Lab Assignment 8: Chapters 19 and 20

Compute the amount of each foreign currency that can be purchased for $620,000:

a.

1 Danish krone = $0.1760 (Round your answer to 2 decimal places.)

Foreign currency

krone

b.

1 Indian rupee = $0.0222 (Round your answer to 2 decimal places.)

Foreign currency

rupee

c.

1 Israeli shekel = $0.2787 (Round your answer to 2 decimal places.)

Foreign currency

shekel

Jenny’s Day Care is considering a merger with Lionel’s Diaper Manufacturers. Jenny’s total operating costs of producing services are $625,000 for sales volume (Sj) of $2.7 million. Lionel’s total operating costs of producing services are $390,000 for a sales volume (SL) of $1.7m.

a.

Calculate the average cost of production for the two firms. (Round your answers to 2 decimal places.)

Average cost

Jenny's

%

Lionel's

%

b.

For a sales volume of $4.4 million, calculate the reduction in production costs the merged firms need to experience such that the total average cost (TAC) for the merged firms is equal to 20 percent.

Needed reduction in production costs

$

Peter’s TV Supplies is considering a merger with Jan’s Radio Supply Stores. Peter’s total operating costs of producing services are $380,000 for a sales volume (S_P) of $5.8 million. Jan’s total operating costs of producing services are $63,000 for a sales volume (S_j) of $680,000.

a.

Calculate the average cost of production for the two firms. (Round your answers to 2 decimal places.)

Average cost

Peter

%

Jan

%

b.

If the two firms merge, calculate the total average cost (TAC) for the merged firm assuming no synergies. (Round your answer to 2 decimal places.)

Total average cost

%

c.

Suppose, instead, that synergies in the production process result in a cost of production for the merged firms totaling $400,000 for a sales volume of $6,480,000. Calculate the total average cost (TAC) for the merged firm. (Round your answer to 2 decimal places.)

Total average cost

%

Convert each of the following direct quotes to dollar indirect quotes:

a.

1 Danish krone = $0.1815 (Round your answer to 3 decimal places.)

Exchange rate

krone

b.

1 Indian rupee = $0.0233 (Round your answer to 3 decimal places.)

Exchange rate

rupee

c.

1 Israeli shekel = $0.2798 (Round your answer to 3 decimal places.)

Exchange rate

shekel