Price of Underlying >= Strike Price of Short Call Covered Combination Payoff Diagram Unlimited Risk Large losses can be experienced when writing a covered combination when the underlying stock price makes a strong move downwards below the breakeven point at expiration. This strategy loses money twice as fast as a regular covered call write as the covered combination loses not only on the long stock position but also on the short put. The formula for calculating loss is given below: Maximum
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Question 2 Cost Volume Profit Analysis 1.0 Introduction According to Jon Scheumann “a successful organizations need a culture that is attuned to cost management and pay attention to cost structure” From that statement manager must pay attention and carefully thinking when do decision making to the cost. For example when manager want to target the profit. They must take every cost that related in production such as variable cost and fix costs. Cost Volume profit analysis is used in decisions
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2 METHODOLOGY 2.1 Explanation of Methodology 2.2 Effort in Methodology Refinement 3 REGRESSION ANALYSIS 3.1 Predictive Analysis 3.2 Interpretation of Findings 4 COST-VOLUME-PROFIT ANALYSIS 4.1 Breakeven Analysis 4.2 CVP Chart 4.3 Interpretation of Findings 5 ACTIVITY-BASED COSTING 5.1 Identification of indirect activities and drivers 5.2 Communication and explanation of drivers 6 ANNUAL PROJECTIONS
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Place your name and the date at the top of the page‚ and answer the following questions making sure you SHOW YOUR WORK. 1. A hardware store bought a gross (12 dozen) of hammers‚ paying $602.40 for the total order. The retailer estimated operating expenses for this product to be 35% of sales‚ and wanted a net profit of 5% of sales. The retailer expected no markdowns. What retail selling price should be set for each hammer? [Hint: The way to handle this problem is to say that the Gross Profit Margin
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Executive Summary: The Director of the European Interior Components Product Line Team of Morgan Components Company‚ Sean O’Fearna is facing a difficult decision. He needs to respond to the price reduction request on a door panel project‚ which would take-off in six months. The initial contract was signed at a price of 90 euros between Asiacar and Plasticom. Morgan Components took ownership of the contract‚ as it acquired the Clondalkin plant of Plasticom. The project was seen infeasible by Morgan
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many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process is more cost effective). For each process the following fixed costs and variable costs are identified below: Anchor and Process Process A Process B Sale price per anchor $45.00 $45.00 Total Fixed cost $ 650
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Case 26-4: Baldwin Bicycle Company* Note: This case is unchanged from the Eleventh Edition Approach The broad issue in this case is the analysis of the profitability of a company’s sales to specific customers. Most differential cost cases dealing with incremental volume are such that the student can reasonably assume that the “great majority (if not all) of the differential cost items will be variable costs. In this instance‚ a possible medium-to-long term volume increase of 22 percent suggests that
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PAPER - 2 BUS529AO2- MANAGERIAL ECONOMICS PROFESSOR: Dr. JOHN THEODORE RIVIER UNIVERSITY KARTHIK GIRIDHAVAR Problem 1 Gomez runs a small pottery firm. He hires one helper at $12‚000 per year‚ pays annual rent of $5000 for his shop‚ and spends $20‚000 per year on materials. He has $40‚000 of his own funds invested in equipment (pottery wheels‚ kilns‚ and so forth) that could earn him $4000 per year if alternatively invested. He has been offered $15‚000 per year to work as a potter for a competitor
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All debt at 9% 3.All preferred stock with 7% dividend EBIT is $ 1‚400‚000 and tax rate is 50%. 200‚000 shares of stock are presently outstanding.Common stock can be sold at $ 50 per share.( 100‚000 additional shares) To determine the EBIT breakeven‚ EPS is calculated for a hypothetical level of EBIT. In this example‚ the hypothetical level of EBIT is $
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was derived by subtracting the net profit margin (10%) from the mark-up on the sales price versus variable costs (15%). (See Appendix A) If the proposal from the private brand was accepted‚ to breakeven in year one‚ Swisher must sell 8‚385 mowers. In year two‚ 7‚623 mowers must be sold. To determine breakeven for the proposal‚ five percent was subtracted from the Manufactures Retail Price. The private brand proposal stipulated that this must be the price per acquired Road King. Also‚ variable costs
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