ACCT
Notes 10
Accounting
I)
Interest rates in macroeconomics
A)
A government institution
A.1) Usually a central bank
A.2) Can lend money to financial institutions to influence their
interest rates as the main tool of monetary policy.
A.3) Usually central
8-29
Compute total cost for each batch:
Units x Average Cost = Total Cost
500 x $0.55
= $275
600 x $0.50
= $300
Use high-low analysis and compute cost function:
Slope (b) = (300-275)/(600-500) = $0.25 / unit
Constant (a) a + $0.25 x (500) = $275
a
= $275
ACG 6425
Solutions Chapter 18
18-24Allocation of Marketing and Administrative Costs; Profit Centers
(20 min)
1.
The 2010 allocation using revenue as a base:
2 010 Cost allocation based on relative revenues:
Lower
School
Tuition Revenue
$1,900
Relative rev
1-28
Answer:
1)
Thebalancedscorecardisanaccountingreportthatincludesthefirm'scriticalsuccessfa
ctorsinfourareas:(1)financialperformance,(2)ustomersatisfaction,(3)internalprocess
es,and(4)learningandgrowth.
2)
a) meeting scheduled deliveries
b) the growth
ACCT
Notes 1
Accounting
I)
Interest rate
A)
The rate at which interest is paid by borrowers for the use of money that
they borrow from a lender.
B)
A percent of principal paid at some rate.
B.1) For example, a small company borrows capital from a bank to
ACCT
Notes 2
Accounting
I)
Interest Rates
A)
Germany
A.1) Experienced deposit interest rates from 14% in 1969 down to
almost 2% in 2003.
A.2) Experienced rates close to 90% in the 1920s down to about 2%
in the 2000s.
B)
In the past two centuries, interest
ACCT
Notes 3
Accounting
I)
Interest Rates
A)
United States
A.1) Authority for interest rate decisions is divided between:
(A.1.a)
Board of Governors of the Federal Reserve
(Board)
The Board decides on changes in discount
rates after recommendations submit
ACCT
Notes 4
Accounting
I)
Interest Rates
A)
Deferred consumption:
A.1) When money is loaned the lender delays spending the money
on consumption goods.
A.2) According to time preference theory people prefer goods now
to goods later
A.3) In a free market t
ACCT
Notes 5
Accounting
I)
Real vs nominal interest rates
A)
Nominal interest rate
A.1) The amount, in percentage terms, of interest payable.
(A.1.a)
Suppose a household deposits $100 with a
bank for 1 year and they receive interest of $10. At
the end of
ACCT
Notes 6
Accounting
I)
Market interest rates
A)
There is a market for investments which ultimately includes:
A.1) Money market
A.2) Bond market
A.3) Stock market
A.4) Currency market
A.5) Retail financial institutions like banks.
B)
Exactly how these
ACCT
Notes 7
Accounting
I)
Interest rates
A)
Risk
A.1) The level of risk in investments is taken into consideration.
A.2) Volatile investments like shares and junk bonds have higher
returns than safer ones like government bonds.
A.3) The extra interest ch
ACCT
Notes 8
Accounting
I)
Interest rates
A)
A market interest-rate model
A.1) A basic interest rate pricing model for an asset
A.2) Assuming perfect information, pe is the same for all
participants in the market, and this is identical.
A.3) Nominal inter
ACCT
Notes 9
Accounting
I)
Interest rates in macroeconomics
A)
Elasticity of substitution
A.1) The elasticity of substitution (full name should be the marginal
rate of substitution of the relative allocation)
A.2) Affects the real interest rate.
A.3) The
9-28
1 X=number of switches
Machine X: $2X=$0.65X+$135,000 $1.35X=$135,000 X=100,000
Machine Y: $2X=$0.3X+$204,000 $1.7X=$204,000 X=120,000
2 From the question 2, I can get this formula:
$0.65X+$135,000=$0.3X+$204,000
$0.35X=$69,000
X=197,143 units
3 Cost