Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.16 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $9.49 million this year and $7.49 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $3.48 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 24% for all other products. The company's marginal corporate tax rate is 38% both this year and next year. What are the incremental earnings associated with the advertising campaign? Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign. Incremental Earnings Forecast ($ million) Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling, General, and Administrative Depreciation EBIT Income Tax at 38% Incremental Earnings $ 6969 $ EA $ $ EA EA $ $ EA $ Year 1

Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.16 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $9.49 million this year and $7.49 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $3.48 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 24% for all other products. The company's marginal corporate tax rate is 38% both this year and next year. What are the incremental earnings associated with the advertising campaign? Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign. Incremental Earnings Forecast ($ million) Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling, General, and Administrative Depreciation EBIT Income Tax at 38% Incremental Earnings $ 6969 $ EA $ $ EA EA $ $ EA $ Year 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. Illustrate the change in the market equilibrium through a graph. What presumably happened to the total revenues of the sellers during the = price hike period? Compute the price elasticity of demand. Derive the total revenue before the hike (TR1), and after the hike (TR2).
Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income increases. Use this information to estimate your income elasticity of demand for each of the items.
consider the demand function for good1, Q1 = 2452 - 7P1 + 0.4P2 - 1.25P3 + 0.09Y Where, price of good1 (P1) is 29, price of good2 (P2) is 181, price of good3 (P3) is 199, and income (Y) is 30466; (a) Find the price elasticity of demand (PED). (Give your answer to two decimal places) (b) Find the income elasticity of demand (YED). (Give your answer to two decimal places) (c) Find the cross-price elasticity of demand (XED) between good1 and good3. (Give your answer to east two decimal places) (d) Estimate the percentage change in the demand for good1 resulting from an 8% decrease in the price of good2. (Give your answer to two decimal places, if required) (e) Based on the value of YED, comment on the nature/type of the goods Answer in one word. (f) Based on the value of the XED between good 1 and good3, comment on the relationship between these two goods Answer in one word.
Mf2.
According to studies undertaken by the U.S. department of agriculture, the price elasticity of demand for cigarettes is about +0.5. Suppose a major brokerage firm advised its clients to buy cigarette stock under the assumption that, if consumer income rise by 50 percent as expected over the next decade, cigarette sales would double. Based on the fundamental economic principles on income elasticity of demand, a reasonable reaction to this investment advice would be?
Jim's Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demand for these two cameras are as follows (DS = demand for the Sky Eagle, Ps is the selling price of the Sky Eagle, DH is the demand for the Horizon and PH is the selling price of the Horizon): Ds = 230 - 0.5 Ps + 0.38 PH DH = 260 + 0.1 Ps - 0.62 PH The store wishes to determine the selling price that maximizes revenue for these two products. Select the revenue function for these two models. Choose the correct answer below. (i) Ps Ds + PHDH = PH(260 - 0.1 Ps - 0.62 PH) + Ps(230 - 0.5 Ps + 0.38 PH) (ii) Ps Ds - PH DH = Ps(230 - 0.5 Ps + 0.38 PH) - PH(260 - 0.1 Ps - 0.62 PH) (iii) Ps Ds + PH DH = Ps(230 - 0.5 Ps + 0.38 PH) + PH(260 + 0.1 Ps - 0.62 PH) (iv) Ps Ds - PH DH = Ps(230 + 0.5 Ps + 0.38 PH) - PH(260 - 0.1 Ps - 0.62 PH) Answer: Option 3 Find the prices that maximize revenue. Do not round intermediate calculations. If required, round your answers to two decimal places. Optimal Solution:…
Gr8 Ideaz Inc. has determined that the demand function for their heated socks is given by: 5 7P². a. Find E(p), the Elasticity of Demand as a function of price, p. E(p) = b. Find the Elasticity of Demand when heated socks are selling at a price of $10. Give result accurate to at least 3 decimal places. E(10) = c. At this price ($10): We would say the demand for heated socks is: Select an answer Based on this, in order to increase revenue we should: Select an answer d. Use the Elasticity model to determine the price that maximizes revenue. (Round result to 2 decimal places.) D(p) = = 345- p=
You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 80 percent of your revenues, which grow about 2 percent annually. You recently received a preliminary report that suggests the growth rate in ebook reading has leveled off, and that the cross-price elasticity of demand between paper books and ebooks is −0.2. In 2019, your company earned about $150 million from sales of ebooks and about $600 million from sales of paper books. If your data analytics team estimates the own price elasticity of demand for paper books is −2.5, how will a 1 percent decrease in the price of paper books affect your overall revenues from both paper books and ebooks sales?
Amazon.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Amazon.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A (sales per week) Group B (sales per week) Vol. of sales before 10% discount 1.55M 1.50M Vol. of sales after 10% discount 1.65M 1.70M Using the midpoint method, calculate the price elasticities of demand for group A and group B. Explain how the discount will affect total revenue from each group. Suppose Amazon.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Amazon.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
*4* When the price of product "X" is (P1=) $42, Shyanne purchases 20 units of product "X" and when the price of product "X" is (P2=) $38, she purchases 30 units of product "X". Shyanne's "arc" price elasticity of demand for product "X" is (Ex,x =): O" -0.25 " and the demand for "X" is relatively elastic. -4.00 " and the demand for "X" is relatively inelastic. O"-0.25 " and the demand for "X" is relatively inelastic. O " -4.00 " and the demand for "X" is relatively elastic. -0.25 " and "X" is a "normal" good. Save & Continue Continue without saving
are products that are usually consumed together and for which an increase in the price of one good reduces the demand for another good. [ 4.4.2 Cross-Price Elasticity of Demand] A) Complements Inferior goods Substitutes D) Normal goods
-A large multinational shipping company, MGC, Inc. has just decided to spend €10 million on new storage space in Munich, €45 million on new aircraft, and €5 million on additional acquisition of kerosene. In addition to these expenses, the company is producing 5 million parcels at a price of €5 per parcel. Now suppose that MGC plans to have a tenth of that production in inventory. Over time, the company's parcels have met with increasing demand, but the inventory has only increased by €1 million. a. What is this firm's total planned investment? b. How much did the firm actually invest? c. What is the difference between actual and planned investment? Should MGC produce more or fewer parcels? Why?