Table 14-5 Ming and Henri Each Run One of the Two Dry

question 34

Multiple Choice

Table 14-5

Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-5 shows the payoff matrix containing the expected quarterly profits for each firm.
-Refer to Table 14-5.Does Henri have a dominant strategy? If yes, what is it?

• A)Yes, Henri's dominant strategy is to not offer free pickup and delivery.
• B)Yes, Henri's dominant strategy is to offer free pickup and delivery.
• C)No, Henri does not have a dominant strategy - his best outcome depends on what Ming does.
• D)Yes, Henri's dominant strategy is to wait and see what Ming does first.

Understand the estimation and calculation of predetermined overhead rates and their effects.

Distinguish between job costing and process costing systems and their applications.

Recognize the treatment and impact of errors in overhead allocation.

Comprehend the mechanisms for prorating underapplied or overapplied overhead across various accounts.

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Definitions:

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholder equity, indicating how effectively management is using a company’s assets to create profits.

Earnings Retention Ratio

The earnings retention ratio, also known as the plowback ratio, measures the percentage of net income that is retained in the company rather than being paid out as dividends.

Market Capitalization Rate

Market capitalization rate, or "cap rate", is used in evaluating and comparing the expected returns on investments in the equity market, reflecting the cost of capital for a company.

P/E Ratio

The price-to-earnings ratio, a valuation metric calculated by dividing the current market price of a stock by its earnings per share.