1) Rowe Pottery designs and makes specialized gift quality pottery. Rowe is considering manufacturing its own clay. Currently, the cost to buy clay is $2.65 per pound. If Rowe were to make the clay, three raw materials would have to be purchased. The raw materials are used in equal quantities (Mat 1 cost $.25/lb, Mat 2 cost $.43/lb and Mat 3 cost $.70/lb) and three pounds of raw materials makes three pounds of clay. The clay would be mixed in a large vat for proper curing and consistency. Three employees ($15/hour labor and benefits) would be needed to monitor each batch of clay which takes 10 hour and yields 500 pounds of clay. Variable overhead would consist of additional maintenance on the required equipment and storage of the unfinished clay and would total $620 per batch of clay. The clay could be produced in the current facility but would result in approximately $90,000 of additional inventory on hand at any given time. Currently, Rowe buys 250,000 pounds of clay each year. What is the return on investment if Rowe decides to make its own clay? Should they make the clay? Explain.
2) Pottery throwers are paid $30 per hour and can throw approximately 6 pieces per hour. Using the costs above for clay, the average pot requires 6 lbs of clay each (use the cost of clay determined above) All pottery must be fired in a kiln to harden. Every firing takes 10 hours of set up and 3 hours of take down ($15/hr) and yeilds 38 pieces of pottery. The kiln in 2011 used 235,000 therms of gas at $.22 per therm and was fired 930 times (which is the projection also for 2012). The kiln cost $150,000 in 2007 and is being depreciated over 10 years with no salvage value using the straight line method. Each piece of pottery is also decorated at a rate of 4 pots per hour with decorators costing $22 per hour. Shipping and handling usually cost $6 per piece. The production manager’s salary is $91,000 per year and selling costs are fixed around $126,000 per year. Rowe receives a special order for 5,000 Christmas pots that will be picked up at the factory cutting shipping and handling costs in half. Also, the decorating needs on these pots will take half as long as usual. The customer is offering $37 per pot (regular price is $58). Should Rowe take the order? Show your computations. Explain your conclusion.
3) Wilson Athletic has developed a new golf ball that consistently flies 20% further than their old balls. With the worldwide market for golf balls at 3 million dozen, Wilson believes their new ball is revolutionary enough to capture 8% of that market in the first year and 16% in the second through fifth year of production. Wilson plans on selling this ball at premium to the price of other balls at $31 per dozen. However, variable costs per dozen are also relatively high due to the specialized nature of the manufacturing-$21. To reach their sales goals, Wilson plans to pay $1.5 million in advertising and $2.2 million in player endorsement contracts each year that Wilson makes the ball. Wilson will also have to add on to its existing factory and add new equipment that will (in total) cost $2.2 million. This facility will require $250,000 in utilities and maintenance per year of manufacturing. This building and equipment will have a five year life and can be sold for $50,000 at the end of five years. Wilson’s tax rate is 40% and discount rate/cost of capital is 12%. What is the NPV and IRR for the new golf ball project? Should Wilson proceed with the project?
One of the primary differences between U.S. GAAP and international accounting standards is that the use of LIFO is permitted for U.S. companies. How does LIFO affect a company’s financial results? In your opinion, should LIFO be a permitted inventory costing method? Why might companies that currently use LIFO oppose its elimination? Support your conclusions with research.
The following two pages offer an example of a break-even analysis. This should assist you in your own completion of this section.
NOTE: You do not need to use the samples below – look online and use the Break Even and Sales Forecast templates you wish to use. If you need additional guides just ask.
NOTE: For Annual break-even analysis – ensure you continue your analysis until your profit is 0 or positive. If you end a year with a negative income – that must be carried over to the next year and added to Fixed Costs – thus your break-even point will be further into the future. (Someone must pay for debts owed!) If you conduct a Monthly Break-Even – then you may provide the number of months until break even. This will correspond to your Sales Estimates.
EXAMPLE: 4.1 Break-even Analysis
First year sales revenue for XXX is estimated to be $48,000,000. The average sales price is $100 per unit with the variable expense per unit at $75. This results in a contribution margin of $25 per unit. The sales volume in the first year is estimated to be 480,000 units. Estimated fixed costs for the first year are $20,000,000. Using the contribution margin method, estimated losses in the first year will be $(8,000,000). (Note: this information is for internal use only.)
TOTAL PER UNIT
Sales (480,000 items) $48,000,000 $100
Less variable expenses $36,000,000 $75
Contribution Margin $12,000,000 $25
Less fixed expenses $20,000,000
Net operating income ($8,000,000)
TOTAL PER UNIT
Sales (1,200,000 items) $120,000,000 $100
Less variable expenses $90,000,000 $75
Contribution Margin $30,000,000 $25
Less fixed expenses $28,000,000
Net operating income $2,000,000
At this rate, break even will be reached when sales reach 1,120,000 units: 28,000,000 / $100-$75 = 1,120,000 units. This is estimated to take place in the second year. Break-even analysis assumes per-unit wholesale revenue will remain at $100 average. Variable costs are $75 per unit.
TOTAL PER UNIT
Sales (1,1200,000 items) $11,200,000 $100
Less variable expenses $84,000,000 $75
Contribution Margin $28,000,000 $25
Less fixed expenses $28,000,000
Net operating income $0
4.2 Sales Forecast: lst year by month; 2nd and 3rd years by quarter
(Kotler, pages 584-586)
• $ Sales forecasted and timing – include charts showing the following: Remember that some products have sales cycles – and whether you are planning for any growth in the market or increased promotions.
Year 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Year 2 1st Q 2nd Q 3rd Q 4th Q Year 3 1st Q 2nd Q 3rd Q 4th Q
• Risks – this is a CRITICAL PART OF ANY MARKETING PLAN – so be sure to give this topic ample attention.
• Most important components of sales performance – this is a CRITICAL PART OF ANY MARKETING PLAN – so be sure to give this topic ample attention.
4.3 Fixed Expenses
List the Fixed Expenses estimated for the Product. Consider if these are changing in the first 3 years. While actual costs are hard to find – your goal is to list the items that are the most likely fixed expenses – and provide a rough estimate that sounds logical for the product.
• How will you monitor expenses/revenue? Identify what methods/reports and how often?
• How will you assess marketing effectiveness?
• How will you assess changes in the market environment?
5.2 Marketing Organization
Roles and Relationships in Your Marketing Functions (who will be responsible and who will implement this Brand Extension Marketing Plan?)
This strategic plan is designed to give management information so decisions on investment can be made – and – to guide departments on what they will need to do to make detailed operating plans. Think about promotions, distribution and any other functions that need to be done to carry out this plan – who will do it?
5.3 Contingency Planning
• Identify risks in this plan strategy
• How you will monitor the risks?
• How you will adapt to adversity and changes? What options will you have?
1. If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium _____.
a) output would rise
b) price level would necessarily fall
c) output would fall
d) price level would necessarily rise
2. The quantity theory of money states that _____.
a) the money supply divided by the velocity of money equals the price level divided by real output
b) the money supply times the price level equals real output divided by the velocity of money
c) the money supply times the velocity of money equals the price level times real output
d) the money supply times the price level equals real output times the velocity of money
3. Paying an above-equilibrium wage rate might reduce unit labor costs by _____.
a) permitting the firm to attract lower-quality labor
b) increasing the supply of labor
c) increasing voluntary worker turnover
d) increasing the cost to workers of being fired for shirking
4. Inflation is undesirable because it _____.
a) usually is accompanied by declining real GDP
b) reduces everyone’s standard of living in the same proportion
c) invariably leads to hyperinflation
d) arbitrarily redistributes real income and wealth
5. Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information you can conclude that _____.
a) the supply of clothing has grown faster than the demand for clothing
b) there is no way to determine what has happened to supply and demand with this information
c) the supply of and demand for clothing have grown by the same proportion
d) demand for clothing has grown faster than the supply of clothing
6. Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to _____.
a) restrict the supply of construction workers
b) increase the price of substitute inputs
c) increase the demand for construction workers
d) increase the elasticity of demand for construction workers
7. Expansionary fiscal policy is so named because it _____
a) is aimed at achieving greater price stability
b) can motivate an expansion of real GDP
c) involves an expansion of the nation’s money supply
d) can only be attained by expanding government consumption
8. A rise in the domestic interest rate leads to capital _____.
a) outflows and exchange rate depreciation
b) outflows and exchange rate appreciation
c) inflows and exchange rate depreciation
d) inflows and exchange rate appreciation
9. The average cost curves (AVC and ATC) should be minimized _____.
a) where MC = ATC and MC = AVC
b) where ATC = AVC
c) where TC starts to increase at a faster rate
d) where FC = ATC and FC = AVC
10. The real wage will rise if the nominal wage _____.
a) increases more rapidly than the general price level
b) increases at the same rate as labor productivity
c) falls more rapidly than the general price level
d) falls at the same rate as the general price level
11. the most important pricing strategy for a perfectly competitive firm is _____.
b) minimizing cost
c) product differentiation
d) maximizing sales
12. Price is constant or given to the individual firm selling in a purely competitive market because _____.
a) each seller supplies a negligible fraction of total supply
b) the firm’s demand curve is downward sloping
c) of product differentiation reinforced by extensive advertising
d) there are no good substitutes for its product
13. All economies of scale are achieved at the minimum of _____.
a) average total cost
b) total cost
c) average fixed cost
d) average variable cost
14. Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should _____.
a) increase government expenditures by $50 billion
b) reduce taxes by $50 billion
c) increase government expenditures by $100 billion
d) reduce taxes by $200 billion
15. An industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called _____.
a) pure competition
c) monopolistic competition
d) pure monopoly
16. An economy’s aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the _____.
a) real-balances effect
b) multiplier effect
c) wealth effect
d) net export effect
17. A third-degree price discrimination can be applied to which of the following market structures?
a) a perfect competition
b) a monopoly
c) a monopolistic competition
d) an oligopoly
18. Inflation in U.S. prices will cause _____.
a) a decrease in the demand for U.S. dollars and a depreciation in the exchange rate
b) a decrease in the supply of U.S. dollars and an appreciation in the exchange rate
c) an increase in the demand for U.S. dollars and an appreciation in the exchange rate
d) an increase in the supply of U.S. dollars and a depreciation in the exchange rate
19. A good real-world example of monopolistic competition is _____.
a) gas stations
c) groceries stores
d) Time Warner Cable
20. A firm under monopolistic competition will earn _____.
a) a positive economic profit as it has some monopoly power
b) a positive economic profit as it sets MC = MR
c) zero economic profit as its P = ATC
d) zero economic profit as it sets P = MC
21. Investing in R&D is more likely to occur in markets where _____.
a) firms have monopoly power protected by regulatory barriers
b) markets are oligopoly markets with strong collusion agreements
c) markets are closely competitive markets with close to zero economic profits
d) markets are monopolistic competitive markets
22. Suppose that US prices rise 4% over the next year while prices in Mexico rise 6%. According to the purchasing power parity theory of exchange rates, what should happen to the exchange rate between the dollar and the peso?
a) The dollar should depreciate.
b) The peso should depreciate.
c) The dollar will be revalued.
d) The peso should appreciate.
23. Other things equal, a decrease in the real interest rate will _____.
a) move the economy downward along its existing investment demand curve
b) move the economy upward along its existing investment demand curve
c) shift the investment demand curve to the left
d) shift the investment demand curve to the right
24. Which of the following is a nonprice barrier of entry?
a) huge sunk cost
c) product differentiation
25. Camille’s Creations and Julia’s Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can’t keep up with the quantity demanded at that price), then we would expect both Camille’s and Julia’s to _____.
a) lower their price and reduce their quantity supplied
b) raise their price and increase their quantity supplied
c) lower their price and increase their quantity supplied
d) raise their price and reduce their quantity supplied
26. Suppose productivity rises in a particular economy, but wages stay the same. Other things equal, _____.
a) the supply curve will shift rightward
b) expenditures curve will shift rightward
c) the supply curve will shift leftward
d) the demand curve will shift leftward
27. GDP understates the value of output produced by an economy because it _____.
a) excludes the value of the wages and benefits of government employee
b) includes transactions that do not take place in organized markets, such as home cooked meals
c) excludes value added from the underground economy, such as tips taken under the table
d) includes environmental degradation caused by increased output production
28.Other things equal, a decrease in corporate income taxes will _____.
a) have no effect on the location of the investment demand curve
b) shift the investment demand curve to the right
c) decrease the market price of real capital goods
d) shift the investment demand curve to the left
29. If the wage rate increases, _____.
a) a purely competitive producer will hire less labor, but an imperfectly competitive producer will not
b) an imperfectly competitive producer will hire less labor, but a purely competitive producer will not
c) a purely competitive and an imperfectly competitive producer will both hire less labor
d) an imperfectly competitive producer may find it profitable to hire either more or less labor
30. In which of the following industries are economies of scale exhausted at relatively low levels of output?
a) aircraft production
b) concrete mixing
c) newspaper printing
d) automobile manufacturing
Write an abstract for a research paper that is no more than 120 words.
2. Write a conclusion for a research paper in a minimum of 150 words or more.
3. Revise the body paragraphs of a research paper while incorporating two new paragraphs
Introduction to Unit VIII
You began this course with an idea of what writing a research paper is or what it can be. You began with an idea, one that you hoped to flesh out, support, and pontificate upon in your Research Paper. You have seen that idea through by building a project around it, constructing a foundation for it in research and establishing the final research paper. Certainly, as each of you entered this course, you came with differing backgrounds and life experiences. You entered armed with these and your desire to succeed. While there is one definable product that each student must be able to complete at the end of the course—the final Research Paper—the individual achievements are more difficult to measure because, in so many ways, these individual achievements are yours personally and yours alone to fully know. For some of you, that may take the form of writing your first academic research paper; for others, that achievement may take the form of smaller goals that you have met; for instance, you may have improved your grammar skills. Whatever your achievements, you should take time to observe and recognize them.
In this final unit, you will work to revise your entire paper and to construct the last two sections, making your paper a finished Research Paper product. Now is the time for you to make those last minute corrections and revisions that you have wanted to make throughout to perfect your paper. In addition to your reflecting upon the process of constructing the Research Paper for this course, you might want to take time to reflect upon your own personal writing process.