180,000 Add: Deposit in transit 40,000 Total 220,000 Less: outstanding checks 60,000 Bank credit recorded in error 10,000 70,000 Balance per books, October 31, 2020 150,000 Data per bank statement for the month of November, 2020: 1. November deposits including note for P 50,000 collected in behalf of Brave Company, P 275,000. 2. November disbursements (including NSF check for P 35,000 and service charges of P 1,500), P 220,000. All checks that were outstanding as of October 31, 2020 cleared through the bank in November, including the bank credit. In addition P 25,000 in checks were outstanding and deposits of P 35,000 were in transit as of November 30, 2020 REQUIRED: Compute the following: 1. Cash receipts per books during November 2. Cash disbursements per books during November 3. Unadjusted balance per ledger as of November 30, 2020 4. Correct cash balance as of November 30, 2020SP'18 ACCO 211-90 / Chapter 8 *Problem 8-5 Some of the information found on a detail inventory card for Buffalo Inc. for the first month of operations Is as follows. Received Issued, Balance, Date No. of Units Unit Cost No. of Units No. of Units January 2 1,500 $4.56 1,500 7 1,000 500 10 900 4.86 1,400 13 800 600 18 1,300 5.02 600 1,300 20 1,100 200 23 1,600 5.17 1,800 26 1,100 700 28 1,900 5.32 2,600 31 1,600 1,000 Calculate average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.) Average-cost per unit From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average-cost. (Round final answers to 0 decimal places, e.g. 6,548.) (1) (2) (3) FIFO LIFO Average-cost Ending Inventory $ If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, would the amounts shown as ending inventory in (1), (2), and (3) above be the same? What amount would be shown as ending inventory? (Round average cost per unit to 4 decimal places, e.g. 2.7621 and final answers to 0 decimal places, e.g. 6,548.) (1) (2) (3) FIFO LIFO Average-cost Would amount be same Ending Inventory S Question Attempts: 0 of 3 used