Financial Decision Making Paper 4

Oak Fine Furnishings manufactures a wide range of home furnishings. One of their products is an oak headboard. The company currently sells 4,000 headboards at an average price of $100 per unit. To manufacture the headboards, the variable costs are $55 per unit and the total fixed costs assigned to the oak headboard are $150,000. If the sale of headboards increases by 50% and all else remains constant, this would result in

Giant Co has received an offer from Patriot Co to produce units that Giant Co currently produces and sells. The unit price quoted by Patriot Co is higher than Giant Co’s variable production cost per unit, but lower than the price at which Giant Co can market the units. Under which circumstance would Giant Co’s profits increase by purchasing units from Patriot Co?

Joe Cooper owns and operates an ice cream truck that he drives through residential neighborhoods to sell five different treats to the area’s children. On average, Cooper sells 100 of each type of treat per day for the 120 days per year when the weather is warm enough to generate sales. Four of his products are profitable, but the other, Creamy Delight, indicates a loss as follows:
Selling price/unit $ 1.75
Cost of each treat 0.80
Truck operating costs/unit 0.37
Joe’s salary/unit 0.60
Administrative costs/unit 0.08
Loss/unit $(0.10)
If Cooper cannot raise his selling price, he should

Adams Corporation’s goal is for operating income to equal 6% of sales. Adams estimates that the highest selling price the market will bear is $115 per unit. Adams expects to sell 100,000 units, incur fixed costs of $3,500,000, and has an effective income tax rate of 40%. To achieve these plans, the target variable cost per unit must be

Which one of the following statements best describes characteristics of the growth phase of the product life cycle?

Which one of the following is the most important difference between a monopoly and a firm facing perfect competition, assuming both are unconstrained profit-maximizers?

Virtucon Company identifies supply chain risks as part of their Enterprise Risk Management (ERM) process. After identification of this risk, Virtucon wants to determine how much of an impact this risk could have on their objectives. Their risk assessment should focus on

At the beginning of the year, a portfolio manager who manages a portfolio with a mean annual return of 8% and annual standard deviation of 25% wants to estimate the worst case expected loss at an 80% confidence level. The value of the portfolio today is $5 million. Which method would the portfolio manager use to estimate the probable maximum loss that may be incurred at the end of the year?

For a firm engaged in risk management, Value at Risk is defined as the

DRP Insurance Company wants to be “best in class” in terms of Enterprise Risk Management (ERM) implementation. To achieve this goal, the company plans to identify events that affect the implementation of strategy and achievement of objectives. Which of the following best reflects an analysis that would help its identification process?