Accounting Answers

A firm’s demand curve in period 1 is Q=25 - P. Fixed costs are 20 and marginal costs per unit are 5. (5 marks) a. Derive equations for total revenue and marginal revenue. b. At what output will marginal revenue be zero? c. At what price will total revenue be maximized? d. At what price and output will profit be maximized? e. Calculate the maximum profits the firm makes.

Concept of revenue from operations and other income

1.      A plant Asset acquired on January 2 at a cost of 275,000 has an estimated useful life of 10 years. Assuming that it will have no residual value, determine the depreciation for each of the first Five years

a.      By the Straight Line Method

b.     By the Double Declining Balance Method

c.      By the Sum of years digits Method

Company ABC Ltd operates in the Health services sector and employs mainly contract doctors and nurses for subcontracting out to local hospitals.

You have used your skills acquired in BUS106 and have found that Health services sector averages for financial ratios/information are as follows:

Overheads = are generally high due to the high cost of employing medical professionals including doctors and surgeons

Operating margin = 40%

Net profit margin = 15%

Quick ratio = 2.5

On average entities in this sector have very little debt.

Required:

Company ABC has a current ratio of 0.5, a debt ratio of 65% and a net profit margin that is negative. Discuss the position and performance of Company ABC in no more than 250 words.

Suppose Ethiopian Electric Light and Power Corporation (EELPC) is a multi plant

monopolist having two plants, Tekeze plant (plant1) and Fincha plant (Plant2). The

operating costs of the two plants are given as follows:

Tekeze Plant: TC1 = 10 Q1

2 and where Q1 - Amount of electric power produced in

Tekeze

Fincha plant: TC2 = 20 Q2

2 Q2 – amount of electric power produced in Fincha

EELPC estimates the demand for electric power by the following function

P= 700 – 5Q where P - is price (total in million birr) per Giga watt and

Q – is the total amount of Giga watt sold and Q = Q1 + Q2

Note that a Giga watt of electric power, whether it comes from Fincha or Tekeze plant worth

equal price

a) What level of output (electric power) should EELPC produce and what price per Kilowatt

should it charge to maximize its profit?

b) How much of the total output should be produced in each plant?

Given Qd = 60 – 15P + P², the (point) price elasticity of demand at a price of 5.

A firm’s demand curve in period 1 is Q=25 - P. Fixed costs are 20 and marginal costs per unit are 5. (5 marks) a. Derive equations for total revenue and marginal revenue. b. At what output will marginal revenue be zero? c. At what price will total revenue be maximized? d. At what price and output will profit be maximized? e. Calculate the maximum profits the firm makes.

Zorba Zantani runs a business, Zantani Manufacturers. Zantani Manufacturers, manufactures kitchen utensils and sells them to retailers who, in turn, sells the product to the public.

Zantani Manufacturers is a registered VAT vendor and only deals with other VAT vendors.

All amounts include VAT at 15%, where applicable, unless otherwise indicated.

In February 2019, Zantani Manufacturers manufactured 1 500 potato peelers at a cost of R690 each (including VAT).

The labour cost to produce the 1 500 potato peelers amounted to R25 000 .

4. Calculate the total sales amount (including VAT) of the 1 500 potato peelers. (5)

5. Calculate the cost of sales incurred by Outside Retailers. (1)

6. Calculate Zantani Manufacturers gross margin. (Round to the nearest whole percentage) (3)

Zorba Zantani runs a business, Zantani Manufacturers. Zantani Manufacturers, manufactures kitchen utensils and sells them to retailers who, in turn, sells the product to the public.

Zantani Manufacturers is a registered VAT vendor and only deals with other VAT vendors.

All amounts include VAT at 15%, where applicable, unless otherwise indicated.

In February 2019, Zantani Manufacturers manufactured 1 500 potato peelers at a cost of R690 each (including VAT).

The labour cost to produce the 1 500 potato peelers amounted to R25 000.

1. Calculate the cost price of manufacturing the potato peelers incurred by Zantani Manufacturers during February 2019. (6)

2. What type of account is VAT Input, an asset, a liability, an expense or an income? (1)

3. Calculate the amount of VAT Input claimable by Zantani Manufacturers during February 2019. (4)

Zantani Manufacturers has a mark-up of 30% on cost and sells all the potato peelers to Outside Retailers.

Suppose that the firm operates in a perfectly competitive market. The market price of his

product is$10. The firm estimates its cost of production with the following cost function:

TC=10q-4q2+q3

A. What level of out put should the firm produce to maximize its profit?

B. Determine the level of profit at equilibrium.

C. What minimum price is required by the firm to stay in the market?