Question & Answer

Assume now that the firm has monopoly power in hiring out equipment, and thus faces a downward-sloping demand curve. Draw in two such demand curves on a diagram like Figure 10.13(b), one crossing the MC curve in the horizontal section, and one in the vertical section. How much will the firm supply in each case and at what price? (You will need to draw in MR curves too.) Is the MC curve still the supply curve?

When we calculate average and effective tax rates, do we consider implicit taxes?  What effect does this have on taxpayers’ perception of equity?

An extrusion operation produces continuous tubing with outside diameter = 2.0 in and inside diameter = 1.7 in. The extruder barrel has a diameter = 4.0 in and length = 10 ft. The screw rotates at 50 rev/min; it has a channel depth = 0.25 in and flight angle = 16°. The head pressure has a value of 350 lb/in2 and the viscosity of the polymer melt is 80 x 10-4 lb-sec/in2 . Under these conditions, what is the production rate in length of tube/min, assuming the extrudate is pulled at a rate that eliminates the effect of die swell (i.e., the tubing has the same OD and ID as the die profile)?

What is the difference between the income and substitution effects?  For which types of taxpayers is the income effect more likely descriptive?  For which types of taxpayers is the substitution effect more likely descriptive?

What is the difference between horizontal and vertical equity?  How do tax preferences affect people’s view of horizontal equity?

Why is it important in the Keynesian analysis for there to be a steady expansion of demand?

What factors determine a country’s terms of trade?

Why might the predictions of the rational choice model generally approximate human behaviour in many situations?

Cost driver; cost categories; appropriateness of regression; relevant information Susan looked at her long-distance telephone bill with dismay. After leaving her job last year to become a self-employed consultant, her long-distance charges had grown considerably. She had not changed long-distance plans for years, partly because she hated taking the time to review the range of service providers and plans. However, the size of her long-distance bill made it clear that it was time to make a change. She had recently seen numerous advertisements by telephone companies offering much lower rates than she was currently paying, but she was sure that at least some of those plans offered low rates only for night and weekend calls. Susan called her current long-distance service provider and asked how she could obtain a lower rate. She mentioned hearing that a competitor was currently offering long distance at 5c per minute. In responding to the service representative’s questions, Susan verified that most of her long-distance calls are weekday and out of state. She also agreed that her activity over the past two months—approximately 500 minutes of long distance per month—was her best estimate for future calling activity. Given this information, the service representative suggested that Susan buy the following long-distance service plan:                                (i)                             Up to 500 minutes of long distance for a flat fee of $20 per month.                              (ii)                             No refunds would be provided for usage less than 500 minutes per month.                            (iii)                             Any minutes over 500 per month would be billed at 10c per minute.                            (iv)                             No service change fee or cancellation fee would apply.                                                                                 Required (a)          What is the cost driver for Susan’s long-distance telephone costs, assuming that the cost object is her consulting business? (b)          In the proposed service plan, which of the costs are fixed and which are variable? Explain. (c)           Would regression analysis be an appropriate tool for Susan to use in deciding whether to buy the new service plan? Why? (d)          Is the cost of Susan’s current long-distance service plan relevant to this decision? Why? (e)           Explain why Susan cannot be certain whether the new service plan will reduce her long-distance costs. (f)           List additional information that might be relevant to Susan in deciding whether to buy the new service plan. (g)          Are Susan’s long-distance services most likely a discretionary cost? Explain. (h)          Are Susan’s long-distance services most likely a direct or indirect cost, assuming that the cost object is an individual consulting job? Explain. (i)            Describe the pros and cons of the new service plan.

Moab Inc. manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision, it has entered into several transactions during the year.    Part (1): Determine the gain/loss realized and recognized in the current year for each of these events. Also determine whether the gain/loss recognized will be §1231, capital, or ordinary.

Cordero Corporation has an employee stock-purchase plan which permits all full-time employees to purchase 10 shares of common stock on the third anniversary of their employment and an additional 15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date purchased and no commission is charged. Discuss whether this plan would be consideredcompensatory.

How do merit goods differ from public goods?

Give some examples of beggar-my-neighbour policies.

Kennedy Company has the following portfolio of available-for-sale securities at December 31, 2014. Percent Per Share Security Quantity Interest Cost Price Frank, Inc. 2,000 shares 8% $11 $16 Ellis Corp. 5,000 shares 14% 23 19 Mendota Company 4,000 shares 2% 31 24 Instructions (a) What should be reported on Kennedy’s December 31, 2014, balance sheet relative to these long-term available-for-sale securities? On December 31, 2015, Kennedy’s portfolio of available-for-sale securities consisted of the following common stocks. Percent Per Share Security Quantity Interest Cost Price Ellis Corp. 5,000 shares 14% $23 $28 Mendota Company 4,000 shares 2% 31 23 Mendota Company 2,000 shares 1% 25 23 At the end of 2015, Kennedy Company changed its intent relative to its investment in Frank, Inc. and reclassified the shares to trading securities status when the shares were selling for $8 per share. (b) What should be reported on the face of Kennedy’s December 31, 2015, balance sheet relative to available-for-sale securities investments? What should be reported to reflect the transactions above in Kennedy’s 2015 income statement?

Indicate where the following items would be shown on a balance sheet. (a) A lien that was attached to the land when purchased. (b) Landscaping costs. (c) Attorney’s fees and recording fees related to purchasing land. (d) Variable overhead related to construction of machinery. (e) A parking lot servicing employees in the building. (f) Cost of temporary building for workers during construction of building. (g) Interest expense on bonds payable incurred during construction of a building. (h) Assessments for sidewalks that are maintained by the city. (i) The cost of demolishing an old building that was on the land when purchased.

1.    : Discuss some of the ways that organizations and jobs have changed over the past ten years. What changes do you anticipate over the next ten years? How might these changes affect the manager’s job and the skills that a manager needs to be successful.

1.              : What are Krista Russell’s options for responding to Tate’s decision? What should she do now? Why?

Stowe Company’s December 31, 2014, trial balance includes the following accounts: Investment in Common Stock $70,000; Retained Earnings $114,000; Trademarks $31,000; Preferred Stock $152,000; Common Stock $55,000; Deferred Income Taxes $88,000; Paid-in Capital in Excess of Par—Common Stock $174,000; Noncontrolling Interest $63,000. Prepare the stockholders’ equity section of the balance sheet.

Cleveland Company has a stock portfolio valued at $4,000 (available-for-sale). Its cost was $3,300. If the Fair Value Adjustment account has a debit balance of $200, prepare the journal entry at year-end.

Future direction of accounting information Think about the type of work you will perform in your future career.   Required (a)     Give examples of the types of financial and non-financial information you will probably use in your work. (b)     List several methods you could use to produce information that will help predict future operations for your employer or for clients. (c)     What types of continuous learning do you foresee in your career? (d)     Explain why you may need to use creative or innovative ideas in your career.

The terms ‘doves’ and ‘hawks’ are frequently used to describe central banks. How do these terms relate to the Taylor rule?

Explain how the credit crisis in the 2008–2009 period affected some savings institutions. Compare the causes of the credit crisis to the causes of the SI crisis in the late 1980s. (LO6)

What shaped graph would you get from the equations:                      y = –6 + 3x + 2x²                      y = 10 – 4x + x² (If you cannot work out the answer, construct a table like Table A1.9 and then plot the figures on a graph.)

What are the potential costs and benefits of mergers to (i) shareholders; (ii) managers; (iii) customers?

What determines the size of this world multiplier effect?