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vazorg [7]
2 years ago
5

Senate Inc. is considering two alternative methods for producing playing cards. Method 1 involves using a machine with a fixed c

ost (mainly depreciation) of $17,000 and variable costs of $1.00 per deck of cards. Method 2 would use a less expensive machine with a fixed cost of only $5,000, but it would require a variable cost of $1.50 per deck. The sales price per deck would be the same under each method. At what unit output level would the two methods provide the same operating income (EBIT)?
Business
1 answer:
photoshop1234 [79]2 years ago
4 0

Answer:

24,000 units

Explanation:

We know,

According to the contribution margin approach,

Operating Income (EBIT) = Sales - Variable cost - Fixed cost

or, EBIT = (Price x Quantity) - (Quantity x VC per unit) - Fixed cost

As there are two methods,

Method 1, Variable cost = $1.00/unit, Fixed cost = $17,000

Method 2, Variable cost = $1.50/unit, Fixed cost = $5,000

According to the Question, as both methods will yield same EBIT at the same output levels,

Method 1 EBIT = Method 2 EBIT

or,  (Price x Quantity) - (Quantity x $1.00) - 17,000 = (Price x Quantity) - (Quantity x $1.50) - $5,000

or, (Quantity x $1.50) - (Quantity x $1.00) = $(17,000 - 5,000) [Deducted (price x quantity from both the sides]

or, $0.50 x Quantity = $12,000

or, Quantity = $12,000/$0.50

Hence, Quantity = 24,000 units

At 24,000 output level, the EBIT of both methods will be same.

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Suppose that the spot price of the euro is currently $1.30. The 1-year futures price is $1.35. Is the interest rate higher in th
valkas [14]

Answer:

The interest rate is higher in the US.

Explanation:

The forward price is calculated using the following formula,

F= S ( 1+Rd / 1+Rf)^t

where,

  • F = Forward rate
  • S = Spot rate
  • Rd = Nominal interest rate in domestic market
  • Rf = Nominal interest rate in foreign market
  • t = time in years

We consider that the domestic market is the US and the domestic currency is the USD. Thus, it is a direct quote where 1 EUR = 1.3 USD

The forward price ER is more than the Sport ER only when the interest rate in domestic market is more than the interest rate in foreign market and as a result, the value of domestic currency against a foreign currency in the forward market depreciates.

We can see this by the following example,

Say Spot rate is $1.3 per 1 EUR and the interest rate in US is 10% while that in Euro zone is 5%. When we calculate the forward ER we will see that 1 EUR will buy us more USD in forward (more than 1.3 USD)

F= 1.3 * (1.1 / 1.05)^1   => $1.362 PER 1EUR

3 0
3 years ago
Consider two companies in a world with no taxes that are alike except in borrowing choices. Company 1 has no debt​ financing, an
Alekssandra [29.7K]

Answer:

Company 1 = $2 per share

Company 2 = $2.50 per share

Explanation:

Given that,

EBIT for both companies = $1,000

Number of shares outstanding for company 1 = 500

Number of shares outstanding for company 2 = 300

Interest paid by company 2 = $250

EPS for company 1:

= (Total income - Preferred dividend) ÷ Shares outstanding

= ($1,000 - $0) ÷ 500

= $2 per share

EPS for company 2:

= (Total income - Preferred dividend) ÷ Shares outstanding

= ($1,000 - $250) ÷ 300

= $750 ÷ 300

= $2.50 per share

6 0
2 years ago
Which of the following defines a compound tariff? A fixed amount of money per unit combined with a fixed percentage of the value
Snezhnost [94]

Answer:

A fixed amount of money per unit combined with a fixed percentage of the value of the imported product .

Explanation:

The composite tariff has always been a mixture of both the basic tax duty and the value tariff. The composition of the compound tariff requires a particular duty for each portion of the product and a part of the import duty. it does not only improve sales elasticity of the firm, but also provide further additional protection for domestic businesses.

4 0
3 years ago
. One of the goals you have set for your company is "to expand our product line." This statement is A. a slow-growth option. B.
mr Goodwill [35]
The statement in above describes the choice letter B, which can be considered as the correct answer. It is considered to be not clear and not measurable because the statement does not provide the exact or clear information. It does not state in which or what way will the expanding of the product line be.
3 0
3 years ago
Read 2 more answers
A country might create safety standards for certain products that other nations can't comply with. As a result, these nations ca
otez555 [7]

Answer:

administrative trade policy

Explanation:

A country might create safety standards for certain products that other nations can't comply with. As a result, these nations can't be involved with exporting parts for those goods and trade does not exist. These safety standards are a form of administrative trade policy.

Administrative trade policies are bureaucratic rules that are almost always <u>deliberately designed to restrict the flow of a particular import into a country</u>.

3 0
3 years ago
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