Answer:
to survive today, organizations need to be present in both the online and physical markets
Explanation:
So far Amazon has dominated the online space when it comes to buying products and services. But the scenario in the question makes it clear that having only one channel open to customers (online) is not sufficient.
It is necessary to diversify by having physical stores in addition to online stores.
Some consumers for example will want to examine what they are buying before paying, others will not have the patience to wait for delivery of goods. So the physical store will serve these segments of customer's.
Final answer:
Amazon's move into physical retail through the acquisition of Whole Foods and the opening of physical stores represents a blend of online and direct customer interaction, leveraging economies of scale for expanded growth.
Explanation:
The general insight regarding Amazon's acquisition of Whole Foods and their expansion into physical retail stores demonstrates a strategic move of blending online dominance with brick-and-mortar presence. While Amazon had traditionally been an online retailer, holding inventory in computerized warehouses, it is now leveraging Whole Foods' nearly 500 stores for rapid physical expansion, thereby gaining the benefits of direct customer interaction and potentially faster delivery options.
By moving into physical spaces in various states including California, Oregon, and Washington, with future plans for Illinois, Massachusetts, New Jersey, and New York, Amazon showcases the economies of scale it can harness. These economies are possible through its highly automated warehouses located in low-rent areas that contribute to lower average costs per sale, highlighting Amazon's continuous exploration of growth opportunities by diversifying its sales approach.
Consider the following statement:
Local government bans on plastic grocery bags due to environmental concerns have led to increased emergency room visits and deaths related to harmful bacteria such as E. coli, as many people do not wash their bags after each use.
Which of the following best characterizes the statement?
a. The statement demonstrates that even when government policies are enacted with good intentions, they do not always guarantee good outcomes due to unintended consequences and secondary effects.
b. The statement shows that all environmental regulations have benefits that exceed the costs.
c. The statement demonstrates that normative economics is often confused with positive economics.
d. The statement is an example of the fallacy of composition because all foods do not contain harmful bacteria.
Answer:
a. The statement demonstrates that even when government policies are enacted with good intentions, they do not always guarantee good outcomes due to unintended consequences and secondary effects.
Explanation:
The government had good intentions by banning plastic grocery bags for environmental concerns, but this led to harmful E. coli infections.
The take-away is that when policies are implemented, apart from the primary effect the secondary long term effect should also be considered.
Which of the following are steps in the warehouse management process?a. Create goods receiptb. Confirm transfer orderc. Create stock transfer orderd. Create transfer requiremente. Post goods issue
Answer:
Create transfer order
Confirm transfer order
Explanation:
A warehouse management system (WMS) refers to the software and procedures allowing companies to track and oversee warehouse activities from the moment that goods or products reach a warehouse before they pass out. Warehouse activities involve stock management and process picking and auditing.
In developing the transfer order stage, process must decide all the containers in the storage that are impacted by the transfer of the products (source storage bin, destination storage bin, and possibly also the return storage bin) and adjust the processing bin data directly.
Within this step, the supervisor confirms a transition order or transfer order product and verify that the quantity of material required has actually been moved from one area to the next, and that the processing of the transfer order or item has also been finished.
The listed steps are part of the warehouse management process that ensures inventory accuracy and efficient flow of goods in a warehouse as part of the larger supply chain sequence from production to distribution.
The steps in the warehouse management process that you've listed are integral to ensuring a seamless flow in the supply chain. These steps fit into larger stages, which include the typical supply chain processes, such as:
Extraction of raw materialsAcquisition of componentsProductionInventoryTransportationWorking with wholesalersDistribution to retailersIn the context of a warehouse management system (WMS), the steps you have listed play specific roles:
Create goods receipt - This is the step where the warehouse takes account of the received goods and updates its inventory.Confirm transfer order - Here, a warehouse worker completes the task of moving goods within the warehouse as directed by the system.Create stock transfer order - This step involves creating an order for moving stock from one location to another internally.Create transfer requirement - This initiates the process of moving goods, usually based on a sales order or production requirements.Post goods issue - This is final step where the goods leave the warehouse, updating the inventory to reflect the goods that have been dispatched or sold.Each of these steps helps in developing the product, developing the process, and developing the controls that will ultimately be transferred to Operations as part of the overall warehouse management strategy.
Chaos State Bank has an old computer system which can go down for weeks at a time, leaving customers unable to access their accounts online. Many customers have left the bank for banks with more reliable computer systems. Which type of risk would this be an example of_____________A. Operational riskB. Legal riskC. Compliance riskD. Strategic riskE. Reputation risk
Answer: A. Operational risk
Explanation:
Operational risk is a possibility of loss that happens as a result of inefficient system or policies, it could also be a result of someone not following internal policies or due process. Operational risk can be as a result of factors such as natural disasters, unfavourable or weak financial policies, fraudulent acts, etc.
The disappearance of the family farm can be partially attributed to the fact that the elasticity of demand for wheat is __________, while at the same time, the income elasticity for wheat is __________.
Ruth keeps account of her family's expenses. She keeps track of the entire family's needs and discusses with other family members about what products need to be bought. She realizes that the family requires a bigger refrigerator and discusses this with her parents. She collects information about refrigerators from various brands so that her parents can make an informed decision. In the given scenario, Ruth plays the role of the ________ in the household purchase process.a. innovator
b. influencer
c. gatekeeper
d. purchaser
The correct answer is B. Influencer
Explanation:
In the purchasing process, an influencer refers to an individual who influences or affects the purchasing process; this includes the type of products other people buy, the reasons to buy them, and the frequency these are bought. Due to this, influencers can make other people pay for certain services or products or abstain from doing this.
In the case presented, Ruth acts as an influencer because through her actions she convinces her family they need to buy a refrigerator, which means she affects the purchasing process. Also, as an influencer, she is the one that chooses the type of product and she informs the buyers (her parents) about the reasons for buying this.
Changes in tariffs and quotas are A) a means of slowing outsourcing. B) corporate strategies designed to maximize profits. C) business actions stimulating imports. D) efforts to stimulate choices among government agencies. E) government actions that reduce competition from international firms.
Answer:
E) government actions that reduce competition from international firms.
Explanation:
Quotas place a limit on the amount of goods that can be imported.
A tariff is a tax levied on imported goods.
Tariffs and quotas are imposed by the government and they limit the amount of import flowing into a country. This reduces the amount of competition from international firms.
I hope my answer helps you
Changes in tariffs and quotas are a form of protectionism, a policy adopted by governments to shield domestic producers and workers from foreign competition by making imported goods more expensive.
Explanation:Changes in tariffs and quotas are primarily means implemented by a government to reduce competition from international firms, making the correct answer E) government actions that reduce competition from international firms.
This is part of a concept known as protectionism. Governments engage in protectionism to safeguard their domestic producers and workers from foreign competition.
The key tools in protectionism are tariffs, import quotas, and non-tariff barriers. For example, a government may place tariffs on goods imported from abroad to make them more expensive and thereby encourage consumers to buy domestic products instead.
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A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,
a.it is best to shut down the bed & breakfast since it is taking a loss.
b.it is best to ignore sunk costs and keep the bed & breakfast operating.
c.it is best to shut down the bed & breakfast even though it is making a profit
d.it is best to keep the bed & breakfast operating because it is profitable.
Answer:
b.it is best to ignore sunk costs and keep the bed & breakfast operating.
Explanation:
The owner of the store will face the mortgage cost wether the bed and breakfast is open or closed therefore it should be ignore in the short-term for the decision wether or not to keep the business open.
The business revenues are 6,000 while their cost 4,000 thie means there is a contribution of 2,000 then we subtract the mortage to get a loss 1,000
If closed the losses will increase to 3,000 asthe mortage expense would not disappear.
We should keep it open and look for ways to either sale or rent the space for a better gain than 2,000
Final answer:
In the short term, the bed & breakfast should keep operating since the revenue of $6000 per month covers the variable costs of $4000, contributing $2000 towards the fixed mortgage cost.
Explanation:
When considering whether to keep a bed & breakfast operating we must apply the shutdown rule. This rule advises that even if a business cannot cover all its fixed costs, it should continue to operate in the short term if it can cover its variable costs with the revenue generated. In this scenario, the bed & breakfast's variable costs rise by $4000 per month, but there is $6000 per month in revenue. While the mortgage is a sunk cost and remains unchanged whether the business operates or not, the revenue exceeds the variable costs by $2000, meaning that, in the short run, the bed & breakfast should continue operating as it contributes towards the fixed costs.
Which of the following does not describe a trial balance? a. Proves that all transactions have been recorded b. Proves the mathematical equality of debits and credits after posting c. Assists in the preparation of the financial statements d. May uncover errors in journalizing and posting
Answer:
Statement which doesn't describe a trail balance is: Option A: Proves that all transactions have been recorded.
Explanation:
A Trial balance lists the accounts and their balances. It is like an internal control made by the accountants to check general ledger's accuracy. It extracts the list of debit and credit balance from the ledger and adds them. They should be equal else some error has been made. These errors might be human. It doesn't prove that company has recorded all its transactions.
So, all statements are correct describing trial balance except Option A.
Tina and James have made an offer on a four-bedroom home that will be much more costly than their present mortgage. The day after making the offer, James learns his company is being sold and he will probably lose his job. Are Tina and James contractually obligated to the offer they have made on the new home?
A. Yes, an offer is put onto a purchase contract form and is legally binding.
B. No, an offer is just an offer until it is accepted by the seller. Once the owner has accepted the offer, the offeror is legally bound to the contract.
C. It depends. If Tina and James have not received notification of the seller's accepting the offer, they may legally withdraw the offer and not be held liable on the contract. However, if the offer has been accepted, and communication of this offer has been received by the buyer, it is legally binding.
D. None of the Above
Answer:
C. It depends. If Tina and James have not received notification of the seller's accepting the offer, they may legally withdraw the offer and not be held liable on the contract. However, if the offer has been accepted, and communication of this offer has been received by the buyer, it is legally binding.
Explanation:
This requirement is made as a form of protection between the sellers and the buyers. After all the parties involved signed the contract, both parties now held accountable to fulfill their part in the contract. No matter what situation occurs in each party, both of them are obligated to fulfill their contract.
In this case, Tina and James are required to pay the agreed upon numbers to the owner of the property. The owner now prohibited to sell the property to other people beside Tina and James.
The only way out for Tina and James in this situation is to convince the seller to nullify the contract by explaining their situation.
Which of the following is not one of the different classes of stocks A. Growth stock B. Preferred Stock C. Common stock CSR
Answer:
A. Growth Stock
Explanation:
Stocks are divided into classes based upon their features with respect to the rights they carry. Usually stocks are of two classes:
Common StockPreferred StockWhile the former carry voting rights and avail dividends as per the profitability of the company, the latter carry preferential rights with respect to principal repayment in the event of winding up apart from carrying a fixed rate of dividend which must be paid periodically.
Growth Stocks refer to those stocks which yield higher rate of growth than average market rate but don't usually carry a right to dividend. Growth stocks relate to capital appreciation.
When an organization has a strong talent pool available from which it can draw employees, the organization is positively influenced by the ______ in the external environment on the organization.
Answer: Labor force
Explanation: Labor force refers to the section of individuals within an environment who are employed and those who are seeking to get a job within an organization. The term labor force also called work force could refer to workers within a particular organization or those within a certain geographic location. An environment with a pool of talented labor force will no doubt have a highly positive on the organizations within that environment because these organizations will be able to recruit or hire brilliant minds which is a characteristic of the labor force in the environment.
Elba Company leased machinery to Conecuh Company on January 1, 2017, for a ten-year period expiring December 31, 2026. Equal annual payments under the lease are $300,000 and are due on January 1 of each year. The first payment was made on January 1, 2017. The rate of interest used by Elba and Conecuh is 9%. The cash selling price of the machinery is $2,100,000 and the cost of the machinery on Elba's accounting records was $1,860,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Elba, what amount of interest revenue would Elba record for the year ended December 31, 2017?A. $0
B. $162,000
C. $189,000
D. $81,000
Answer:
The interest charged for the year will be the amount that Conecuh has to pay at the start of the year. In this case the amount that Conecuh has to pay at the start of the year (January 1, 2017) is the amount left after his equal annual payment. The price at which Conecuh purchased is $2,100,000 of which $300,000 was paid at the start of the year. So the residue amount is:
Liability = $2,100,000 - $300,000 = $1,800,000
So the interest charge which is 9% is= $1,800,000 * 9% = $162,000
Option B is the correct answer.
A large film production company merges with a popular sound processing studio, resulting in the formation of a new company out of the two previously independent firms. This is most likely an example of a _____.
A. market extension merger
B. conglomerate merger
C. vertical merger
D. horizontal merger
Answer:
c. vertical merger
Explanation:
Answer:
The correct answer is letter "C": vertical merger.
Explanation:
A vertical merger happens when operations combine between two companies producing goods or services for the same finished products. Generally, the two combined companies work at different levels in the supply chain of a single industry, and they are expected to act more effectively as one.
During May, the cost of goods manufactured was $55,000. The beginning finished goods inventory for the month was $22,000, and the ending finished goods inventory was $34,000. What was the cost of goods sold for May?
Answer:
$43,000
Explanation:
The cost of goods sold refers to the direct expense incurred in producing goods sold by a company. The formula for calculating the cost of goods sold (COGS) is as follows
COGS=Beginning Inventory+Purchases −Ending Inventory. For a manufacturing firm, Purchases is replaced by manufactured goods.
In this case:
Beginning inventory is $22,000
Ending inventory is $ 34000
Cost of manufactured goods is $55,000
Therefore:
COGS = $22000+ $55000 -$34,000
COGS =$43,000
JBC Customs only hires people who are curious and eager to learn as its managers believe that those are the two traits every employee needs to have if they want to contribute anything of value to the company. Every applicant is carefully screened, and only those applicants who have these two traits are chosen to proceed further in the hiring process. In this scenario, JBC Customs is using _____
A) concertive control
B) adaptive control
C) bureaucratic control
D) normative control
Answer: (D) Normative control
Explanation:
The normative control is refers to the process of governing the behavior and the values of the different types of standards and the norms. It basically handle all the financial, bureaucratic, financial and the quality related controls in an organization.
According to the given question, the normative control basically used by the JBC custom for the hiring process and the every applicant are carefully screen by an organization.
Therefore, Option (D) is correct answer.
Activity sequencing involves reviewing the activity list and attributes, project scope statement, and milestone list to determine the relationships or dependencies between activities.a. Trueb. False
Answer:
The correct answer is letter "A": True.
Explanation:
Activity sequencing is the set of steps organizations follow to accomplish certain tasks or even to reach greater goals at the corporate level. The activity implies finishing with a stage and jumping into the next one immediately after that according to a line-up strategically outlined.
The distinction between substitutes and complements is A. substitute goods are used together while complementary goods are used for the same purposes. B. when income increases, demand for a complementary good decreases while demand for a substitute good increases. C. substitute goods are used for the same purposes while complementary goods are used together. D. when income increases, demand for a substitute good increases while demand for a complementary good falls.
Answer:
C. substitute goods are used for the same purposes while complementary goods are used together
Explanation:
Substitute goods are goods that can be used in place of another good because they serve the same purposes. For example, butter and margarine can be substitutes. If the price of butter increases, the demand for butter falls and consumers shift to consuming margarine.
Complementary goods are goods that are consumed together. For example, gasoline and car are complementary goods. If the price of car falls, the demand for gasoline rises.
I hope my answer helps you
Substitute goods can be used interchangeably to fulfill similar purposes, while complementary goods are typically consumed together to complement each other.
Substitutes and complements are terms used to describe the relationship between two goods in economics. Substitute goods are products that can be used in place of each other to satisfy a particular need or want.
For example, if the price of tea increases significantly, people might switch to coffee as a substitute to fulfill their desire for a hot beverage. On the other hand, complementary goods are items that are often consumed together because they enhance each other's utility.
Classic examples are peanut butter and jelly or computers and software - when the price of one increases, the demand for the other tends to decrease.
Hence the correct option is (c).
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All else equal, when investors consider a firm's return on equity (ROE) they consider less risky a firm that earns proportionately more of that return from operating activities as opposed to nonoperating activities. Select one: True False
Answer:
True
Explanation:
Return from operating activities are returns made from the regular and recurring operations of a business. Since they are from the normal operations of a company, they are less risky than returns made from the non-operating activities of a company which do not re-occur.
As such, a firm that earns more of its return from operating activities which are recurring is usually considered less risky than a firm than earns more of its return from non-operating activities which are usually one-off.
In thinking about it, Jerzy realizes that he and Leon could create a shoe-manufacturing facility in Spain. Doing so would certainly require a large outlay of money, but Jerzy thinks that with his expertise in shoe design and Leon’s expertise in navigating Spanish management and business practices, they could create a partnership that has true synergy.(A) Global outsourcing (B) Acquisition (C) Licensing (D) Joint venture
Answer:
In thinking about it, Jerzy realizes that he and Leon could create a shoe-manufacturing facility in Spain. Doing so would certainly require a large outlay of money, but Jerzy thinks that with his expertise in shoe design and Leon’s expertise in navigating Spanish management and business practices, they could create a partnership that has true synergy Licensing
Explanation:
Jerzy and Leon thought they could be licensed to start the business since both of them are expertise in design and navigatingspanish management and business practices. These should give them the edge to be licensed and kickj start the business of shoe manufacturing
Organizational markets is another name for _____. A. single-sourcing markets B. outsourcing C. business-to-business markets D. government markets E. resellers
Option C
Organizational markets is another name for business-to-business markets
Explanation:B2B (business-to-business) marketing is retailing of goods to companies or another businesses for aid in making of goods, for application in usual business processes, or resale to different users, so as a wholesaler marketing to a retailer.
Business to business commits to trade that is carried within organizations, preferably than within a firm and personal customers. While buyers accept goods based not solely on cost but on reputation, rank, and additional sensitive triggers, B2B customers obtain judgments on value and gain inherent simply.
_______ are special-purpose printers that use output from graphics tablets or other graphical input devices that are typically found in architectural and engineering environments.
Answer:
The correct word for the blank space is: Plotters.
Explanation:
Plotters are high precision printing and cutting devices. They are used to print plans and projects. They are considered external devices that allow drawing o scheme diagrams and graphs. There are monochromatic plotters and other versions of four, eight, and twelve colors.
The correct answer which can be used to complete the given sentence is:
Plotters
Based on the given question, we can see that we need to find the name of a special purpose printer which makes use of output from graphical input devices.
With this in mind, we can see that a plotter is the correct answer because they make use of high precision to print building plans and are considered as external devices because they are not like the conventional printers which makes use of papers.
Therefore, the correct answer is plotters
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Sunset Resort, a successful 100-year-old hotel and resort, entered into a co-marketing arrangement with Sleepytime Hotels, a five-star hotel chain. Both companies benefit from the new relationship. Pleasant is now able to market its facility and services through Sleepytime's marketing team, and Sleepytime Hotels now offers access to an upscale resort that it can recommend to its customers who are looking for a resort experience. Sleepytime Hotels and Sunset Resort can be considered strategic allies.
Answer:
Yes its true that both companies are strategic allies.
Explanation:
In strategic alliance, two companies work together to achieve their combined objectives. For example if we talk about Sony Ericson K510i cellphone, it was one of best selling cell phones at its time because two companies Sony and Ericson worked together to increase their sales and earn profit. One of these had display and camera capabilities and the other had cellphone designs, etc. These were the things that made the product differentiated from the rest of the cellphones and we see that both companies earned a lot from it.
Sunset Resort and Sleepytime Hotels have entered into a co-marketing arrangement, making them strategic allies to benefit from each other's services.
Explanation:Sunset Resort and Sleepytime Hotels can be considered strategic allies as they have entered into a co-marketing arrangement whereby both companies benefit from the new relationship. Sunset Resort is able to market its facility and services through Sleepytime's marketing team, while Sleepytime Hotels can recommend Sunset Resort to its customers looking for a resort experience. This partnership allows both companies to expand their offerings and reach a wider customer base.
In the implementation phase of the marketing process, ethics can be introduced by _______. a. including ethical statements in the firm's mission and vision b. statements policing the violation of human rights and child labor laws c. encouraging employees to exhibit ethical behavior d. putting systems in place to check ethical issues and react to changes
Answer:
The correct answer is C
Explanation:
In the phase of the implementation or execution of the strategy of the marketing, when the business or firms are recognizing the potential markets and the methods to deliver the 4Ps and the firms also need to consider the issues of the ethical.
Under this phase, the ethics is defined as encouraging or inspire or uplift the employees in order to exhibit the ethical behavior.
A set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization is referred to as itsa.core benefit proposition. b.corporate philosophy. c.organizational culture. d.core value proposition.
Answer: Corporate culture.
Explanation:
The Corporate culture of a company is the ideas, behavior and values that are shared among workers of that company and it is normally in line with the vision and mission statements of that company. The Corporate culture of an organization is what makes it stand out from other similar Organizations.
__________ consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input).
Answer:
Secondary Activities
Explanation:
Secondary activities inside an organization are those who support the primary activity. The primary activity consists in the production and distribution of goods and/or services to customers, while secondary activities are meant to improve aspects of the primary activity.
For example, the goal of human resources is to create good labor conditions so that employees are happier, and therefore, more productive. And the goal of the technology department is to engage in research to produce new goods or provide new services in the future.
Eula, a company that manufactures soda, offers its latest products at very low prices. Eula's strategy is based on the assumption that more customers will be willing to buy its products if they are offered at lower prices. Eula has adopted this strategy to attract a larger customer base and increase its sales volume even though it will only gain a small profit on each individual sale. In this scenario, Eula has implemented the _________ strategy.A. high/low pricing
B. skimming pricing
C. penetration pricing
D. loss-leader pricing
Answer:
C. penetration pricing
Explanation:
Penetration pricing is a marketing strategy where price is set to a low amount in order to get a large portion of the market within a short time.
It is based on the logic that consumers will prefer to buy goods at lower prices.
Penetration pricing is used to get market share and profits are gained at scale. That is small profits on each sale, and when there is large sales turnover profit will be high.
In order to generate quick revenue, Helium Corp., an electronics manufacturing firm makes a technical improvement to one of its competitor's ERP offerings. This is an example of _____.
1. leveraged creativity
2. state-of-the-art breakthrough
3. applications engineering
4. product adaptation
Answer:
This is an example of:
4. product adaptation
Explanation:
Product adaptation is the process by which the management of a company changes product features to meet the needs of specific consumers. It can involve the improvement of a key feature that meets customer demand. This improves a company's competitive advantage over it's rivals. There are various reason as to why a product might need to be improved, namely;
1. To meet the regulatory standards in that particular area. Maybe the specification standards has changed, so the company also adjusts it's products to fit into the threshold of the required standards.
2. To make the product more attractive to a particular audience.
In general, product adaptation is meant to increase the market share especially in a business environment that is always changing with respect to customer needs and business regulations. An increased market share for the improved products usually translates to increased profit margins. Big profit margins is usually considered as a sign of success by most commercial businesses.
Which kind of norm is so deeply ingrained that the very thought of breaking it brings feelings of disgust or horror?
A comparative financial statement:
a. Places the balance sheet, the income statement, and the statement of cash flows side-by-side in order to compare the results
b. Places two or more years of a financial statement side-by-side in order to compare results
c. Places the financial statements of two or more companies side-by-side in order to compare results
d. Places the dollar amounts next to the percentage amounts of a given year for the income statement
Answer:
The answer is B
Explanation:
A comparative financial statement compares places two or more years financial statement together in order to compare.
It is always referred to as horizontal analysis because it is the same company and we are only comparing the previous years and the current year result which are placed side by side. Hence, the reason why it is called horizontal analysis.
Eric Christie and Johnnie Pitt organize a partnership. Their partnership agreement states that Christie will receive two-thirds of the partnership income or loss and Pitt will receive the remaining one-third. On January 2, the two partners agree to accept Peter Morgan as a partner with a 10% interest if Morgan invests $50,000 cash. At the time of Morgan's admission, the partnership`s accounting records show that Christie has recorded equity of $210,000 and Pitt has recorded equity of $60,000. The bonus that will be allocated to Christie as a result of this transaction (rounded to the nearest dollar) is:_______
Final answer:
Eric Christie receives a bonus of $90,000 when Peter Morgan invests $50,000 for a 10% interest in the partnership based on the implied and book values of Christie's equity before and after the transaction.
Explanation:
The transaction of accepting Peter Morgan as a partner involves calculating the bonus allocation for the existing partners, Eric Christie and Johnnie Pitt. We begin by determining the total capital or equity before Morgan's investment, which is $210,000 for Christie and $60,000 for Pitt, resulting in a total of $270,000. When Morgan invests $50,000 for a 10% interest, it implies the total post-investment valuation of the partnership to be $500,000 ($50,000 is 10% of $500,000). Thus, the implied value of the existing partnership before the investment is $450,000 ($500,000 - Morgan's $50,000).
To determine the bonus to Christie, we calculate the difference between the implied value of his share before the investment and the book value of his equity. Before the investment, two-thirds of the implied $450,000 value is $300,000. Subtracting Christie's book equity of $210,000 from this amount gives us a bonus of $90,000. However, since Christie and Pitt must now share their combined bonus with Morgan (who doesn't get a bonus but instead pays for his share), Christie's bonus is his two-thirds share of the $90,000 (the combined bonus before deducting Morgan's investment).
The calculation of Christie's bonus is as follows:
Total equity before Morgan's investment: $210,000 (Christie) + $60,000 (Pitt) = $270,000Total post-investment valuation: $50,000 / 10% = $500,000Implied value of existing partnership: $500,000 - $50,000 = $450,000Christie's share of the implied value: 2/3 of $450,000 = $300,000Bonus to Christie: $300,000 (implied share) - $210,000 (book equity) = $90,000Therefore, the bonus allocated to Christie as a result of the transaction is $90,000.