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Natalija [7]
3 years ago
8

cattle farmer expects to harvest 100K live cattle, there is a futures contract for delivery of 40k cattle. Explain how farmer ca

n use this to hedge his position
Business
1 answer:
kap26 [50]3 years ago
4 0

Answer:

The question does not mention when does the farmer has to sell the cattles in the future. So assuming the cattles are to be sold in the next 3 months.

The farmer can short 3 contracts that have 3 months to maturity. Two contracts would be of the 40k cattles whereas one of 20k.

Explanation:

When the prices of the cattles falls in the future, the gain on the futures contract will offset the loss on the sale of the cattle. Whereas, when the prices of cattle rises in the future, the gain on the sale of the cattle will be offset by the loss on the futures contract.

So basically, using futures contracts to hedge has the advantage that it can at no cost reduce risk to almost zero.

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Which of the following refers to the costs of production that fluctuate depending on the number of units​ produced? A. Total cos
Natalka [10]

Variable cost refers to the costs of production that fluctuate depending on the number of units​ produced.

<h3><u>Explanation:</u></h3>

The cost of any product that changes based on the quantity of goods that are produced. The volume that is produced decides the fluctuations in the variable cost. Fixed cost is the cost that will not change based on the number of units of the goods that is produced. Rent of a building can be considered as a fixed cost.

Example for variable cost may be raw materials cost, packaging cost,etc. Variable cost can be calculated by adding up the cost of labor and raw materials that are used in the production of one unit of a good. The total variable cost can be calculated by multiplying   variable cost per unit with the number of units produced.

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3 years ago
"Scott Manufacturing Co.'s static budget at 10,000 units of production includes $40,000 for direct labor and $4,000 for electric
Assoli18 [71]

Answer:

Total costs= $75,000

Explanation:

Giving the following information:

For 10,000 units:

$40,000 for direct labor

$4,000 for electric power

Total fixed costs are $23,000

We need to determine the unitary variable cost for direct labor and electric power:

Unitary direct labor= 40,000/10,000= $4

Electric power= 4,000/10,000= $0.4 per unit

Now, for 12,000 units:

Total direct labor cost= 4*12,000= $48,000

Electric power= 0.4*12,000= $4,800

Fixed costs= 23,000

Total costs= $75,000

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3 years ago
Advances in technology like the creation of cheap, lightweight laptops has allowed workers to work from almost anywhere. Please
andriy [413]

Answer:

Got this from the same website you used

Explanation:

Advances in technology like the creation of cheap, lightweight laptops have allowed workers to work from almost anywhere. TRUE.

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B. Thanks can have collection agencies seize part of the borrowers income

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a. from one banks to another

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