Answer:
$148.3 million
Explanation:
Calculation to determine the deferred tax liability that Isaac would report in its year-end 2021 balance sheet
Using this formula
Deferred tax liability=Total future taxable income × Tax rate
Let plug in the formula
Deferred tax liability=(2022 137 million+2023 129 million+2024 162 million+2025 165 million)*25%
Deferred tax liability=$593 million*25%
Deferred tax liability=$148.3 million
Therefore the deferred tax liability that Isaac would report in its year-end 2021 balance sheet is $148.3 million
A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will
Answer:
Increase and remain the same respectively
Explanation:
Given the above information, we know that current ratio is computed as;
Current ratio = Current assets ÷ Current liabilities
Current ratio = $60,000 ÷ $34,000
Current ratio = 1: 1.76
Working capital is computed as;
= Current asset - Current liabilities
= $60,000 - $34,000
= $26,000
As a result of the above, the current ratio increased because of the reduction in the current liabilities value while the working capital remains the same.
NorthRim Inc. (NRI), imports extreme condition outdoor wear and equipment from the Allofit Territories Company (ATC) located in Canada. With the steady decline of the U.S dollar against the Canadian dollar NRI is finding a continued relationship with ATC to be an increasingly difficult proposition. In response to NRI's request, ATC has proposed the following risk-sharing arrangement. First, set the current spot rate as the base rate. As long as spot rates stay within 5% (up or down) NRI will pay at the base rate. Any rate outside of the 5% range, ATC will share equally with NRI the difference between the spot rate and the base rate. If the current spot rate is C$1.20/$, what are the upper and lower limits for trading to take place at C$1.20?
a. C$1.205/$ - C$1.195/$
b. C$1.15/$ - C$1.25/$
c. C$1.14/$ - C$1.26/$
d. none of the above
Answer:
The answer is "Option C".
Explanation:
Let
Spot rate = Base rate= 1.20
Within the [tex]5\%[/tex] range, the trade will taking the place at the base rate that is [tex]=1.20[/tex]
Calculating the lower limit:
[tex]\to 1.20 - (5\% \times 1.20) =1.20 - (0.06)= 1.20 - 0.006 = 1.14\\\\\to 1.20 + (5\% \times 1.20)=1.20 + (0.06) = 1.20 + 0.006 = 1.26[/tex]
You want to have $2.7 million when you retire in 37 years. You feel that you can save $600 per month until you retire. What APR do you have to earn in order to achieve your goal
Answer:
9.87%
Explanation:
Calculation to determine What APR do you have to earn in order to achieve your goal
$2.7 million = $600{[(1 + r)444 − 1] / r}
r = .0082*100
r=.82%
r = .82% × 12
r = 9.87%
Therefore the APR you have to earn in order to achieve your goal is 9.87%
Gena Manufacturing Company has a fixed cost of $225,000 for the production of tubes. Estimated sales are 150,000 units. A before tax profit of $125,000 is desired by the controller. If the tubes sell for $5 each, what unit contribution margin is required to attain the profit target?
$1.47.
$2.33.
$3.00.
$0.90.
Answer: $2.33
Explanation:
The unit contribution margin that is required to attain the profit target will be calculated thus:
= (Fixed cost + Desired profit) / Estimated units
= ($225,000 + $125,000) / 150,000
= $350,000 / 150,000
= $2.33
Therefore, the unit contribution margin is $2.33
A machine shop uses a periodic system to maintain the inventory saw blades. The review period is four days and lead time is two days. They use an average of 11 saw blades per day. The standard deviation of use over a six-day period is 9 saw blades. Saw blades aren't the most critical item they carry, but the manager would like to limit the probability of a stockout to 2.5% of the time. What should their restocking level be
Answer:
the restocking level is 147 units
Explanation:
The computation of the restocking level is shown below:
= (11 × (2 + 4)) + 9 × 1.96
= 147 units
The 1.96 comes from
= 100 - 2.5%
= 97%
The value of z for 97% is 1.96
Hence, the restocking level is 147 units
The same would be considered and relevant too
Assume a $1,000 Treasury bill is quoted to pay 8% and matures in 3 months. 1. How much interest would an investor receive? (10 pts)
Answer:
i dont know
Explanation:
If you were an investor during the dot revolution, and you invested primarily in technology stocks, what fundamental principle of finance did you ignore and how did it affect the value of your portfolio
Answer:
If an individual has shares in a dot.com or IT firm in his or her portfolio, the essential concept of finance that might be overlooked while owning the commodity is :
1) The corporation's income/EPS has decreased.
2) A slowdown in the corporation 's growth and turnover.
3) The dividend payment ratio will be reduced.
Quarterly effects on the outcomes would rarely make a difference in the year results, given the seasonal or business pattern in IT organisations.
assuming the hiking shoes division of the all about shoes corporation had the following results last year managements target rate of return 10% and the weighted average cost of capital is 30%. its effective rac rate is 25% what is the divisions return on investment roi
Answer:
116.67%
Explanation:
Note: Complete question is attached as picture below
Capital Turnover = Sales / Total Assets
Capital Turnover = $7,000,000 / $1,500,000
Capital Turnover = 4.67
Sales Margin = Operating Income / Sales
Sales Margin = $1,750,000/$7,000,000
Sales Margin = 0.25
Sales Margin = 25%
Division Rate of Investment = Capital Turnover * Sales Margin
Division Rate of Investment = 4.67 * 25%
Division Rate of Investment = 116.67%
Inez is compensated based on a plan that pays a base salary, with commission in addition. Inez receives $40,000/year salary (and is paid monthly); additionally, she receives 8% on all sales in excess of $50,000 in sales/month. In April, Inez sold $69,500 of product. Calculate her monthly earnings.
Answer:
$4,893.33
Explanation:
Inez's monthly earnings in April comprises of her monthly salary and the performance bonus which are both computed as shown below:
monthly salary=annual salary/12 months
annual salary
monthly salary=$40,000/12
monthly salary=$3,333.33
Note that the performance bonus is not based on the entire sales revenue generated by her but on the sales revenue above the threshold of $50,000
sales performance bonus=($69,500-$50,000)*8%
sales performance bonus=$1,560
monthly earnings=$3,333.33+$1,560
monthly earnings=$4,893.33
The current assets of Sheridan Company are $292400. The current liabilities are $116960. The current ratio expressed as a proportion is
The current ratio expressed as a proportion is 2.5
Explanation:
Given :
The current assets = $292400
The current liabilities are $116960.
To find :
The current ratio
Solution :
Current Ratio =
[tex]\sf{\dfrac{Current \: Assets }{Current \: Liabilities}}[/tex]
[tex]\sf{\implies{\dfrac{292400}{116960}}}[/tex]
[tex]\implies[/tex] 2.5
Therefore, The current ratio expressed as a proportion is 2.5
You recently purchased a stock that is expected to earn 24 percent in a booming economy, 13 percent in a normal economy, and lose 2 percent in a recessionary economy. There is 24 percent probability of a boom, 61 percent chance of a normal economy, and 15 percent chance of a recession. What is your expected rate of return on this stock
Answer:
13.39%
Explanation:
Calculation to determine the expected rate of return on this stock
Using this formula
E(r)=(Boom probability*Expected boom economy stock)+(Normal economy*Expected Normal Economy stock)+(Recession*Recession economy lose)
Let plug in the formula
E(r) = (.24 * .24) + (.61 * .13) + (.15 *- .02)
E(r)= .0576 + .0793- .003
E(r)= .1339*100
E(r)=13.39%
Therefore the expected rate of return on this stock will be 13.39%
The financing of long term assets should be made from
Answer:
The main sources constituting long-term financing are shares, debentures, and debts form banks and financial institutions.
All of the following are advantages of using the average rate of return except a.the average rate of return method emphasizes accounting income, which is often used by investors and creditors in evaluating management performance. b.the average rate of return method uses present values. c.the average rate of return method includes the entire amount of income earned over the life of the proposal. d.the average rate of return is easy to compute.
Answer:
Advantages of using the average rate of return except:
b.the average rate of return method uses present values.
Explanation:
The company's average rate of return or the accounting rate of return (ARR) ignores the time value of money or the cash flows in its calculations. It is a simple capital evaluation method which calculates the ratio based on the percentage of annual returns over the project's initial cost. The ARR is not like other investmental appraisal methods, it bases its calculations on accounting profits rather than cash flows.
Knowledge Check 01 On January 1, Year 1, Abbott Company granted 92,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3, and expire on January 1, Year 7. Each option can be exercised to acquire one share of $1 par common stock for $14. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. What is the amount of compensation expense for Year 1
Answer:
$153,333
Explanation:
Calculation to determine What amount should Olympic recognize as compensation expense for 2016
Using this formula
Compensation expense =Total compensation/Vesting period
Let plug in the formula
Compensation expense=($5 x 92,000)/3 years
Compensation expense=$460,000/3 years
Compensation expense=$153,333
Therefore What amount should Olympic recognize as compensation expense for 2016 is $153,333
Assume that the reserve requirement is 5 percent. All other things being equal, will the money supply expand more if the Fed buys $2,000 worth of bonds or if someone deposits in a bank $2,000 that she had been hiding in her cookie jar? If one creates more, how much more does it create? Support your thinking.
Answer: See explanation
Explanation:
Based on the information given in the question, the reserve ratio is given as 5%, then the money multiplier will be:
= 1 / reserve requirement
= 1/5%
= 1 / 0.05
= 20.
Therefore, the money multiplier will increase by 20.
Then, the Money supply will be calculated as:
= amount x money multiplier
= 2000 x 20
= 40000
Therefore, the increase in the money supply will be $40000.
In this case, if the FED purchases $2000 worth of bonds, it'll expand the money supply more.
Why are multinational corporations (MNCs) getting involved in corporate social responsibility and sustainable business practice
Answer:
Some are genuinely giving back to the community:
Some MNCs are engaged in Corporate Social Responsibility (CSR) and Sustainable business practices because they genuinely care about the communities they have a presence in and the earth as well. With this is mind, they find out ways to give back to the community to ensure that people's lives are touched and improved so that the wider community benefits from the success of the MNC.
Brand Strengthening and Recognition.
Sometimes MNCs get involved in CSR to build their brand because people would associate their brand with the good works they do. This would go a long way in improving their sales figures as well because people want to support a company that supports its communities.
Tax Considerations.
Various tax credits exist for MNCs across many countries and tax regimes to reward them for their CSR activities. MNCs therefore see this as a chance to kill two birds with one stone as they get to use money that would have gone to taxes to improve their PR standing.
Which functions do investment companies perform for their investors? Check all that apply: Asset management Diversification and divisibility Investment advice Lower transaction costs Record keeping
Answer: All of the above
Explanation:
Investment companies such as mutual and closed end funds work to increase the investments of investors by providing superior asset management services. By investing in many different sectors, they give the investors diversification and divisibility benefits which reduce risk to the investor.
Because these investment companies invest for a lot of people, they are able to buy in bulk which lowers transaction costs per investor. They also have to keep records of all these transactions so they provide the benefit of record keeping as well.
The functions that can be attributed to investment companies to their investors are;
Asset management Diversification divisibility Investment advice Lower transaction costs Record keepinginvestment companies are those companies that are responsible management Diversification and divisibility Investment advice to their clients.
Therefore, all the provided options are correct.
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Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. Pursuing its own best interests, Firm Awill concede that cigarette smoke causes cancer.
a. only if Firm B concedesthat cigarette smoke causes lung cancer.
b. only if Firm B does notconcede that cigarette smoke causes lung cancer.
c. regardless of whetherFirm B concedes that cigarette smoke causes lung cancer.
d. none of the above. Inpursuing its own best interests, Firm A will in no case concedethat cigarette
Answer:
d. none of the above. In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes cancer
Explanation:
The given scenario is a classic case of prisoner's dilemma.
Individuals in a given situation tend to tend to not cooperates or confess even if doing so is in their best interest.
Rationally Firm A will have the incentive of a lower liability in the suit brought against them. But they will in no situation admit that cigarette smoke causes cancer. Even if Firm B admits to it.
The best interest for Firm A will be not to admit and maintain their sales as this will affect their business adversely
Oligopolies would like to act like a Group of answer choices duopoly, but self-interest often drives them closer to the perfectly competitive outcome. competitive firm, but self-interest often drives them closer to the duopoly outcome. monopoly, but self-interest often drives them to charge a higher price than would be charged by a monopoly. monopoly, but self-interest often drives them closer to the perfectly competitive outcome.
Answer:
monopoly, but self-interest often drives them closer to the perfectly competitive outcome.
Explanation:
In the given situation, the oligopoly tried to act like the monopoly via collusion but at the same time they would tend to cheat that drives the profit and the price per unit is less also it acted as the competitive firm
so here the self-interest would also be drives them near to the perfectly competitive result
hence, the above represent the answer
Oligopolies would like to act like a monopoly, but self-interest often drives them closer to the perfectly competitive outcome. The correct option is d.
Oligopolies are a market structure with a small number of firms, none of which can keep the others from having significant influence. The concentration ratio measures the market share of the largest firms.
A monopoly is a market with only one producer, a duopoly has two firms, and an oligopoly consists of two or more firms. There is no precise upper limit to the number of firms in an oligopoly, but the number must be low enough that the actions of one firm significantly influence the others.
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1. Do you think the day will come when people no longer use cash? Why, or why not?
2. Would the overall impact of a cashless economy be positive or negative? Explain your answer.
Many restaurants do not take reservations. You simply arrive and wait your turn. If you arrive at 7:30 in the evening, you have at least an hour wait. Notwithstanding that fact, a few people arrive, speak quietly with the maître d’, hand him some money, and are promptly seated. At some restaurants that do take reservations, there is a month wait for a Saturday evening, three weeks for a Friday evening, two weeks for a Tuesday through Thursday, and virtually no wait for Sunday or Monday evening. How do you explain these events using demand and supply?
A registered investment adviser often recommends real estate limited partnership investments to her wealthy clients. The RIA's personal financial statement and income are consistent with those of her wealthy clients, yet she never buys limited partnership units for her personal account. Which statement is TRUE
Answer: Her actions are inconsistent with the advice being given to her clients and this must be disclosed
Explanation:
Since the registered investment adviser often recommends real estate limited partnership investments to her wealthy clients but she never buys limited partnership units for her personal account.
This shows that her actions are inconsistent with the advice being given to her clients and this must be disclosed.
Find the APR, or stated rate, in each of the following cases:
Stated Rate (APR) Number of Times Effective
Compounded Rate (EAR)
% Semiannually 11.9%
Monthly 12.8
Weekly 10.5
Infinite 14.2
Answer and Explanation:
The annual percentage rate or stated rate is as follows;
Effective annual rate = [1 + (Annual percentage rate ÷ compounding period )]^compounding period - 1
Annual percentage rate
= 2[(1.119)1 ÷ 2 - 1]
= 11.57%
Annual percentage rate is
= 12 [(1.128)1 ÷ 12 - 1]
= 12.11%
Annual percentage rate
= 52[(1.105)1 ÷ 52 - 1]=
= 9.99%
Annual percentage rate
= 365[(1.142)1 ÷ 365 - 1]
= 13.28%
Read the scenario carefully and provide your response regarding the organizational structure and culture in the fictional organization provided below.
Scenario:
An industry consulting firm has the following structure and culture:
All the employees at this consulting firm work full-time. All the full-time consultants report to various industry directors depending on the industry contract. The company employees work mostly from home with directors or consultants renting temporary office space with or without videoconferencing when needed for either client meetings or vendor meetings. The company is very successful and has an expanding client base. The company CEO is extremely relaxed and extremely smart and expects everyone at the company to display a relaxed yet expert demeanor as well. There really are very few rules or expectations at the company as the CEO also believes in keeping processes very simple. The previous president retired about six months ago, and the CEO, together with a human resources firm, hired a new president. About two months ago the companyâs employees (i.e., consultants) started receiving emails from the new president putting pressure on all of them to produce results in less time but pressuring them to charge the clients higher sums without making any more money for themselves. In addition, the new president wants the staff to come into the office now three times a week for meetings. Three months ago the new president hired thirty new full-time consultants that seem more like salespersons than consultants to existing employees. A few of the long-time consultants have been emailing the CEO about these changes and suggesting they may go elsewhere. In the meantime, the Finance Director has detected several anomalies in the contract terms and financial results from some of the new consultants and one or two of the existing consultants.
a. Describe the organizational structure at this consulting firm and how it affects employee behavior.
b. Describe how the changes to the organizationâs culture might affect employee behavior.
c. Provide a recommendation for any adjustments you think need to be made at this organization based on the Reading and explain why?
Answer:
The response to the given question can be defined as follows:
Explanation:
This organizational structure is flat and also has a strongly attributed. Its flat culture gives experts the chance to be innovative and boost productivity. Its freedom to work or to work allowed its productivity to be enhanced. It kept them in touch with it and allowed them t stay tuned to a consultation environment. This change has caused confusion amongst this personnel and they are frustrated with the change. You've begun to approach the CEO. It indicates that they're not really happy and that the change is not welcomed. They have dismantled a whole manner for working. The company should communicate its objectives to its employees and also develop an acceptable way of working. All they need to grasp here is that before the new President has been hired, people already exist inside a specific method of work and culture. When the changes are required, an organization as a whole must be discreet and agreeable to enable the implementation easier. The manager should develop a seamless transition–
Email the staff and express your view.Include a career strategy and schedule certain objectives.Identify modifications and also be receptive to input. Not that every modification done provides the best outcomes.It ensures the restoration of the inclusive community, as well as the manner of work and objectives, are altered still.
The following are the relevant data for calculating sales variances for Fortuna Co., which sells its sole product in two countries: Gallia Helvetica Total Budgeted selling price per unit $6.00 $10.00 -- Budgeted variable cost per unit (3.00) (7.50) -- Budgeted contribution margin per unit $3.00 $ 2.50 -- Budgeted unit sales 300 200 500 Budgeted mix percentage 60% 40% 100% Actual units sold 260 260 520 Actual selling price per unit $6.00 $ 9.50 NA Question The sales mix variance for the two countries is
Answer:
$26 U
Explanation:
Calculation to determine what The sales mix variance for the two countries is
First step is to calculate the sales mix variance in Gallia
Using this formula
Sales mix variance in Gallia={[Actual units sold-(Actual total units sold×Budgeted percentage)×Budgeted UCM}
Let plug in the formula
Sales mix variance in Gallia= {[260 –(520 actual × .6 )] × $3 }
Sales mix variance in Gallia=$156 U
Second step is to calculate the sales mix variance in Helvetica using this formula
Sales mix variance in Helvetica={[Actual units sold-(Actual total units sold×Budgeted percentage)×Budgeted UCM}
Let plug in the formula
Sales mix variance in Helvetica= {[260 –(520 × .4 )] × $2.50 }
Sales mix variance in Helvetica=$130 F
Now let calculate the multiple-country sales mix variance using this formula
Sales mix variance =Sales mix variance in Gallia-
Sales mix variance in Helvetica
Let plug in the formula
Sales mix variance= ($156 U –$130 F)
Sales mix variance=$26U
Therefore The sales mix variance for the two countries is $26U
Your credit card company quotes a lending rate of 15.4% APR. How much is the periodic rate (in percentage points) if the company compounds monthly
Answer:
1.28%
Explanation:
Periodic rate = APR / amount of compounding
the amount of compounding is equal to the number of months that the company compounds the amount
15.4 / 12 = 1.28%
Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below. Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same.
Direct materials used $(a) $83,000 $63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000
Answer:
Orlando Company
Indication of the missing amount for each letter:
a) = $53,150 ($145,650 - 50,000 - 42,500)
b) = $55,850 (201,500 - 145,650)
c) = $9,200 (201,500 - $192,300)
d) = $119,000 ($140,000 * 85%)
e) = $342,000 ($83,000 + $140,000 + $119,000)
f) = $357,500 ($342,000 + $15,500)
g) = $345,700 ($357,500 - $11,800)
h) = $81,000 = ($149,850 * 100/185)
h) and i) = $149,850 ($213,000 - $63,150)
$149,850 = 185% (100 + 85%)
i) = $68,850 ($149,850 * 85/185)
j) = $231,000 ($213,000 + $18,000)
k) = $9,000 ($231,000 - $222,000)
Explanation:
a) Data and Calculations:
Job 1 Job 2 Job 3
Direct materials used $(a) $83,000 $63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000
Job 1 Job 2 Job 3
Direct materials used $53,150 $83,000 $63,150
Direct labor 50,000 140,000 81,000
Manufacturing overhead applied 42,500 119,000 68,850
Total manufacturing costs 145,650 342,000 213,000
Work in process 1/1/14 55,850 15,500 18,000
Total cost of work in process 201,500 357,500 231,000
Work in process 12/31/14 9,200 11,800 9,000
Cost of goods manufactured 192,300 345,700 222,000
a) = $53,150 ($145,650 - 50,000 - 42,500)
b) = $55,850 (201,500 - 145,650)
c) = $9,200 (201,500 - $192,300)
d) = $119,000 ($140,000 * 85%)
e) = $342,000 ($83,000 + $140,000 + $119,000)
f) = $357,500 ($342,000 + $15,500)
g) = $345,700 ($357,500 - $11,800)
h) = $81,000 = ($149,850 * 100/185)
h and 1 = $149,850 ($213,000 - $63,150)
$149,850 = 185%
i) = $68,850 ($149,850 * 85/185)
j) = $231,000 ($213,000 + $18,000)
k) = $9,000 ($231,000 - $222,000)
Concord is a nonprofit organization that captures stray deer bewildered within residential communities. Fixed costs are $10000. The variable cost of capturing each deer is $10 each. Concord is funded by a local philanthropy in the amount of $56000 for 2020. How many deer can Concord capture during 2020?
Answer: 4600
Explanation:
The number of deer that Concord can capture during 2020 will be calculated thus:
Let the number of deers that'll be captured be represented by x.
Based on the information given in the question, we can form an equal which will be:
Fixed cost + Variable cost = Total cost
10000 + 10x = 56000
10x = 56000 - 10000
10x = 46000
x = 46000/10
x = 4600
Therefore, 4600 deers can be captured
One-fifth of the population, rank ordered by income, is A) An income quintile B) A population quintile. C) An earnings-population quintile. D) None of the choices are correct.
Answer: income quintile
Explanation:
An income quintile is how the socioeconomic status of a population is measured. Here, the population is divided into 5 income groups which is from the lowest income group to the highest income group. One-fifth of the population are in each group, which is rank ordered by income.
The first quintile = 0 - 20%
Second quintile = 20% - 40%
Third quintile = 40% - 60%
Fourth quintile = 60% - 80%
Fifth quintile = 80% - 100%
Suppose the price of a BMW falls. Explain the law of demand based on the income and substitution effects.
Answer:
According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.
It is expected that when the price of a BMW falls, the quantity of cars demanded increases.
there are two effect in place that affect the demand for BMW.
They are :
the substitution effect the income effectThe substitution effect looks at the change in price of a good relative to other goods. When the price of a BMW falls, it becomes cheaper relative to other goods. As a result, consumers buy more of BMWs and less of other goods. This leads to a movement down along the demand curve for that good.
The income effect looks at how a change in price affects real disposable income. When the price the BMW decreases, real disposable income increases. As a result, consumers can afford to buy more BMW cars as the consumers purchasing power has increased, holding money income constant.
These two effects lead to an increase in the quantity of BMW demanded
Explanation: