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sp2606 [1]
2 years ago
14

you are the manager of a hamburger joint with a marginal cost of $6.00 per hamburger. The hamburger joint is a local monopoly ne

ar campus. During the day, only students eat at the joint while in the evening only the faculty members eat there. If students have an elasticity of demand for hamburger of -4 and the faculty has an elasticity of demand of -3, what should your pricing strategy be to maximize profits?
Business
1 answer:
vredina [299]2 years ago
6 0

Answer:

A low-price strategy

Explanation:

Price elasticity of demand is the responsiveness of quantity demand to a change in price. It is calculated by dividing the % change in quantity demanded by the % change in price.

  1. Perfectly elastic demand: Even no changes in price causes a change in quantity demanded (horizontal demand curve)
  2. Elastic demand: Change in price causes a relatively higher change in quantity demanded (Sloped demand curve, PES > 1)
  3. Unitary elastic demand: Change in price causes the same change in quantity demanded (PES = 1)
  4. Inelastic demand: Change in price causes a relatively lower change in quantity demanded (Steep slope in demand curve, PES < 1)
  5. Perfectly inelastic demand: Even with changes in the price, there is no change in the quantity demanded (vertical demand curve).

In this case, demand for hamburgers by both students and faculty is elastic since it is 4 and 3 respectively and hence higher than 1. Thus, any change in price will cause a higher change in quantity demanded.

Note: <em>The negative figures DOES NOT mean less than 1. The negative figure is because price and quantity demanded have an inverse relationship (when one rices, the other falls). Hence, even -4, -3, -6 are all elastic. However, -0.2, -0.9 and such are considered inelastic. </em>

<em />

When demand is elastic, a fall in price will help to maximize total revenue and profits, because when price falls by a certain amount, demand will increase by a much larger amount. Thus, in order to maximize profits, a low-price strategy should be used. In this low price strategy, students should be charged lower than faculty members, since students have a more elastic demand compared to faculty members. For example, students can be charged $5.6 and faculty members $5.8

<em />

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Answer:

b. A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

Explanation:

Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc, invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800).

The following journal entries records this purchase transaction:  A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

<u>The reason is that with a perpetual inventory system, transportation costs are added directly to the inventory balance</u>

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5 0
3 years ago
Kalim developed a new food product that he was certain would be popular with consumers. He researched his target market and made
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<u>A. By conducting a focus group before launching the product</u>


Pricing in the business world is very delicate. People will always tend to go for the cheapest product if they aren't loyal to a specific brand. So, when you are starting a business, it is extremely important to focus on pricing. Your prices have to be low enough for people to buy them, but high enough to break even and make a profit.

A focus group would have assisted Kalim in finding the best price for his product. By conducting this, the group would have told him exactly what they would pay for something like his product. However, the damage done is not permanent. He should now lower the prices or conduct a focus group to find out the best price for his food.

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Anson Jackson Court Company (AJC) The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of
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Answer:

7.38%

Explanation:

Calculation to determine what would be AJC's new WACC and total value

Using this formula

WACC and total value=(Equity)(Required rate of return on equity)+(Debt)(1-Tax rate)(Required rate of return on debt)

Let plug in the formula

WACC and total value=(0.6)(0.095)+(0.4)(1-0.4)(0.07)

WACC and total value=0.057+0.0168

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The typical horizontal flows of information in an accounts payable/cash disbursements process might include all of the following
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Answer:

d. a copy of a receiving report is sent to the cashier

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In the case of the horizontal flows with respect to the account payable or cash disbursements, it involved the invoice i.e. collected from the vendor, the voucher i.e. returned and the approved disbursement voucher is sent to the cashier but it does not involve the receiving report that sent to the cashier

Therefore the correct option is d.

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