After a tax is imposed on the buyers of bottled water, the price buyers pay is $2.50 per bottle and the price sellers receive is
1 answer:
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Answer:
(a) Since the percentage margin is more than maintenance margin, there would be no call
(b) A margin call would be received when the price is $15.26
Explanation:
(a) Total investment = $23,072 × = $46,144
Total shares = Total investment ÷ share price
= $46,144 ÷ $41.2 = 1,120
Value of share in market = new price × number of shares
= $41 × 1,120
= $45,920
Value of equity = Value of share in the market - borrowed cash
= $45,920 - $23,072
= $22,848
Percentage margin = Value of equity ÷ Value of shares
= ($22,848 ÷ $45,920) × 100%
= 49.76%
(b) Total number of shares = 1,120
Assumed value of shares = $1,120X
Borrowed fund = $23,072
Value of equity = $1,120X - $23,072
Margin = Value of equity ÷ Value of shares
0.35 = ($1,120X - $23,072) ÷ $1,120X
392X = $1,120X - $23,072
1512X = $23,072
X = $15.26
My answer is: Produce Product C first, then followed by Product A. to maximize contribution margin. Product B will not be produced since the maximum number of pounds has already been used in producing Products C and A.
<span> <span> </span><span><span> PER UNIT
</span> <span> PRODUCT A B C
</span> <span> SELLING PRICE 80 62 81
</span> <span> VARIABLE EXPENSES
</span> <span> DIRECT MATERIALS 24 18 9
</span> <span> OTHER VAR EXP. 24 25.4 43.65
</span> <span> TOTAL VAR EXP 48 43.4 52.65
</span> <span> CONTRIBUTION MARGIN 32 18.6 28.35
</span> <span> <span>CM RATIO </span> 0.4 0.3 0.35
</span> <span> </span> <span>
COMPANY CAN SELL 800 UNITS OF EACH PRODUCT PER MONTH.
</span> <span> SAME RAW MATERIAL IS USED IN EACH PRODUCT.
</span> <span> MATERIAL COSTS 3 PER POUND W/ A MAX OF 5,000 POUNDS EACH MONTH
</span> <span> </span> <span>
PRODUCT DM <span>UNIT COST </span> NO. OF LBS
</span> <span> A 24 3 8
</span> <span> B 18 3 6
</span> <span> C 9 3 3
</span> <span> </span> <span> PRODUCT NO. OF LBS/UNIT MAX UNITS TOTAL NO. OF LBS
</span> <span> A 8 800 6400
</span> <span> B 6 800 4800
</span> <span> C 3 800 2400
</span> <span> TOTAL 13600
</span> <span> LIMITATION: 5,000 POUNDS PER MONTH ONLY.
</span></span></span><span> <span> </span><span><span> <span>required: </span>
</span> <span> <span>1. calculate the contribution margin per pound of the constraining resource for each product. </span>
</span> <span> 2. which orders would you advise the company to accept first, those for a, b, or c? which orders second? third?
</span> <span> </span> <span>
</span></span></span><span>PLS. SEE ATTACHMENTS FOR MY FULL COMPUTATIONS. </span>
<span> <span> </span><span><span> PER UNIT
</span> <span> PRODUCT A B C
</span> <span> SELLING PRICE 80 62 81
</span> <span> VARIABLE EXPENSES
</span> <span> DIRECT MATERIALS 24 18 9
</span> <span> OTHER VAR EXP. 24 25.4 43.65
</span> <span> TOTAL VAR EXP 48 43.4 52.65
</span> <span> CONTRIBUTION MARGIN 32 18.6 28.35
</span> <span> <span>CM RATIO </span> 0.4 0.3 0.35
</span> <span> </span> <span>
COMPANY CAN SELL 800 UNITS OF EACH PRODUCT PER MONTH.
</span> <span> SAME RAW MATERIAL IS USED IN EACH PRODUCT.
</span> <span> MATERIAL COSTS 3 PER POUND W/ A MAX OF 5,000 POUNDS EACH MONTH
</span> <span> </span> <span>
PRODUCT DM <span>UNIT COST </span> NO. OF LBS
</span> <span> A 24 3 8
</span> <span> B 18 3 6
</span> <span> C 9 3 3
</span> <span> </span> <span> PRODUCT NO. OF LBS/UNIT MAX UNITS TOTAL NO. OF LBS
</span> <span> A 8 800 6400
</span> <span> B 6 800 4800
</span> <span> C 3 800 2400
</span> <span> TOTAL 13600
</span> <span> LIMITATION: 5,000 POUNDS PER MONTH ONLY.
</span></span></span><span> <span> </span><span><span> <span>required: </span>
</span> <span> <span>1. calculate the contribution margin per pound of the constraining resource for each product. </span>
</span> <span> 2. which orders would you advise the company to accept first, those for a, b, or c? which orders second? third?
</span> <span> </span> <span>
</span></span></span><span>PLS. SEE ATTACHMENTS FOR MY FULL COMPUTATIONS. </span>