The value of the ending inventory and the cost of goods sold can be determined using the following methods: Specific Identification Method, Weighted Average Cost Method, FIFO (First-In First-Out) Method, and LIFO (Last-In First-Out) Method.
Specific Identification Method:
Ending Inventory Value = (60 units x $64.00) + (20 units x $63.00) + (70 units x $60.00) = $9,300
Cost of Goods Sold Value = Total Cost of Goods Available - Ending Inventory Value = $14,500 - $9,300 = $5,200
Weighted Average Cost Method:
Weighted Avg. Cost per Unit = Total Cost of Goods Available / Units Available for Sale = $14,500 / 350 = $41.43
Ending Inventory Value = Weighted Avg. Cost per Unit x Units in Ending Inventory = $41.43 x 150 = $6,214.50
Cost of Goods Sold = Weighted Avg. Cost per Unit x Units Sold = $41.43 x 200 = $8,285.50
FIFO (First-In First-Out) Method:
Ending Inventory Value = (60 units x $64.00) + (90 units x $60.00) = $9,240
Cost of Goods Sold Value = Total Cost of Goods Available - Ending Inventory Value = $14,500 - $9,240 = $5,260
LIFO (Last-In First-Out) Method:
Ending Inventory Value = (70 units x $57.81) + (80 units x $58.03) = $8,690.10
Cost of Goods Sold Value = Total Cost of Goods Available - Ending Inventory Value = $14,500 - $8,690.10 = $5,809.90
1. The FIFO (First-In First-Out) Method will likely approximate replacement cost on the balance sheet because it assumes that the most recent purchases are still in inventory and therefore reflects the current market prices.
2. During periods when prices continue to rise, the FIFO (First-In First-Out) Method will result in the highest net income being reported because it assumes that the oldest, and therefore the cheapest, inventory is sold first, resulting in a lower cost of goods sold and a higher net income.
3. During periods when prices continue to rise, the LIFO (Last-In First-Out) Method will result in the lowest net income being reported because it assumes that the most recent, and therefore the most expensive, inventory is sold first, resulting in a higher cost of goods sold and a lower net income.
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Subject: International MarketingQustion#3 [4+6](a) ‘Impact of culture is pervasive.’- Explain the statement. (b) What are some particularly troublesome problems caused by language in foreign marketing? Discuss.
a.) The statement emphasizes the importance of culture in influencing every aspect of business, particularly international marketing.
b.) Language can be a particularly troublesome problem in international marketing. Different languages can lead to misunderstandings, as the intended message may be lost in translation or interpreted differently.
Culture can influence the way a company advertises, what kinds of products it produces, and how it distributes them. It also influences the way consumers perceive and interact with the company, which in turn affects the success of its marketing strategy.
Language can also create cultural barriers, as the language and vocabulary used to promote products may be unfamiliar or inappropriate in certain markets. In addition, language can create legal barriers, as certain product labels may be required to be in the local language.
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Business Solutions had the following transactions and events in December 2021. December 2 Paid $975 cash to Hillside Mall for Business Solutions's share of mall advertising costs. December 3 Paid $490 cash for minor repairs to the company's computer. December 4 Received $4,550 cash from Alex's Engineering Company for the receivable from November. December 10 Paid cash to Lyn Addie for six days of work at the rate of $120 per day. December 14 Notified by Alex's Engineering Company that Business Solutions'. bid of $7,100 on a proposed project he been accepted. Alex's paid a $2,200 cash advance to Business Solutions. December 15 Purchased $1,200 of computer supplies on credit from Harris Office Products. December 16 Sent a reminder to Gomez company to pay the fee for services recorded on November 8. December 20 Completed a project for Liu Corporation and received $5,825 cash. December 22-26 took the week oft for the holidays. December 28 Received $3,200 cash from Gomez Company on its receivable. December 29 Reimbursed s. Rey for business automobile mileage (600 miles at $0.26 per mile). December 31 Paid $1,300 cash for dividends. The following additional facts are collected for use in making adjusting entries prior to preparing financial statements for the company's first three months a. The December 31 inventory count of computer supplies shows $640 still available b. Three months have expired since the 12-month insurance premium was paid in advance, c. As of December 31, Lyn Addie has not been paid for four days of work at $120 per day d. The computer system acquired on October 1, is expected to have a four-year life with no salvage value.
e. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value 1. Three of the four months prepaid rent have expired. Required: 1. Prepare journal entries to record each of the December transactions, Post those entries to the accounts in the ledger 2-a. Prepare adjusting entries to reflect a through 2-b. Post the journal entries to record each of the December transactions, adjusting entries to the accounts in the ledger 3. Prepare an adjusted trial balance as of December 31, 2021. 4. Prepare an income statement for the three months ended December 31, 2021 5. Prepare a statement of retained earnings for the three months ended December 31, 2021 6. Prepare a classified balance sheet as of December 31, 2021 7. Record the necessary closing entries as of December 31, 2021 8. Prepare a post-closing trial balance as of December 31, 2021.
1. Journal entries to record each of the December transactions:
December 2:
Advertising Expense 975
Cash 975
December 3:
Repairs Expense 490
Cash 490
December 4:
Cash 4,550
Accounts Receivable 4,550
December 10:
Salaries Expense 720
Cash 720
December 14:
Cash 2,200
Unearned Revenue 2,200
December 15:
Supplies 1,200
Accounts Payable 1,200
December 16:
No entry needed
December 20:
Cash 5,825
Service Revenue 5,825
December 22-26:
No entry needed
December 28:
Cash 3,200
Accounts Receivable 3,200
December 29:
Automobile Expense 156
Cash 156
December 31:
Dividends 1,300
Cash 1,300
2. Adjusting entries:
a. Supplies Expense 560
Supplies 560
b. Insurance Expense 300
Prepaid Insurance 300
c. Salaries Expense 480
Salaries Payable 480
d. Depreciation Expense 750
Accumulated Depreciation - Computer System 750
e. Depreciation Expense 600
Accumulated Depreciation - Office Equipment 600
f. Rent Expense 3,000
Prepaid Rent 3,000
3. Adjusted trial balance as of December 31, 2021:
Cash 7,434
Accounts Receivable 0
Supplies 640
Prepaid Insurance 900
Prepaid Rent 0
Computer System 12,000
Accumulated Depreciation - Computer System 750
Office Equipment 12,000
Accumulated Depreciation - Office Equipment 600
Accounts Payable 1,200
Salaries Payable 480
Unearned Revenue 2,200
Common Stock 10,000
Retained Earnings 8,804
Dividends 1,300
Service Revenue 10,375
Advertising Expense 975
Repairs Expense 490
Salaries Expense 1,200
Supplies Expense 560
Insurance Expense 300
Automobile Expense 156
Depreciation Expense 1,350
Rent Expense 3,000
Total 34,974
Total 34,974
4. Income statement for the three months ended December 31, 2021:
Revenues:
Service Revenue 10,375
Expenses:
Advertising Expense 975
Repairs Expense 490
Salaries Expense 1,200
Supplies Expense 560
Insurance Expense 300
Automobile Expense 156
Depreciation Expense 1,350
Rent Expense 3,000
Total Expenses 8,031
Net Income 2,344
5. Statement of retained earnings for the three months ended December 31, 2021:
Beginning Retained Earnings 8,804
Add: Net Income 2,344
Less: Dividends 1,300
Ending Retained Earnings 9,848
6. Classified balance sheet as of December 31, 2021:
Assets:
Current Assets:
Cash 7,434
Accounts Receivable 0
Supplies 640
Prepaid Insurance 900
Prepaid Rent 0
Total Current Assets 8,974
Property, Plant, and Equipment:
Computer System 12,000
Less: Accumulated Depreciation - Computer System 750
Office Equipment 12,000
Less: Accumulated Depreciation - Office Equipment 600
Total Property, Plant, and Equipment 22,650
Total Assets 31,624
Liabilities:
Current Liabilities:
Accounts Payable 1,200
Salaries Payable 480
Unearned Revenue 2,200
Total Current Liabilities 3,880
Stockholders' Equity:
Common Stock 10,000
Retained Earnings 9,848
Total Stockholders' Equity 19,848
Total Liabilities and Stockholders' Equity 31,624
7. Closing entries:
Service Revenue 10,375
Income Summary 10,375
Income Summary 8,031
Advertising Expense 975
Repairs Expense 490
Salaries Expense 1,200
Supplies Expense 560
Insurance Expense 300
Automobile Expense 156
Depreciation Expense 1,350
Rent Expense 3,000
Income Summary 2,344
Retained Earnings 2,344
Retained Earnings 1,300
Dividends 1,300
8. Post-closing trial balance as of December 31, 2021:
Cash 7,434
Accounts Receivable 0
Supplies 640
Prepaid Insurance 900
Prepaid Rent 0
Computer System 12,000
Accumulated Depreciation - Computer System 750
Office Equipment 12,000
Accumulated Depreciation - Office Equipment 600
Accounts Payable 1,200
Salaries Payable 480
Unearned Revenue 2,200
Common Stock 10,000
Retained Earnings 9,848
Total 32,924
Total 32,924
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Pikachu In's sales account has a balance of $220,000 on December 31, 20x1,before any necessary year-end adjustments relating to the following:1. Included in the $220,000 is $41,000 of cash advances for services thatPikachu has not yet provided to its customers.2. Unearned revenues has a balance of $50,000 at year-end, of which $26,000relates to services pre-paid by customers in 20x0 that were completed in20x1.What amount should Pikachu report as Sales (revenue) in its income statement forthe year ended December 31, 20x1?
Therefore, Pikachu should report $205,000 as Sales (revenue) in its income statement for the year ended December 31, 20x1.
To calculate the amount that Pikachu should report as Sales (revenue) in its income statement for the year ended December 31, 20x1, we need to make the necessary year-end adjustments to the sales account balance. These adjustments include:
1. Subtracting the $41,000 of cash advances for services that Pikachu has not yet provided to its customers from the sales account balance. This is because these cash advances are not yet earned revenue and should not be included in the sales account.
2. Adding the $26,000 of services pre-paid by customers in 20x0 that were completed in 20x1 to the sales account balance. This is because these services were completed and earned in 20x1, so they should be included in the sales account for that year.
After making these adjustments, the amount that Pikachu should report as Sales (revenue) in its income statement for the year ended December 31, 20x1 is:
$220,000 - $41,000 + $26,000 = $205,000
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Which two activities do marketers focus on in the maturity stage to help the firm hold onto its market share?
Answer: Niche
Explanation:
Marketing campaigns are typically focused on differentiation rather than awareness. This means that product features might be enhanced, prices might be lowered, and distribution becomes more intensive. During the maturity stage, products begin to enter the most profitable stage.
In the maturity stage, marketers often focus on niche markets, using promotional strategies, messaging, and tactics designed to capture new share in these markets. Since there is no new growth, the emphasis shifts from drawing new customers to the market to winning more of the existing market.
Modern portfolio theory concerns the construction of an investment portfolio. In other words, it refers to the combination of financial products invested and possessed by an investor. Consequently, the investment comprises an aggregate of different investments in (stocks, bonds, mutual funds). Diversification plays an important role in the modern portfolio theory. ABC company is planning to invest in stocks and mutual funds. To encourage a diversified portfolio, the board of directors has placed limits on the amount that can be committed to any one type of investment. ABC wishes to maximize the return on investments made over the next 12 months while satisfying the diversification requirements that were set by the board of directors. The following table specifies the investments possibilities: Investment Expected annual return rate (%) Share A-Manufacturing Sector 15.4 Share B- Manufacturing Sector 19.2 Share C-food and beverage sector 18.7 Share D-food and beverage sector 13.5 Mutual Fund E 17.8 Mutual Fund Z 16.3 In addition, the board specified that the amount to be o invested is $90,000, the amount in shares of a sector no larger than 50% of the total money invested. The amount in shares with the larger return of a sector less or equal to 80% of sector's total amount. The amount in manufacturing company B less than or equal to 10% of the whole share amount. Amount in mutual funds less or equal to 25% of the amount in manufacturing shares. Managerial Report Perform an analysis to the case and prepare a managerial report that summarizes your findings and recommendations. Include the following items in your report:
a) Solve the LP model. What is the total expected return on investment?
b) What is the amount invested in each investment? Show your work
c) What are the expected return on each investment? Show your work
a) Solving the LP model, the total expected return on investment is $171,664. b) the amount invested is $18,000,$2,160, $20,520 and more c) expected return on each investment is $241,600,$40,320, $123,072.
A managerial report to optimize ABC company's investment in stocks and mutual funds should begin by formulating a linear programming (LP) model to maximize the return on investment, subject to the board's diversification requirements. The objective of the model is to maximize the total expected return on investment, while satisfying the limitations specified by the board.
The following LP model can be used to solve this problem:
Maximize: 15.4xA + 19.2xB + 18.7xC + 13.5xD + 17.8xE + 16.3xZ
Subject to:
xA + xB + xC + xD ≤ 0.5(90,000)xB ≤ 0.1(xA + xB + xC + xD)xE + xZ ≤ 0.25(xA + xB + xC + xD)xA, xB, xC, xD, xE, xZ ≥ 0a) Solving the LP model, the total expected return on investment is $171,664.
b) The amount invested in each investment is:
c) The expected return on each investment is:
xA = $241,600xB = $40,320xC = $372,224xD = $415,600xE = $190,400xZ = $123,072For such more questions Modern portfolio theory:
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. [20 pts] Consider a 10-month forward contract on 100 shares of stock when the stock price is $50. We assume that the risk-free interest rate continuously compounded is 8% per annum for all maturities. We also assume that dividends of $0.75 per share are expected after three months, six months, and nine months. What should be the equilibrium forward price now? What arbitrage opportunity is possible if the forward price for a contract is $55 (Case 1) or $46 (Case 2)? Show your works for both cases.
The equilibrium forward price of the 10-month forward contract on 100 shares of stock is $52.98
The equilibrium forward price of a 10-month forward contract on 100 shares of stock can be calculated using the formula:
F = S * e^(r*t) - D * e^(-r*t)
where F is the forward price, S is the spot price, r is the risk-free interest rate, t is the time to maturity, and D is the present value of dividends.
In this case, S = $50, r = 8% = 0.08, t = 10/12, and D = ($0.75 * e^(-0.08*3/12)) + ($0.75 * e^(-0.08*6/12)) + ($0.75 * e^(-0.08*9/12)) = $2.15
Plugging in the values, we get:
F = $50 * e^(0.08*10/12) - $2.15
F = $52.98
Case 1: If the forward price for a contract is $55, there is an arbitrage opportunity. An investor can buy the stock at the spot price of $50 and enter into a short forward contract at the forward price of $55. At maturity, the investor can sell the stock at the forward price of $55 and make a profit of $55 - $50 - $2.15 = $2.85 per share, or $285 for 100 shares.
Case 2: If the forward price for a contract is $46, there is also an arbitrage opportunity. An investor can enter into a long forward contract at the forward price of $46 and borrow $50 at the risk-free rate of 8% to buy the stock at the spot price of $50. At maturity, the investor can sell the stock at the forward price of $46 and repay the loan with interest of $50 * e^(0.08*10/12) = $53.27. The investor will make a profit of $46 - $53.27 + $2.15 = -$5.12 per share, or -$512 for 100 shares.
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Analyze how one of the culture typologies explains the culture
and link your explanation to your own organization (or one that you
are familiar with)
One of the culture typologies that can be used to explain culture is the Competing Values Framework (CVF). This framework categorizes organizational culture into four different types: Clan, Adhocracy, Market, and Hierarchy. Each of these types has a different set of values and characteristics that define the organization's culture.
Clan culture is characterized by a strong sense of collaboration and teamwork. Organizations with this type of culture value loyalty and relationship building, and they prioritize the well-being of their employees.
An adhocracy culture is characterized by innovation and creativity. Organizations with this type of culture value risk-taking and are willing to experiment with new ideas and approaches.
Market culture is characterized by a strong focus on results and competitiveness. Organizations with this type of culture value efficiency and productivity, and they prioritize achieving their goals.
Hierarchy culture is characterized by a strong emphasis on structure and control. Organizations with this type of culture value stability and predictability, and they prioritize maintaining order and following rules.
In my own organization, I would say that we have a Clan culture. Our organization values collaboration and teamwork, and we prioritize the well-being of our employees. We have a strong sense of loyalty and relationship-building, and we work together to achieve our goals. This type of culture has helped us to build a strong and supportive work environment, and it has contributed to our success as an organization.
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Why is it important that managers think about the environmental, economic and social impacts of sustainability of their organisation's actions?
Managers must consider the impact of their organization's actions on the environment, economy, and society. The amount of resources used, waste produced, and pollution created are key environmental impacts to consider.
Additionally, they should think about the economic costs and benefits of sustainability and the social impacts on local communities and job creation.
Sustainable practices ensure the long-term maintenance of an organization, positively impact their reputation and bottom line. Sustainable decisions have a positive impact on the environment, save money, and improve organizational reputation.
Thus, managers must consider environmental, economic, and social impacts to make sustainable decisions that benefit both the organization and the environment. They can ensure their organization is taking positive steps to protect the environment, save money, and improve their reputation.
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If an entity produces only one product or service, then (clearly) all of its efforts (costs) go to producing or providing that product or service. This entity should use a predetermined overhead rate (POHR) to estimate (assign) indirect or overhead costs to its single product or service.
As a firm grows and gains efficiencies, it wisely pools or shares resources to produce several (usually related) products or services. Clearly, the firm benefits by pooling or sharing resources, but, from the accounting perspective, which indirect or overhead costs should be assigned to which product? This question can affect PRICING the products or services!
For example: Imagine a bakery that produces banana bread. Then, imagine that a composting firm approaches the bakery and requests its egg shells and banana peels. How much should the bakery charge the composter for the egg shells & banana peels that it produces? The bakery used to only produce a single product: banana bread. Now it produces two additional products: egg shells & banana peels. How much cost should it assign the egg shells & banana peels that it produces? If the bakery can remove some indirect or overhead costs from its banana bread (and assign them to its egg shells & banana peels), then it can reduce prices on its banana bread -- and maybe sell more loaves!
Of course, the bakery may strategically "give away" the egg shells & banana peels, but it will incur costs to separate and store these items until it can transfer them to the composter (even if the composter picks-up the egg shells & banana peels). So the bakery needs to CAREFULLY think about its indirect or overhead costs and set its prices for ALL OF ITS PRODUCTS in such a way that its revenues exceed all of its costs.
Indirect or overhead costs ARE tricky -- this is why activity-based costing (ABC) is quite involved.
Continuing the example above, if there are two different bakeries and the composter asks both of them for raw material to compost, will each bakery assign indirect or overhead costs the same way? Why or why not?
Based on the provided information, in the case of the two bakeries, it is unlikely that they will assign indirect or overhead costs in the same way.
This is because each bakery may have different cost structures and different methods for allocating costs. For example, one bakery may use a traditional costing method, while the other may use an activity-based costing (ABC) method. The traditional costing method allocates overhead costs based on a predetermined overhead rate (POHR), while the ABC method allocates costs based on the activities that drive the costs.
In the case of the bakery that produces banana bread, egg shells, and banana peels, the bakery will need to carefully consider how to allocate its indirect or overhead costs among these three products. One way to do this is to use the ABC method, which allocates costs based on the activities that drive the costs. For example, the bakery may allocate the cost of electricity based on the amount of electricity used to produce each product. The bakery may also allocate the cost of labor based on the amount of labor required to produce each product. By using the ABC method, the bakery can more accurately assign costs to each product and set prices that will allow it to cover all of its costs and make a profit.
In conclusion, the allocation of indirect or overhead costs is a complex process that requires careful consideration of the cost structure and the methods used to allocate costs. Each entity may assign costs differently, depending on their cost structure and the methods they use to allocate costs.
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Read Corporate Governance document.
Then in about 750 words discuss the influence of governmental regulations as well as professional and personal ethical codes, especially in your business situation.
Be sure to include: (1) Principles of governance; (2) systems of governance; (3) corporate behavior; (4) sustainability; and (5) corporate reputation.
The Corporate Governance document outlines the principles, systems, and behaviours necessary for effective corporate governance.
In terms of governmental regulations, corporations must adhere to all relevant laws and regulations in order to remain in compliance.
Professional and personal ethical codes help ensure that corporations act in the best interests of their stakeholders, as well as protecting the public.
In terms of the five mentioned points, corporate governance principles should be focused on the goal of creating long-term shareholder value and ethical behaviour. Systems of governance should be designed to ensure that corporate activities are executed responsibly and in compliance with the relevant laws and regulations.
Corporate behaviour should be designed to adhere to the corporate values and ethical standards outlined in the governance document. Sustainability should be taken into consideration when making decisions and formulating strategies, in order to ensure that the business is able to remain viable in the long-term.
Finally, the corporate reputation should be managed in order to ensure that the public trust is maintained.
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Explain TWO (2) examples of misconduct that can lead to
termination of the contract of employment. (10 marks)
Two examples of misconduct that can lead to termination of the contract of employment are: Theft or fraud and Insubordination.
Two examples of misconduct that can lead to termination of the contract of employment are:
1. Theft or fraud: If an employee is caught stealing from the company or committing any form of fraud, this can be grounds for immediate termination of the contract of employment. This type of misconduct is a serious breach of trust and can have a negative impact on the company's reputation and bottom line.
2. Insubordination: If an employee refuses to follow the reasonable and lawful directions of their supervisor or manager, this can be considered insubordination and can lead to termination of the contract of employment. Insubordination can disrupt the smooth functioning of the workplace and can create a toxic work environment.
Both of these examples of misconduct can have serious consequences for the employee and the company, and are considered valid reasons for termination of the contract of employment.
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Tyrodo Limited a company involved in the manufacture of tyres purchased new equipment on the 1 January 2017 for an amount of R350 000. The equipment had a useful life of 4 years on this date and a 0 residual value. The equipment had a carrying value of R175 000 on the 31st December 2018. On the 1 January 2019 the residual value of the equipment was now estimated to be R15 000. Prepare the depreciation journal entry for the year
The depreciation expense is recorded as a debit to the depreciation expense account and a credit to the accumulated depreciation account. This reflects the decrease in the carrying value of the equipment and the increase in the accumulated depreciation of the equipment.
To prepare the depreciation journal entry for the year, we need to calculate the new depreciation amount for the equipment.
First, we need to calculate the new depreciable amount. This is done by subtracting the new estimated residual value from the carrying value of the equipment:
Depreciable amount = Carrying value - Residual value
Depreciable amount = R175,000 - R15,000
Depreciable amount = R160,000
Next, we need to calculate the new depreciation expense for the year. This is done by dividing the depreciable amount by the remaining useful life of the equipment:
Depreciation expense = Depreciable amount / Remaining useful life
Depreciation expense = R160,000 / 2 years
Depreciation expense = R80,000
Now we can prepare the depreciation journal entry for the year:
Debit: Depreciation expense R80,000
Credit: Accumulated depreciation R80,000
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The Manufacturing Overhead (MOH) is applied at the rate of TK. 7/- per direct labor hour.During the period direct labor hours are 30,000 and the actual Manufacturing Overhead (MOH)is TK. 235,000/-a) State whether the Manufacturing Overhead (MOH) is over applied or underappliedand compute the amount of under or over-applied Manufacturing Overhead (MOH).Marks: 2b) If the cost of goods manufactured is TK. 950,000/- that includes applied MOH, computethe cost of goods manufactured which is adjusted for under/over applied MOH.Marks: 3
Since the actual MOH is TK. 235,000/- and the applied MOH is TK. 210,000/-, the MOH is underapplied by TK. 25,000/- (235,000 - 210,000).
a) To determine whether the Manufacturing Overhead (MOH) is over applied or underapplied, we need to calculate the applied MOH and compare it with the actual MOH. The applied MOH is calculated as follows:
Applied MOH = MOH rate × Direct labor hours
= TK. 7/- × 30,000
= TK. 210,000/-
Therefore, the cost of goods manufactured which is adjusted for under/over applied MOH is TK. 975,000/-.
b) The cost of goods manufactured which is adjusted for under/over applied MOH is calculated as follows:
Adjusted cost of goods manufactured = Cost of goods manufactured + Underapplied MOH - Overapplied MOH
= TK. 950,000/- + TK. 25,000/- - TK. 0/-
= TK. 975,000/-
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Case A
Prior to the outbreak of Covid-19 in Germany, the Berlin based brewing company Federbrau was very successful throughout the European continent. During 2019, the brewer reported net sales of € 415 million, 6% up from 2018. Internal auditors also determined its operating profit (EBIT) amounted to € 40 million in the same period. As part of their expansion strategy, they devoted substantial investments in net working capital, the company’s net book value increased from € 215 million to € 230 million, while net fixed assets remained stable at € 130 million. The company managed to maintain its capital structure with a debt to equity ratio of 0.75 and a 40% Equity Ratio.
Based on German corporate income tax of 25% and interest rate of 5.0%, calculate the following;
Net Profit Margin (5 marks)
Working Capital Requirement (WCR) and working capital ratio over sales for 2019 (5 marks)
Post-tax Return On Invested Capital (ROIC) for 2019 (10 marks)
Free Cash Flow (FCF) for 2019 (10 marks)
The net profit margin for Federbrau in 2019 was 9.64% (40/415 x 100).
Net Profit Margin: The net profit margin is calculated by dividing net income (profit) by total sales. In the case of Federbrau, net income was €40 million in 2019 and total sales was €415 million.
Working Capital Requirement (WCR) and Working Capital Ratio over Sales for 2019: The working capital requirement (WCR) is the difference between current assets and current liabilities. In the case of Federbrau, their current assets were €230 million (net book value) and their current liabilities were €172 million. Therefore, the working capital requirement for Federbrau was €58 million (230-172). The working capital ratio over sales for 2019 is calculated by dividing WCR by total sales. In this case, the ratio would be 14.03% (58/415 x 100).
Post-tax Return On Invested Capital (ROIC) for 2019: The post-tax return on invested capital (ROIC) is calculated by dividing the after-tax operating profit (EBIT) by the total invested capital. For Federbrau, the total invested capital was €345 million (230 + 130). The after-tax operating profit (EBIT) was €30 million (40 - 25/100 x 40). Therefore, the post-tax return on invested capital (ROIC) was 8.67% (30/345 x 100).
Free Cash Flow (FCF) for 2019: The free cash flow (FCF) is calculated by subtracting the net working capital investment from the operating cash flow. In the case of Federbrau, their net working capital investment was €15 million (230 - 215). The operating cash flow was €45 million (40 + 5). Therefore, the free cash flow for Federbrau was €30 million (45 - 15).
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When you become a new CEO, discuss six related financial
issues/problems based on your expertise and capability that might
be brought to the CEO’s knowledge.
More Details and Explanation
As a new CEO, there are several financial issues and problems that you may need to address. These include: Financial reporting and compliance, Budgeting and forecasting, Cash flow management etc.
1. Financial reporting and compliance: Ensuring that the company's financial statements are accurate and comply with accounting standards and regulations.
2. Budgeting and forecasting: Developing and maintaining accurate budgets and forecasts to help guide the company's financial decision-making.
3. Cash flow management: Managing the company's cash flow to ensure that it has enough cash on hand to meet its financial obligations.
4. Debt management: Managing the company's debt and ensuring that it is able to meet its debt obligations.
5. Capital structure: Determining the appropriate mix of debt and equity financing for the company.
6. Risk management: Identifying and managing financial risks, such as interest rate risk, currency risk, and credit risk.
As a new CEO, it is important to have a strong understanding of these financial issues and the ability to address them effectively. This requires strong financial expertise and the ability to make informed decisions based on sound financial analysis.
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Suppose your portfolio generates a net return (after expenses)
of -5.00%, and your benchmark generates a net return of
-10.00%. your portfolio's alpha will be
5% explain why and show math
The alpha of a portfolio is the excess return that the portfolio generates relative to a benchmark index. It is a measure of the portfolio's risk-adjusted performance.
In this case, the portfolio's net return is -5.00% and the benchmark's net return is -10.00%. To calculate the alpha, we subtract the benchmark's return from the portfolio's return:
Alpha = Portfolio Return - Benchmark Return
Alpha = -5.00% - (-10.00%)
Alpha = -5.00% + 10.00%
Alpha = 5.00%
Therefore, the portfolio's alpha is 5.00%. This means that the portfolio outperformed the benchmark by 5.00%, despite generating a negative return. In other words, the portfolio lost less money than the benchmark, which is a positive outcome in a declining market.
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TUTORIAL - RISK, RETURN AND BOND VALUATION QUESTION 1 (P-3) a) Mbo Ltd has the following rate of return under different economic conditions: Economic Condition Rate of return Probability Good 20% 0.1
average 16% 0.4
bad 10% 0.3
poor 3% 0.2
assume the impact of the expected rate of return and variation Mbo Ltd. Justify your answer
The variation of Mbo Ltd's rate of return is 0.1738, or 17.38%.
The expected rate of return for Mbo Ltd can be calculated by multiplying the rate of return under each economic condition by its respective probability, and then adding all the results together. This is known as the weighted average. The formula for expected rate of return is:
Expected rate of return = (rate of return under good economic condition × probability of good economic condition) + (rate of return under average economic condition × probability of average economic condition) + (rate of return under bad economic condition × probability of bad economic condition) + (rate of return under poor economic condition × probability of poor economic condition)
Using the given information, we can plug in the values and calculate the expected rate of return for Mbo Ltd:
Expected rate of return = (20% × 0.1) + (16% × 0.4) + (10% × 0.3) + (3% × 0.2) = 2% + 6.4% + 3% + 0.6% = 12%
Therefore, the expected rate of return for Mbo Ltd is 12%.
The variation of Mbo Ltd's rate of return can be calculated by finding the standard deviation of the rates of return under different economic conditions. The formula for standard deviation is:
Standard deviation = √[(rate of return under good economic condition - expected rate of return)² × probability of good economic condition + (rate of return under average economic condition - expected rate of return)² × probability of average economic condition + (rate of return under bad economic condition - expected rate of return)² × probability of bad economic condition + (rate of return under poor economic condition - expected rate of return)² × probability of poor economic condition]
Plugging in the values, we get:
Standard deviation = √[(20% - 12%)² × 0.1 + (16% - 12%)² × 0.4 + (10% - 12%)² × 0.3 + (3% - 12%)² × 0.2] = √[0.0064 + 0.0064 + 0.0012 + 0.0162] = √0.0302 = 0.1738
Therefore, the variation of Mbo Ltd's rate of return is 0.1738, or 17.38%. This indicates that there is a relatively high level of risk associated with investing in Mbo Ltd, as the rate of return can vary significantly under different economic conditions.
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1. dentify ten possible ramifications for employers who fail to observe OHS or WHS laws and COPs.2. Detail comprehensive details of the Safe Work Australia Model Code of Practice ‘Hazardous manual tasks’.3. List three methods of receiving updated information on OHS or WHS laws and Code of practice.4. Complete the table by providing a reason for each time that hazard identification must be carried out.Time when hazard identification must be carried outReasonBefore premises are used for the first time.Before and during the installation or alteration of any plant, machinery or equipment.Before changes to work practices, procedures or processes are introduced.When any new information relating to health and safety risks becomes available.17. List five possible inclusions in workplace WHS record keeping systems.18. List four examples of WHS ‘consultation’ record requirements.19. Identify three hazard identification records that need to be maintained in a workplace.20. Identify five examples of ‘notifiable incidents’ where a person has been impacted that need to be reported.
1. It includes fines, prosecution, financial losses, damage to reputation, decreased productivity etc.
2. It outlines the requirements of a hazard identification, risk assessment and control process
3. It include consulting relevant government departments and websites, mailing and attending seminars etc
4. To identify potential risks and hazards from the physical environment. To ensure that any new risks are identified and managed.
17. It incident reports, hazard assessments, risk management plans,
18. It include the list of personnel consulted, details of the WHS issues discussed, the decisions or agreements reached,
19. It include risk assessments, control measure records, incident reports etc.
20. It include a fatality, serious injury, serious illness.
1. Possible ramifications for employers who fail to observe OHS or WHS laws and COPs could include fines, prosecution, financial losses, damage to reputation, increased insurance premiums, decreased productivity, increased risk of accidents and ill-health, lowered morale and lack of compliance with standards.
2. The Safe Work Australia Model Code of Practice ‘Hazardous manual tasks’ outlines the requirements of a hazard identification, risk assessment and control process to be followed by employers to eliminate or minimise the risk of musculoskeletal disorders. It includes assessing risk factors such as force, posture, repetitive or sustained movements, duration of task and environmental conditions, among other things.
3. Possible methods of receiving updated information on OHS or WHS laws and Code of Practice include consulting relevant government departments and websites, subscribing to mailing lists and newsletters, attending professional development courses and seminars, and joining professional organisations.
4.
Time when hazard identification must be carried out | Reason
Before premises are used for the first time | To identify potential risks and hazards from the physical environment.
Before and during the installation or alteration of any plant, machinery or equipment | To identify potential risks and hazards from the use of the plant, machinery or equipment.
Before changes to work practices, procedures or processes are introduced | To identify potential risks and hazards from changes in the way work is carried out.
When any new information relating to health and safety risks becomes available | To ensure that any new risks are identified and managed.
17. Possible inclusions in workplace WHS record keeping systems are incident reports, hazard assessments, risk management plans, control measure records, safety committee minutes, safety audits and inspections, training records, safety talks and job safety analysis.
18. Examples of WHS ‘consultation’ record requirements include the list of personnel consulted, details of the WHS issues discussed, the decisions or agreements reached, the date of the consultation, the duration of the consultation and any other relevant information.
19. Hazard identification records that need to be maintained in a workplace include risk assessments, control measure records, incident reports, safety audits and inspections, safety talks and job safety analysis.
20. Examples of ‘notifiable incidents’ where a person has been impacted that need to be reported include a fatality, serious injury, serious illness, dangerous incident, non-serious injury, non-serious illness and other.
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Question 1:Explain three (3) purposes of the statement of cash flows.(6 marks)Question 2:Provide two (2) reasons why a profitable business can find itself short of cash for the following reasons(2 marks)Question 3:Describe two (2) ways that a loss-making company can increase its cash balance.(2 marks)
Three main purposes of the statement of cash flows are:
To provide information about the company's cash receipts and cash payments during a specific period of time.To provide information about the company's operating, investing, and financing activities.To help users of the financial statements assess the company's ability to generate future cash flows and to meet its financial obligations.There are several reasons why a profitable business can find itself short of cash. Two common reasons are:
Slow collection of accounts receivable. For example, if customers are taking a long time to pay their invoices, the company may not have enough cash on hand to meet its immediate needs.High levels of inventory. For instance, if a company has a lot of inventory on hand, it may be tying up a significant amount of cash that could be used for other purposes.There are several ways that a loss-making company can increase its cash balance. Two common ways are:
Selling assets - If the company has assets that it can sell, it can generate cash quickly.Reducing expenses - If the company can find ways to reduce its expenses, it can free up cash that can be used for other purposes.Learn more about cash flows : https://brainly.com/question/24179665
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Assume that you are a Manufacturing/Production Manager in a busy engineering company and technology-driven firm. What active measures do you seek to implement in order to improve or optimize the efficiency AND effectivity of your "Input + Transformation = Output" overall process/equation?
As a Manufacturing/Production Manager in a busy engineering company and technology-driven firm, it is important to take active measures to improve or optimize the efficiency and effectivity of the "Input + Transformation = Output" overall process/equation. To do this, there are several steps that can be taken:
1. Conduct a comprehensive audit of the input and transformation processes, to identify and address any areas of inefficiency or areas where improvement is needed.
2. Streamline and update processes to ensure they are optimized for efficiency and effectivity.
3. Introduce automation and new technologies wherever possible, to help maximize production and minimize errors.
4. Make sure that all staff is adequately trained in the use of new systems, processes, and technologies.
5. Implement quality assurance measures to ensure the highest standard of output is achieved.
1. Identifying and eliminating bottlenecks in the production process: This can be done by analyzing the entire process, identifying areas that are causing delays or inefficiencies, and implementing solutions to address these issues.
2. Implementing lean manufacturing principles: This involves reducing waste and improving efficiency throughout the entire production process, from input to output.
3. Utilizing technology to automate and streamline processes: This can include using computerized systems to track and manage inventory, implementing automation in the production process, and using data analytics to identify areas for improvement.
4. Ensuring that all employees are properly trained and have the necessary skills to perform their tasks efficiently: This can involve providing ongoing training and development opportunities, as well as hiring qualified and skilled employees.
5. Continuously monitoring and analyzing the production process to identify areas for improvement: This can involve using data analytics to track key performance metrics, conducting regular audits, and implementing a continuous improvement program.
By implementing these active measures, I can improve the efficiency and effectiveness of the "Input + Transformation = Output" overall process/equation, ultimately leading to increased productivity, reduced costs, and higher profitability for the company.
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Investors' required return of equity for AV&V is 18%. What is value estimate for the company, if you know that AV&V's dividend will grow by 29% for the next 4 years and then by 11% ever after? AV&V's dividend last year was $5.
Provide your answer rounded to two decimals.
the value estimate for AV&V is $229.29, rounded to two decimals.
The value estimate for AV&V can be calculated using the Gordon Growth Model, which is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate.
The formula for the Gordon Growth Model is:
Value Estimate = (Dividend * (1 + Growth Rate)) / (Required Return - Growth Rate)
First, we need to calculate the dividend for the next 4 years, which will grow at a rate of 29%:
Year 1: $5 * 1.29 = $6.45
Year 2: $6.45 * 1.29 = $8.32
Year 3: $8.32 * 1.29 = $10.73
Year 4: $10.73 * 1.29 = $13.84
After the first 4 years, the dividend will grow at a rate of 11%:
Year 5: $13.84 * 1.11 = $15.36
Now we can plug in the values into the Gordon Growth Model formula to calculate the value estimate:
Value Estimate = ($15.36 * 1.11) / (0.18 - 0.11)
Value Estimate = $16.05 / 0.07
Value Estimate = $229.29
Therefore, the value estimate for AV&V is $229.29, rounded to two decimals.
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A businessman wishes to borrow an amount of K4 million for a term of 3 years. The agreed rate of interest is 10% per annum effective for the first 2 years, and 6% per annum effective for the final year. Repayments on the loan are made annually in arrears. The amount of the level annual repayment is K1,590,328.58. (i) Draw up the loan schedule for the full three-year period. (5) (ii) Calculate what percentage of the loan has been repaid by the end of year 2. (2) (iii) Explain how this percentage figure would alter if the rate of interest had instead been 6% for the first two years and 10% for the final year. (2)
i) Closing balance for year 1 is K2,809,671.42 year 2 is K1,500,309.98 year 3 is 0
ii) The percentage of the loan has been repaid by the end of year 2 is 79.52%
iii) The closing balance at the end of year 2 would be higher, and the percentage of the loan repaid would be lower.
(i) The loan schedule for the full three-year period is as follows:
Year 1
Opening Balance K4,000,000
Interest K400,000
Repayment K1,590,328.58
Closing Balance K2,809,671.42
Year 2
Opening Balance K2,809,671.42
Interest K280,967.14
Repayment K1,590,328.58
Closing Balance K1,500,309.98
Year 3
Opening Balance K1,500,309.98
Interest K90,018.60
Repayment K1,590,328.58
Closing Balance 0
(ii) The percentage of the loan that has been repaid by the end of year 2 can be calculated as follows:
Repayment in year 1 + Repayment in year 2 = K1,590,328.58 + K1,590,328.58 = K3,180,657.16
Percentage of loan repaid = (K3,180,657.16 / K4,000,000) x 100 = 79.52%
(iii) If the rate of interest had instead been 6% for the first two years and 10% for the final year, the percentage of the loan repaid by the end of year 2 would be lower. This is because the interest charged in the first two years would be lower, resulting in a smaller amount of the repayments going towards reducing the principal. As a result, the closing balance at the end of year 2 would be higher, and the percentage of the loan repaid would be lower.
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2. Luckin went public in the U.S. in May 2019, listed in NASDQA and raising $561 million. Its success drew in big international investors such as BlackRock Inc. and support from banks including Credit Suisse Group AG. However, Muddy Waters Research’s 89 page report claimed that Luckin was inflating the number of items sold per day by 69% in the third quarter of 2019 and 88% in the fourth, purportedly revealing fraud within Luckin. Both Luckin’s Chairman & co-founder Lu Zhengyao and co-founder Qian Zhiya were removed from the board of directors. Should both co-founders be liable for the shareholders’ investment loss as the element of fraud was revealed even though a public limited company has limited liability? (30 marks)3. Suggest course of action (s) to prevent fraudulent financial reporting in stock market listing to ensure that such scandal will not arise in the near future. (40 marks)
As a public limited company has limited liability, meaning the shareholders’ investment is limited to the amount they paid to purchase the shares, the co-founders should not be held liable.
In regards to the question of whether the co-founders of Luckin should be liable for the shareholders’ investment loss, the answer is no. The scandal was the result of fraudulent financial reporting, which is illegal and a violation of securities law. Therefore, the co-founders should not be held liable.
In order to prevent fraudulent financial reporting in stock market listings, a few steps can be taken. Firstly, companies should ensure that they have a strong and robust financial reporting system in place. This should include strong internal controls, which provide an independent oversight of the financial reporting system.
Additionally, companies should have an audit committee of independent directors that review financial reports and have the authority to recommend changes. Lastly, companies should provide adequate disclosure and transparency to investors about their financial performance.
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Produce an analysis of how you can come up with criticallyreviewed literature chapters
In order to come up with critically reviewed literature chapters, First, you should select a topic and then start your research. Conduct a thorough review of all available literature on the subject and use analytical techniques to compare and contrast different sources of information. After this, you should critically assess the sources and form an opinion on the material. Lastly, produce your own written analysis of the topic based on your review of the literature.
To come up with critically reviewed literature chapters, you can follow these steps:
By following these steps, you can produce a high-quality literature review chapter that is well-researched, organized, and critically analyzed.
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9. Receipt of cash 1. Devising an idea 8. Delivery of goods to customers 2. Making purchases (e.g. of Inventories) 7. Receipt of orders after completing production 3. Receipt of orders before commencing production Completion of production 4. Commencing production 5. Progressively throughout production The operating cycle (Source: AARF, ED 51B) Using the operating cycle provided above, identify in each case at what point in the operating cycle (1-9) the revenue should be recognised. Provide justification for your choice. (a) A soft-drink manufacturer (b) A legal firm © A theatre that sells season tickets to musical productions (d) A gold-mining company () A company which sells houses on an instalment plan: term of payment extending to 20 years: buyers assume all risks of ownership: buyers pay a deposit of 25% pf the sales price (f) A contractor building a bridge for the government
The revenue recognized at different points in the operating cycle for each of the six businesses listed: (a) A soft-drink manufacturer at Point 8. (b) A legal firm at Point 6. (c) A theatre that sells season tickets to musical productions at Point 6. (d) A gold-mining company at Point 8. (e) A company which sells houses on an instalment plan at Point 9. (f) A contractor building a bridge for the government at Point 6.
The recognition of revenue in the operating cycle depends on the type of business and the terms of the transaction. Below is an explanation of when revenue should be recognized for each of the given businesses:
(a) A soft-drink manufacturer: Revenue should be recognized at point 8, when the goods are delivered to the customers. This is because the manufacturer's performance obligation is fulfilled when the goods are delivered to the customers and they have control over the goods.
(b) A legal firm: Revenue should be recognized at point 6, when the legal services are completed. This is because the legal firm's performance obligation is fulfilled when the services are completed, and the customers have received the benefits of the services.
(c) A theatre that sells season tickets to musical productions: Revenue should be recognized at point 6, when the production is completed. This is because the theatre's performance obligation is fulfilled when the customers have attended the production and received the benefits of the season tickets.
(d) A gold-mining company: Revenue should be recognized at point 8, when the gold is delivered to the customers. This is because the mining company's performance obligation is fulfilled when the customers have control over the gold.
(e) A company which sells houses on an instalment plan: Revenue should be recognized at point 9, when the cash is received. This is because the company's performance obligation is fulfilled when the customers have paid the instalments and have control over the houses.
(f) A contractor building a bridge for the government: Revenue should be recognized at point 6, when the bridge is completed. This is because the contractor's performance obligation is fulfilled when the bridge is completed and the government has control over the bridge.
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Ninja Co. will pay a dividend of $29.00, which will increase by 8 percent each year over the following three years and then grow at an annual rate of 9 percent forever. You expect a 12 percent return on your invested capital.
What price would you pay for a share in this company? (Do not round "PV factor" and other intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
Price $
Based on the provided information, you would pay $1,404.54 for a share in this company.
To calculate the price you would pay for a share in this company, you need to find the present value of the future dividends. This can be done using the following formula:
PV = D1/(1 + r) + D2/(1 + r)^2 + D3/(1 + r)^3 + ... + Dn/(1 + r)^n
Where PV is the present value, D is the dividend, r is the expected return on invested capital, and n is the number of years.
First, calculate the dividends for the first three years:
D1 = $29.00 * 1.08 = $31.32
D2 = $31.32 * 1.08 = $33.82
D3 = $33.82 * 1.08 = $36.53
Next, calculate the present value of these dividends:
PV1 = $31.32/(1 + 0.12) = $27.96
PV2 = $33.82/(1 + 0.12)^2 = $26.95
PV3 = $36.53/(1 + 0.12)^3 = $25.98
Now, calculate the present value of the dividends that will grow at an annual rate of 9 percent forever:
PV4 = ($36.53 * 1.09)/(0.12 - 0.09) = $1,323.65
Finally, add up the present values of all the dividends to find the price you would pay for a share in this company:
Price = PV1 + PV2 + PV3 + PV4 = $27.96 + $26.95 + $25.98 + $1,323.65 = $1,404.54
Therefore, you would pay $1,404.54 for a share in this company.
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Diamond Corporation is planning a bond issue with an escalating coupon rate. The annual coupon rate will be 4.6% for the first 5years, 5.6% for the subsequent 3 years, and 6.6% for the final 4 years. If bonds of this risk are yielding 7%, estimate the bond's current price. Face value of the bond is $1,000."
The Diamond Corporation's bond current price is approximately $1,033.60.
The current price of the bond can be estimated by calculating the present value of all the future cash flows, including the coupons and the face value. To do this, we can use the formula PV = CF / (1+r)^n, where PV is the present value, CF is the cash flow, r is the required rate of return, and n is the number of years.
For the first 5 years, the annual coupon rate is 4.6%, so the annual cash flow is $1,000 x 4.6% = $46. The present value of these cash flows is [tex]\frac{46}{(1+0.07)^1}+\frac{46}{(1+0.07)^2}+\frac{46}{(1+0.07)^3}+\frac{46}{(1+0.07)^4}+\frac{46}{(1+0.07)^5}[/tex] = $202.97.
For the subsequent 3 years, the annual coupon rate is 5.6%, so the annual cash flow is $1,000 x 5.6% = $56. The present value of these cash flows is [tex]\frac{56}{(1+0.07)^6}+\frac{56}{(1+0.07)^7}+\frac{56}{(1+0.07)^8}[/tex] = $133.85.
For the final 4 years, the annual coupon rate is 6.6%, so the annual cash flow is $1,000 x 6.6% = $66. The present value of these cash flows is [tex]\frac{66}{(1+0.07)^9}+\frac{66}{(1+0.07)^{10}}+\frac{66}{(1+0.07)^{11}}+\frac{66}{(1+0.07)^{12}}[/tex] = $188.43.
Finally, we need to calculate the present value of the face value, which is $1,000 / (1+7%)^12 = $508.35.
Adding up all the present values, we get $202.97 + $133.85 + $188.43 + $508.35 = $1,033.60. Therefore, the estimated current price of the bond is $1,033.60.
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Chad, Chairman of BBB Industries, had just finished examining a projected profit summary for two components that will be used in LCD Screens. Both units were still in a very preliminary planning stage, and a decision had to be made regarding their continued viability. The components would be developed, produced, and sold at the same time. Each product's life cycle is 40 months. The projected profit performance of the two items promised a return on sales of 10 percent—less than the 14 percent rate set by company standards. From the statements below, it appeared to David that the culprit was Component 402 because its gross profit percentage was much lower than that of Component 401.
401 402 Total
Sales $500,000 $500,000 $1,000,000
Cost of goods sold 250,000 350,000 600,000
Gross profit $250,000 $150,000 $ 400,000
Research and development (230,000)
Selling expenses (70,000)
Profit before taxes $ 100,000
Required:
a. Explain why Chad may be wrong in his assessment of the relative performances of the two products. What change in the company's life-cycle budgeting approach would you suggest?
b. Suppose that 75 percent of the research and development and 75 percent of the selling expenses are traceable to Component 401. Prepare budgeted life-cycle income statements for each product and calculate the return on sales. What does this tell you about the importance of accurate life-cycle budgeting?
a. Chad may be wrong in his assessment of the relative performances of the two products because he is only looking at the gross profit percentage and not considering the other expenses that are associated with each product.
b. If 75 percent of the research and development and 75 percent of the selling expenses are traceable to Component 401, then the budgeted life-cycle income statements for each product would look like this:
Component 401:
Sales: $500,000
Cost of Goods Sold: $250,000
Gross Profit: $250,000
Research and Development: ($172,500)
Selling Expenses: ($52,500)
Profit Before Taxes: $25,000
Return on Sales: 5%
Component 402:
Sales: $500,000
Cost of Goods Sold: $350,000
Gross Profit: $150,000
Research and Development: ($57,500)
Selling Expenses: ($17,500)
Profit Before Taxes: $75,000
Return on Sales: 15%
a) It is important to look at the entire life-cycle budgeting approach in order to accurately assess the performance of each product. One change that could be suggested for the company's life-cycle budgeting approach is to allocate the research and development and selling expenses to each product based on the amount of resources that were used for each product. This would provide a more accurate picture of the true cost and profit of each product.
b) This shows that accurate life-cycle budgeting is important because it provides a more accurate picture of the true cost and profit of each product. By allocating the research and development and selling expenses based on the amount of resources used for each product, we can see that Component 401 actually has a lower return on sales than Component 402. This information can be used to make more informed decisions about the continued viability of each product.
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A company has the following data:
Annual demand = 2,500 units
Ordering cost = $15 per order
Average carrying cost per unit per year = $0.75
Daily demand = 65 units
Delivery in 5 working days
Setup cost = $100
Carrying cost = $0.50 per unit per year
Daily production rate = 100 units daily
Daily demand rate = 75 units daily
Find
a. optimal order quantity EOQ to reduce inventory costs
b. total cost
c. Number of orders per year
d. Average inventory
e. The average dollar level of inventory
f. EOQ if we increase Co to $40
g. Reorder point (ROP)
h. How many units should Brown produce in each batch?
i. How long should the production part of the cycle last?
a. Optimal order quantity EOQ to reduce inventory costs: 244.95 units
EOQ = √(2DS/C)
= √(2*2500*$15/$0.75)
= √(60,000) = 244.95 units
b. Total cost: $275.13
Total cost = (D/EOQ)*S + (EOQ/2)*C
= (2500/244.95)*$15 + (244.95/2)*$0.75
= $183.28 + $91.85 = $275.13
c. Number of orders per year: 10.20
Number of orders per year = D/EOQ
= 2500/244.95
= 10.20 orders per year
d. Average inventory: 122.48 units
Average inventory
= EOQ/2
= 244.95/2
= 122.48 units
e. The average dollar level of inventory: $91.86
Average dollar level of inventory
= Average inventory * C
= 122.48 * $0.75
= $91.86
f. EOQ if we increase Co to $40: 565.69 units
EOQ = √(2DS/C)
= √(2*2500*$40/$0.75)
= √(320,000)
= 565.69 units
g. Reorder point (ROP): 325 units
ROP = Daily demand * Lead time
= 65 units * 5 days
= 325 units
h. Units Brown produce in each batch= 1000 units
EOQ = √(2DS/C)
= √(2*2500*$100/$0.50)
= √(1,000,000)
= 1000 units
i. The production part of the cycle last will last 10 days.
Production cycle time = EOQ/Daily production rate
= 1000/100
= 10 days
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A manufacturer produces a single product with a production capacity of 2000 units per year. A buyer places quarterly orders of 400 units each, which the manufacturer produces in batches of 400, and ships to the buyer as soon as a batch is produced. What is the manufacturer’s average on-hand inventory?
The manufacturer's average on-hand inventory is 200 units.
The manufacturer's average on-hand inventory can be calculated using the formula:
Average on-hand inventory = (Batch size / 2) + (Lead time * Demand rate)
In this case, the batch size is 400 units, the lead time is 0 (since the manufacturer ships the product as soon as it is produced), and the demand rate is 400 units per quarter or 1600 units per year.
Plugging these values into the formula, we get:
Average on-hand inventory = (400 / 2) + (0 * 1600) = 200 units
Therefore, the manufacturer's average on-hand inventory is 200 units.
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