Cindy's reasoning illustrates: <u>sunk-cost fallacy</u>.
<u>Explanation</u>:
The term fallacy refers to failure in reasoning and mistaken belief. A sunk cost is a cost incurred in the business that cannot be recovered. The cost invested in the business and lost is referred as sunk cost.
Sunk cost fallacy gives false hope to the people about their investment plan in business and makes them take wrong decision.
In the above scenario, Cindy invested $850,000 into the business. She faced loss continuously and lost her money. But she stills thinks on investing in her business instead of selling it.
<u>The change in the owner's equity</u> is often documented in a separate revenue account when cash is received from sales.
<h3><u>What Is Revenue?</u></h3>
Revenue, which is determined by multiplying the average sales price by the number of units sold, is the money made from routine business operations. It is the top-line (or gross income) figure from which costs are deducted to calculate net income. On the income statement, revenue is referred to as sales.
Revenue is the money that a business generates via its operations. Depending on the accounting method used, there are various methods for calculating revenue. Sales made on credit will be included in revenue for products or services delivered to the client in accrual accounting. Revenue may be recognized in accordance with certain regulations even though payment has not yet been made.
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Answer: Opportunity
Explanation:
1. Opportunity - Given the fact that employees are granted access to very important documents, this might provide them the opportunity to commit theft. Employees who occupy top positions have access to classified information of the company which when manipulated can result to disastrous consequences. It now be holds on the employers of labour or the internal control system, to limit access to such information so as to make it hard for such fraud to be committed.
The procedures used by auditors to provide evidence are in two phases namely; the planning phase and execution phase.
1. The procedure for the planning phase is - Designing Appropriate Procedures : The evidence in this case could be a red flag noticed in the account records. The person who tried to commit the fraud could change figures in places that may not be noticeable.
2. The procedure for the execution phase involves - Implementing Appropriate Procedures : The evidence could be seen as an error. This error most likely results in wasteful spending.
Answer: Moral hazard
Explanation: Moral hazard can be defined as a situation when an individual increases his risk even when he has the option to no to, as he knows that he is insured and the potential loss will be bore by someone else.
In the given case Joe starting taking risk of fire as he knew that if there comes any loss, it will be bore by the insurance company. Hence the economic problem in this theory is Moral hazard .
Answer:
the current total contribution margin = 100 x 60% x ($80 - $20) = $3,600 per day
scenario 1: $10 discount
$3,600 = 100 x ?% x ($70 - $20)
$3,600 = $5,000 x ?%
$3,600 / $5,000 = ?%
occupancy rate = 72%
scenario 2: 10% discount
$3,600 = 100 x ?% x ($72 - $20)
$3,600 = $5,200 x ?%
$3,600 / $5,200 = ?%
occupancy rate = 69.23%
