4. Profit maximization and loss minimization
1 answer:
Jake is incorrect with his assertion that the BYOB should charge 2.25 per can.
<h3>What is Profit maximization and Loss minimization?</h3>
The process of Profit maximization ensures that favorable output and price are achieved to maximize its return while the process of Loss minimization ensures there is lower loss on return in the longer-run.
Price QD T*R(P*Q) Total cost(ATC*Q) Profit(TR-TC)
2 1000 2000 2750 -750
2.25 750 1687.5 2625 -937.5
Given that loss realized is lower in $2 per unit than $2.25 per unit, then, Jake is not correct with his assertion that the BYOB should charge 2.25 per can.
Note: The point has been placed on the graph to indicate the profit-maximizing price and quantity for BYOB.
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Answer: Please refer to Explanation.
Explanation:
Your question was incomplete so I attached the missing details.
The Carrying Amount of the Division has to be ascertained to move forward as it is needed in calculating the loss on Impairment. It is calculated by subtracting Goodwill from the Net Assets.
= 496 - 214
= $282 million
Calculating the Loss on impairment is done by the following formula,
= Market Price - Carrying Amount of the Division (net of Goodwill) - carrying value of Goodwill
= 335 - 282 - 214
= -$161 million.
Journal Entry
DR Loss on Impairment $161 million
CR Goodwill $161 million
(To record the loss on Impairment)
