Question

Indicate difficulties in a multi-product setting when you need to compute target profit

          Indicate difficulties in a multi-product setting when you need to compute target profit

Added by Beverly P.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Sri K

05/30/2023

Step 1

This includes production costs, marketing expenses, and any overhead costs that may be shared among products. Show more…

Show all steps

lock

Please give Ace some feedback

Your feedback will help us improve your experience

Thanks for your feedback!

Indicate difficulties in a multi-product setting when you need to compute target profit

Play audio

Feedback

Powered by NumerAI

Sri K and 61 other subject Principles of Accounting educators are ready to help you.

Ask a new question

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Recommended Videos

3_-a-by-selling-x-tons-of-one-commodity-the-firm-gets-price-per-ton-given-by-px-by-selling-y-tons-of-another-commodity-the-price-per-ton-is-qy-the-cost-of-producing-and-selling-x-tons-of-the-55045

(a) By selling x tons of one commodity the firm gets a price per ton given by p(x). By selling y tons of another commodity the price per ton is q(y). The cost of producing and selling x tons of the first commodity and y tons of the second is given by C(x, y). Write down the firm's profit function and find necessary conditions for x* > 0 and y* > 0 to solve the problem. Give economic interpretations of the necessary conditions. (b) Suppose that the firm's production activity causes so much pollution that the authorities limit its output to no more than m tons of total output. Write down the necessary conditions for x̂ > 0 and ŷ > 0 to solve the problem.

Sri K.

exercises-81-a-risk-neutral-firm-has-very-rigid-production-lechnology-either-it-does-not-produce-or-it-produces-single-quantity-say-50-besides-because-production-takes-time-the-choice-of-the-24054

(8.1) A risk neutral firm has a very rigid production technology: either it does not produce or it produces a single quantity, say 50. Besides, because production takes time, the choice of the production level must be made before demand (D) is known. The level of demand is represented by a binary random variable (20, 1 - p; 50, p), where p is the equivalent of the probability of success in the text. The economic data are as follows: (1) fixed costs amount to 100; (2) the output price per unit is 60 and it is independent of the production decision; (3) constant average variable costs amount to 30. Answer the following questions. (a) What is the distribution of profits attached to each of the two production levels? Assume that any output that is produced and not sold has a salvage value of zero. (b) Draw the expected profit attached to each decision as a function of p and characterize the optimal expected profit. Convince yourself that it is convex in p. (c) What is the probability of success such that the expected profits attached to each decision are the same? (d) Assume now that before making its output decision the firm can observe a signal that is perfectly correlated with the state of demand, i.e. the signal is good (g) whenever D is 50 and bad (b) whenever D is 20. How much should the firm produce when it receives a good signal? What should it do in the presence of a bad signal? Compute the expected profits with the signals when: p = 0.10, p = 0.16, p = 0.50. Then by comparison with the optimal expected profits without the signal compute the value of information at these three probabilities. (e) Draw the value of perfect information as a function of p.

Sri K.

in-a-market-with-annual-demand-q-100-a-p-there-are-two-firms-a-and-b-that-make-identical-products-because-their-products-are-identical-if-one-charges-a-lower-price-than-the-other-all-consume-83083

In a market with annual demand Q = 100 - p, there are two firms, A and B, that make identical products. Because their products are identical, if one charges a lower price than the other, all consumers will want to buy from the lower-priced firm. If they charge the same price, consumers are indifferent and end up splitting their purchases about evenly between the firms. Marginal cost is constant and there are no capacity constraints. a. What are the single-period Nash equilibrium prices, pA and pB? b. What prices would maximize the two firms' joint profits? Assume that one firm cannot observe the other's price until after it has set its own price for the year. Assume further that both firms know that if one undercuts the other, they will revert forever to the noncooperative behavior you described in (a). c. If the interest rate is 10%, is one repeated-game Nash equilibrium for both firms to charge the price you found in part (b)? What if the interest rate is 110%? What is the highest interest rate at which the joint profit-maximizing price is sustainable? d. Describe qualitatively how your answer to (c) would change if neither firm was certain that it would be able to detect changes in its rival's price. In particular, what if a price change is detected with a probability of 0.7 each period after it occurs? (Note: Do not try to calculate the new equilibria.) Return to the situation in part (c), with an interest rate of 10%. But now suppose that the market for this good is declining. The demand is Q = A - p with A = 100 in the current period, but the value of A is expected to decline by 10% each year (i.e., to 90 next year, then 81 the following year, etc.). e. Now, is it a repeated-game Nash equilibrium for both firms to charge the monopoly price from part (b)? (Assume MC = 10.)

Kratika B.

Recommended Textbooks

Horngren’s Cost Accounting

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

achievement

1,148 solutions

Cost Accounting A Managerial Emphasis

Cost Accounting A Managerial Emphasis

Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan 14th Edition

achievement

1,986 solutions

Principles of Accounting Volume 1: Financial Accounting

Principles of Accounting Volume 1: Financial Accounting

Mitchell Franklin, Patty Graybeal, Dixon Cooper 1st Edition

achievement

1,401 solutions

Transcript

00:01 Hello, let's look at the question.

00:02 We have been given form's profit function by selling x terms of one commodity the firm gets the price per turn as px and by selling the y terms of another commodity the price per turn is qy.

00:18 The cost of production in selling of x terms of commodity and y terms of second is given by cxy.

00:25 We have to write down the form's profit function.

00:27 Let's write down the form's profit function.

00:46 The necessary condition is x is greater than zero and our y is also greater than zero.

01:03 So we should add to as px is greater than zero, qy is greater than zero, then our cx, x and y is less than zero and cy, x and y is less than zero.

01:27 The first two condition states that the price of two commodity must be positive.

01:31 Third and fourth condition states that the marginal cost of producing these two commodity must be negative, which are these two and of course two are these.

01:39 These condition ensure that firm can increase its profit by producing more of two commodities...

Need help? Use Ace

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Ace is your personal tutor for learning

Step-by-step explanations

Instant summaries

Summarize YouTube videos

Understand textbook images or PDFs

Study tools like quizzes and flashcards

Listen to your notes as a podcast

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later

Get step-by-step video solution
from top educators

Start your free 7-day trial, Sign up now.

Continue with Clever

or

Name

Email

Password

By creating an account, you agree to the Terms of Service and Privacy Policy

Already have an account? Log In

A free answer
just for you

Watch the video solution with this free unlock.

Log in to watch this video
...and 100,000,000 more!

EMAIL

PASSWORD

OR

Continue with Clever