Montgomery Industries spent $700,000 in 2017 on a construction project to build a library. Montgomery also capitalized $35,000 o
1 answer:
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The cost of underestimating the demand is considered a revenue loss that arises due to cancellation of flight costing $134. Hence, cost of underetimating the demand is 
.
The cost of overestimating the demand is known as rewards. For example, free round trip ticket worth $263. Hence, the cost of overestimating the demand is
.
The z-score that yields a p-value of 0.3375 is -0.4193.
Thus, super discount airlines should overbook the flight by 35 + (-0.4193 x 24) = 35 - 10.0632 = 24.9368 = 25 seats.
Therefore, super discount airlines should overbook the flight by 25 seats.
The cost of overestimating the demand is known as rewards. For example, free round trip ticket worth $263. Hence, the cost of overestimating the demand is
The z-score that yields a p-value of 0.3375 is -0.4193.
Thus, super discount airlines should overbook the flight by 35 + (-0.4193 x 24) = 35 - 10.0632 = 24.9368 = 25 seats.
Therefore, super discount airlines should overbook the flight by 25 seats.
Answer:
b. In the first economy, the spending multiplier is greater than in the second economy. In the third economy, the spending multiplier is undefined
Explanation:
This can be easily understood by going through some calculations in a spending multiplier formula.
WORKINGS
The formula for Spending Multiplier =
Spending Multiplier
Economy 1: Multiplier = = 2
Economy 2: Multiplier = = 1
Economy 3: Multiplier = = undefined
Note: MPS can be abbreviated as Marginal propensity to save
As we can see here economy 1 is 50% greater than economy 2 and economy 3 is undefined because they spend whole dollar they earn additionally.
On behalf of the above calculations, option B is a perfect match!