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# The change in the revenue

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1. Is is possible to maximize sales revenue or market share and profit at the same time? Why?

2. Are all demain curves downward sloping ? Why? What is the meaning for firms of demand curves that do or do not slope downward?

3. If the firm reduces the price for its product, will it decrease its revenue? Why?

4. Are all relevant per unit cost curves upwards sloping? Why? What is the meaning for firms of upward or downward sloping per unit cost curves?

https://brainmass.com/economics/demand-supply/72490

#### Solution Preview

1. Is it possible to maximize sales revenue or market share and profit at te same time? Why?

First, let's take a look at the firm's profit maximization decision.
Since Profit(Q) = TR - TC
Then the first order condition for Profit maximization is dProfit / dQ = 0, i.e.,
dTR/dQ - dTC/dQ = 0
MR - MC = 0
MR = MC
Thus, it is necessary for the firm to set marginal revenue and marginal cost equal.

On the other hand, the condition for maximizing sales revenue is MR = 0.

Now if the firm wants to max revenue and profit at the same time, it should be satisfied that MR = MC = 0
Or, the ...

#### Solution Summary

What is the meaning for firms of upward or downward sloping per unit cost curves?

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## Oracle System Corporation Case: Revenue recognition methods and policies

Answer the following questions based on the Oracle System case file attached.

1. What assumptions underlie Oracle's recognition of revenue for license fees? Are these assumptions reasonable given the firm's business and operating policies?

2. Estimate Oracle's 1990 sales if revenue is recognized at delivery rather than when the contract is signed. Hint: use the estimate provided by the controller of the effect of recognizing revenue at delivery on days receivable.

3. If the firm's 1990 cost of sales to sales ratio and average tax rate are unaffected by a change to the more conservative revenue recognition method, what would be the affect of this accounting change on the company's 1990 net income?

4. Use the 1990 cost of sales to sales ratio and average tax rate to estimate the size of the opening retained earnings write-off required if Oracle decides to retroactively adopt the new revenue recognition method.

5. How would a change in revenue recognition affect the firm's lending contracts and management compensation?

6. How do you expect investors to respond if Oracle decides to recognize revenue at delivery rather than when the contract is signed?

7. Do you recommend that Oracle make the accounting change? Why?

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