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11111nata11111 [884]
3 years ago
9

Suppose all the producers sell toasters through Wal-Mart, and WalMart lets producers choose from 2 options. With Option A, a pro

ducer sells a toaster at $49 but has to offer a free warranty to the consumer. With Option B, a producer sells a toaster at $10 without any warranty. A free warranty means that if a customer's toaster breaks, then she can return it and the producer must give her a full refund. (The returned good is of no use to anyone and will be dumped.)
a. Which option will a low-quality producer choose, A or B? Justify numerically.
b. Which option will a high-quality producer choose, A or B? Justify numerically.
c. Will offering a free warranty send a useful signal to the consumer in this case? Why?
Business
1 answer:
Marta_Voda [28]3 years ago
3 0

Answer:

see explaination

Explanation:

1. A low-quality producer will not provide any warranty, because he knows there will be more warranty claims.

He will choose option B.

Example:

Option B:

Toaster sell 100

Price $10

Sales = $1000

Profit = $100 (let's say it costs him $9 to make it).

Toaster sell 35 (as 5 times high price).

Price $49

Sales = $1725

Warranty Expense (let's say, due to multiple times claims) = $1500

Profit = -$90 (let's say it costs him $9 to make it).

2. A high-quality producer will provide any warranty because he knows there will be very very few warranty claims.

He will choose option B.

3. Yes, the act of offering free warranty will go a long way in conveying a positive signal to customers that the brand is providing quality product & it trusts its product.

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Hitzu Co. sold a copier costing $6,500 with a two-year parts warranty to a customer on August 16, 2018, for $13,000 cash. Hitzu
Marina CMI [18]

Answer and Explanation:

1. The computation of warranty expenses is shown below:-

Warranty expense in 2018 = Warranty for a customer × Rate of sales

= $13,000 × 6%

= $13,000 × 0.06

= $780

2. The computation of estimated warranty liability is shown below:-

As we have calculated in part 1 so it is same that is

Estimated warranty liability in 2018 = $780

3. The computation of Warranty expenses in 2019 is shown below:-

In 2019 no warranty expense is there so the correct answer is $0

4. The computation of estimated warranty liability is shown below:-

Estimated warranty liability = Warranty expenses in 2018 - Repairs cost

= $780 - $121

= $659

5. The Journal entries is shown below:

a. Cash Dr, $13,000

            To Sales $13,000

(Being cash is recorded)

b. Cost of goods sold Dr, $6,500

        To Merchandise inventory $6,500

(Being cost of goods sold is recorded)

c. Warranty expense $650

         To Estimated warranty liability $650

(Being warranty expenses is recorded)

Estimated warranty liability Dr, $121

           To Repair parts inventory $121

(Being warranty liability is recorded)

4 0
2 years ago
Xanat is grief-stricken after the death of her mother. Consequently, her productivity at work is suffering. Humberto, her superv
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Answer: B) counseling

Explanation:

Counseling is the process of rendering professional advice and guidance to individuals through personal interviews, testing interests and aptitudes by utilizing psychological methods. In the case above the supervisor is trying to counsel Xanat due to her deteriorating performance, by assessing her and suggesting possible solutions to her condition.

3 0
3 years ago
Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financi
Arte-miy333 [17]

Answer:

Explanation: Subtract from net income to arrive at net cash flows from operating activities.

3 0
3 years ago
An apparel manufacturing plant has estimated the variable cost to be $2.40 per unit. Fixed costs are $2,000,000 per year. Forty
marta [7]

Answer:

BEP units:          42,017

BEP dollars: 2,100,850

unit cost at 100,000 units produced: 22.40 dollars

operating profit :    1,656,000

Explanation:

Sales \: Revenue - Variable \: Cost = Contribution \: Margin

50 - 2.4 = 47.6 contirbution margin per unit

\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}

2,000,000/47.6 = 42.016,80 BEP units

BEP units x sales price = BEP dollars

42,017 x 50 = 2,100,850

(B)

fixed cosy/ units produced = fixed cost per unit

2,000,000/ 100,000 = 20 fixed cost per unit

fixed cost + variable cost = total cost

20 + 2.40 = 22.4

(C)

There are 40% units sold at the preferred customer at cost

So we sale at gain only 60% of the units:

100,000 units x 60% x 50       =  3,000,000

100,000 units x 40% x 22.40  =     896,000

Total revenue                              3,896,000

Cost: 100,000 x 22.40          <u>     (2,240,000)  </u>

operating profit                            1,656,000

4 0
3 years ago
Which of the following best describes the main difference between B2B and B2C transactions? B2B transactions involve transaction
Stolb23 [73]

Answer: B2B transactions involve transactions where the buyers and sellers are both businesses, while B2C involves transactions between businesses and consumers.

Explanation:

Business-to-business transactions are simply regarded as the transactions that takes place between one business and another business. This can occur when the business is looking for inputs for its production process.

Business-to-consumer transactions simply regarded as the transactions that takes place between a business and the customers. This occurs when a business sells its goods or services to the customers directly without the goods passing through the middlemen.

8 0
3 years ago
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