The quantity of coffee sold fell sharply last month, while the price remained the same. Five people suggest various explanations
:Lorenzo: Supply decreased, but demand was unit elastic.Neha: Supply decreased, but it was perfectly inelastic.Sam: Supply decreased, but demand was perfectly elastic.Teresa: Demand decreased, but supply was perfectly elastic.Andrew: Demand decreased, but supply decreased at the same time.Who could possibly be right? A) LorenzoB) NehaC) SamD) TeresaE) Andrew
1 answer:
Answer:
Sam: Supply decreased, but demand was perfectly elastic.
Explanation:
Sam is right because the only possible explanation is that the demand is perfectly elastic and the supply decreased. When the price elasticity of demand is perfectly elastic, the demand curve is completely horizontal. Since the price of coffee remained the same, that means that the quantity demanded will decrease only if the supply of coffee decreased.
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Answer:
a. Gross income = sales - COGS
Pretax = gross income - SG$A expense +operating income + non operating income- interest expense - unusual expense
income taxes = Pretax - net income
income statement 2016 2015 2014 2013 2012
sale 59387 55355 55870 52708 53341
COGS 23425 20651 20522 21418 20507
gross earnings 35962 34704 35348 31290 32834
SG&A EXPENSE 21149 19835 19693 18729 18117
operating income 14813 14869 15655 12561 14717
non operating income 533 -51 224 595 463
interest expense 733 337 192 244 90
unusual expense 1677 269 -114 301 217
pretax 27749 29081 31456 25172 29590
income taxes 17433 17661 19752 15552 18585
Net income 10316 11420 11704 9620 11005
b. Average tax rate = total taxes / total taxable income ( for this calculation we need the tax table for identifying the correct tax brackets for each taxable income falling on it.
2016 2015 2014 2013 2012
gross profit margin 0.61% 0.63% 0.63% 0.59% 0.62%
net profit margin 0.17 % 0.21% 0.21% 0.18% 0.21 %
c. is attached
d.income statement 2016 2015 2014 2013 2012
sale 100 100 100 100 100
COGS 39.44% 37.31% 36.73% 40.64% 38.45%
gross earnings 60.56% 62.69% 63.27% 59.36% 61.55%
SG&A EXPENSE 35.61% 35.83% 35.25% 35.53% 33.96%
operating income 24.94% 26.86% 28.02% 23.83% 27.59%
non operating expense 0.90% -0.09% 0.40% 1.13% 0.87%
interest expense 1.23% 0.61% 0.34% 0.46% 0.17%
unusual expense 2.82% 0.49% -0.20% 0.57% 0.41%
pretax 46.73% 52.54% 56.30% 47.76% 55.47%
income taxes 29.35% 31.90% 35.35% 29.51% 34.84%
Net income 17.37% 20.63% 20.95% 18.25% 20.63%
Explanation:
gross profit margin = gross profit/ sales
net profit margin = net profit / sales
no c is an attachment
