Ultimate Business Study Guide - Questions & Answers
Partial income statements for Murphy & Murphy (M & M) reported the following summarized amounts: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Net Sales $ 60,000 $ 59,000 $ 80,000 $ 68,000 Cost of Goods Sold 24,000 26,550 29,050 26,520 Gross Profit $ 36,000 $ 32,450 $ 50,950 $ 41,480 After these amounts were reported, M & Ms accountant determined the inventory at the end of Quarter 2 was understated by $2,950. The inventory balance at the end of the other three quarters was accurately stated.Required:Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
Fire Department Turns to BI Analytics. New York City has nearly one million buildings, and each year, more than 3000 of them experience a major fire. The Fire Department of the City of New York (FDNY) is adding BI analytics to its arsenal of firefighting equipment. It has created a database of over 60 different factors (e.g., building location, age of the building, whether it has electrical issues, the number, and location of sprinklers) in an attempt to determine which buildings are more likely to have a fire than others. The values of these parameters for each building are fed into a BI analytics system that assigns each of the city's 330,000 inspectable buildings a risk score. (FDNY doesn't inspect single and two-family homes.) Building inspectors then use these risk scores to prioritize which buildings to visit on their weekly inspections. The FDNY has roughly 350 inspectors who are trained and certified to perform their duties. Which set of three parameters all provides measures useful in determining which buildings are more likely to have a fire than others? a. Year the building was constructed, the number of building occupants, and primary materials used in the construction of the building b. Primary materials used in the construction of the building, the assessed value for property taxes, and distance from the nearest fire station c. Distance from the nearest fire hydrant, whether or not the building has an elevator, and the number of stories in the building d. The amount the building is insured for, distance from the nearest fire hydrant, and primary building materials used in the construction of the building
Determine the amount to be paid in full settlement of each of the following invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period:MerchandiseFreight Paid by SellerReturns and Allowancesa.$32,000---FOB destination, n/30$1,600b.12,800$300FOB shipping point, 2/10, n/302,500c.21,000---FOB shipping point, 1/10, n/304,000d.9,000175FOB shipping point, 2/10, n/301,000e.77,400---FOB destination, 1/10, n/30---
On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What are the effects on net income from these transactions? a. $8,000 Discount Expense plus a $12,000 negative Adjustment to Net Income when the merchandise is delivered. b. $8,000 Discount Expense plus a $12,000 positive Adjustment to Net Income when the merchandise is delivered. c. $8,000 Discount Expense plus a $20,000 negative Adjustment to Net Income when the merchandise is delivered. d. $8,000 Discount Expense plus a $20,000 positive Adjustment to Net Income when the merchandise is delivered. e. $8,000 Discount Expense plus an $8,000 positive Adjustment to Net Income when the merchandise is delivered.
The accompanying table shows a small community's demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm's marginal cost is constant and equal to 0 (zero) due to excess capacity.Price/Month (P) Number of Customers (Q) Total Revenue/Month (TR) $10 0 $0 $9 100 $900 $8 200 $1,600 $7 300 $2,100 $6 400 $2,400 $5 500 $2,500 $4 600 $2,400 $3 700 $2,100 $2 800 $1,600 $1 900 $900 $0 1,000 $0If the two firms operating in this market agreed to each supply one-half of the quantity a monopolist would supply, the contract would specify that: a) Nextflix supplies zero subscriptions and Flixbuster supplies 500 subscriptions. b) Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions. c) Flixbuster supplies 400 subscriptions and Nextflix supplies 100 subscriptions. d) Nextflix supplies 400 subscriptions and Flixbuster supplies 100 subscriptions. e) Flixbuster supplies 500 subscriptions and Nextflix supplies zero subscriptions.
The R&D division of Piqua Chemical Corp. has just developed a chemical for sterilizing the vicious Brazilian "killer bees" which are invading Mexico and the southern United States. The president of the company is anxious to get the chemical on the market to boost the companys profits. He believes his job is in jeopardy because of decreasing sales and profits. The company has an opportunity to sell this chemical in Central American countries, where the laws are much more relaxed than in the United States. The director of Piquas R&D division strongly recommends further testing in the laboratory for side-effects of this chemical on other insects, birds, animals, plants, and even humans. He cautions the president, "We could be sued from all sides if the chemical has tragic side-effects that we didnt even test for in the labs." The president answers, "We cant wait an additional year for your lab tests. We can avoid losses from such lawsuits by establishing a separate wholly-owned corporation to shield Piqua Corp. from such lawsuits. We cant lose any more than our investment in the new corporation, and well invest in just the patent covering this chemical. Well reap the benefits if the chemical works and is safe, and avoid the losses from lawsuits if its a disaster." The following week, Piqua creates a new wholly-owned corporation called Finlay Inc., sells the chemical patent to it for $10, and watches the spraying begin.Instructions: 1. Who are the stakeholders in this situation? 2. Are the president's motives and actions ethical? 3. Can Piqua shield itself against losses of Finlay Inc.?
Carbamate Manufacturing produces a pesticide chemical and uses process costing. There are three processing departmentslong dashMixing, Refining, and Packaging. On January 1, the Refining Department had 2,000 gallons of partially processed product in production. During January, 30,000 gallons were transferred in from the Mixing Department, and 29,000 gallons were completed and transferred out. At the end of the month, 3,000 gallons of partially processed product remained in the Refining Department. The weightedminusaverage method is used. See additional details below. Refining Department, ending balance at January 31Percent completed for materials cost: 92% Percent completed for conversion cost: 76% What was the total number of equivalent units of production for conversion costs for the month of January for the Refining Department?
angaroo inc is a U.S. company whose shares are listed on and freely traded on the New York stock exchange. Let ???????? be the price of Kangaroo inc shares in dollars, at time ???? (measured in years). Time zero is today.You are (still) the Global Head of Equity Options trading at Goldman Sachs. You are approached by a hedge fund that today wants to buy a security (called a SQUARED DIFFERENCE contract) that has the following features:The SQUARED DIFFERENCE security has a maturity of one year.At maturity, the SQUARED DIFFERENCE security pays an amount in dollars equal to the amount(????????)????????(????????)???? (????????)????Here, ???????? and ???????? are, respectively, the Kangaroo inc share price one year from now and the share price today.Assume that the risk-free interest rate is zero per cent and that Kangaroo inc shares pay no dividends. Assume that the share price, in dollars, today is ???????? = 1.Using Excel, build a four-step binomial tree (this means each time step corresponds to three months). (Hint: It is the same idea as we did in classes and assignments but whereas, before, we had one, two or three steps, now you will have four binomial steps).Assume the absence of arbitrage throughout and assume that there are no transactions costs.a) Assume (to begin with) that the volatility of Kangaroo inc shares is ????????. Using your binomial tree, what is the price today of this SQUARED DIFFERENCE security? (???? marks)b) Still assuming the volatility of Kangaroo inc shares is ????????, and using the binomial tree, what is the delta hedge at each step. To answer this, do a screen-shot (Control-C then Control V on a pc) of the delta hedges. Do you see a pattern in the delta hedges? What is it? (???? marks)c) Now assume instead that the volatility of Kangaroo inc shares is ????????. What is the price today of this SQUARED DIFFERENCE security? (???? mark)d) Now assume instead that the volatility of Kangaroo inc shares is ????????, then ????????, then ????????, then finally ???????????? (skip ????, ????, ???? and ???????? - you will (hopefully) already see a pattern emerging).For each case, what is the price today of this SQUARED DIFFERENCE security? (Hint: If you do this in excel in an efficient manner, this can be done very rapidly). (???? marks)Give your answers to parts (a), (c) and (d) (in dollars) by filling out the table below (replacing x.yyyyyyy) giving every answer to ???? decimal places (you will see that the answers are quite small so that is why I am asking for ???? decimal places but this is no hassle - decimal places are "free" in excel since excel allows you to format up to ???????? decimal places Google this formatting feature if you have not seen it before):e) What is the pattern of prices? (A graph might be helpful here but is not obligatory). For example, could you guess (with a slight approximation not to ???? decimal places! - by doing the calculations in your head) what the price would be if the volatility were, for example, to be ????.???????? or ????????? How are you able to guess? In one or two brief sentences, what is the pattern? (???? marks)Hint: When you examine the payoff of this SQUARED DIFFERENCE security (i.e., in equation (*)), does the pattern of prices look intuitive? Why?P.S. Dont worry about the seemingly small prices. If a bank or hedge fund wanted to actually trade a security like this, they would actually trade, for example, ten million times the security that I have described and then all the answers would just get scaled up by this same constant amount.