Answer:
The WACC is 8.66%
Explanation:
The WACC or weighted average cost of capital is the cost to firm of its capital structure which can have 3 components namely debt, preferred stock and common stock. We take the weighted average of these components and their respective costs to calculate WACC. Furthermore, we take the after tax cost of debt for WACC calculation and that is why we multiply the cost of debt by (1-tax rate).
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
WACC = 0.33 * 0.065 * (1-0.28) + 0.08 * 0.06 + 0.59 * 0.1125
WACC = 0.086619 or 8.86619% rounded off to 8.66%
Answer: A. Market Period.
B. Long Run
C. Short Run
Explanation:
A.Output and the number of firms are fixed
The MARKET PERIOD is a very short period that refers to a situation where all resources are FIXED. This means that Output itself is fixed and therefore cannot adjust to demand.
B.Plant capacity is flexible. Firms can enter and exit an industry.
This is the LONG RUN. A time where all resources are Variable. This means that factors such as Plant Capacity which is FIXED in the Short Run will simply be Variable and hence flexible in the long run. Other Firms are also free to enter or leave the Industry during this time.
C.Plant capacity and the number of firms are fixed. Firms can employ more labor if needed
This refers to the SHORT RUN which is a situation where AT LEAST one resource is FIXED and others are VARIABLE. As long as there is a Fixed Resource with some Variable Resources, it is the Short Run. Plant Capacity and Number of Firms are fixed but Labor is Variable. This makes this scenario a Short Run Scenario.
Answer: $4,000
Explanation: Economic profit can be defined as the difference between the total revenues generated from operations and cost incurred plus any opportunity cost taken.
Opportunity cost is the cost of next best alternative foregone, that is loss of profits that occurred due to choosing one alternative over other. In the given case loss of interest and loss of highest salary are opportunity cost for Jacqui .
Hence,
economic profit = revenues - (interest + salary)
= $50,000 - ($1000 + $45,000)
= $4,000
Answer:
B. fixed cost per unit increases
Explanation:
As we know that
If the production volume increases, the fixed cost per unit is decreases as it reflect an inverse relationship between the fixed cost per unit and the production volume
Let us take an example
Fixed cost = $20,000
Production volume = 100,000
Decrease in production volume = 80,000
So, the fixed cost per unit in the first case is
= 20,000 ÷ $100,000
= $0.2
And, the fixed cost per unit in the second case is
= 20,000 ÷ $80,000
= $0.25
Therefore, the fixed cost per unit increases
Answer: a.Working to ensure that all variances are favorable.
Explanation:
Variance Analysis is an analysis of the difference between planned and actual numbers. For example of $599 was budgeted for bills but only $500 was paid, $99 would be the Variance.
Summing Variances up gives a picture of performance for a particular period of time in relation to if one has OVER -PERFORMED or UNDER-PERFORMED
The following are steps in Effective Variance Analysis Management
1. Identifying questions and their explanations
2. Preparing standard cost performance reports
3. Taking corrective and strategic actions
4. Computing and analyzing variances.
Option A is not included therefore it is the correct option.
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