1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
astraxan [27]
3 years ago
13

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages

$600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should:
Business
2 answers:
Korvikt [17]3 years ago
6 0

Answer:The Firm should continue to produce up until Revenue generated equals Marginal Cost. Cold Duck Company would maximize profit when the number of flights is in a level when Revenue equals Marginal cost which is the same as variable costs in this case.

Explanation:

Cold duck Airlines leases plane on a year long contract at an average cost of $600 per flight.The average cost of $600 per flight is calculated as Lease cost per year divided by number of flights. This tells us that the lease cost per year is fixed and the $600 average  cost per flight is the Average Fixed cost. if Cold duck flies more planes between Tacoma and Portland The number flights will increase which will decrease the average lease cost per flight.

Other Costs fuel (flight attendants,etc) amount to $550 per flight, these costs will increase as Cold Duck Airlines increases flights between Tacoma and Portland. These costs should be treated as Variable costs because they increase as the number flights increases.

The revenue generated on each flight, which can be seen as the price for each flight is $1000.

The Firm maximizes its profits in a competitive market by producing a quantity level That makes Price equals Marginal cost, Marginal cost being the price of producing an additional unit, in this case is the cost of an additional flight which is $550 amount of other costs  because lease cost fixed  whether Cold Duck Makes 1 flight or 10 flights it doesnot change

The Firm should continue to produce up until Revenue generated equals Marginal Cost. Cold Duck Company would maximize profit when the number of flights is in a level when Revenue equals Marginal cost which is the same as variable costs in this case. Revenue would be equal to $550 when profit is at the maximum level

Juliette [100K]3 years ago
5 0

Answer:

D) continue flying until the lease expires and then drop the run.

Explanation:

Currently Cold Duck Airlines is losing money:

  • total revenue < total costs

It only gets $1,000 in revenue per flight but spends $1,150 per flight (net loss of $150 per flight).

They should continue flying only until the lease contract expires. Usually lease contracts apply penalties if they are terminated early. We don't know the penalty amount but still it is never good to breach a contract.

We could also consider the lease payments as fixed costs, but still the equation at the end will not change, the company will continue to lose money. The difference is that variable costs are covered, if they weren't, the company should stop flying immediately.

You might be interested in
Payne, Inc., a nonpublicly traded company, implemented a defined benefit pension plan for its employees on January 2, year 2. Th
Dovator [93]

Answer:

b. $25,000

Explanation:

For computing the pension liability amount, we need to do apply the formula which is shown below:

= Projected benefit obligation - Fair value of plan assets

= $103,000 - $78,000

= $25,000

The net periodic pension cost and the employer's contribution is not relevant. So, these items are ignored and hence not included in the computation part.

The excess amount is shown as a pension liability.

7 0
3 years ago
MILLS ALLOCATES MANUFACTURING OVERHEAD TO PRODUCTION BASED ON STANDARD DIRECT LABOR HOURS. MILLS REPORTED THE FOLLOWING ACTUAL R
tekilochka [14]

Answer:

1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.

  • variable overhead cost variance = $1,000 unfavorable
  • variable efficiency variance = -$1,200 favorable
  • fixed overhead costs = $1,500 unfavorable
  • fixed overhead volume variance = -$100 favorable

2. EXPLAIN (as best you can) why the variances are favorable or unfavorable. Based on cost and efficiency budget standards.

  • variable overhead cost variance is unfavorable because actual variable overhead costs per unit are higher than budgeted.
  • variable efficiency variance is favorable because the company used less direct labor hours than budgeted to produce a higher amount of units (1,600 vs. 2,000).
  • fixed overhead costs are unfavorable because total fixed overhead costs were much higher than budgeted, but most of this variance can be explained by higher output.
  • fixed overhead volume variance are favorable because a higher volume was produced using less hours than budgeted.

Explanation:

Static budget variable overhead $1,200

Actual variable overhead $4,000

Static budget fixed overhead $1,600

Actual fixed overhead $3,100

Static budget direct labor hours 800 hours

Actual direct labor hours 1,600

Static budget number of units 400 units

Actual units produced 1,000

Standard direct labor hours 2 hours per unit

Actual direct labor hours 1.6 per unit

standard variable rate = $1,200 / 400 units = $3 per unit

actual variable rate = $4,000 / 1,000 units = $4 per unit

standard fixed rate = $1,600 / 800 hours = $2 per hour

actual fixed rate = $3,100 / 1,600 hours = $1.9375 per hour

variable overhead cost variance = actual costs - (standard rate x actual units) = $4,000 - ($3 x 1,000) = $1,000 unfavorable

variable efficiency variance = (actual hours x standard rate) - (standard hours x standard rate) = (1,600 × $3) − (2,000 x $3) = $4,800 - $6,000 = -$1,200 favorable

fixed overhead costs = actual overhead costs - budgeted overhead costs = $3,100 - $1,600 = $1,500 unfavorable

fixed overhead volume variance = (actual fixed rate x actual hours) - (standard rate x actual hours) = ($1.9375 x 1,600) - ($ x 1,600) = $3,100 - $3,200 = -$100 favorable

5 0
3 years ago
Suppose the price of a pound of flax seed in west virginia is currently $1.00. the law of one price suggests that because the pr
Reptile [31]

Answer:

It will be between $1.00 and $ 1,20

Explanation:

Solution

Given:

From the given question, the price of a flax seed in west Virginia is presently at $1.00

From the law of one price states that since the price of a pound of flax seed is $1.20 in Kentucky,

Then,

The price of a flax seed pound will be between 1.20 and 1.00

Therefore, the price of the flax seed in Kentucky as compared to that of west Virginia will be placed in between  prices of $1.20 and $1.00 after the supply by sellers in both market has been adjusted or raised.

6 0
3 years ago
Kleen Company acquired patent rights on January 10 of Year 1 for $400,000. The patent has a useful life equal to its legal life
inessss [21]

Answer:

a. Particulars                                  Amount  

Patent cost                                     $400,000  

Less: Amortization for 3 years      <u>$150,000 </u> ($400,000*3/8)

Book value at the end of year 3  $250,000

Addition during Year 4                  <u>$20,000  </u>

Total book value                            <u>$270,000</u>

Patent amortization expense for the Year 4 = Total book value / Remaining life

Patent amortization expense for the Year 4 = $270,000 / 5

Patent amortization expense for the Year 4 = $54,000

b.                       Adjusting Entry

Date  Account titles                   Debit       Credit

         Amortization expense    $54,000

                Patents                                       $54,000

6 0
2 years ago
Question #5
Svetradugi [14.3K]

Answer:

I think industrial markets

7 0
2 years ago
Other questions:
  • Wu Systems has the following balance sheet. Assume that all current assets are used in operations. How much net operating workin
    10·2 answers
  • 1. Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 25%. The T-bill r
    10·1 answer
  • Which of the following can be classified as a Third-Party Logistics Provider (3PL)?
    8·1 answer
  • Mccaskell corporation's relevant range of activity is 7,000 units to 11,000 units. when it produces and sells 9,000 units, its a
    8·1 answer
  • One way service businesses communicate a higher level of service quality to their customers is by having their employees be clea
    8·1 answer
  • Adding a new product line to an existing portfolio means that the line has​ __________________. A. increased product support ser
    8·1 answer
  • lantwide rate unit cost, using direct labor hours? Relative to the plantwide rate, the cost increased for Form A and decreased f
    12·1 answer
  • if the federal reserve decreases the reserve rate from 10% to 8%, how does this affect the amount of money that would result bec
    12·1 answer
  • Factors of production ​
    12·1 answer
  • Firms often consolidate industries through horizontal mergers and acquisitions to?
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!