The firm should shut down if the market price is:___________.
1 answer:
Answer: D. less than $4.50.
Explanation:
In the short run, a business should shutdown if the market price is below the Average Variable costs as because at this point, only losses are being made if the company stays in action.
If price is below the variable cost, it is best to shutdown so that the company can stop incurring the variable costs and incur the fixed cost alone. The lowest Average Variable cost is $4.50 for this good and so if the price falls below $4.50, the should shutdown.
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Answer and Explanation:
The computation of the operating cash flow using the four different approaches is shown below:
1. EBIT + depreciation - taxes approach
But before that the net income would be
Sales $219,000
Less cost -$96,000
Less depreciation -$26,000
EBT $97,000
Less tax at 23% -$22,310
Net income $74,690
Now the operating cash flow is
= EBIT + depreciation - taxes
= $97,000 $26,000 - $22,310
= $100,690
2. top down approach
= Sales - cost - taxes
= $219,000 - $96,000 - $22,310
= $100,690
3. Tax shield approach
= (Sales - cost) × (1 - tax rate) + tax rate × depreciation expense
= ($219,000 - $96,000) × 0.23 + 0.23 × $26,000
= $94,710 + $5,980
= $100,690
4. Bottom up approach
= Net income + depreciation
= $74,690 + $26,000
= $100,690
Answer:
Given retained earnings, Net income can be calculated.
Ending retained earnings = Beginning retained earnings + Net Income - dividends
9,800 = 6,800 + NI - 2,800
NI = 9,800 - 6,800 + 2,800
Net Income = $5,800
Net Income = Revenue - Salaries - Advertising - Utilities
5,800 = 38,000 - Salaries - 5,800 - 3,800
Salaries = 38,000 - 5,800 - 3,800 - 5,800
Salaries = $22,600
