26. Consider a firm that uses labor (L) and capital (K) to produce output. Which of the following factors will cause this firm's long-run demand for labor curve to be relatively (wage) elastie? a) The firm views L and K as close substitutes in production. b) The firm changes its output level by very little in response to a change in the price of labor. c) The firm's marginal revenue product of labor curve is highly inelastic. d) A minimum wage is in effect. e) All of the above.

26. Consider a firm that uses labor (L) and capital (K) to produce output. Which of the following factors will cause this firm's long-run demand for labor curve to be relatively (wage) elastie? a) The firm views L and K as close substitutes in production. b) The firm changes its output level by very little in response to a change in the price of labor. c) The firm's marginal revenue product of labor curve is highly inelastic. d) A minimum wage is in effect. e) All of the above.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 4QE: Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its...

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Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its products from those of its competitors. Because of this strategy, you project that next year the firm will generate 6.0% revenue growth from price increases and 3.0% revenue growth from sales volume increases. Assume that the firms production cost structure involves strictly variable costs. (That is, the cost to produce each unit of product remains the same.) Should you project that the firms gross profit will increase next year? If you project that the gross profit will increase, is the increase a result of volume growth, price growth, or both? Should you project that the firms gross profit margin (gross profit divided by sales) will increase next year? If you project that the gross profit margin will increase, is the increase a result of volume growth, price growth, or both?
Which of the following statements is true? A In linear break-even analysis, the contribution margin is the difference between the selling price and the average fixed cost. B The Theory of the Business Firm assumes perfect market competition. This means it assumes that the selling price decreases as a firm's production rate increases. C In the Theory of the Business Firm, profits per period are maximized at the production rate at which marginal cost equals average cost. D In the Theory of the Business Firm, profits per period are maximized at the production rate at which average cost is minimized. E All four statements are false.
Is my explanation correct? When the shit in sales toward the lower contribution margin. In the sales mix, if the shift in sales to a product that has a low contribution margin ratio, the break-even point will increase. In this case, the company will generate more sales; hence, the net operating income will increase. Also, the contribution margin ratio will increase. Moreover, the degree of operating leverage will increase, too. Please explain (True or False) in detail.
you are the owner of a firm, and your firm is experiencing "economies of scale" in production. If this is the case, will the average total cost increase, decrease or remain unchanged as you increase the level of output?
Suppose firms in this economy pay their workers efficiency wages. This practice will likely lead to a (faster, slower) adjustment of the economy to its long-run equilibrium because firms will be (less, more) likely to (reduce, raise) the wages of their employees.
the link between short-run average costs and long-run average costs? Explain the association between return to scale and economies of scale and suggest the potential sources of internal and external economies of scale. Why might firms face diseconomies of scale and shutdown/break-even situations in the long run?
What will happen to a company’s break-even point if the sales price and unit variable cost of its only product increase by the same dollar amount?
Which of the following statements about operating leverage is false? a. Operating leverage measures how operating income will be affected by changes in sales b. The degree of operating leverage is higher for companies with lower fixed costs c. Keeping all factors constant, the higher the contribution margin, the higher the operating leverage. d. All of the given answers are true. e. If the degree of operating leverage higher for a company, this means that the company is more risky than another company with low degree of operating leverage.
Which of the following is true regarding the contribution margin ratio of a company that produces only a single product? Select one: a. The contribution margin ratio equals the selling price per unit less the variable expense ratio. b. The contribution margin per unit multiplied by the selling price per unit equals the contribution margin ratio. c. None of the given answer is correct. d. As fixed expenses decrease, the contribution margin ratio increases. e. The contribution margin ratio will decline as unit sales decline.
which one is correct please confirm? QUESTION 28 A firm that employs relatively large amounts of labor- saving equipment in its operations will have a relatively ____ degree of operating leverage. a. low b. high c. insignificant d. constant
1 Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis? 2 If the units produced equals the units sold, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why? 3 Should a company allocate its common fixed costs to business segments when computing the break-even point for those segments? Why? 4 If the units produced equals the units sold, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why?
Would each of the following increase, decrease, or have an indeterminant effect on a firm’sbreak-even point (unit sales)?a. The sales price increases with no change in unit costs.b. An increase in fixed costs is accompanied by a decrease in variable costs.c. A new firm decides to use MACRS depreciation for both book and tax purposes ratherthan the straight-line depreciation method.d. Variable labor costs decline; other things are held constant.