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Based on current market values, Shawn Supply's capital structure is 30% debt, 20% preferred stock, and 50% common stock. When using book values, capital structure is 25% debt, 10% preferred stock, and 65% common stock. The required return on each component is: debt,10% before tax; preferred stock, 11%; and common stock,18%. The marginal tax rate is 35%. What rate of return must Shawn Supply’s earn on its investments if the value of the firm is to remain unchanged?
a seller of boiled eggs faces a market price,P=ksh15 average total cost of ptoduction,ATC=10 and output,q=150,what is its profit level?
Assume that beer is a normal good. If the price of beer rises, then the substitution effect
results in the person buying ________ of the good and the income effect results in the
person buying ________ of the good.
A. more, more
B. more, less
C. less, more
D. less, less
6. Which of the following is true regarding income along a price-consumption curve?
A. Income is increasing.
B. Income is decreasing.
C. Income is constant.
D. The level of income depends on the level of utility.
7. Joe’s coffee house produces coffee drinks under the production function q = 5KL where q
is the number of cups generated per hour, K is the number of coffee machines (capital), and
L is the number of employees hired per hour (labor). What is the average product of
labor(APL)?
A. APL = 5
B. APL = 5K
C. APL = 5L
D. APL = 5K/L
Muoki says, “I’d rather see an action movie than a comedy, and I’d rather see a comedy
than a foreign film. But given the choice, I think I’d rather see a foreign film than an action
movie. Which of these statements about individual preferences is violated?
A. Muoki’s preference ordering is complete
B. Muoki’s indifference curves are convex to the origin
C. Muoki’s indifference curves are negatively sloped
D. Muoki’s preferences are transitive
2. Peter likes one cup of tea with two teaspoons of sugar. He gets no extra utility for an
additional cup of tea if he doesn’t have two teaspoons of sugar and no extra utility for extra
sugar without a cup of tea. Paul has,
A. Linear and negatively sloped indifference curves
B. Linear and positively sloped indifference curves
C. L-shaped indifference curves
D. Vertical indifference curves
3. Diminishing marginal rate of substitution of ugali (X) for rice (Y), MRSXY means that the
rate of substitution of ___________.
Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility function
is as follows: U(X, Y) = XY. Donald has an income (M) of $120 and the price of carrots
(PX) and donuts (PY) are both $1.
a) Find the marginal utility that Donald receives from carrots (MUX) and from
donuts(MUY) (4marks)
b) Determine the marginal rate of substitution of X for Y (MRSXY)(4 marks)
c) How does MRSXY change as the firm uses more X, holding utility constant.(3 marks)
d) What is Donald's budget line and relative price (PX/ PY )(4 marks)
e) What quantities of carrots and donuts will maximize Donald's utility? (5 marks)
Catalina Films produces video shorts using digital editing equipment (K) and editors (L).
The firm has the production function Q(K, L)=KxL, where Q is the hours of edited footage.
The wage is $25, and the rental rate of capital is $50. The firm wants to produce 3,000 units
of output at the lowest possible cost.
a) Find the marginal product of each input.(4 marks)
b) Determine whether the production function exhibits diminishing marginal product to
each input.(4 marks)
c) Find the marginal rate of technical substitution(MRTSLK) (4 marks)
d) How does MRTSLK change as more L, is used holding output constant.(3 marks)
e) Find the least costly combination of labor and capital to produce 3000 units (5 marks).
The marginal rate of technical substitution of labour and capital is defined as the rate at which the quantity of
On June 30, 2021, a flash flood damaged the warehouse and factory of a particular
manufacturing company, completely destroying the work in process inventory. There was
no damage to either the direct materials or finished goods inventories. A physical inventory
taken after the flood revealed the following costs
Direct material $62,000
Work in process -0-
Finished goods 119,000
The inventory on June 1, 2021, consisted of the following
Direct material $30,000
Work in process 100,000
Finished goods 140,000
A review of the records disclosed that the gross margin historically approximated 25% of sales.
The sales for the first six months of 2021 were $340,000. Direct material purchases were
$1150,000. Direct labor costs for this period were $80,000, and manufacturing overhead has
historically been 50% of direct labor hour.
Required: Compute the cost of work in process destroyed on June 30, 2021
The Beach Comber is a takeout food store at a popular beach resort. Susan Sexton,
owner of the beach comber, is deciding how much refrigerator space to devote to four different
drinks. Pertinent data on these four drinks are as follows
Cola Lemonade Punch Natural
Orange
Juice
Selling price per case $18.00 $19.20 $26.40 $38.40
Variable cost per case $13.50 $15.20 $20.10 $43.20
Cases sold per foot of shelf space per day 25 24 4 5
Sexton has a maximum front shelf space of 12 feet to devote to the four drinks. She wants a
minimum of 1 foot and a maximum of 6 feet of front shelf space for each drink.
Required:
1) A Co-worker of Sexton recommends that she can maximize the shelf space devoted to
those drinks with the highest contribution margin per case. Evaluate this recommendation
2) What shelf space allocation for the four drinks would you recommend for the beach
comber? Show your calculations
Assume the following account balances (in thousands) for Guma Company, a
manufacturing firm
Beg.of. 2020 End of 2020
Direct Material Inventory Br. 22,000 Br. 26,000
Work in process inventory 21,000 20,000
Finished Goods Inventory 18,000 23,000
Purchase of direct materials 75,000
Direct Manufacturing Labor 25,000
Indirect Manufacturing Labor 15,000
Insurance on Factory Property 9,000
Depreciation – Factory Building and Equipment 11,000
Factory Utilities 4,000
Marketing, Distribution, and Customer Service Costs 93,000
General and Administrative Costs 29,000
Required:
1) Prepare a schedule of cost of goods manufactured for 2020
2) If revenues for 2020 were 300 million, prepare income statement
