The Sawtooth Leather Company manufactures leather handbags and moccasins. For simplicity, the company has decided to use a singl
1 answer:
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Answer:
option (D) loss, $3,000
Explanation:
Given:
price of the truck = $48,000
estimated residual value = $8,000
Exchange price of the truck = $60,000
Trade allowance = $35,000
Since, straight line depreciation is given, thus,
Total depreciation =
or
Total depreciation = $5,000 per year
Therefore,
the book value after two years
= Price of truck - total depreciation in two years
or
= $48,000 − ($5,000 × 2 years)
= $38,000
Now,
a trade allowance received ( i.e $35,000 ) is less than the book value
therefore a loss is recorded
The amount of loss = (Book value - trade allowance received)
or
The amount of loss = $38,000 - $35,000 = $3,000
Hence, correct answer is option (D) loss, $3,000
Answer:
D. the demand for bottled water is price elastic in the price range considered.
Explanation:
- <u>Demand elasticity</u> can be express as the sensibility of change in the demanded quantity when prices change.
- Mathematically , can be written as
, where
is the price and
is the quantity demanded. This means that elasticity reflects what is the percentage change in quantity
in the presence of a percentage change
in prices.
- A <u>decrease in supply would tipically rise prices</u>, ceteris paribus.
- If the <u>decrease in supply was the cause of a decrease in revenues,</u> it means that the <u>percentage change in demanded quantity as a consequence of the rise in prices was bigger than the change in prices.</u>
- To see it more clearly, remember that the seller's revenue can be express as
. If prices increased, but revenues fall, then
- If
, then
, wich is consistent with an elastic range of demand.