Question Completion:
Trial Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 80,000
Work in process inventory 0
Finished goods inventory 15,000
Prepaid rent 3,000
Accounts payable 17,000
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 218,000
Factory overhead 115,000
Operating expenses 60,000
Totals $736,000 $736,000
Answer:
Bergamo Bay
1. Journal Entries to assign the following costs:
a. Direct materials costs to Work in Process Inventory.
Debit Work in Process $10,200
Credit Raw materials $10,200
To record direct materials for Job 402.
Debit Work in Process $18,600
Credit Raw materials $18,600
To record direct materials for Job 404.
b. Direct labor costs to Work in Process Inventory.
Debit Work in Process $36,000
Credit Factory Payroll Payable $36,000
To record ticket 6052 direct labor to Job 402.
Debit Work in Process $23,800
Credit Factory Payroll Payable $23,800
To record ticket 6053 direct labor to Job 404.
c. Overhead costs to Work in Process Inventory.
Debit Work in Process $119,600
Credit Factory Overhead $119,600
To apply overhead costs, 200% of direct labor cost to WIP.
d. Indirect materials costs to the Factory Overhead account.
Debit Factory Overhead $5,600
Credit Raw materials $5,600
To record indirect materials to factory overhead.
e. Indirect labor costs to the Factory Overhead account.
Debit Factory Overhead $8,200
Credit Factory Payroll Payable $8,200
To record indirect labor costs to factory overhead.
2. Revised balance of the Factory Overhead account after above entries:
= $9,200
Underapplied overhead = $9,200
Adjusting Journal Entry to Cost of Goods Sold:
Debit Cost of Goods Sold $9,200
Credit Factory Overhead $9,200
To record underapplied overhead to cost of goods sold.
3. Revised Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 45,600
Work in process inventory 0
Finished goods inventory 223,200
Prepaid rent 3,000
Accounts payable $17,000
Factory payroll payable 65,400
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 227,200
Factory overhead 0
Operating expenses 60,000
Totals $804,000 $801,400
4. Income Statement for the year ended December 31, 2017
Sales 373,000
Cost of goods sold 227,200
Operating expenses 60,000 287,200
Net Income 85,800
Retained Earnings 271,000
Net income 85,800
Retained earnings 356,800
Balance Sheet as of December 31, 2017:
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 45,600
Work in process inventory 0
Finished goods inventory 223,200
Prepaid rent 3,000 $516,800
Accounts payable $17,000
Factory payroll payable 65,400
Notes payable 25,000
Total liabilities 107,400
Common stock 50,000
Retained earnings 356,800 406,800
Total Liabilities and equity 514,200
5. Assume that the $5,600 on materials requisition 21-3012 should have been direct materials charged to Job 404. Without providing specific calculations, describe the impact of this error on the income statement for 2017 and the balance sheet at December 31, 2017
If the $5,600 were direct materials instead of indirect materials, it would not be expensed in the income statement, through Cost of Goods Sold. Instead, it would be carried forward as Finished Goods Inventory in the Balance Sheet.
Explanation:
a) Data and Calculations:
Trial Balance as at December 31, 2017:
Debit Credit
Cash $170,000
Accounts receivable 75,000
Raw materials inventory 80,000
Work in process inventory 0
Finished goods inventory 15,000
Prepaid rent 3,000
Accounts payable $17,000
Notes payable 25,000
Common stock 50,000
Retained earnings 271,000
Sales 373,000
Cost of goods sold 218,000
Factory overhead 115,000
Operating expenses 60,000
Totals $736,000 $736,000
Raw materials inventory
Account Titles Debit Credit
Balance 80,000
Work in Process (Job 402) 10,200
Work in Process (Job 404) 18,600
Factory overhead 5,600
Balance 45,600
Work in process inventory
Account Titles Debit Credit
Balance 0
Raw materials 10,200
Raw materials 18,600
Factory payroll 36,000
Factory payroll 23,800
Overhead 119,600
Finished Goods 208,200
Finished goods inventory
Account Titles Debit Credit
Balance 15,000
WIP 208,200
Balance 223,200
Factory Payroll Payable
Account Titles Debit Credit
WIP ticket 6052 36,000
WIP ticket 6053 23,800
Factory overhead 5,600
Balance 65,400
Cost of goods sold
Account Titles Debit Credit
Balance 218,000
Factory overhead 9,200
Balance 227,200
Factory overhead
Account Titles Debit Credit
Balance 115,000
Raw materials 5,600
Payroll Payable 8,200
Work in Process 119,600
Underapplied:Cost of goods 9,200
Lucid Lighting uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. Lucid has provided the following estimated costs for next year: Direct materials Direct labor Sales commissions Salary of production supervisor Indirect materials Advertising expense Rent on factory equipment OH Costs Lucid estimates that 10,000 direct labor-hours and 15,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
Answer:
$2.27
Explanation:
Note: The missing word is attached as picture
Salary of production supervisor $20,000
Indirect materials $4,000
Rent of factory Equipment $10,000
Total estimated factory overhead $34,000
Divide by Estimated machine hours 15,000
Predetermined overhead rate $2.27
Explain which types of market inefficiencies derive from monopolies. Use examples from the textbook to support your claims. Describe the types of inefficiencies that derive from monopolistic competition. Use examples from the textbook to support your claims. How are monopolies and monopolistic competitive firms profitable? Use examples from the textbook to support your analysis.
Answer:
The two types of market structure, monopoly, and monopolistic competition, generate essentially the same two types of market inefficiency:
Charging prices higher than marginal cost, meaning that consumers pay a higher price than they would otherwise in a perfectly competitive market.
Producing a smaller amount of output that in a perfectly competitive market.
The difference is in the degree of the inefficiency: monopolies are more market inefficient, and cause more harm to consumers, while monopolistic competition is a less inefficient market structure, and only causes marginal harm to consumers when compared to the hypothetical results of a perfectly competitive market structure.
The form of market inefficiency that can be derived from monopolies is higher prices.
It should be noted that in a monopoly and a monopolistic firm, consumers pay a higher price for the goods that they purchase. Monopolies cause more harm to the consumers.
Monopolies charge a price that's above the marginal cost. Monopolies and monopolistic competitive firms are profitable since they have the market power to produce few products and charge a higher price.
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How does the government use monetary policy and fiscal policy to achieve its macroeconomic goals?
Which of the following is a general example of a business?
Answer: D
Explanation:
And I just did it
Answer:
Explanation:
its actually C.
How did you identify your customers?
On January 1, Year 1, Cumulus Contracting, Inc., entered into an agreement to construct a building on the customer's land. The project was expected to take 3 years and involve a total cost of $6,000,000. The client has agreed to pay Cumulus $9,000,000 upon completion of the building. Cumulus determined that revenue from this contract is recognized over time. Cumulus uses the input method based on costs incurred to measure progress toward completion of the contract.
The following information about the costs of the project are taken from the accounting records of Cumulus.
Year 1 Year 2 Year 3
Costs incurred during year $1,000,000 $3,000,000 $4,000,000
Expected future costs $5,000,000 $4,000,000 $0
Required:
Write the appropriate amounts.
Answer:
% completion method Year 1 Year 2 Year 3
Cost incurred in till previous year 0 1000000 4000000
Add Cost incurred during the year 1000000 3000000 4000000
Total cost incurred till date 1000000 4000000 8000000
Add: Estimated cost to be incurred 5000000 4000000 0
Total estimated cost to be incurred 6000000 8000000 8000000
Percentage of completion (A) 17% 50.00% 100%
Note: Percentage of completion = (Cost incurred till date / Total estimated cost)
Total revenue (B) 9000000 9000000 9000000
Total revenue recognized(A*B) 1500000 4500000 9000000
- Revenue recognized in previous year 0 1500000 4500000
Revenue recognized in current year 1500000 3000000 4500000
Year 1 Year 2 Year 3
Revenue 1500000 3000000 4500000
Less: Cost incurred 1000000 3000000 4000000
Gross profit 500000 0 500000
Inventory that had cost $21,200 was sold for $39,900 under terms 2/20, net/30. Customers returned merchandise to Ozark five days after the purchase. The merchandise had been sold for a price of $1,520. The merchandise had cost Ozark $920. All customers paid their accounts within the discount period. Selling and administrative expenses amounted to $4,200. Interest expense paid amounted to $360. Land that had cost $8,000 was sold for $9,250 cash.
Determine the amount of net sales Prepare a multistep income statement.
Where would the interest expense be shown on the statement of cash flows?
Operating activities
Investing activities
Financing activities
How would the sale of the land be shown on the statement of cash flows?
The full sales price of the land, $9,250, would be shown as a cash inflow from financing activities on the statement of cash flows.
The full sales price of the land, $9,250, would be shown as a cash inflow from investing activities on the statement of cash flows.
The full sales price of the land, $9,250, would be shown as a cash inflow from operating activities on the statement of cash flows
Answer and Explanation:
The interest expense should be shown in the operating activities section of the cash flow statement
Also the full sales price of the land i.e. $9,250 would be presented in the investing activities section of the cash flow statement as a cash inflow
So the same would be considered and relevant too
In general, a larger R squared tends to suggest that:_______.
a. the estimated sample regression function explains a greater percentage of the total variation in y
b. the estimated sample regression function is more accurate
c. the estimated sample regression function explains a greater percentage of the explained variation in y
d. the estimated slope coefficient is more likely to equal the population slope coefficient
Answer:
c. the estimated sample regression function explains a greater percentage of the explained variation in y
Explanation:
The above is the reason showing the direct correlation between the sample regression and the R Square value.
A company had the following transactions during September, the first month of its operations:
• Issued 50,000 shares of common stock in exchange for $600,000.
• Purchased land for $400,000, using a $150,000 cash down payment and signing a note payable for the balance.
• Received $5,000 from a customer for services to be performed in December
• Made a $60,000 payment on the note payable from the purchase of the land.
• Total monthly sales: Cash sales $50,000 Credit Sales: $17,000
• Purchased equipment on credit for $63,000.
• Collected $8,000 from customers on account.
• Paid $2,000 for September employee wages.
• Received a utility bill for $500 which will be paid next month.
What is the balance in the Cash account at the end of September?
A. $451,000
B. $468,000
C. $461,500
D. $405,000
E. $445,000
Answer:
A. $451,000
Explanation:
Particular Amount
Issue of common stock $600,000
Receipt from customer $5,000
Cash sales $50,000
Collection from customers $8,000
Less:
Cash down payment made ($150,000)
Payment made on notes payable ($60,000)
Employee wages paid ($2,000)
Cash balance at on end of September $451,000
Select the correct answer.
On May 30, 2015, XYZee Inc. paid a dividend of $10,000 to its shareholders. How will this transaction be recorded in the journal of the corporation?
A.
Cash Account (Debit) $10,000 Dividend Account (Credit) $10,000
B.
Dividend Account Debit) $10,000 Cash Account (Credit) $10,000
C.
Common Stock Account (Debit) $10,000 Cash Account Credit) $10,000
D.
Cash Account (Debit) $10,000 Common Stock Account (Credit) $10,0000
Answer:
answer is b
Explanation:
Varughese incorporated is working on its cash buget for March. The budgeted beginning cash balance is $33,000. Budgeted cash receipts total $182,000 and buegeted cash disbursements total $191,000. The desired ending cash balance is $40,000. To attain its desired ending cash balace for March, the company needs to borrow:__.
a. $40,000.
b. $0.
c. $16,000.
d. $64,000.
Answer:
C. $16,000
Explanation:
Beginning cash balance
$33,000
Add cash receipt
$182,000
Less cash disbursement
($191,000)
Ending cash balance
$24,000
Desired ending cash balance
$40,000
Borrowing ($40,000 - $24,000)
$16,000
Therefore, the company needs to borrow $16,000 to attain its desired ending cash balance for March.
Madison Inc. stock price moves from $95 to $65 and also pays $7 in dividends at the end of the period. What is the rate of return on Madison Inc. stock over this period as a percent to two places.
Answer:
-24.21%
Explanation:
The rate of return of a stock is the sum of the stock price appreciation and the dividend yield
price appreciation = change in price level = (new price - old price) / old price ($65 - $95) / $95 = -0.3158
dividend yield = dividend / initial price $7/$95 = 0.07368
Rate of return = 0.07368 - 0.3158 = -0.2421 = -24.21%
Newspaper advertisements. . . . . . . . . . . . . . . . . . . . $5,100
Payment to consultant for advice on location of new store. . . . . . . . . . . . . . $2,300
Purchases of merchandise. . . . . . . . . . . . . . . . . . . . . $40,000
Freight-in. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,900
Salespeople's salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,200
Depreciation expense on delivery trucks. . . . . . . . . . $1,100
Research on whether store should sell satellite radio service. . . . . . . . $200
Customer Complaint Department. . . . . . . . . . . . . . . . . . $800
Rearranging store layout. . . . . . . . . . . . . . . . . . . . . . . . . $950
Required:
What is the total production cost?
Answer:
Total production cost is $43,900.
Explanation:
Total production cost refers to the addition of the direct materials, labor costs, and manufacturing overhead costs that are directly related to the production of a good.
From the question, total production cost can be calculated as follows:
Total production cost = Purchases of merchandise + Freight-in = $40,000 + $3,900 = $43,900
Therefore, total production cost is $43,900.
A freight delivery service is looking at the impact of allowing overtime in their packing-sorting department. For a week they measured the average number of packages sorted during a regular 8-hr shift. The next week they measured the average number of packages sorted during a regular shift with 2 hr of overtime. During the first week (just regular time), the average number of packages sorted was 1,250. During the second week (regular time with overtime), the average number of packages sorted was 1,500.
Required:
a. What was the productivity during the first week?
b. What was the productivity during the second week?
Answer:
a. 31 packages per hour
b. 30 packages per hour
Explanation:
If we consider 5 working days in the week and 8 hours a day in the first week
a. The total hours working in a week = 40
Productivity = 1250/40
Productivity = 31 packages per hour
b. During the second week the hours worked per day = 10
Productivity = 1500/50
Productivity = 30 packages per hour
An economic profit includes implicit costs and accounting profit does not. A distinction between them is important because an accounting profit is a relative amount of money. Some amount of accounting profit may or may not be a sufficient amount of profit to keep an entrepreneur in:________
Answer:
his/ her present line of business
Explanation:
Economic profit is accounting profit less implicit cost
Accounting cost is total revenue less explicit cost
Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives
Explicit cost is the actual cost incurred in carrying out an activity.
In determining profit, it is essential to consider implicit cost to determine if the business is earning economic profit
Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor hours, and had the following manufacturing overhead:
Overhead Cost Pool Budgeted Overhead Cost Budgeted Level for Cost Driver Overhead Cost Driver
Materials handling $ 160,000 3,200 pounds
Weight of materials Machine setup 13,260 390 setups
Number of setups Machine repair 1,380 30,000 machine hours
Machine hours Inspections 10,560 160 inspections
Number of inspections
Requirements for Job #971 which manufactured 4 units of product:
Direct labor 20 hours
Direct materials 130 pounds
Machine setup 30 setups
Machine hours 15,000 machine hours
Inspections 15 inspections
Using ABC, the materials handling overhead cost assigned to Job #971 is:_______
a. $2,300
b. $990
c. $6,500
d. $690
e. $1,020
Answer:
Allocated overhead= $6,500
Explanation:
Giving the following information:
Estimated overhead costs:
Materials handling $ 160,000 3,200 pounds
Requirements for Job #971
Direct materials 130 pounds
First, we need to calculate the activity rate for material handling:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Material handling= 160,000 / 3,200
Material handling= $50 per pound
Now, we can allocate overhead costs to Job 971:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated overhead= 50*130
Allocated overhead= $6,500
On December 1st, the company pays a local radio station $200,000 for 4 months of radio ads that are to be aired equally throughout December through March. Prepaid Advertising was debited on December 1st and no other entries regarding this transaction were made since then.
15. $ After the adjusting entry has been recorded on December 31", determine the amount of advertising expense for the year ended December 314 16. S After the adjusting entry has been recorded on December 31%, determine the ending balance in the prepaid advertising account that should be recorded on the December 31" Balance Sheet. Use the following transactions to answer questions
17-19 Determine the amount of revenue or expense that would be reported at the time of the transaction under the two methods. An example transaction has been completed for you.
Question Completion:
Journalize the adjusting entry.
Answer:
Adjusting Journal Entry:
December 31:
Debit Advertising Expense $50,000
Credit Prepaid Advertising $50,000
To record the advertising expense for the year (1 month's).
Explanation:
a) Data and Calculations:
December 1: Prepaid Advertising for 4 months = $200,000
Advertising expense for the year (1 month) = $50,000 ($200,000/4 months)
Balance of Prepaid Advertising for 3 months = $150,000 ($200,000 *3/4)
b) The Adjusting Journal entry recognizes the advertising expense that relates to the year and carry forward the prepaid balance to the next accounting year. Expenses and revenue are recorded when the services are consumed or rendered and not when cash is exchanged. In this case, the $200,000 is not recognized as advertising expense for the current year. Instead, only $50,000 is recorded as expense. The balance of $150,000 is carried forward to the next year when the service will be consumed.
The outstanding capital stock of Novak Corporation consists of 1,800 shares of $100 par value, 7% preferred, and 5,100 shares of $50 par value common. Assuming that the company has retained earnings of $80,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.
(a) The preferred stock is noncumulative and nonparticipating (Round answers to decimal places, es $38,487.) Preferred Common
(b) The preferred stock is cumulative and nonparticipating. (Round answers to decimal places, es $38,487) Preferred Common decimal places The preferred stock is cumulative and participating (Round the rate of participation to 4 decimal places, s 1.4278X Round answers to $38.487.)
Solution :
Preferred Common
Non cumulative and non Participative 12,600 67,400
Cumulative and non participative 37800 42200
Cumulative and participative 47876 32124
Current Stock Out Standing
Common stock at the rate 50 5100 shares 255000
Preferred stock 7% at the rate 100 1800 shares 180000
Cumulative the annual dividend on the preferred stock
Preferred stock dividend (180000 x 7%) 12600
Dividend Arrears to preferred stock (12600 x 2) 25200
Non cumulative and non participative
Preferred Common Total
Current year 12600 12600
Arrears 0 0
Common stock 67400 67400
Total dividend 12600 67400 80000
Cumulative and non participative
Preferred Common Total
Current year 12600 12600
Arrears 25200 25200
Common stock 42200 42200
Total dividend 37800 42200 80000
Cumulative and participative
Preferred Common Total
Current year 12600 12600
Arrears 25200 25200
Common stock (255000 x 7%) 17850 17850
Balance dividend pro data 10076 14274 24350
Total dividend 47876 32124 80000
Working notes :
Amount for the participation = 80000-(12600+25200+17850) = 24350
Rate of participation = [tex]$\frac{24350}{(255000+180000)} $[/tex] = 5.5977%
Participating dividend:
Preferred stock = 18000 x 5.5977% = 10076
Common stock = 255000 x 5.5977% = 14274
Total participating dividend = 24350
Wang Company accumulates the following adjustment data at December 31.
For each item, indicate the (1) type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or understated). (Enter your answers in alphabetical order.)
(1)Type of Adjustment (2) Accounts Before Adjustment
(a) Services performed but unbilled totals $600.
(b) Store supplies of $160 are on hand. The supplies account shows a $1,900 balance.
(c) Utility expenses of $275 are unpaid.
(d) Service performed of $490 collected in advance.
(e) Salaries of $620 are unpaid.
(f) Prepaid insurance totaling $400 has expired.
Answer:
(a)Type of adjustment is accrued revenue. The account was understated before adjustment.
(b) The type of adjustment is prepaid expense. The account was overstated.
(c) The type of adjustment is accrued expense which has been understated.
(d) Adjustment type is unearned revenue. The account was understated.
(e) Salaries of $620 are unpaid. - Adjustment type is accrued expense and the account was understated.
(f) Prepaid expense which was overstated before adjustment.
Explanation:
(a) Services performed but unbilled totals $600 - Since the service has been provided, revenue has been earned and should have been recognized with the corresponding debit to the accrued revenue account. Before adjustment, the accrued revenue account would have been understated.
(b) Store supplies of $160 are on hand. The supplies account shows a $1,900 balance. - This shows that stores supplies of $1,740 (the difference between $1,900 and $160) had been used up and should have been recognized as expense. As such, the type of adjustment is to prepaid expense. The account was overstated before adjustment as the balance should be $160 and not $1,900.
(c) Utility expenses of $275 are unpaid - The adjustment should have been posted to expense and accrued expense. Hence the type of adjustment is accrued expense which has been understated before adjustments.
(d) Service performed of $490 collected in advance - When the advance was collected, unearned revenue should have been recognized. Since it was not recognized before adjustment, the account was understated.
(e) Salaries of $620 are unpaid. - This is an accrued expense as the expense has been incurred but is yet to be paid. A non recognition before adjustment means the account was understated.
(f) Prepaid insurance totaling $400 has expired - This means that the prepaid insurance should have been derecognized since it has expired. As such, the account was overstated before adjustment.
The gross domestic product (GDP) of the United States is defined as the market value of allfinal goods and services produced within the United States in a given period of time. Based on this definition, indicate which of the following transactions will be included in (that is, directly increase) the GDP of the United States in 2018.
a. An accountant starts a client's 2018 tax return on April 14, 2019, finishing it just before midnight on April 15, 2019. Chocolate Express, a Swiss chocolate company, produces a chocolate bar at a plant in Illinois on December 5, 2018.
b. An elementary school student buys the chocolate bar on December 24. Rotato, a U.S. tire company, produces a set of tires at a plant in Michigan on September 13, 2018. It sells the set of tires to Speedmaster for use in the production of a two-door coupe that will be made in the United States in 2018. (Note: Focus exclusively on whether production of the set of tires increases GDP directly, and ignore the effect of production of the two-door coupe on GDP.)
c. Zippycar, a U.S. automobile company, produces a convertible at a manufacturing plant in Minneapolis on January 9, 2018. It sells the car at a dealership in San Diego on February 24, 2018.
d. Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 17, 2018. Athleticus imports the pair of sneakers into the United States on May 21, 2018.
Answer:
Chocolate Express, a Swiss chocolate company, produces a chocolate bar at a plant in Illinois on December 5, 2018.
b. An elementary school student buys the chocolate bar on December 24..
c. Zippycar, a U.S. automobile company, produces a convertible at a manufacturing plant in Minneapolis on January 9, 2018. It sells the car at a dealership in San Diego on February 24, 2018.
d. Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 17, 2018. Athleticus imports the pair of sneakers into the United States on May 21, 2018.
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Net export = exports – imports
When exports exceed import there is a trade deficit and when import exceeds import, there is a trade surplus.
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
The accountant's work would be included in 2019's GDP
The chocolate purchase would be included in GDP as part of consumption expenditure
Tire is an intermediate good in this question and would not be included in GDP
The purchase of the shoe from Vietnam would have no effect on GDP because it decreases net export
The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 1.2. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 1.4. The correlation between the futures price changes and the spot price changes is 0.7. It is now October 15. A beef producer is committed to purchasing 200,000 pounds of live cattle on November 15. The producer wants to use the December live cattle futures contracts to hedge its risk. Each contract is for the delivery of 40,000 pounds of cattle. What strategy should the beef producer follow?
Answer:
The answer is below
Explanation:
The optimal hedge ratio shows the degree of correlation between an asset or liability and the final product.
The optimal hedge ratio = correlation * (standard deviation of monthly changes in the spot price) / (standard deviation of monthly changes in the futures price)
The optimal hedge ratio = 0.7 * (1.2/1.4) = 0.6
The beef producer requires a long position = 0.6 * 200000 lbs = 120000 lbs of cattle.
The beef producer should take a long position in 3 December contracts closing out the position on November 15.
The total effect of a price change on the amount of a good that a consumer demands can be broken down into two parts: the income effect and the substitution effect. Consider an increase in the price of the good and assume that the good in question is not a perfect substitute or a perfect complement relative to another good. 1st attempt See Hint If the good is normal, then (1) the substitution effect is the demand curve is , (2) the income effect is C , and (3) the slope of If, however, the good is inferior (but not a Giffen good), then (4) the substitution effect is , ,and (6) the slope of the demand curve is D ,(5) the income effect is Finally, if the good is a Giffen good then (7) the substitution effect is (9) the slope of the demand curve is ,(8) the income effect is ______, and (9) the slope of the demand curve is ______.
Answer:
1. negative, 2. negative, 3. negative, 4. negative, 5. positive, 6. negative, 7. negative, 8. positive, 9. positive
Explanation:
In the context, if the given good is normal, then substitution effect effect will be negative as the quantity demanded will decrease with the price for the normal goods. Income effect also becomes negative as the increase in the income will also increase he quantity that is demanded in the case of the normal good. And the demand curve slope will become negative as the substitution effect will overpower the income effect.
However, the substitution effect will be negative when the goods are inferior and the net income will be positive, but the demand curve slope will become negative as the positive income effect is not as large as to outweigh substitution effect.
When the good is Giffen good, the substitution effect will become negative and the income effect becomes positive and the demand curve slope becomes positive.
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Answer:
Oh dear... Do you need help with something or is this just something random- lol
Explanation:
Neha and Teresa are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Neha takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Teresa takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza.
Neha's opportunity cost of making a pizza is _____ of root beer, and Teresa's opportunity cost of making a pizza is _____ of root beer.
_____ has an absolute advantage in making pizza, and _____ has a comparative advantage in making pizza.
If Neha and Teresa trade foods with each other, _____ will trade away pizza in exchange for root beer.
The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is _____ of root beer, and the lowest price that makes both roommates better off is _____ of root beer per pizza.
Answer:
Neha's opportunity cost of making a pizza is 0.67 gallons of root beer, and Teresa's opportunity cost of making a pizza is 0.71 gallons of root beer.
Neha has an absolute advantage in making pizza, and Neha has a comparative advantage in making pizza.
If Neha and Teresa trade foods with each other, Neha will trade away pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is 0.71 gallons of root beer, and the lowest price that makes both roommates better off is 0.67 gallons of root beer per pizza.
Explanation:
Neha's opportunity cost to brew a gallon of root beer = 3/2 = 1.5 pizzas
Neha's opportunity cost to make a pizza = 2/3 = 0.67 gallons of root beer
Teresa's opportunity cost to brew a gallon of root beer = 7/5 = 1.4 pizzas
Teresa's opportunity cost to make a pizza = 5/7 = 0.71 gallons of root beer
Opportunity costs are extra costs or benefits lost that result from choosing one activity or investment over another alternative. E.g. in this case, Neha can either make 1.5 pizzas or 1 gallon of root beer during a 3 hour period, but she cannot make both of the together. She must choose one or the other.
Consider a firm with a marginal cost that initially decreases, but after reaching a minimum then increases with output (that is, the more output is produced, the higher the marginal cost). Suppose the firm is producing in the short run, which implies that there are some fixed costs. Which of the following statements is correct?
a. To produce at the minimum average total cost, the firm must produce more output than it would need to produce at the minimum average variable cost.
b. To produce at the minimum average variable cost, the firm must produce more output than it would need to produce at the minimum average total cost.
c. The level of output that minimizes the average variable cost is also the level of output that minimizes the average total cost.
d. There is no level of output that minimizes the average total cost.
Answer:
a. To produce at minimum average total cost, the firm must produce more output than it would need to produce at the minimum average variable cost.
Explanation:
The total cost of a firm minimizes when a firm produces more units. Variable cost of a firm is lower when there is more output produced. The average total cost includes the average fixed cost also for which output should be more so that total fixed cost is divided to the produced units resulting in lowest possible per unit cost.
Below are the account balances for a company at the end of December. Accounts Balances Cash $ 4,900 Salaries expense 1,950 Accounts payable 2,900 Retained earnings 3,950 Utilities expense 1,000 Supplies 13,300 Service revenue 8,800 Common stock 5,500 Required: Use only the appropriate accounts to prepare an income statement.
Answer:
See below
Explanation:
The preparation of the end December income statement for the company is seen below;
Service revenue
$8,800
Less:
Salaries expenses
($1,950)
Utilities expenses
($1,000)
Net income
$5,850
Indigo Company exchanged equipment used in its manufacturing operations plus $3,960 in cash for similar equipment used in the operations of Sweet Company. The following information pertains to the exchange.
Indigo Co. Sweet Co.
Equipment (cost) $36,960 $36,960
Accumulated depreciation 25,080 13,200
Fair value of equipment 16,500 20,460
Cash given up 3,960
Required:
a. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.
b. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.
Answer:
A. Indigo Co
Dr Accumulated depreciation 25,080
Dr Equipment 15,840
Dr Equipment $36,960
Cr Cash 3,960
Sweet Co.
Dr Equipment 16,500
Dr Accumulated depreciation 13,200
Dr Cash 3960
Dr Loss on disposal of equipment 3,300
Cr Equipment $36,960
B. Indigo Complete
Dr Accumulated department 25,080
Dr Equiipment 20,460
Cr Equiipment $36,960
Cr Gain on disposal of equipment 78,540
Cr Cash 3,960
Sweet Co.
Dr Equiipment 16500
Dr Accumulated department 13200
Dr Cash 3960
Dr Loss on disposal of equipment 5660
Cr Equiipment 28,000
Explanation:
a. Preparation of the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.
Indigo Co
Dr Accumulated depreciation 25,080
Dr Equipment 15,840
[$36,960+3,960-25,080]
Dr Equipment $36,960
Cr Cash 3,960
Sweet Co.
Dr Equipment 16,500
Dr Accumulated depreciation 13,200
Dr Cash 3960
Dr Loss on disposal of equipment 3,300
[$36,960-(16,500+13,200+3960)
Cr Equipment $36,960
b. Preparation of the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.
Indigo Complete
Dr Accumulated department 25,080
Dr Equiipment 20,460
Cr Equiipment $36,960
Cr Gain on disposal of equipment 78,540
[(25,080+20,460+$36,960)-3,960]
Cr Cash 3,960
Sweet Co.
Dr Equiipment 16500
Dr Accumulated department 13200
Dr Cash 3960
Dr Loss on disposal of equipment 5660
(16500+13200+3960-28,000)
Cr Equiipment 28,000
Colby Corporation has provided the following information: Operating revenues from customers were $207,700. Operating expenses for the store were $119,000. Interest expense was $8,700. Gain from sale of plant and equipment was $3,700. Dividend payments to Colby's stockholders were $7,700. Income tax expense was $37,000. Prepaid rent expense was 4,100. How much was Colby's net income?
Answer:
$46,700
Explanation:
Operating revenue
$207,700
Less:
Operating expenses
($119,000)
Operating profit
$88,700
Less:
Interest expense
($8,700)
Income tax expense
($37,000)
Net income
$43,000
Add:
Gain from sale
$3,700
Total net income
$46,700
Therefore, Colby's net income is $46,700
You have just been appointed the product manager of the "Vesuvius" counter top vegetable steamers in a large consumer products company. As part of your new job, you want to develop an understanding of the financial situation for your product. Your brand assistant has provided you with the following facts:
a. Retail selling price $50 per unit
b. Retailer's margin 20%
c. Jobber's margin 15%
d. Wholesaler's margin 23.5%
e. Direct factory labor $2 per unit
f. Raw materials $1 per unit
g. All factory and administrative overheads $2 per unit (if unit volume = 100,000)
h. Salesperson's commissions 10% of manufacturer's selling price
i. Sales force travel costs $215,000
j. Advertising $900,000
k. Total market for counter top vegetable steamers 1 million units
l. Current yearly sales of "Vesuvius" 190,000 units
Questions
1. What is the contribution per unit for the "Vesuvius" brand?
2. What is the break-even-volume in units and in dollars?
3. What market share does the Vesuvius brand need to break even?
4. What is the current total contribution?
5. What is the current before-tax profit of the Vesuvius brand?
6. What market share must Vesuvius obtain to contribute a before tax profit of exactly $3.9 million?
Answer:
Vesuvius
1. The contribution per unit for the "Vesuvius" brand is:
= $25.60.
2. The break-even volume in units and in dollars:
Break-even volume in units = FC/Contribution per unit
= $1,115,000/$25.60
= 43,555 units
Break-even volume in dollars = FC/Contribution margin ratio
= $1,115,000/0.753
= $1,480,745
3. Market share that the Vesuvius brand needs to break-even is:
= 4.36%
4. The current total contribution is:
= $4,864,000
5. The current before-tax profit of the Vesuvius brand is:
= $3,749,000
6. The market share that Vesuvius must obtain to contribute a before tax profit of exactly $3.9 million is:
= 19.59%
Explanation:
a) Data and Calculations:
a. Retail selling price $50 per unit
b. Retailer's margin 20%
c. Jobber's margin 15%
d. Wholesaler's margin 23.5%
e. Direct factory labor $2 per unit
f. Raw materials $1 per unit
g. All factory and administrative overheads $2 per unit (if unit volume = 100,000)
h. Salesperson's commissions 10% of manufacturer's selling price
i. Sales force travel costs $215,000
j. Advertising $900,000
k. Total market for counter top vegetable steamers 1 million units
l. Current yearly sales of "Vesuvius" 190,000 units
Total fixed costs = $1,115,000 ($215,000 + $900,000)
Variable Costs:
Direct materials per unit = $1
Direct labor cost per unit = $2
Total direct costs per unit = $3
Variable overhead costs per unit = $2
Total factory costs per unit = $5
Total factory costs for 100,000 units = $500,000
Wholesaler's selling price = $50 * (100% - 20) * (100% - 15) = $34
Sales commission = 10% of $34 = $3.4
Total variable cost per unit = $8.40 ($5 + $3.40)
Contribution margin per unit = $25.60 ($34 - $8.40)
Contribution margin ratio = $25.60/$34 = 75.3%
Market share to break-even = Break-even units/Market size * 100
= 43,555/1,000,000 * 100 = 4.36%
The current total contribution = $25.60 * 190,000
= $4,864,000
Total fixed costs = $1,115,000
Current before-tax profit = $3,749,000
Market Share to contribute a before-tax profit of exactly $3.9 million:
= (Fixed cost + Target profit)/Contribution per unit
= ($1,115,000 + $3,900,000)/ $25.60
= 195,898/1,000,000 * 100 = 19.59%
Summit Record Company is negotiating with two banks for a $150,000 loan. Fidelity Bank requires a compensating balance of 26 percent, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a compensating balance of 13 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 12 percent. Compensating balances will be subtracted from the $150,000 in determining the available funds in part a. a-1. Calculate the effective interest rate for Fidelity Bank and Southwest Bank.
Answer and Explanation:
The computation of the effective interest rate is shown below:
For Fidelity bank
= (2 × 4 × $150,000 × 0.12) ÷ (4 +1 )× ($150,000 - $18,000 - ($150,000 × 26%)
= 30.97%
For southwest bank
= (2 × 12 × $150,000 × 0.12) ÷ (12+1 )× ($150,000 - ($150,000 × 13%)
= 25.46%