Answer: e. Both b & d
Explanation:
Economies and Efficiency can be achieved by managing costs better. This can be done by training employees more so that they may use deep skills gained to be able to keep costs low by being more efficient on the job.
A good place to reduce costs would be the common costs. The business can target these costs by optimising them which means to reduce costs while still maximizing output and value. Reducing the costs here would lead to better efficiency.
Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: $5 per share Number of shares: 3 million Proceeds to Beedles: $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $340,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price? $5 per share? Use minus sign to enter loss, if any. $ $6.25 per share? Use minus sign to enter loss, if any. $ $4.25 per share? Use minus sign to enter loss, if any.
Answer and Explanation:
The computation of profit or loss is shown below:
The formula used is
= (Price × number of shares) - proceeds to Beedles - out of pocket expenses
a. For $5 per share
= ($5 × 3 million shares) - $14,000,000 - $340,000
= $15,000,000 - $14,000,000 - $340,000
= $660,000
b. For $6.25 per share
= ($6.25 × 3 million shares) - $14,000,000 - $340,000
= $18,750,000 - $14,000,000 - $340,000
= $4,410,000
c. For $5 per share
= ($4.25 × 3 million shares) - $14,000,000 - $340,000
= $12,750,000 - $14,000,000 - $340,000
= -$1,590,000
assuming it is stored safely how long after It was prepared can refrigerated food be sold or served 1-7 days b-10 days c-14 days d-20 days
Answer:
1-7 days
Explanation:
But, ideally 4 days should be the maximum for prepared food to be refrigerated before it is sold or served.
Leaving food refrigerated for a long time makes it to lose its nutrients. Some foods like potatoes, meat, eggs, chicken, etc. can become harmful or poisonous, especially when you reheat them before eating. That is why it is right to adhere to proper routines for refrigerating food and also preparing and serving the food. Some healthy food are better eaten immediately after their preparation.
A. Suppose the wages of computer-factory workers rises. This will cause (the supply / the demand) of tablet computers to (shift in / shift out) , causing tablet computer price to (rise / fall) and quantity to (rise / fall) .
B. Suppose the price of notebook computers (a substitute for tablets) falls. This will cause (the supply / the demand) of tablet computers to (shift in / shift out) , causing price of tablet computers to (rise / fall) and quantity to (rise / fall) .
C. Suppose the number of tablet computer manufacturers rises. This will cause (the supply / the demand) the supply the demand of tablet computers to (shift in / shift out) , causing price to (rise / fall) and quantity to ( (rise / fall) .
D. Suppose an exciting new game is released that is only available on tablet computers. This will cause the supply / the demand the supply the demand for tablet computers to (shift in / shift out) , causing tablet computer price to (rise / fall) and quantity to (rise / fall) .
E. Suppose the prices for popular apps (complements to tablet computers) rise. This will cause (the supply / the demand) the supply the demand of tablet computers to (shift in / shift out) , causing tablet computer price to (rise / fall) and quantity to (rise / fall) .
Answer:
Supply, shift in , rise fall
the demand, shift in, fall ,fall
supply , shift out fall, rise
the demand , shift out rise rise
the demand shift in fall fall
Explanation:
If the wages of factory worker increases, it becomes more expensive to hire workers, the cost of production increases and the demand for labour would fall. as a result, production would fall and the supply of tablets would fall. a decrease in supply leads to an inward shift of the supply curve. as a result of the fall in supply, quantity would fall and there would be a rise in price.
Substitute goods are goods that can be used in place of another good. If the price of notebooks falls, it becomes cheaper to purchase notebooks, so the quantity demanded of notebooks would rise and the demand for tablets would fall since it is cheaper to buy a tablet. the demand curve for tablets would shift in as a result of the fall in demand. As a result, price and quantity of tablets would fall.
Increase in the number of manufactures would lead to an increase in supply. this would cause a rise in the supply of tablets. when there is a rise in supply, the supply curve shifts out, prices fall and quantity increases.
the new game would increase demand for tablets because people would be interested in playing the game. as a result of the rise in demand, the demand curve would shift out, the quantity would rise and prices would rise
A complement is a good that is consumed together with another good. if the price of apps rise, it would become more expensive to buy apps as result the demand for tablets would fall. the demand curve would shift in and price and quantity would fall
When the wages of factory worker increases, it becomes more expensive to hire workers, also the cost of production increases, and also the demand for labor would fall. as a result, when the production would fall also the supply of tablets would fall. when a decrease in supply leads to an inward shift of the supply curve. Although as a result of the fall in supply, the quantity would fall, and also there would be a price rise.
When Substitute goods are goods that can be used in place of another good. also If the price of notebooks falls, it becomes cheaper to purchase notebooks, so the quantity demanded of notebooks would rise, and also the demand for tablets would fall since it is cheaper to buy a tablet. the demand curve for tablets would shift in as a result of the fall in demand. So As a result, the price and also the number of tablets would fall.
When Increase in the number of manufacturers would lead to an increase in supply. this would cause a rise in the supply of tablets. when there are a rise in supply, the supply curve shifts out, prices fall, and also quantity increases.
When the new game would increase demand for tablets because people would be interested in playing the game. So as a result of the rise in demand, the demand curve would shift out, the quantity would rise and also prices would rise
Thus A complement is a good that is consumed together with another good. if the price of apps rises, it would become more expensive to buy apps as a result the demand for tablets would fall. Then the demand curve would shift in and price and also quantity would fall
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Babcock Company received the following reports of its defined benefit pension plan for the current calendar year: PBO Plan assets Balance, January 1 $ 650,000 Balance, January 1 $ 530,000 Service cost 369,000 Actual return 51,000 Interest cost 74,000 Annual contribution 226,000 Benefits paid (97,000 ) Benefits paid (97,000 ) Balance, December 31 $ 996,000 Balance, December 31 $ 710,000 The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year
Answer:
The pension expense for the year is $400600
Explanation:
From the question; we have:
Babcock Company received the following reports of its defined benefit pension plan for the current calendar year:
PBO Plan assets
Balance, January 1 650,000 Balance, January 1 530,000
Service cost 369,00 Actual return 51,000
Interest cost 74,000 Annual contribution 226,000
Benefits paid (97,000 ) Benefits paid (97,000 )
Balance,December 31 $996,000 Balance, December 31 $710,000
The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year
From the information given;we have the plan assets to be $530000
the expected rate of return on plan assets = 8%
therefore
expected return on the plan assets = 8% × $530000
expected return on the plan assets = 0.08 × $530000
expected return on the plan assets = $42400
The pension expense for the year can be determined by the formula:
pension expense = service cost + interest cost - expected return on plan
assets.
pension expense = $(369000 + 74000 -42400)
pension expense = $(443000 - 42400)
pension expense = $400600
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
Answer: costs of production fall
Explanation:
When the costs of production fall, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
This is because when there is a reduction in the costs of production, there will be more money and hence, the producer can supply more goods thereby shifting the supply curve to the right.
Loyalty/reward programs are becoming more and more prevalent. With the onset of more loyalty programs, it becomes important for companies to design programs that are differentiated from other competitor programs. What are at least three key aspects that a company must consider when developing a successful loyalty/reward program
Answer:
A loyalty/reward program refers to prizes, discounts and other incentives that companies provide to their customers as art of aan strategy to encourage them to continue buying their products or services. Three key aspects that a company must consider when developing a successful loyalty/reward program are:
-Exclusivity because the customer has to feel that it is special to be part of the program and not that everyone gets the same benefits as the program won't provide any value for the customer.
-Customer knowledge because you need to understand your customers to make sure that the program would be relevant to them by appealing to their needs and desires.
-Contribution to the brand because you have to make sure that all the efforts support your brand as that is your image and the incentives offered have to provide value to it.
holdy Inc's bonds currently sell for $1,275. They pay a $120 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,120. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between the bond's YTM and its YTC?
Answer:
Yield to maturity (YTM) is 1.91% higher than yield to call (YTC).
Explanation:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
YTM = {$120 + [($1,000 - $1,275)/20]} / [($1,000 + $1,275)/2] = $106.25 / $1,137.50 = 9.34%
YTC = {coupon + [(call price - market value)/n]} / [(call price + market value)/2]
YTC = {$120 + [($1,120 - $1,275)/5]} / [($1,120 + $1,275)/2] = $89 / $1,197.50 = 7.43%
9.34% - 7.43% = 1.91%
Assume instead that the equipment was disposed of in 2022 and the original error was discovered in 2023 after the 2022 financial statements were issued. Prepare the correcting entry in 2023.
Answer:
No journal entry is required
Explanation:
As if we assume that the disposal of equipment is done in the year 2022 but the original error was discovered in the year 2023 after issuing the 2022 financial statements
Based on the above information, the correct entry for the year 2023 is that no journal entry is required for this transaction and the same is to be considered
Jeffreys Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Jeffreys Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment $510,000 $750,000 Accumulated Depreciation-Equipment 328,000 500,000 A. $18,000. B. $28,000. C. $62,000. D. $58,000. E. $38,000.
Answer:
Computation of cash received from the sale of the equipment:
D. $58,000.
Explanation:
Computation:
Sale of Equipment Account
Equipment account $240,000
less acc. depreciation 172,000
Net book value $68,000
less loss on sale 10,000
Cash received $58,000
Equipment Account
Year 1 balance $750,000
Year 2 balance 510,000
Sale of equipment $240,000
Accumulated Depreciation:
Year 1 balance $500,000
Year 2 balance 328,000
Sale of equipment $172,000
b) The sale of the equipment caused a loss of $10,000. The net book value of the equipment is $68,000. This implies that it was sold for $58,000 ($68,000 - $10,000). So, the cash received from the sale is $58,000.
Arthur White Sunglasses sell for about $ 151 per pair. Suppose the company incurs the following average costs per pair: LOADING...(Click the icon to view the cost information.) Arthur White has enough idle capacity to accept a one-time-only special order from Nevada Glasses for 22 comma 000 pairs of sunglasses at $ 62 per pair. Arthur White will not incur any variable marketing expenses for the order. Read the requirements
Requirement
How would accepting the order affect Arthur White's operating income?
In addition to the special order's effect onprofits, what other (longer-term qualitative) factors should Arthur White's managers consider in deciding whether to accept theorder?
Prepare an incremental analysis to determine the specialorder's effect on operating income. (Enter a "0" for any zero balances.
Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Total Order Incremental Analysis of Special Sales Order Decision Per Unit (22,000 units) Revenue from special order Less variable expense associated with the order: Variable manufacturing costs Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order
Answer:
How would accepting the order affect Arthur White's operating income?
operating income will increase by $88,000In addition to the special order's effect onprofits, what other (longer-term qualitative) factors should Arthur White's managers consider in deciding whether to accept theorder?
The most important qualitative factors which cannot be measured in $ are:
Morale Customers Investors Community ProductsIn this case, the only two factors that could be affected are the investors which will be happy to earn more money and customers which might consider making special orders only. In this case, the special order is feasible because the company has a lot of spare capacity, but what would happen in the future if there is no spare capacity and more customers want to place special orders?
Prepare an incremental analysis to determine the special order's effect on operating income.
without special with special differential
order order amount
revenue $0 $1,364,000 $1,364,000
variable costs $0 ($1,276,000) ($1,276,000)
contribution $0 $88,000 $88,000
margin
fixed costs $0 $0 $0
total effect on $0 $88,000 $88,000
operating income
Explanation:
production costs per unit:
direct labor $11direct materials $39variable manufacturing overhead $8fixed manufacturing overhead $16variable marketing expenses $4total $78sales price $151
special order 22,000 pairs at $62:
since the company has idle capacity, no fixed manufacturing costs nor any variable marketing expenses
total cost per unit = $78 - $16 - $4 = $58
special order's contribution margin = $62 - $58 = $4 x 22,000 = $88,000
Equivalent Units of Conversion Costs The Filling Department of Eve Cosmetics Company had 4,000 ounces in beginning work in process inventory (60% complete). During the period, 46,000 ounces were completed. The ending work in process inventory was 8,000 ounces (25% complete).
What are the total equivalent units for conversion costs? If required, round to the nearest unit.
Answer:
The total equivalent units for conversion cost = 45,600 ounces
Explanation:
Let us arrange the information in a tabular form to help in solution:
% conversion equivalent units
Particulars whole units completed for conversion
Beginning inventory in process 4,000 40% 1,600
started and completed in period 42,000** 100% 42,000
completed . . . . . . . . . . . . . . . . . . 46,000 43,600
ending inventory in process . . . . 8,000 25% 2,000
Total units to be assigned cost 54,000 45,600
Therefore, the total equivalent units for conversion cost = 45,600 ounces
**Note the inventory that was started and completed within the period is the inventory that was 100% completed within the period and it is the difference between the total inventory completed within the period and the beginning inventory, and this is represented as:
46,000 - 4,000 = 42,000 ounces.
At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $55,000, and it estimates that 2% will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has: (a) a $415 credit balance before the adjustment. (b) a $291 debit balance before the adjustment.
Answer:
Mazie Supply Co.
Adjusting entries under the assumptions that the allowance for doubtful accounts has:
a) A $415 credit balance before the adjustment:
Debit Bad Debts Expense $685
Credit Allowance for Doubtful Accounts $685
To record the bad debts expense for the year.
b) A $291 debit balance before the adjustment:
Debit Bad Debts Expense $1,391
Credit Allowance for Doubtful Accounts $1,391
To record bad debts expense and bring the allowance for doubtful accounts to a balance of $1,100.
Explanation:
a) Accounts Receivable outstanding = $55,000
Uncollectible estimate of 2% = $1,100
b) With a credit balance of $415, the balance will be brought to $1,100 with an adjusting amount of $685 ($1,100 - $415).,
c) With a debit balance of $291, the balance will be brought to $1,100 with an adjusting amount of $1,391 ($1,100 + 291).
d) When the allowance for doubtful accounts has a credit balance, the bad debts expense is calculated as the difference between the new balance and the old credit balance. But, if the allowance for doubtful accounts has a debit balance, the bad debts expense would be the addition of the estimated allowance and the debit balance. These actions will respectively bring the balance of the allowance for doubtful accounts to the new estimated balance.
We need 25000 units per year. Two suppliers for those units have provided us their quotes. The order cost is $300 per order and holding cost is $30 per unit per month. a.) What is the economic order quantity
Answer:
EOQ = 204.124 rounded off to 204 units
Explanation:
The EOQ or economic order quantity is the optimal order quantity that a company should order every time in order to minimize the inventory related costs such as holding, ordering and shortage/stock out costs. The formula o calculate EOQ is attached.
Holding cost per unit per annum = 30 * 12 = $360
EOQ = √(2 * 25000 * 300) / 360
EOQ = 204.124 rounded off to 204 units
Wheat Inc. produces and sells a single product. The selling price of the product is $235.00 per unit and its variable cost is $86.95 per unit. The fixed expense is $373,653 per month. The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)
Answer:
Break-even point (dollars)= $593,100
Explanation:
Giving the following information:
The selling price of the product is $235.00 per unit and its variable cost is $86.95 per unit. The fixed expense is $373,653 per month.
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 373,653 / [(235 - 86.95)/235]
Break-even point (dollars)= $593,100
Beth works for a large corporation that has managers for every department who employees report to. Which type of management decision making system does this company use
Answer:
vertical decision-making system
Explanation:
Based on this scenario it seems that Beth's company is using a vertical decision-making system. This is a hierarchical organization system in which management passes information from the top of the hierarchy/pyramid down to the bottom. This system is made up of many layers, while each layer has upper management that supervises the employees at that level. Such as in this case where the employees are reporting to the managers within their departments.
Sosa Company reported net income of $190,000 for 2017. Sosa Company also reported depreciation expense of $35,000 and a loss of $5,000 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 increase in prepaid expenses.
Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method.
Answer:
$228,000
Explanation:
Preparation of the operating activities section of the statement of cash flows for 2017 for Sosa Company
Sosa Company operating activities section of the statement of cash flows for 2017
Net income $190,000
Add:Depreciation expenses $35,000
Loss on disposal of plant assets $5,000
Increase in accounts payable $17,000
Less: Increase in accounts receivable($15,000)
Increase in prepaid expenses ($4,000)
Net cash flow of the operating activities $228,000
Therefore the operating activities section of the statement of cash flows for 2017 for Sosa Company will be $228,000
When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.
a) true
b) false
Answer:
True
Explanation:
The Cash generated from the operating activities is actually the net cash that arises from operating activities which is the core operation of the organization.
When we use the Indirect method, we add back all the non cash deductions from Net Income and we also minus the non cash additions in the revenue.
The example of non cash deduction which is added back includes depreciation and amortization expense. On the other hand the example of non cash additions includes accrued revenue which would be deducted by increase in revenue.
Hence the statement is true.
Answer:
True
Explanation:
Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO
Answer:
Beginning projected benefit obligation = $90,000
Explanation:
Beginning projected benefit obligation = Interest cost / Discount rate
=$7,200 / 8%
=$7,200 / 0.08
=$90,000
Assume that England and Spain each has 40 labor hours available. Originally, each country divided its time equally between the production of cheese and bread. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of cheese increased by:____________
a. 15
b. 20
c. 25
d. 40
Answer: a. 15
Explanation:
Given;
Labour hours available to each nations.
England = 40 labour hours.
Spain = 40 labour hours.
Solution:
Total production of bread in 40 labour hours for each nation from the table is 15.
England = 10
Spain = 5
Since both nations decided to focus on their strength where they pose comparative advantage, the production of cheese would increase by 15. As this is the amount of bread produced in that time frame of 40 labour hours.
Portfolio managers pick stocks for their clients’ portfolios based on the investment objective of the portfolio and several other factors. One key consideration is each stock’s contribution to portfolio risk and its statistical relationship with the portfolio’s other stocks. Based on your understanding of portfolio risk, identify whether each statement is true or false.
Answer:
False True True FalseExplanation:
First one is false because diversification reduces risk because it divides the risk amongst different securities. The portfolio risk will therefore be lower than the average of all stocks' standard deviations.
Second one is true because unsystematic risk is risk that will come with the type of stock or security purchased. It is usually referred to as diversifiable risk because using negatively correlated stocks can help diversify this risk.
Third one is True because the portfolio's risk when diversified is indeed likely to be smaller than the average of all stocks' standard deviation.
Fourth one is false because portfolio risk is reduced if stock that are negatively correlated are put into a portfolio because it means that when one stock is not doing so well, the other being negatively correlated, will be doing fine.
A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:________
a. operating activities
b. investing activities
c. noncash investing and financing activities
d. financing activities
Answer:
b. investing activities
Explanation:
Cash flow can be defined as the net amount of cash and cash-equivalents that is flowing into (received) and out (given) of a business. There are three components of the cash flow;
1. Operating cash flow: all cash generated from the business activities of an organization.
2. Financing cash flow: all payments made by an organization and profits from issuance of debts and equity.
3. Investing cash flow: costs associated with purchasing of capital assets and investments of cash resources in other businesses.
A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under investing activities.
Generally, investing activities comprises of purchasing physical assets, investing in securities and the sale of assets or securities associated with the company.
Hence, a company that purchases equipment for $32,000 cash should show the transaction on the statement of cash flows under investing activities.
Suppose that nominal GDP was $9000000.00 in 2005 in Orange County California. In 2015, nominal GDP was $12000000.00 in Orange County California. The price level rose 3.00% between 2005 and 2015, and population growth was 4.50%. Calculate the following figures for Orange County California between 2005 and 2015. Give all answers to two decimals. a. Nominal GDP growth was %.
Nominal GDP growth was __%
Economic growth was __%
Inflation was __%
Real GDP growth was __%
Per capita GDP growth was __%
Real per capita GDP growth was __%
Answer:
i. Norminal GDP growth
National GDP growth = Nominal GDP (current year) - Nominal GDP (base year) / Nominal GDP (base year) * 100
=(12,000,000 - 9,000,000) / 9,000,000 * 1000
= 3,000,000 / 9,000,000 * 100
=33.33%
Hence, the nominal GDP growth is 33.33%
ii. Economic growth
Economic growth = {GDP (current year) / GDP (base year) - 1 } * 100
= {12,000,000 / 9,000,000 - 1} * 100
=(1.33 - 1) * 100
= 0.33 * 100
= 33%
Hence, the economic growth is 33.33%
iii. Inflation
The inflation is the situation of increase in the general price level of the goods and services produced by the economy. Here, the price level rose by 3%, so the inflation become 3%
iv. Real GDP growth
Real GDP growth = Nominal GDP growth - Inflation
= 33.33% - 3%
= 30.33%
Hence, the real GDP growth is 30.33%
v. Per Capita GDP growth
Per Capita GDP growth = Nominal GDP growth - Population growth
= 33.33% - 4.50%
= 28.83%
Hence, the Per Capita GDP growth is 28.83%
vi Real Per Capita GDP
Real Per Capita GDP = Real GDP growth - Population growth
= 30.33% - 4.50%
= 25.83%
Hence, the Real Per Capita GDP growth is 25.83%
The market price of a share of common stock at the time of issuance was $17.00, while the market price of a preferred share of stock at the time of issuance was $26.50. The company paid $11.50 per share for its treasury stock. Required: Determine the missing amount in the stockholders' equity section of the balance sheet set forth below. (Input all amounts as positive values.)
The correct answer is $55
Explanation:
Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: A. Investing activities. B. Direct activities. C. Indirect activities. D. Operating activities. E. Financing activities.
Answer:
D. Operating activities.
Explanation:
A financial statement is a written report that quantitatively describes a firm's financial health. Under the financial statements is a cash-flow statement, which is used to record the cash inflow and cash equivalents leaving a business firm.
Cash flow statement, also known as the statement of cash flows, contains financial information about operating, financial and investing activities.
Hence, activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as operating activities. All the net income or cash from all operational business activities of a company is recorded as operating activities.
Prior to the first month of operations ending October 31 Marshall Inc. estimated the following operating results:
Sales (20,000 x $71) $1,420,000
Manufacturing costs (20,000 units):
Direct materials 852,000
Direct labor 202,000
Variable factory overhead 94,000
Fixed factory overhead 112,000
Fixed selling and administrative expenses 30,500
Variable selling and administrative expenses 36,800
The company is evaluating a proposal to manufacture 22,400 units instead of 20,000 units, thus creating an Inventory, October 31 of 2,400 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.
Required:
a. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the absorption costing format.
b. What is the reason for the difference in income from operations reported for the two levels of production by the absorption costing income statement?
Answer:
a.
Estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured
20,000 22,400
Sales (20,000 x $71) $1,420,000 $1,420,000
Less Cost of Goods Sold ($1,260,000) ($1,248,000)
Opening Stock $ 0 $0
Add Cost of Goods Manufactured $1,260,000 $1,397,760
Less Closing Stock $0 ($149,760)
Gross Profit $160,000 $172,000
Less Expenses
Selling and administrative expenses
Fixed ($30,500 ) ($30,500 )
Variable ($36,800) ($36,800)
Net Income / (Loss) $92,700 $104,700
a. Reasons
Variable Production Costs have increased for the Manufacture of 22,400 units.
Fixed assets have been deferred in Inventory for the Manufacture of 22,400 units.
Explanation:
Cost of Goods Manufactured
Manufacturing costs (20,000 units):
Direct materials 852,000
Direct labor 202,000
Variable factory overhead 94,000
Fixed factory overhead 112,000
Total 1,260,000
Cost of Goods Manufactured
Manufacturing costs (22,400 units):
Direct materials (852,000 / 20,000 × 22,400) = $954,240
Direct labor (202,000 / 20,000 × 22,400) = $226,240
Variable factory overhead (94,000 / 20,000 × 22,400) = $105,280
Fixed factory overhead = $112,000
Total = $1,397,760
Closing Inventory = $1,397,760 / 22,400 × 2,400
= $149,760
The estimated net income in the manufacturing of 22,400 units is more than the income of 20,000 units by applying the method of absorption costing.
What do you mean by Absorption costing?Absorption costs, sometimes referred to as “total costs,” are a management method of taking into account all the costs associated with producing a particular product.
Direct and indirect costs, such as direct assets, direct employment, rent, and insurance, are calculated using this method.
a) The calculation of the estimated income statement for 22,400 units and 20,000 units is shown in the image below.
b) The reason for the difference in the income from operations for the two production levels is because of the presence of closing inventories, which reduces the cost of goods sold and increases the income from operations.
Working note:
[tex]\rm\,Cost \; of \;Goods \;Manufactured \;=\\Manufacturing \; Costs (20,000 units)= Direct \;Materials \;+ Direct \; Labor + Variable \;factory \;overhead + Fixed \;factory \;overhead\\\\Manufacturing costs (20,000 units)=852,000+202,000+94,000+112,000\\\\Manufacturing costs (20,000 units) = \$1,260,000[/tex]
Cost of manufacturing when 22,400 units are produced:
Manufacturing costs (22,400 units):
[tex]\rm\,Manufacturing \; Costs (22,400 units):\\Direct \; Materials (\dfrac{852,000}{20,000} \times 22,400) = $954,240\\\rm\,Direct \;labor \;\dfrac{202,000}{20,000}\times 22,400 = $226,240\\Variable factory overhead \dfrac{94,000}{20,000 }\times 22,400 = $105,280\\Fixed factory overhead = $112,000[/tex]
[tex]\rm\,Cost \; of \;Goods \;Manufactured \;= Manufacturing \; Costs (22,400 units)= Direct \;Materials \;+ Direct \; Labor + Variable \;factory \;overhead + Fixed \;factory \;overhead\\\\\rm\,Cost \; of \;Goods \;Manufactured \; = 954,240+26,240+105,280+ 112,000\\\\\rm\,Cost \; of \;Goods \;Manufactured \; = \$1,397,760\\\\Closing \,Inventory = \dfrac{\$1,397,760}{22,400}\times 2,400 \\\\Closing \,Inventory = \$149,760[/tex]
Hence, it can be concluded that the estimated net income in the manufacturing of 22,400 units is more than the income of 20,000 units by applying the method of absorption costing.
Refer to the image to know the calculation of Estimated Net Income.
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For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then a.the expected future return must be less than the most recent past realized return. b.the past realized return must be equal to the expected return during the same period. c.the expected future returns must be equal to the required return. d.the required return must equal the realized return in all periods. e.the expected return must be equal to both the required future return and the past realized return.
Answer:
c.the expected future returns must be equal to the required return.
Explanation:
When the stock is at equilibrium than the intrinsic value of the stock is equivalent to the market price of the stock that depicts that the expected returns which held in the future should be equivalent to the required return
Therefore the option c is correct
And, the other options that are mentioned in the question are incorrect
For a stock to be in equilibrium, the expected future returns must be equal to the required return.
The correct answer to this question is answer option c. At the equilibrium position there is a balance between the expected returns and the required returns.
At this point the intrinsic value is the same thing as the market value. Telling us that the rate the investor is expecting is the same as the actual required rate of return.
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AA Companies has identified two mutually exclusive projects. Project A has cash flows of - $20,000, $5,000, $10,500, and $11,500 for Years 0 to 3, respectively. Project B has a cost of $20,000 and annual cash inflows of $9,500, and $16,000 for Years 2 to 3, respectively. At what rate would you be indifferent between these two projects
Answer:
At the Internal Rate of Return (IRR).
Explanation:
The Internal rate of return is the Interest rate that will make the Present Value of Cash Flows equal to the price or cost of the initial investment. This rate gives a Net Present Value of zero.
If at that rate both Project A and Project B give a Net Present Value of zero, you will be indifferent (the choice is the same irregardless of the alternative chosen).
Project that provide for a return greater than the Internal Rate of Return must be chosen.
10 points eBookPrintReferences Check my work Check My Work button is now enabledItem 1Item 1 10 points An investment project provides cash inflows of $745 per year for eight years. a. What is the project payback period if the initial cost is $1,700? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Answer:
Payback Period (in years) 2.28
Explanation:
Calculation for the project payback period if the initial cost is $1,700
Using this formula
Payback Period (in years) = Cash Outflow / Cash Inflows
Where,
Cash Outflow=1,700
Cash Inflows=745
Let plug in the formula
Payback Period (in years) =1,700 / 745
Payback Period (in years) =2.28
Therefore the Payback Period (in years) will e 2.28
Your portfolio is 240 shares of Callahan, Inc. The stock currently sells for $94 per share. The company has announced a dividend of $2.50 per share with an ex-dividend date of April 19. Assuming no taxes, what is your portfolio value as of April 19
Answer:
$21,960
Explanation:
the value of the portfolio before the ex-dividend date = $94 x 240 stocks = $22,560
Generally when investors are expecting a dividend, they will pay a higher price for a stock just before the ex-dividend date. After the stockholders' eligible for the dividend are recorded (ex-dividend date), the seller of the stock will receive the dividend, so the stock's sales price will decrease by the dividend amount.
New price per stock at ex-dividend date = $94 - $2.50 = $91.50
the value of the portfolio at the ex-dividend date = $91.50 x 240 stocks = $21,960
Answer:
240*94=22560
Explanation:
Just regularly calculate the portfolio, don't try to do any fancy thing.
Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Assembly. Assume the following information for the Assembly Department:
Direct labor per filing cabinet 30 minutes
Supervisor salaries $150,000 per month
Depreciation $31,000 per month
Direct labor rate $15 per hour
Steelcase Inc-Assembly Department
Flexible Production Budget
August 2016 (assumed data)
Units of production 18,000 20,000 22,000
Variable cost:
Direct labor
Total variable cost
Fixed cost:
Supervisor salaries
Depreciation
Total fixed cost
Total department cost
Prepare a flexible budget for 12,000, 15,000, and 18,000 filing cabinets for the month of August, similar to Exhibit 5, assuming that inventories are not significant.
Answer:
Note: Per unit Direct labour cost = $15 /60 minutes * 30 minutes
=$7.5
Steelcase Inc
Assembly Department
Flexible budget for the month of August, 2016
Unit of Production Per Unit No. of filling cabinet
18,000 20,000 22,000
Variable cost
Direct labour cost 7.5 135,000 150,000 165,000
Total variable cost A 135,000 150,000 165,000
Fixed cost
Supervisor salaries 150,000 150,000 150,000
Depreciation 31,000 31,000 31,000
Total fixed cost B 181,000 181,000 181,000
Total Departmental Cost A+B 316,000 331,000 346,000
Per unit Department Cost 17.55 16.55 15.72
Note: Per unit department cost = Total department cost / No of filling cabinet