Order of Operations and Dependent and Independent Variables Chapter 7, study question 12 Real GDP = Nominal GDP/ Price

Index Year 1960 1968 1978 1988 1998 Nominal GDP, Billions 527.40 911.5 2,295.90 4,742.50 8,790.20 Price Index (1996 = 100) 0.2219 0.2629 0.4822 0.8022 1.0322 Real GDP, Billions 2,376.75 3,467.09 4,761.30 5,911.87 8,515.98

Inflate Inflate Inflate Inflate Deflate

Chapter 08, study question 02 and 11 Study question 02 The growth rate of real GDP [(31,200 30,000)/30,000] x 100% = 4% GDP per capita year 1 = 30,000 /100 = 300 GDP per capita year 2 = 31,200 / 102 = 305.88 The growth rate of GDP per capita [(305.88 -300)/300] x 100 %= 1.96% Study question 11 Rate of inflation = (121 -110)/110 x 100% = 10% Rule of 70 is a way of estimate the number of years it will take for some measure to double. It was calculated by dividing the annual percentage increase into the number 70 a. 70/2 = 35 years

b. 70/5 = 14 years

c. 70/10 = 7 years Chapter 20, study question 2 Product Price $5 $4 $3 $2 $1 Quantity Demand 1 2 3 4 5

E d = (change in quantity/ (sum of quantities/2)) (change in price/( sum of price/2)) Price $ 1 - $ 2 E d = 1/ (9/2) 1/ (3/2) = 1/3 = 0.3333 Price $ 2 - $ 3 E d = 1/ (7/2) 1/ (5/2) = 5/7 = .7142 Price $ 3 - $ 4 E d = 1/ (5/2) 1/ (7/2) = 7/5 = 1.40 Price $ 4 - $ 5

E d = 1/ (3/2) 1/ (9/2) = 9/3 = 3 The demand curve is linear, which means that the slope is constant throughout. Demand is more price elastic toward the upper left than toward the lower right. In the southeast segment, the price is low, Ed <1, so demand is inelastic. At higher price, the northwest segment, Ed>1, demand is elastic. a. Chapter 22, study question 7

Total Product 0 1 2 3 4 5 6 7 8 9 10

Total Fixed Cost 60 60 60 60 60 60 60 60 60 60 60

Total Variable Cost 0 45 85 120 150 185 225 270 325 390 465

Total Cost 60 105 145 180 210 245 285 330 385 450 525

Average Fixed Cost 60 30 20 15 12 10 8.57 7.50 6.67 6

Average Variable Cost 45 42.5 40 37.50 37 37.5 38.57 40.625 43.33 46.50

Average Marginal Total Cost Cost 105 72.5 60 52.5 49 47.50 47.14 48.125 50 52.50 45 40 35 30 35 60 125 55 65 75

ATC can be found by adding vertically the AFC and AVC curves. The vertical distance between the ATC and AVC curves measures AFC at any level of output. The graph shows that the marginal - cost curve intersects both AVC and the ATC curves at their minimum points. Chapter 3, exercise E3.6 ( Accounting: what Numbers Mean) a. Firm D Margin = Net income/ sales = $27,900/$930,000 = 3% Turnover = Sales/ average total assets = $930,000/$465,000 =2 ROI = margin x turnover = 3% x 2 = 6% b. Firm E

Margin = Net income/ sales = $75,000/$1,250,000 = 6% ROI = margin x turnover

Turnover = ROI / margin = 15% / 6% = 2.50 Average total assets = sales/ turnover

= 1,250,000 / 2.50 = $ 500,000

c. Firm F Sales = average total assets x turnover = $ 1,730,159 x 1.40 = 2,422,223 Margin = ROI/turnover = 12.6% / 1.40 = 9% Net income = margin x sales = 9% x 2,422,223 = $218,000 Chapter 2, question 2B2 (Introduction to Management Accounting) 1. Selling per unit $ 20.00 Fix expense $ 5,000.00

Variable expense per unit $ 15.00 Unit contribution margin = Unit sales price Unit variable per unit = $ 20.00 - $ 15.00 = $ 5.00 Break even sales in units = Fix expense/ Unit contribution margin = $ 5,000.00/$5.00 = 1,000 units 2. Sales, $40,000.00; Variable expenses, $ 30,000.00; fix expenses, $7,500.00; net income, $2,500.00

Total Sales Variable expenses Contribution margin Fix expense $ 40,000.00 $ 30,000.00 $ 10,000.00 $ 7,500.00

Percentage 100% 75% 25%

Net income

$ 2,500.00

Break even sales in dollars = Fix expenses / contribution margin ratio = $ 7,500.00 / 0.25 = $ 30,000.00 3. Selling price per unit, $30.00; fix expenses, $ 33,000.00; variable expenses per unit, $ 14.00; Unit contribution margin = Unit sales price Unit variable per unit = $ 30.00 - $ 14.00 = $ 16.00 Break even sales in units = Fix expense/ Unit contribution margin = $ 33,000.00/$16.00 = 2,063 units Total sales in units to get profit $ 7,500.00 is 2,063.00 units + $ 7,500.00/$16 = 2,532 units 4. Sales, $ 50,000.00; variable expenses, $20,000.00; fix expenses, $20,000.00; net income $10,000,00

Activity volume increases 10% Total Sales Variable expenses Contribution margin Fix expense Net income $ 55,000.00 $ 22,000.00 $ 33,000.00 $ 20,000.00 $ 13,000.00 Percentage 100% 40% 60%

5. Selling price per unit, $40; total fix expenses, $80,000; variable expense per unit, $30 Variable expenses reduced by 20% per unit

$ 30 - $30 x 20% = $24 Total fix expenses increased 10% $80,000 + $80,000 x 10% = $ 88,000 Unit contribution margin = Unit sales price Unit variable per unit = $ 40.00 - $ 24.00 = $ 16.00 Break even sales in units = Fix expense/ Unit contribution margin = $ 88,000.00/$16.00 = 5,500 units Sales in units to get profit $ 20,000 $ 20,000/16 +5,500.00 units = 6,750 units