Answer:
$13,000
Explanation:
The total budgeted cost is $15,000
The cumulative actual cost is $10,000
The cumulative earned value is $12,000
Therefore, the forecasted cost at completion can be calculated as follows
= Cumulative actual cost + ( Budgeted cost-Cumulative earned value)
= $10,000 + ($15,000-$12,000)
= $10,000 + $3,000
= $13,000
Hence the forecasted cost at completion is $13,000
Exercise D Viking Corporation is operating at 80% of capacity, which means it produces 8,000 units. Variable cost is $100 per unit. Wholesaler Y offers to buy 2,000 additional units at $120 per unit. Wholesaler Z proposes to buy 1,500 additional units at $140 per unit. Which offer, if either, should Viking Corporation accept
Answer:
Results are below.
Explanation:
Giving the following information:
The variable cost is $100 per unit.
Wholesaler Y offers to buy 2,000 additional units at $120 per unit.
Wholesaler Z proposes to buy 1,500 additional units at $140 per unit.
We need to choose the best alternative, in this case, the one with the higher increase in income:
Effect on income= total contribution margin
Wholesaler Y:
Effect on income= 2,000*(120 - 100)= $40,000 increase
Wholesaler Z:
Effect on income= 1,500*(140 - 100)= $60,000 increase
The best option is to sell the units to Wholesaler Z. If Wholesaler Y accepts, you can still sell 500 more units.
Bethesda Water has an issue of preferred stock outstanding with a coupon rate of 4.30 percent that sells for $91.18 per share. If the par value is $100, what is the cost of the company's preferred stock
Answer: 4.72%
Explanation:
Given: Bethesda Water has an issue of preferred stock outstanding with a coupon rate of 4.30 percent
i.e. dividend = 4.30%
Price of a share = $91.18
Since, the cost of the company's preferred stock = (dividend) ÷ (Price of a share ) x 100
= (4.3) ÷ ($91.18) x 100
= 0.0472 x 100
= 4.72%
Hence, the cost of the company's preferred stock = 4.72%
Farrow Co. expects to sell 200,000 units of its product in the next period with the following results:
Sales (200,000 units) $3,000,000
Costs and expenses:
Direct materials 400,000
Direct labor 800,000
Overhead 200,000
Selling expenses 300,000
Administrative expenses 514,000
Total costs and expenses 2,214,000
Net income $786,000
The company has an opportunity to sell 20,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs:
1. total overhead would increase by 15%
2. administrative expenses would increase by $86,000.
Required:
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit.
Answer:
Combined net income =$810,000
Explanation:
In order to carry out an incremental analysis, only relevant cash flows should be considered.
The relevant cash flows from accepting the special order are the variable costs and the sales revenue plus the incremental cost of overhead and administrative cost . Please, note that the fixed costs are not relevant for this decision. Simply because they would be incurred either way.
The relevant cash flows include:
The sales revenueThe variable cost And the increase in overhead and administrative costSelling price per unit = $13
Variable cost per unit of additional sales
= (Direct material + Direct labour cost)/200,000 = 6
Analysis of incremental net income
$
Additional sales revenue ( 13×× 20,000) = 260,000
Incremental variable cost (6 × 20,000) = 120000
Incremental overhead (15%× 200,000) = (30000)
Incremental admin cost (86,000)
Net income from additional sales 24,000
Combined net income = original Net income + Additional net income
= 786,000 + 24000 = $810,000
Combined net income =$810,000
For a variety of reasons, a bank sometimes will hold more reserves than is legally required. These reserves are known as excess reserves. How does holding excess reserves affect the degree to which the money supply will change
Answer: D. The money supply will decrease as banks loan out less money.
Explanation:
The money supply in the Economy is inversely related to the amount of reserves that a bank holds. This is because the higher the reserves held, the less the banks will have to borrow out and the less new money can be created from the money loaned out. Holding excess reserves therefore results in less money supply.
the next dividend pwyment by Savitz, inc., will be 1.88 per share. YThe dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells foe 37 per share, what is the required return?
Answer: 9.08%
Explanation:
Using the Gordon Growth model, a required return on a stock can be calculated if the stock price, next dividend and constant growth rate is given.
Stock Price = [tex]\frac{Next Dividend}{Required return - growth rate}[/tex]
37 = [tex]\frac{1.88}{r - 0.04}[/tex]
37(r - 0.04) = 1.88
r - 0.04 = 1.88/37
r = 1.88/37 + 0.04
r = 9.08%
Poulter Corporation will pay a dividend of $4.60 per share next year. The company pledges to increase its dividend by 6.75 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
You will pay $108.24 for the company’s stock today.
Explanation:;
The price to pay for the company’s stock today can be calculated using the Gordon Growth Model (GGM) formula which assumes that dividend growth rate of a company will continue to be constant indefinitely. The GGM formula is as given below:
P = d/(r – g) ……………………………………… (1)
Where;
P = Price to pay for the company’s stock today = ?
d = Next year dividend per share = $4.60
r = required return = 11%, or 0.11
g = Constant dividend growth rate = 6.75%, or 0.0675
Substituting the values into equation (1), we have:
P = $4.60 / (0.11 - 0.0675)
P = $4.60 / 0.0425
P = $108.24
Therefore, you will pay $108.24 for the company’s stock today.
The table below represents how Marco feels about chocolate candy bars.
a. Fill in the missing values for total and marginal utility.
Marco's Utility
Chocolate Candy Bars Total Utility (utils) Marginal Utility (utils)
0 0 —
1 25
2 17
3 54
4
5 66 4
6 –1
b. Suppose Marco currently has two candy bars. You tell Marco you will give him either a soda, which gives him 22 utils of happiness, or two additional candy bars. Which is he likely to prefer?
options soda or two extra candy bars
Answer:
A. Chocolate Candy Bars Total Utility (utils) Marginal Utility (utils
0 0 —
1 25 25
2 42 17
3 54 12
4 62 8
5 66 4
6 65 –1
2. Soda
Explanation:
A.Chocolate Candy Bars Total Utility (utils) Marginal Utility (utils)
0 0 —
1 25 25
2 42 17
3 54 12
4 62 8
5 66 4
6 65 –1
1. In a situation where the consumption go up from 0 to 1, this means that total utility will from 0 to 25.
Therefore the , marginal utility will be 25 (25 – 0).
2. Total utility will be 42(25+17)
3. Marginal utility will be 12 (54-42)
4. The total utility for quantity of 5 is 66, while the marginal utility is 4.
Hence the total utility will be 62 (66 – 4) while marginal utility will be 4(12-8)
6. Total utility will be 65(66-1)
B. Based on( A )above Marco already has two candy bars, which gave him a total utility of 42 this means that when we Add soda his utility would increase to 64 (42 + 22)
And in a situation where he consumes four candy bars which is 2 candy bars + another 2 extra candy bars this means his utility will be only 62.
Based on this Soda will be the preferred one
uses the weighted-average method in its process costing system. In their first processing department, the company worked on 1,050 equivalent units of production with respect to conversion costs in April. Additional information for April is: Beginning inventory 230 units 40% complete Started 1,345 units Completed and transferred out 700 units Q: The % of completion of the ending inventory in work-in-process with respect to conversion cost is:
Answer:
The % of completion of the ending inventory in work-in-process with respect to conversion cost is: 40%.
Explanation:
First Calculate the Physical units in Ending Work in Process Inventory.
Physical units in Ending Work in Process Inventory = Beginning Work in Process inventory + Started Units - Units Completed and transferred out
Thus, Ending Work in Process Inventory = 230 + 1,345 - 700
= 875
Then, Calculate the Equivalent Units of Ending Work in Process Inventory.
Total equivalent units of production - conversion costs 1,050
Less Units Completed and transferred out (700)
Equivalent Units of Ending Work in Process Inventory 350
Finally Calculate the % of completion of the ending inventory in work-in-process with respect to conversion cost
The % of completion = Equivalent units of Ending Work in Process Inventory/ Physical units in Ending Work in Process Inventory × 100
= 350 / 875 × 100
= 40%
Suppose peanut butter is an inferior good for Ilya and the price of peanut butter rises. What will happen to Ilya's consumption of peanut butter
Answer:
The substitution effect will cause a decrease in the consumption of peanut butter and the income effect will cause an increase in the consumption of peanut butter.
Explanation:
Inferior goods are those whose demand drops as income increases. People tend to prefer other goods but are forced to use the inferior good because of income constraints.
If peanut butter is an inferior good and the price rises substitution effect will tend to cause a decrease in demand and consumption of peanut butter. This is because consumers will seek other alternatives.
Income effect acts in opposite direction to substitution effect, and will cause an increase in consumption of peanut butter.
Les is concerned that his variable cost per unit projection for a project may not be reliable. Which type of analysis will best help him determine the effect that an incorrect variable cost estimate could have on the final outcome of the project
Answer:
Cost Volume Profit Analysis (CVP)
Explanation:
The Cost Volume Profit Analysis (CVP) shows the change in profit or loss as a result of change in the (1) cost structure (variable and fixed costs), (2) sales revenue and (3) level of activity.
Thus this would be helpful to Les in determining the effect that an incorrect variable cost estimate could have on the final outcome of the project by altering the cost structure.
For a risk-free return rate of 5%, a market risk premium of 6%, what is the required rate of return for a security with a beta coefficient of 1.5?
Answer:
14%
Explanation:
required rate of return = risk free rate of return + ( risk premium x beta)
5% + 1.5 x 6% = 14%
Average costs _______initially due to the presence of fixed costs and then rise due to _________ a. rise; increasing fixed costs b. fall; decreasing marginal costs c. fall ; increasing marginal costs d. rise; decreasing fixed costs
Answer:
C. fall; increasing marginal costs.
Explanation:
Option C is the correct answer because initially, the average costs fall due to increasing return or production of more units. When output increases, the average fixed cost slopes downwards. Moreover, when the average cost falls, marginal cost also falls and it starts rising as the marginal cost cuts the average cost at its minimum point. However, after cutting at the minimum point, marginal cost increases, and due to which average cost also increases.
Joe wants to start an SEP-IRA that will have $460,000 in it when he retires in 15 years. How much should he invest semiannually in his IRA to do this if the interest is 15% compounded semiannually?
Answer:
$4,448.77
Explanation:
time until retirement = 15 years x 2 semiannual contributions = 30 payments
interest rate =15% / 2 = 7.5%
future value = $460,000
we can use the future value of an annuity formula:
future value = payment x annuity factor
FV annuity factor 7.5%, 30 periods = 103.3994
payment = future value / annuity factor
payment = $460,000 / 103.3994 = $4,448.77
The amount that should be invested is $4,448.77.
Calculation of the amount:Since
time until retirement = 15 years x 2
= 30 payments
And,
interest rate =15% / 2 = 7.5%
Also,
future value = $460,000
Now we can use the future value of an annuity formula:
Here,
future value = payment x annuity factor
where,
FV annuity factor 7.5%, 30 periods = 103.3994
So,
payment = future value / annuity factor
= $460,000 / 103.3994
= $4,448.77
hence, The amount that should be invested is $4,448.77.
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During 2016, Basler Manufacturing produced 60,000 units and sold 55,000 for $10 per unit. Variable manufacturing costs were $5 per unit. Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold, and fixed selling and administrative costs were $30,000.
Required:
Prepare an absorption costing income statement.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Production= 60,000 units
Units sold= 55,000
Selling price per unit= $10
Variable manufacturing costs were $5 per unit.
Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold
Fixed selling and administrative costs were $30,000.
The absorption costing method includes the unitary fixed overhead costs to the cost of goods sold.
Sales= 55,000*10= 550,000
COGS= (5 + 2)*55,000= (385,000)
Gross profit= 165,000
Total selling and administrative costs=(1*55,000)+30,000= (85,000)
Net operating income= 80,000
A project that costs $1,900 to install will provide annual cash flows of $500 for the next 5 years. The firm accepts projects with payback periods of less than 4 years.
a. What is this project's payback period?
b. Will the project be accepted?
Yes
No
c. What is project NPV if the discount rate is 4%?
Answer:
A. 3.8 YEARS
B YES
C $325.91
Explanation:
Payback period is the amount of time it takes to recover the amount invested in a project from its cumulative cash flows.
payback period = amount invested / cash flows
$1,900 / $500 = 3.8 years
the project should be accepted because the payback period is less than the maximum acceptable year
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
cash flow in year 0 = $-1900
cash flow each year from year 1 to 5 = $500
I = 4%
NPV = $325.91
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
On a CVP chart, on either side of the break-even point, the vertical distance between the total sales line and the total cost line represents:
Answer:
The answer is:
Total loss to the left of the intersection
Total profit to the right of the intersection
Explanation:
Cost-volume-profit (CVP) analysis is a method that looks into the impact of how varying levels of costs and volume will affect the operating profit of a firm. This gives companies good understanding of the profitability of their products or services.
To answer the question above;
Total loss to the left of the intersection
Total profit to the right of the intersection
While the intersection is the break-even
At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales $1,905,000
Credit sales 5,682,000.
In addition, its unadjusted trial balance includes the following items.
Accounts receivable $1,270,100 debit
Allowance for doubtful accounts 16,580 debit
Reqiured:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
A. Bad debts are estimated to be 1.5% of credit sales.
B. Bad debts are estimated to be 1% of total sales.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1c.
Answer:
Hawke Company
1. Adjusting Entries to recognize bad debts under the following independent assumptions:
A. Bad debts are estimated to be 1.5% of credit sales:
Debit Bad Debts Expense $73,400
Credit Allowance for Doubtful Accounts $73,400
To record bad debts expenses and bring the allowance for doubtful accounts balance to $56,820.
B. Bad debts are estimated to be 1% of total sales:
Debit Bad Debts Expense $92,450
Credit Allowance for Doubtful Accounts $92,450
To record bad debts expenses and bring the allowance for doubtful accounts balance to $75,870.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Debit Bad Debts Expense $80,085
Credit Allowance for Doubtful Accounts $80,085
To record bad debts expenses and bring the allowance for doubtful accounts balance to $63,505.
2. Balance Sheet as of December 31, 2015:
A. Accounts Receivable $1,270,100
less allowance for doubtful accounts 56,820
Net balance $1,213,280
3. Balance Sheet as of December 31, 2015:
C. Accounts Receivable $1,270,100
less allowance for doubtful accounts 63,505
Net balance $1,206,595
Explanation:
a) Data:
Cash sales $1,905,000
Credit sales 5,682,000
Accounts Receivable $1,270,100
Allowance for doubtful accounts $16,580 debit
1. Bad debts = 1.5% of $5,682,000 = $56,820
2. Bad debts are estimated to be 1% of total sales:
Bad debts = 1% of $7,587,000 = $75,870
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Bad debts = 5% of $1,270,100 = $63,505
The adjusting entries to recognize bad debts including how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015 balance sheet are:
1a. Journal entry to estimate Bad debts at 1.5% of credit sales.
First step is to calculate the Bad debt accrual
Bad debt accrual=Total credit sales × Bad debt accrual percentage
Bad debt accrual=$ 5,682,000×1.5%
Bad debt accrual=$85,230
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $85,230
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $101,810
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $101,810
Credit Allowance for doubtful account $101,810
(To record Bad debts at 1.5% of credit sales)
1b. Journal entry to estimate Bad debts at 1% of credit sales.
First step is to calculate the Bad debt accrual
Total credit sales $5,682,000
Total cash sales $1,905,000
Total sales $7,587,000
($5,682,000+$1,905,000)
Bad debt accrual % 1%
Bad debt accrual $75,870
($7,587,000× 1%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $75,870
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $92,450
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $92,450
Credit Allowance for doubtful account $92,450
(To record Bad debts at 1% of credit sales)
1c. Journal entry to estimate 5% of year-end accounts receivable are uncollectible
First step is to calculate the Bad debt accrual
Accounts Receivable $1,270,100
Bad debt accrual % 5.0%
Bad debt accrual $63,505
($1,270,100×5%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $63,505
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $80,085
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $80,085
Credit Allowance for doubtful account $80,085
(To record accounts receivable uncollectible)
2. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $101,810
Accounts Receivable (net) $1,168,290
3. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $80,085
Accounts Receivable (net) $1,190,015
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In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time,
A. were necessary as US industries had zero incentive to control pollution.
B. were an inexpensive incentive for industrial polluters to improve performance.
C. are given considerable credit for cleaner air and water in recent decades.
D. draws distinctions between the needs of firms and costly equipment upgrades.
The correct answer is C. are given considerable credit for cleaner air and water in recent decades.
Explanation:
The command-and-control environmental laws are a set of policies first proposed in the early 1970s that protected the environment by limiting the pollution levels. Also, the government demanded certain changes in production methods or the use of technologies to reduce pollution.
Moreover, these regulations are considered to be the main factor that contributed to the reduction in air and water pollution because since the laws were approved air and water pollution had decreased in the country. Also, it is believed these laws protected ecosystems and natural resources, which contributes to the conservation of nature. Thus, these laws "are given considerable credit for cleaner air and water in recent decades".
During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows: Sales $2,150,000 Manufacturing costs: Direct materials $960,000 Direct labor 420,000 Variable manufacturing cost 156,000 Fixed manufacturing cost 288,000 1,824,000 Selling and administrative expenses: Variable $204,000 Fixed 96,000 300,000 Required: 1. Prepare an income statement based on the absorption costing concept. YoSan Inc. Absorption Costing Income Statement For the Month Ended July 31 $ Cost of goods sold: $ $ $ 2. Prepare an income statement based on the variable costing concept. YoSan Inc. Variable Costing Income Statement For the Month Ended July 31, 2016 $ Variable cost of goods sold: $ $ $ Fixed costs: $ $ 3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2). The income from operations reported under costing exceeds the income from operations reported under costing by the difference between the two, due to manufacturing costs that are deferred to a future month under costing.
Answer:
1) YoSan Inc.
Income Statement
For the month ended July 31, 202x
Sales revenue $2,150,000
- Cost of goods sold $1,520,000
Gross profit $630,000
- S & A expenses $300,000
Operating profit $330,000
2) YoSan Inc.
Income Statement
For the month ended July 31, 202x
Sales revenue $2,150,000
- Variable costs:
Direct materials $800,000 Direct labor $350,000 Variable manufacturing cost $130,000Variable S & A expenses $170,000 $1,450,000Contribution margin $700,000
- Period costs:
Fixed manufacturing cost $288,000Fixed S & A expenses $96,000 $384,000Operating profit $316,000
3) When you prepare a variable costing income statement, the ending inventory of finished goods and WIP only includes variables costs. All fixed or period expenses are included during the period that they occur and are not carried over to the next period. I.e. the ending inventory (400 units) for next month will be lower under variable costing.
Bogart Company is considering two alternatives. Alternative A will have revenues of $147,400 and costs of $103,400. Alternative B will have revenues of $188,200 and costs of $121,600. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income.
Answer:
B is better than A
Explanation:
Here, we want to compare “A” to “B”. It means if B’s amount is higher than A’s amount, it should be positive; If B’s amount is lower than A’s amount, it should be negative.
Net income for each alternative = Revenues – Costs
Since the net income is positive, B is better than A.
Please check attachment for for actual tabular calculations
Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno's monthly manufacturing cost and other expense data are as follows. Rent on factory equipment $11,000 Insurance on factory building 1,500 Raw materials (plastics, polystyrene, etc.) 75,000 Utility costs for factory 900 Supplies for general office 300 Wages for assembly line workers 58,000 Depreciation on office equipment 800 Miscellaneous materials (glue, thread, etc.) 1,100 Factory manager's salary 5,700 Property taxes on factory building 400 Advertising for helmets 14,000 Sales commissions 10,000 Depreciation on factory building 1,500 Margin check figures provide key numbers to confirm that you are on the right track. Instructions
(a) Prepare an answer sheet with the following column headings. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns. DM $75,000 DL $58,000 MO $22,100 PC $25,100
(b) Compute the cost to produce one helmet. P1-2A Classify manufacturing costs into different categories and compute the unit cost. (LO 2), AP Bell Company, a manufacturer of audio systems, started its production in October 2017.
Answer:
a)
Cost Item Direct Direct Manufacturing Period
materials labor overhead costs
Rent on $11,000
factory equip.
Insurance on $1,500
factory building
Raw $75,000
materials
Utility costs $900
for factory
Supplies for $300
general office
Wages for $58,000
assembly line
Dep. on office $800
equip.
Miscellaneous $1,100
materials
Factory manager's $5,700
salary
Property taxes $400
on factory building
Advertising $14,000
for helmets
Sales $10,000
commissions
Dep. on factory $1,500
building
TOTAL $75,000 $58,000 $22,100 $25,100
b) the cost to produce one helmet = total manufacturing costs / total output = ($75,000 + $58,000 + $22,100) / 10,000 helmets = $15.51
In the Month of March, Digby received orders of 104 units at a price of $15.00 for their product Dell. Digby uses the accrual method of accounting and offers 30 day credit terms. Digby delivers 104 units in April. They received payment for 52 units in March, and 52 units in April. In the March income statement, how much revenue is recognized on the March income statement from this order? How much in the April Income statement? (Answer in thousands)
Answer:
$1,560 and $0
Explanation:
According to the accrual method of accounting, the revenue should be recognized when it is realized or when the sale is made not when the cash is received
Since Digby delivers 104 units in April
So for the March income statement, the amount is
= 104 units × $15
= $1,560
And, for the April income statement, it would be zero as the total units order received in March only
Barbara Hastings has no children of her own, but she does have a beloved niece named Ellen Laughridge. Attentive to the future financial needs of Ellen, Barbara secures a $500,000 life insurance contract from Chameleon Insurance Company, listing Ellen as the sole beneficiary. Barbara has every intention to inform Ellen of her new life insurance policy, but "life gets in the way," and she neglects to do so. Hastings dies on January 15, 2005. As part of her estate distribution, Ellen receives a chest-of-drawers from her dear aunt. On August 29, 2007, while rearranging her clothing in the chest-of-drawers, Ellen comes upon a secret compartment. In the secret compartment is an original copy of the life insurance contract. Ellen is overjoyed to see her name listed as beneficiary, and she contacts Chameleon Insurance Company immediately. Upon review of the policy, Chameleon denies coverage. Chameleon’s claims representative points to Section 15(b) of the policy, which specifically requires notification of the insured’s death no later than one year after death. It has been over two years and seven months since Barbara Hastings died. 1. Will Ellen recover the $500,000 in insurance proceeds? 2. Is it ethical for an insurance company to deny a claim on the basis of a "technicality?"
Answer:
1. Ellen would only be able to recover the $500,000 insurance proceed if she should be able to find a technicality in the insurance company's rules and regulation. This is because, strictly following the rules, there is nothing she can do regarding to the claim.
2. It is not ethical for the insurance company to deny the claim of Ellen on the basis of technicality but when viewed from another perspective, they are strictly following the rules of the insurance organization and applying it to the later. It is now left for the claimant to find another technicality on why he or she must be paid the insurance claim.
Explanation:
Suppose Stark Ltd. just issued a dividend of $2.57 per share on its common stock. The company paid dividends of $2.10, $2.31, $2.38, and $2.49 per share in the last four years. If the stock currently sells for $60.
Required:
a. What is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends?
b. What if you use the geometric average growth rate? (Do not round intermediate calculations.
Answer:
arithmetic average growth rate = (10% + 3.03% + 4.62% + 3.21%) / 4 = 5.22%
we need to find the required rate or return (RRR) in the following formula:
stock price = expected dividend / (RRR - growth rate)
expected dividend = $2.57 x 1.0522 = $2.7042stock price = $60growth rate = 0.0522605 = 2.7042 / (RRR - 0.0522)
RRR - 0.0522 = 2.7042 / 60 = 0.045
RRR = 0.045 + 0.0522 = 0.0973 = 9.73%
geometric average growth rate = [(1.10 x 1.0303 x 1.0462 x 1.0321)¹/⁴] - 1 = 0.05178 = 5.18%
again we need to find the required rate or return (RRR) in the following formula:
stock price = expected dividend / (RRR - growth rate)
expected dividend = $2.57 x 1.0518 = $2.703126stock price = $60growth rate = 0.051860 = 2.703126 / (RRR - 0.0518)
RRR - 0.0518 = 2.703126 / 60 = 0.0450521
RRR = 0.0968521 = 9.69%
Each bottle contains the same amount of pepper sauce. Which
28.
set of pepper sauce is the better buy?
B
ra
2 bottles for $22.50
3 bottles for S34.00
Answer:
2 bottles for $22.50
Explanation:
$22.50/2 = $11.25 per bottle
$34/3 = $11.33 per bottle
Better buy: 2 bottles for $22.50
Break-Even Sales and Sales to Realize Income from Operations For the current year ended October 31, Friedman Company expects fixed costs of $361,200, a unit variable cost of $43, and a unit selling price of $64. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize income from operations of $84,000. units
Answer:
a. Compute the anticipated break-even sales (units). units
17,200 unitsb. Compute the sales (units) required to realize income from operations of $84,000. units
21,200 unitsExplanation:
break even point in units = total fixed costs / contribution margin per unit
total fixed costs = $361,200contribution margin per unit = $64 - $43 = $21break even point in units = $361,200 / $21 = 17,200 units
break even point + expected profits = (total fixed costs + expected profits) / contribution margin per unit
total fixed costs + expected profits = $361,200 + $84,000 = $445,200contribution margin per unit = $64 - $43 = $21break even point + expected profits in units = $445,200 / $21 = 21,200 units
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as a(n):
Answer:
Opportunity costs
Explanation:
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as opportunity costs.
Opportunity cost has to do with losing other alternatives by chosing to go with one alternative. Hence it is also called foregone alternative. It has to do with making a decision or choice to give up something in order to get something else which may be of more value.
A city mandates that all businesses who sell goods and services to the city must pay at least a living wage to their workers that is substantially above what low-skilled workers are currently being paid. Which of the following will result in a greater decrease in employment of low-skilled workers who were working for the affected businesses?
a. The city's demand for the services that businesses supply them in highly inelastic.
b. Low-skilled workers represent a small fraction of the costs of doing business with the city.
c. Higher-skilled workers are readily available at the higher wage.
d. Low-skilled workers are complements with other inputs providing city services.
Answer:
c. Higher-skilled workers are readily available at the higher wage.
Explanation:
the government decree would make the cost of hiring low skilled labour higher. As, a result there would be a reduction in the quantity demanded of low skilled labour.
if High skilled workers are readily available at the higher wage this would lead to a greater decrease in employment of low-skilled workers. Employers would ask themselves why pay the same high wages high skilled labour earns to low skilled labour when high skilled labour can be hired at the same price since most likely higher skilled workers would carry out the tasks better than lower skilled labour ?
You bought an American put option some time ago. Today it has one year left to expiration. Interest rate is 10% per year. Annual compounding applies. Strike price is $100, and stock price is $5. Which of the following is incorrect?
A. If you wait until expiration day to exercise the put option, the maximum amount it can possibly be worth at that time is 100
B. It is better to exercise the put now than wait until expiration
C. You need to know the option premium to decide whether to exercise it now or to wait
D. If you exercise the option now, it is worth 95
Answer:
D. If you exercise the option now, it is worth $95
Explanation:
A put option gives the holder of the option the right to sell a certain stock at an specific strike price.
In order to determine the value of a put option, you must subtract the current market value from the strike value = strike value - current market value = $100 - $5 = $95
If the strike value is lower than the current market value, then the put option is worthless ($0).
Farrow Co. expects to sell 400,000 units of its product in the next period with the following results.
Sales (400,000 units) $ 6,000,000
Costs and expenses
Direct materials 800,000
Direct labor 1,600,000
Overhead 400,000
Selling expenses 600,000
Administrative expenses 1,028,000
Total costs and expenses 4,428,000
Net income $ 1,572,000
The company has an opportunity to sell 40,000 additional units at $12 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $172,000.
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit.
Normal Volume Additional Volume Combined Total
Costs and expenses:
Total costs and expenses
Incremental income (loss)
from new business
Answer:
the combined total net income = $ 1,576,000
Incremental Income = $4,000
Explanation:
Calculation of the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit.
Sales (400,000 units) $ 6,000,000
Additional Sales (40,000 units × $12) $480,000
Combined Sales $6,480,000
Costs and expenses :
Direct materials (800,000 + (800,000 / 400,000 × 40,000)) ( $880,000)
Direct labor (1,600,000 + (1,600,000 / 400,000 × 40,000)) ( $1,760,000)
Overhead 400,000 × 1.16 ($464,000)
Selling expenses ($600,000 )
Administrative expenses ($1,028,000 + $172,000) ($1,200,000)
Net income $ 1,576,000
Incremental Income / (loss)
Net Income After Accepting Offer $ 1,576,000
Less Income Before Accepting Offer $ 1,572,000
Incremental Income / (loss) $4,000