A Company Makes Products a and B from 2 Resources

question 62

Multiple Choice

A company makes products A and B from 2 resources, labor and material. The company wants to determine the selling price which will maximize profits. A unit of product A costs 25 to make and demand is estimated to be 20 − .10 * Price of A. A unit of product B costs 18 to make and demand is estimated to be 30 − .07 * Price of B. The utilization of labor and materials and the available quantity of resources is shown in the table. A reasonable price for the products is between 100 and 200. Let X₁ = demand for As and X₂ = demand for Bs. Let P₁ = price for As and P₂ = price for Bs.
The objective function for this problem is?

• A) MAX 25 X₁ + 18 X₂
• B) MAX (20 − 0.10*P₁) X₁ + (30 − 0.07*P₂) X₂
• C) MAX 20 P₁ − 0.1 P₁² + 30 P₂ − 0.07 P₂² − 1040
• D) MAX 22.5 P₁ − 0.1 P₁² + 31.26 P₂ − 0.07 P₂² − 1040

Assess the quality of a company's earnings based on its deferred tax note and effective tax rate.

Recognize the importance of accounting for income taxes in corporate decision-making and financial reporting.

Differentiate between current and deferred tax expenses and understand their calculation according to GAAP.

Understand the concept and reporting requirements for deferred taxes and temporary differences in financial statements.

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Definitions:

Unrealized Holding

A profit or loss that arises from the change in value of an investment that has not yet been sold or realized.

Trading Securities

Financial instruments such as stocks and bonds that are bought and sold for the purpose of generating profits on short-term fluctuations in their prices.

Held-to-Maturity Securities

Held-to-maturity securities are debt securities that an investor intends and is able to hold until their maturity date, recorded at amortized cost.