Question:1 (a) What market structure is used to benchmark allocative efficiency and why do we use it? Illustrate and explain using a diagram Ans: Allocative efficiency is an economic efficiency in which producers produce goods and services which are highly in preference by the consumers. In allocative efficiency price is equal to marginal cost of production. At this price consumer will willing to pay as it is equivalent to marginal utility. Allocative efficiency is used when firm minimize the cost of input require to produce given number of outputs. This is maximizing the input or output ratio. This can be better explain with the help of diagram given below. Graph: Explanation: • If the marginal cost was $10, and customer were only willing to pay $5 …show more content…
Compare the impact on pre-recorded music compact disks and the cabinet maker’s work of an economic expansion that increases consumer incomes by 10 per cent. Ans: • Cabinet maker’s and pre recorded music compact disk both are normal goods. • The income of the cabinet maker’s is inelastic and pre recorded music Compact disk is elastic. Where as the real value of cabinet maker’s is <1 and pre recorded music compact disk is >1. • If the consumer income is increase by 10% demand of compact disk follow by 70% where as the cabinet maker’s is 7%. • If we compare both impacts on economic expansion demand of compact disk is 70% it is a luxury goods and where cabinet maker’s is necessary goods. (b) How might you determine whether the pre-recorded music compact discs and MP3 music players are in competition with each other? Ans: • In this pre-recording music compact discs and MP3 music players are in competition each other. • Both the products are having positive meaning. Hence they are substitute
Moncrief Company agreed to pay Jim Lester 20% of the gross profit made from the 2013 sales of the Zelenex. Between January 1, 2013 and December 28, 2013, Moncrief’s total available units for sale were, 50,000 units of Zelenex for $30.00 per unit ($1,500,000). Also in addition to the former activities, Moncrief sold 35,000 units for $60.00 per unit ($2,100,000). Moncrief Company uses periodic LIFO inventory method as a result, Jim Lester was to receive $210,000. (Textbook pg.469)
Table C projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table C substantially larger sales are required to break even.
In order to estimate the possible impacts of introducing Oxyglobin as a major product, it was assumed that Biopure would be able to produce and sell its full capacity of 300,000 units per year. As can be seen in Exhibit 1, the results of such an aggressive marketing strategy would yield a positive gross margin of between 49% and 66%, assuming the product was sold at a price of $100 to $150 per unit.
There are two solutions that provide the optimal profit given the current constraints under which JP Molasses operates. Under these conditions, the optimal profit is $63,571. This profit margin is achieved in both cases with revenue of $942,354 and cost of $412,333 for material purchased and $466,450 for fixed and variable costs in processing, for total cost of $878,783.
Assume required profit is equal to selling, general and administrative expenses so after expenses they will breakeven.
When Maria was considering a large bulk order, how should she use the concept of contribution margin to decide which cookie's production to reduce in order to free up enough capacity to accept the bulk order? Under what circumstances should she not have accepted the bulk order? In the simulation Maria should use the contribution margin method when sales revenue less variable costs. It is the amount available to pay for fixed costs and provide any profit after variable cost has paid. Maria suggested that the total contribution Margin as well as the operating profits from lemon crème cookies is less than that for real mint cookies. Therefore reduce the current production volume for lemon crème cookies and produce more real mint cookies to accommodate this bulk order.However, Maria decision what not so conducive. When a company maximizes operating profits it is better to produce more of the product that has a greater contribution margin per-unit like the lemon cookie. In the beginning of the simulation Maria felt that price reduction alone was not sufficient. Aunt Connie's Cookies had to establish that they were one of the favorites in the convenience food category. It was best that Aunt Connie's Cookies increase their ad expenses by half for both peanut butter and lemon cookies. The company would then reach out to more retailers in the metros. To achieve this, they must pay more to their distributors $0.10 per pack instead of $0.06 per pack. Retaining the unit prices and increasing Aunt Connies Cookie's marketing expenditure resulted in good profits for the company. However, reducing unit prices could have boosted sales and resulted in even better profits. The bulk order shou...
The sales director proposed that if the firm were to reduce the price of Item 345 to FF15.00/m, they would be able to increase sales to 175,000 units (or 25% of industry volume). But if they were to keep the price at the current value of FF20.00/m, they would be able to sell not less than 75,000 units (or 11% of industry volume).
Lululemon’s has to produce and sell 150,000 jackets in order to cover their total expenses, fixed and variable. At this level of sales, Lululemon’s will breakeven (profit = loss).
In Houston, TX there is $ 33 Billion revenue generation and the business have estimated around 190,000 units or bakery items specifically customized cakes for our business, and the total market supply is 140,000 units. The gap in estimated demand and total supply from major competitors would be like 50,000 units shortage, which our bakery aims to fulfill within stipulated time.
Efficiency is highly prized in a culture turned toward productivity. It is therefore cultivated in contemporary business administration theories. It also tends to be prized above all other values in modern society, as society is more and more oriented toward technological advancement. Efficiency is also defined here as the most economic or the shortest or fastest or most simple way of realizing or achieving a goal with the least cost.
If the company follow this recommendations, it will obtain a profit of $ 531,000 that represents $180,000 more than with seasonal production
(a) If the gold futures price remains unchanged until 26 August then falls to $250/oz, on 27 August, what is your profit or loss per ounce?
To breakeven, we would have to sell 267,857 units. We plan on selling the Galaxy Note 8 at a price of $499 which is cheaper than our previous phones in the Galaxy Note line. Consumers aren’t going to purchase a new smartphone if the price is going to be in the same range of the Galaxy Note 7. So we are going to be selling the smartphone at a discount. We are using odd-even pricing for the Samsung Galaxy Note 8. It gives a sense to the consumer that they will be purchasing the Samsung Galaxy Note 8 at a bargain, instead of using the even pricing method. The cost to make the smartphone itself is around $275. There will be a picture below that will explain the details of the build of the smart phone. For the breakeven I subtracted the Total Cost from the Total Revenue. The profit for year 1 will be $1 billion dollars, I subtracted the total revenue for year 1, which was $1.06 billion and subtracted that number by the fixed cost amount of $60
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.
Production rate of the line must be 47 units/hr. Base parts are attached to a moving conveyor