SOLVE ALL, You have recently been hired as a consultant for…

Question Answered step-by-step SOLVE ALL, You have recently been hired as a consultant for… SOLVE ALL, You have recently been hired as a consultant for Cranberry Distributors. Cranberry Distributors grows and ships cranberries to several international clients with invoices denominated in the customer’s local currency. In the past two years Cranberry has been unable to meet Wall Street estimates in large part due to swings in foreign currency exchange rates causing significant losses to be recorded on their income statement. Cranberry has hired you to examine its previous two years of financial statements and provide insight on whether its current accounting is correct and to offer potential solutions.RequiredA memo to Cranberry Distributors addressing the following:Is it correct for foreign currency exchange losses be reported on the income statement? Provide support for your answer using the FASB Codification.If so, suggest an accounting strategy for how Cranberry can avoid unexpected currency exchange losses in the future. You must be specific and you must justify your recommendation. If you decide to use any outside resources, please make sure to properly cite any resources you use to answer this question. Question 2:You have recently started working at ACCT450 Partners, an accounting firm that provides services to multinational companies. Recently, Green Tree Inc. acquired its first subsidiary located in another country and they are unsure of the steps they need to perform when preparing consolidated financial statements with the new subsidiary.  RequiredA memo to Green Tree management that provides guidance on how to perform consolidations with a foreign subsidiary. Include relevant discussion about any accounting standards or methods that can be used. Question 3:The spectacular senior students in ACCT450 decide to form a partnership in order to start a business that researches mergers and acquisitions and sells the analysis to investors via a monthly report. Further, they decide to split the responsibilities of the partnership into three different areas as follows:Some will invest the majority of the capital needed to start the business, but do not want to be involved in the daily operations since they never want to think about consolidations again ?After the writing assignment, a few have developed a passion for analyzing mergers and acquisitions and beg the other partners to perform the majority of the daily work.The remaining believe they provide the most value to the new partnership by marketing the monthly report to their investment contacts, but will not be involved in the research or writing.RequiredA  memo to the other members of ACCT450 proposing how the partnership can fairly allocate the profits of the partnership among the three different groups of partners identified above. Make sure you explain why it is fair to all partners. Problem 1 (Q-theory with depreciation and taxes): Consider an Nfirm industry (N large) in which firms have instantaneous earnings flows: ?(?(?)) · ?(?) where ?(?) is industry-wide capital, ?(?) is firm-specific capital, and ?0 (·) ? 0? The firm level capital stock adjusts according to ?? = (? ? ??)?? where ? is the instantaneous investment flow and ? is the depreciation rate. The price of capital is unity and firms pay convex adjustment costs ?(?(?)), with ?(0) = 0, ?0 (0) = 0, and ?00 ? 0? Let ?(?) represent the NPV of the stream of profits from a marginal unit of installed capital. ?(?) = Z ? ?=? ??(?+?)(???) ?(?(?))?? a. Interpret ?(?). How and why does this definition of ?(?) differ from the definition we used in class? Using the Envelope Theorem, show that ?? (???) ?? = ?, where ? (???) is the value function of a firm. b. Derive the firm’s Bellman Equation, and the first-order condition: ?(?)=1+ ?0 (?(?)) c. Derive the Bellman Equation associated with ?(?): (? + ?)?(?) = ?(?(?)) + ??(?) d. Analyze the phase diagram associated with this industry. Plot the ?? = 0 and ?? = 0 loci. Graph the saddle path. How does this diagram differ from the one we derived in class? How does a rise in the depreciation rate affect the steady state level of capital? Explain. 1 e. Now suppose the industry is in steady state. At time period ?0 the government announces a temporary investment tax credit which will last until time period ?1. The investment tax credit provides a ? (??) subsidy per unit of positive (negative) investment (0 ??? 1). Derive the first-order condition of the firm during the transition interval [?0? ?1]: ?(?)=1 ? ? + ?0 (?(?))? f. Plot the transition path of the industry on the phase diagram. In addition, plot the path of ? and ? against time. Explain why investment is nonmonotonic over the interval [?0? ?1]. Does a temporary or a permanent investment tax credit have a larger impact on short-run investment? Why? g. Now suppose that the subsidy is pre-announced at period ??1 ? ?0? In other words, the subidy begins at period ?0? and economic agents find out about it at time ??1. Plot the transition path of the industry on the phase diagram. In addition, plot the path of ? and ? against time. Problem 2 (True, False, or Uncertain). Please explain whether the following statements are True, False, or Uncertain. You will be graded on the quality of your explanation. a. Ito’s Lemma implies that second-order terms in the total differential of the value function vanish as ?? ? 0? b. If an investment tax credit is anticipated before the tax credit starts, investment will rise above its steady state level before the tax credit starts. When the tax credit starts, investment will jump(c) Suppose your von Neumann-Morgenstern utility function is ?W. Calculate your expected utility.What sure sum, if offered to you instead of the game, would give you the same utility?(d) Suppose your von Neumann-Morgenstern utility function is lnW. Calculate your expected utility.What sure sum, if offered to you instead of the game, would give you the same utility?(e) Suppose your von Neumann-Morgenstern utility function is ? 1/W. Calculate your expected utility.What sure sum, if offered to you instead of the game, would give you the same utility?(f) What is the coefficient of relative risk aversion for each of the utility functions in (c)-(e) ?Question 2:Consider the following simplified version of “Who Wants To Be A Millionaire”. You have reached the$32,000 level. (Any Princeton student should be able to do that.) Now you face a succession of questions,each with two possible answers. If you answer a question correctly, whether because you know the correctanswer or because you make a lucky guess, you proceed to the next higher prize level. We call your firstquestion (the one that if correctly answered takes you to the $64,000 level) “the $64,000 question” for short;similar abbreviations apply to the following levels. The prize doubles at each level. If you answer the $64,000question correctly and so reach the $64,000 level, you face the $128,000 question, and so on to $256,000, and$512,000. If you reach the $512,000 level, you face one final question, and the correct answer to it will winyou $1,024,000.At any level, when you get the question that can take you to the next level, you may choose not toanswer it, and leave with the prize of the level you have already reached. At any level, if you answer thenext question and your answer is wrong, you will leave with only $32,000.At each level, before you have seen the question that can take you to the next level, there is a probabilitythat you know the correct answer. The questions get successively harder, so these probabilities decline fromone level to the next. Before you see the $64,000 question, the probability that you know the answer is 40percent. If you answer this question successfully to reach the $64,000 level, and before you see the $128,000question, the probability that you know the answer to that is 35 percent. Similarly, the probabilities are 30percent for the $256,000 question, 25 percent for the $512,000 question, and 20 percent for the $1,024,000question.At each level, once you have seen the question, you will know for sure whether you know the correctanswer. Thus there is no possibility that you are confident but wrong, or that you know the correct answerbut fail to realize that you know.At each level, after you see the question, if you know the correct answer, of course you will give it. Ifyou don’t, you have to decide whether to make a guess, which at any level has a 50 percent chance of beingcorrect, or to walk, that is, leave with the amount of the level you have reached. Remember that if youchoose to guess and are lucky, you proceed to the next level, but if you choose to guess and are unlucky, youwill have to leave with only $32,000, no matter what level you had reached.Your von Neumann-Morgenstern utility function is log2(W/32000), where W is the amount of dollars ofyour prize. (Note that logs are to base 2, not 10 or e.)1(a) What are the utility numbers corresponding to the various possible levels of prizes?(b) Find your optimal strategy, namely your plan of action that prescribes, at each level, whether tomake a guess if you don’t know the answer to the question, or to walk with the prize of the level you havereached. You have to begin at the end (where you have already reached the $512,000 level) and work yourway backward. At each stage you will find it useful to draw a mini “decision t 1. Short review questionsSome short review questions on basic concepts and mechanisms to understand microeconomicsof banking.1. Explain, in words, how banks achieve optimal risk sharing through maturity transformation,when there is uncertainty in liquidity demand.2. What are funding liquidity and market liquidity? Through which channels are they likelyto aect the stability of banking system?3. Why is fragility in banking desirable as a disciplinary device for banks?4. What is “run-on-the-repos”? Why is it dierent, comparing with the classical bank run?5. What is securitization? How do banks gain from securitization? What factors explain therapid growth of securitization?6. What is shadow banking? Why do banks have the incentives to move their activities toshadow banking?7. What is credit rationing? How does credit rationing come out of banks’ optimal decision?8. Under what circumstances is financial structure irrelevant to the value of firms? Why dobanks need to hold a certain ratio of capital? Why are banks likely to hold less capitalthan what is socially desired?9. How do principal-agent problems aect eciency in banking? Give a few examples ofthe social costs due to principal-agent problems in banking.110. Why do bond market and banks co-exist, or, why some firms can borrow directly fromthe market while others need bank intermediation? What factors may contribute to suchmarket separation?11. Does bank competition increase the stability of financial system? Present one theory onbank competition and financial stability, and provide empirical evidence to support yourarguments.2. Risk sharing and financial intermediationConsider a one-good, three-date economy: There are infinitely many ex ante identical consumers,each endowed with one unit of resource at t = 0. Consumption takes place either att = 1 or t = 2, while the timing preference only gets revealed at t = 1: With probability a consumeris an impatient one (type 1 consumer), who only values consumption at t = 1, while withprobability 1 ?? a consumer (type 2 consumer) is a patient one, who only values consumptionat t = 2. A consumer’s type is private information.Let ci denote the consumption of a type i = 1; 2 consumer, and ex post, the utility fromconsumption is u(ci) = 11??  c1?? i with   > 1.The economy has two technologies of transferring resources between periods: storage technologywith gross return equal to 1, and a long-term investment technology with a constant grossreturn R > 1 at t = 2 for every per unit invested at t = 0. If necessary, an on-going long-termproject can be liquidated or stopped prematurely at t = 1, with a return 0 < < 1.(A) Specify the social planner's problem, who wants to maximize a consumer's expectedutility at t = 0 by allocating her endowments between two technologies.1. Compute the optimal allocation, and consumption for each type's consumer—denote thesolution asc1; c2;2. Why aren't consumption levels for two types' consumers identical? Will there be liquidationat t = 1?3. What will happen to the consumers' optimal consumption when   ! +1?(B) Suppose that the economy is in autarky such that every consumer has to allocate herendowments between two technologies by herself at t = 0. Show that the consumer's ex postconsumption is inferior to the solution in (A) 1.2(C) Suppose there is a bond market available at t = 1. At t = 1 competitive bond issuerspurchase long assets from impatient consumers, issue bonds against these long assets, and sellbonds to the patient consumers (who can pay with the proceeds from their short assets). Eachunit of bond bought at t = 1 will deliver one unit of consumption good to the bond holder att = 2.1. Compute the equilibrium bond price;2. Show that the consumer's ex post consumption is inferior to the solution in (A) 1.(D) Suppose there is a competitive banking sector in the economy, in which banks take consumers'endowments as deposits at t = 0 and allocate between the two technologies. Consumerswithdraw ci at t = i according to their type i.1. Show that banks can replicate the optimal solution achieved in (A) 1.2. Comparing with the result in (B), how can banks improve social welfare in the economy?RDiamond, D. W. and Dybvig, P. H. (1983), Bank runs, deposit insurance, and liquidity,Journal of Political Economy 91, 401-419.3. Bank run and financial fragilityConsider the equilibrium with intermediation, as in Problem 2 (D) in which banks oerconsumers the deposit contractsc1; c2at t = 0.(A) Explain why there exist two (Nash) equilbria which are consistent with rational behaviourfor all agents: one in which only the early consumers withdraw at t = 1, and another onein which everyone withdraws at t = 1—no matter what type he or she is. What is the individualconsumption level in the latter equilibrium? Does the existence of multiple equilibria depend onthe value of ?(B) Propose a mechanism that can eliminate the bank run equilibrium. Explain how it works.(C) Suppose that it is know in the economy that a small group of consumers always panic att = 1, i.e., they want to withdraw with certainty at t = 1 no matter what type they actually are.Will there still exist two Nash equilibria as in (A)?RDiamond, D. W. and Dybvig, P. H. (1983), Bank runs, deposit insurance, and liquidity,Journal of Political Economy 91, 401-419.34. 4. A monopolist sells the same product in two markets. The production cost is linear such that ???????????? is the cost of production in the ith market. The demand equations for each market are: ????????=????????????????????????? ? ????=1,2 where ???????? is the price in the ith market.a. If the monopolist is allowed to set different prices in each market, write down the monopolist's problem and solve for optimal prices and quantity in each market.max????1????2,??????1?????1????1??????1+??????2?????2????2??????2?????(????1+????2)FOCs: ??????1?2????1????1???????=0 and ??????2?2????2????2???????=0 so ????1=????1??????? 12 and ????2=????2??????? 22. So that prices are????1=????1+?????? 12????1 and ????1=????2+?????? 22????2b. Under what conditions, i.e. the values for the demand parameters in each market, will the monopolist opt not to price discriminate?If a1=a2 and b1=b2.The denominator is negative because that is the second order condition. The numerator is ambiguous. It will be positive if ?????????? >0. Note ?????? >0 because the good is normal. So if that assumption holds, ?????????????????>0.b. How does an increase in income affect the price set by the monopolist? Show an expression that proves this relationship.??????????????? =?????????????????+?????????????????????????????????This is ambiguous. The direct effect is positive but the indirect effect is negative when ?????????????????>0 because ??????????????????<0.3. There are two consumers with the following utility functions: ????1=????1????1 and ????2=????2????2 where ????1>????2. A monopolist supplies the good. It can produce the good at zero marginal cost but it can only produce 10 units of the good at most. The monopolist offers two price-quantity packages: (????1,????1) and (????2,????2) where ???????? is the cost of purchasing ???????? units of the ith good.a. Write the monopolist’s profit maximization problem. Hint: It should have four constraints along with a capacity constraint. Identify which constraints are binding.max????1,????2????1+????2 ????.????. ????1????1? ????1,????2????2?????2, ????2????2?????2?????2????1?????1,????1????1?????1?????1????2?????2,????1+????2?10The binding constraints are ????2????2=????2 and ????1????1?????1=????1????2?????2 and ????1+????2=10.b. Substitute these constraints into the monopolist’s profit maximization problem and derive the values of (????1,????1) and (????2,????2).So now, max????1,????2????1????1?????1????2+2????2????2 ????.????. ????1+????2=10 or max ????2????110+2(????2?????1)????2 So ????1=10 and ????2=0. This means that ????2=0 and ????1=10????1.4. A monopolist sells the same product in two markets1 (i) Alie and Bob are given ¿4 to divide among themselves and they agree todo so as follows. Both pik simultaneously a non-negative integer less orequal to 4 and• if the integers add up to 4 or less, eah gets the amount they named,• if the integers are dierent and add up to more than 4, the personwhohose the smaller number gets that amount and the other persongets the rest, and• if the integers are equal and add up to more than 4, eah gets ¿2.(a) Desribe this situation as a game in strategiform. (5 marks)(b) Find all strategies whih are stritly dominated, and all strategiesthat are weakly dominated. (3 marks)    Develop a proposal for a new information system for Poly. Describe the primary features of this new system and explain why this is the best solution for Poly to pursue. Discuss the relevance of such advanced technologies as MRP, MRPII, and EDI information system options.   2.WireBuzz Ltd has been operating in the competitive electronics industry for over twenty years. The company produces a range of electronic systems and a few years ago, began manufacturing several different types of wall key pad systems where now two of these, account for the majority of the company’s sales. This case focuses on these two types of wall key pad systems: the simple push button pad (PBP) and the LCD wireless touchscreen pad (LWTP). PBP has been the more common product in the industry for several years. The market for this product is quite competitive and price sensitive. WireBuzz plans to sell 62,000 units in the 2021/2022 year at $170 each. LWTP is a recent addition to the Company’s product line. This product is different to PBP namely, it incorporates technology that is more sophisticated and the materials used in its production are different to those used for PBP. As such, management has decided to sell LWTP at a premium price. The sales budget for 2021/2022 includes the sale of 35,000 units at $340 each. In addition, there is no beginning or ending inventory budgeted for the year. The management team at WireBuzz usually meet to discuss key issues affecting the company. Since the company’s profitability over the couple of years has not met expectations, the decision was made to schedule monthly meetings. Hence, beginning with the current month the next few meetings will focus on discussing strategies to increase the company’s overall profitability in 2021/2022. In the first meeting, the main topic that management focused on was how to spend the sales and promotion dollars for 2021/2022. During the meeting Kane Fang, the National Sales Manager, said “I believe the market share for PBP could be expanded, by concentrating WireBuzz’s promotional work in this area”. In response to this suggestion the Production Manager, Toni Price shook her head and said, “I disagree. I believe the company should go after a bigger market for LWTP. The costing sheets that I get show the contribution from LWTP is greater than the contribution from PBP. As we get a premium price for LWTP, focusing on expanding its sales should help overall profitability”.WireBuzz currently uses a traditional costing system. Budgeted direct materials costs are $10,830,000 in total, for production of the two types of wall key pads with $5,580,000 being the total budgeted cost for PBP direct materials. Direct labour is budgeted at $20 per direct labour hour (DLH). The company expects to use 4 DLH and 2 machine hours (MH) for each LWTP unit and 1.5 DLH and 1 MH for each PBP unit produced.This traditional costing system was developed a number of years ago when the company first commenced operations and uses three types of manufacturing overhead: material-related overhead, variable manufacturing overhead and machine-related overhead. WireBuzz applies a material handling charge at 15 percent of direct materials cost, which is not included in variable manufacturing overhead. Variable manufacturing overhead is applied on the basis of direct labour hours. For 2021/2022 the budgeted variable manufacturing overhead rate is $5/DLH. In addition, machine-related overhead is applied on the basis of MH and is budgeted at $22/MH.Jane Web the Company’s Financial Controller, who recently joined the company, had previously worked in another company that used a different costing system which was predominately based on the principles of Activity Based Costing (ABC). Upon having reviewed WireBuzz’s past financial reports and costing information Jane became sceptical about the accuracy of the costing data for both PBP and LWTP. Based on her experience with ABC and the uncertainty she had, Jane made a recommendation to the management team during the first meeting. She recommended that before the group proceeded with the discussion about allocating sales and promotional dollars to individual products; it may be worthwhile to look at these products on the basis of the activities involved in their production. Jane further explained, “using this information, we can calculate an activity-based cost for PBP and LWTP and then compare each to the traditional costing we have been using”. She also suggested at assessing the activities involved in production. The management team all agreed that Jane and her team should go ahead with the activity analysis she suggested and present back the results.Subsequently, Jane and her team conducted an activity analysis and identified that the original three overhead categories used under the traditional costing system involved a series of different activities. Approximately 20% of material related overhead involved the procurement of material components; 18% involved the scheduling of production for the PBP and LWTP wall key pads; 15% involved moving materials around the production facility and the remaining overhead was incurred for packaging and shipping of the wall pads. Quality control accounted for 45% of the variable manufacturing overhead and involved ensuring that finished wall pads conformed to the design specifications for each type. The other variable manufacturing overhead comprised of: setting machines up in preparation for production; disposing of waste; and ordering and maintaining general supplies, which are used in producing the completed wall pads. These were incurred in the ratio of 0.7: 0.25: 0.05 respectively. Machine- related overhead, was now considered a conversion cost, and involved machine soldering of the PBP and LWTP wall key pads and inserting material components into each PBP and LWTP wall key pad. The cost of soldering the wall pads amounted to $634,800. Inserting material components into the wall key pads was a different process, where some of the material components were inserted by machines, and accounted for 30% of the activity cost pool. Other material components involved a more manual insertion process where a number of employees manually inserted individual components into the wall key pads. As a result of this analysis, Jane concluded that the direct labour category was no longer relevant and she also established that the only cost that would remain the same under both the traditional costing method and the ABC method is the cost of direct materials. Jane and her team also identified information specific to PBP and LWTP. Each PBP wall key pad required two machine setups whilst each LWTP wall key pad required eight setups. A total of forty-six components were used to produce the PBP and LWTP wall key pads. Of these, thirty-four specific components were used in the production of each LWTP wall key pad and fifteen of these components were manually inserted onto the LWTP wall key pad by assembly line employees. The remaining components were used in the production of each PBP wall key pad and assembly line employees manually inserted five of these components onto each PBP wall key pad. Materials were moved three times for each PBP wall key pad and nine times for each LWTP wall key pad. Both types of wall key pads passed an inspection process which involved a total of ten inspections where 20% of these were for each PBP wall key pad and the remaining inspections were for each LWTP wall key pad. A total of 0.60kg of waste would arise from the production of one PBP wall key pad and one LWTP wall key pad, and approximately 15% of this came from the production of each PBP wall key pad.As part of the analysis, Jane and her team also identified a number of activity cost drivers. These are in Figure 1 below. AssignmentFigure 1: Identified Activity Cost DriversCOST DRIVERNumber of Wall Key Pads Number of Components Number of Material Moves Number of Setups Number of Inspections Number of Insertions** Kilograms of Waste** manual insertions**machine (automated) insertions (CMA Adapted) REQUIREMENTS: 1.WireBuzz’s management team have agreed that the company needs to become more focused in implementing activity-based Costing (ABC) and also activity-based management (ABM) and have asked your project team to research this further with respect to product costing analysis. Firstly, you will need to conduct research and discuss, in general, how ABC and ABM can be used to gain a competitive advantage. Secondly, you should identify and discuss in detail two Australian or US, publicly listed manufacturing companies (include the company code of each) which have implemented ABC and ABM analysis explaining why the approach was chosen. In addition, discuss how these companies have used this approach and also discuss what the overall outcome has been for each company. 2.Based on WireBuzz’s current traditional costing system, as outlined in the case, calculate the total cost and unit cost expected for the PBP and the LWTP wall key pads.3. Jane and her team have asked you to help them design an ew costing system based on the observations of their activity analysis and on the principles of ABC. As part of this task you are required to:(i) Describe in detail the elements of this new costing system justifying the activity cost pools and activity cost drivers included. You will need to quantify the normal capacity of each activity cost driver.(ii)Calculate the total cost and unit cost expected for the PBP and LWTP wall key pads using this new ABC system designed above. Please round answers to two decimal places. 4. Compare and contrast WireBuzz’s current traditional costing and new ABC costings for PBP and LWTP as presented in your answers to Requirements 2 and 3 above. Discuss in detail your ABC results for WireBuzz with an emphasis on analysing the activity costs and highlight the differences to the original costing approach.5. In light of your ABC/ABM research in Requirement 1, and your ABC costings and analysis so far, discuss in detail what information WireBuzz’s management may consider before making product line decisions and advise WireBuzz on a strategy for increasing company profits by also drawing on the discussion between Kane Fang, (National Sales Manager) and Toni Price, (Production Manager) (pp.2-3).  Accounting Business Cost Accounting BUSINESS 1A Share QuestionEmailCopy link Comments (0)