Construct profitt diagrams or profit tables on expiration to show what position in ibm puts,

calls and/or underlying stock best expresses the investor's objectives described below. as-

sume ibm currently sells for $150 so that prot diagrams/ tables between $100 and $200 (in

$10 increments) are appropriate. also assume that "at the money" puts and calls cost $15

each. (as usual, the prot calculations ignore dividends and interest.)

(a) an investor wants upside potential if ibm increases but wants (net) losses no greater

than $15 if prices decline.

(b) an investor wants to capture prots if ibm declines in price but wants a guaranteed

limited loss if prices increase.

(c) an investor wants to capture prots if ibm declines in price and is ready to accept

unlimited losses if prices increase. further, the investor wants to break even if the stock

price does not change between now and the maturity of the options.

(d) an investor wants to prot if ibm's upcoming earnings announcement is either unex-

pectedly good or disappointingly bad.

Exercise 6-2 variable costing income statement; explanation of difference in net operating income [lo6-2] ida sidha karya company is a family-owned company located on the island of bali in indonesia. the company produces a handcrafted balinese musical instrument called a gamelan that is similar to a xylophone. the gamelans are sold for $970. selected data for the company’s operations last year follow: units in beginning inventory 0 units produced 200 units sold 180 units in ending inventory 20 variable costs per unit: direct materials $ 130 direct labor $ 300 variable manufacturing overhead $ 30 variable selling and administrative $ 15 fixed costs: fixed manufacturing overhead $ 63,000 fixed selling and administrative $ 25,000 the absorption costing income statement prepared by the company’s accountant for last year appears below: sales $ 174,600 cost of goods sold 139,500 gross margin 35,100 selling and administrative expense 27,700 net operating income $ 7,400 required: 1. under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. prepare an income statement for last year using variable costing.