Calculating Residual Income Pelican Manufacturing earned operating income last year as shown in the following income statement:
1 answer:
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Solution :
a). At the break even units, the total contribution margin = fixed expenses
We know that : (Selling price - variable cost) x units sold = fixed expenses
i.e. (20-14)x = 225,000
6x = 225,000
x = 37,500
Therefore, the number of units sold, x = 37,500
So, the break even analysis = 37,500 x 20
= 750,000
b).
= 30%
The Breakeven sales =
= 750,000
c).
= 37.5%
d). Units needed :
units
Therefore, the sales required = 62,500 x 20
= 125,000
Solution:
Given :
Location game with 9 possible and other than the players who are moving simultaneously and also independently, but they move in a sequential manner.
Vendor 1 selects a location.
After observing decision of vendor 1, vendor 2 chooses where to locate.
Using backward induction the game is solved as below :
-- will be a Nash equilibrium.
-- Presently (vendor 1) picks first then he will likewise get the chance to pick last as this another move amusement.
-- In the end of the game, vendor 1 will have claimed five regions and candidate 2 (vendor 2) will have claimed four regions.
-- So vendor 2 will keep this in mind and apply backward induction and choose the best regions early on the game.
-- Vendor 2 will keep in mind that vendor 1 will choose last and will ensure that his choices take up the best locations first.
--- This will be his ideal technique for each activity of vendor 1.
Hence this is the Nash equilibrium.