Answer:
The current price of the stock is $99.76
Explanation:
The price of a stock which pays a constant dividend throughout for an indefinite period of time can be calculated using the present value of perpetuity formula. The stock qualifies as a perpetuity as it pays a constant cash flow after equal intervals of time and for indefinite time period.
The formula for the present value of perpetuity is,
Present Value = Cash Flow or Dividend / r
Where,
r is the discount ratePresent value = 4.18 / 0.0419
Present value = $99.76
So, the current price of the stock is $99.76
Opunui Corporation has two manufacturing departments--Molding and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Molding Finishing Total Estimated total machine-hours (MHs) 3,250 1,750 5,000 Estimated total fixed manufacturing overhead cost $ 20,000 $ 5,600 $ 25,600 Estimated variable manufacturing overhead cost per MH $ 1.00 $ 2.00 During the most recent month, the company started and completed two jobs--Job A and Job M. There were no beginning inventories. Data concerning those two jobs follow: Job A Job M Direct materials $ 17,000 $ 10,700 Direct labor cost $ 23,800 $ 10,400 Molding machine-hours 1,250 2,000 Finishing machine-hours 1,250 500 Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 40% on manufacturing cost to establish selling prices. The calculated selling price for Job A is closest to: (Round "Predetermined overhead rate" to 2 decimal places.)
Answer:
The calculated selling price for Job A is closest to: $80,290
Explanation:
Predetermined Overhead Rate = Budgeted Fixed Overheads / Budgeted Activity
= $ 25,600 / 5,000
= $5.12 per machine hour.
Manufacturing Cost Statement for Job A
Direct materials $17,000
Direct labor cost $23,800
Variable manufacturing overhead :
Molding ($ 1.00 × 1,250) $1,250
Finishing ($ 2.00 × 1,250) $2,500
Fixed Manufacturing Overheads
Molding ($5.12 × 1,250) $6,400
Finishing ($5.12 × 1,250) $6,400
Total Manufacturing Cost $57,350
Calculation of Selling Price
Total Manufacturing Cost $57,350
Add Mark -up ($57,350 × 40%) $22,940
Selling Price $80,290
Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company has no preferred stock. The company sold 3,000 shares before the end of the year. There were no other stock transactions. The company's earnings per share is:
Answer:
EPS = $1.71 per unit
Explanation:
Earnings per share is the total earnings attributable to ordinary shareholders divided by the number of units of common stock .
It represents profit per unit of stock unit held by common stock holder investor. The higher the more profitable and the better.
Earnings per share = Earnings attributable to ordinary shareholders / units of common stock
Earnings attributable to ordinary shareholders= Net income after tax - preference dividend
Net income = 132,000
Preference dividend = Nil
Number of shares at the end of the year = Number of shares at the beginning - number of shares at the end
Number of shares at the end of the year = 80,000 - 3000 = 77,000 units
Earnings = = 132,000 - 0 = 132,000
Earnings per shares(EPS) = $132,000 / 77,000 units = $1.71 per unit
EPS = $1.71 per unit
Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10−gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.7 pounds $90 per pound Direct labor 0.05 hours $20 per hour During June, Heavy Products produced and sold 24,000 containers using 1,500 pounds of direct materials at an average cost per pound of $92 and 1,200 direct manufacturing labor−hours at an average wage of $91.25 per hour. The direct manufacturing labor efficiency variance during June is ________.
Answer:
Direct labor time (efficiency) variance= 0
Explanation:
Giving the following information:
Standard:
Direct labor 0.05 hours $20 per hour
Actual:
Heavy Products produced and sold 24,000 containers using 1,200 direct manufacturing labor−hours.
To calculate the direct labor efficiency variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (0.05*24,000 - 1,200)*20
Direct labor time (efficiency) variance= 0
At first, it might seem that valuable commodities, such as cattle or lead bars, might be good forms of money. What makes paper money preferable to these alternatives
Answer:
This questions is incomplete, the options are missing. The options are the following:
a) It is less likely to be stolen.
b) It has more intrinsic value than cattle or lead bars.
c) It is divisible (unlike cattle) and easily portable (unlike lead bars).
And the correct answer is the option C: It is divisible (unlike cattle) and easily portable (unlike lead bars).
Explanation:
To begin with, the current paper money that is used nowadays has a lot of benefits in comparison with those other material valuable commodities due to the fact of all the characteristics that the paper money has. In addition, this currency is much more divisible than those other due to the fact that a one hundred dollar paper could turn into two fifty dollars papers. Besides, the paper money is much more portable than those others and the person could even carry more value in paper money than the same value but with those other commodities. And finally, the paper money is much more liquid than those other goods, so that indicates that is extremely easy to exchange for other thing, while the other options are not.
The performance of the manager of Ottawa Division is measured by residual income. Which of the following would decrease the manager’s performance measure?
A. Increase in amount of return on investment desired.
B. Increase in sales.
C. Increase in contribution margin.
D. Decrease in required rate of return.
Answer:
A. Increase in amount of return on investment desired
Explanation:
The residual income is a superior measure to return on investment of he performance of a division and its manger.
Residual income is the excess of the net income of a division over the opportunity cost of the capital invested into operating the assets of the division.
Residual income = Net income - (Required rate of return × Operating assets)
For example, lets consider the following data
Net income = 300,000
Assets = 500,000
Required rate of return = 10%
Residual income = 300,000 - (10% × 500,000) = 250,000
If the require rate of return is increased to 15%, then will reduce to
Residual income= 300,000 - (15% × 500,000) = 225,000
In the options given, an increase in the amount of require rate of return would decrease performance while others would increase it
Answer :A. Increase in amount of return on
ROI: Fill in the Unknowns Provide the missing data in the following situations: North American Division Asian Division European Division Sales Answer $5,000,000 Answer Net operating income $80,000 $200,000 $168,000 Operating assets Answer Answer $700,000 Return on investment 16% 10% Answer Return on sales 0.04 Answer 0.16 Investment turnover Answer Answer 1.5
Answer and Explanation:
The computation of the missing data is shown below:
Particulars North American Asian European
division Division Division
Sales $2,000,000 $5,000,000 $1,050,000
Net Operating
Income $80,000 $200,000 $168,000
Operating
assets $500,000 $2,000,000 $700,000
Return on
Investment 16% 10% 24%
Return on sales 0.04 0.04 0.16
Investment
turnover 4 2.5 1.5
Working notes :
1. For North American division
Sales is
= Net operating income ÷ return on sales
= $80,000 ÷ 0.04
= $2,000,000
Operating assets is
= Net Operating income ÷ return on investment
= $80,000 ÷ 16%
= $500,000
Investment turnover is
= Sales ÷ operating assets
= $2,000,000 ÷ $500,000
= 4
For Asian Division
Operating assets is
= Net operating income ÷ return on investment
= $200,000 ÷ 10%
= $2,000,000
Return on sales is
= Net Operating income ÷ sales
= $200,000 ÷ $5,000,000
= 0.04
Investment turnover is
= Sales ÷ operating assets
= $5,000,000 ÷ $2,000,000
= 2.5
For European division:
Sales is
= Operating assets × investment turnover
= $700,000 × 1.5
= $1,050,000
Return on investment is
= Net operating income ÷ operating assets × 100
= $168,000 ÷ $700,000
= 24%
Which of the following is NOT an option for remedying a cost disadvantage associated with activities performed by forward channel allies (wholesale distributors and retail dealers)?
a. Change to a more economical distribution strategy such as putting more emphasis on cheaper distribution channels (perhaps direct sales via the Internet) or perhaps integrating forward into company-owned retail outlets
b. Enhance differentiation through activities such as cooperative advertising) at the forward end of the value chain
c. Pressure distributors/dealers and other forward-channel allies to reduce their costs and markups
d. Insisting on across-the-board cost cuts in all value chain activities—those performed by suppliers, those performed in- house, and those performed by distributors/dealers
e. Collaborate with forward channel allies to identify win-win opportunities to reduce costs
Answer: d. Insisting on across-the-board cost cuts in all value chain activities—those performed by suppliers, those performed in- house, and those performed by distributors/dealers
Explanation:
The cost disadvantage is from the forward channel allies and not an across the board problem which involves all value chain activities. As such, the solution should be garnered towards the forward channel allies.
Insisting on cuts in areas that could be already functioning efficiently could lead to a loss of that efficiency.
Insisting on across-the-board cost cuts in all value chain activities is therefore not an option for remedying a cost disadvantage associated with activities performed by forward channel allies.
You make monthly payments on your car loan. It has a quoted APR of 6.7% (monthly compounding). What percentage of the outstanding principal do you pay in interest each month?
Answer:
Monthly percentage rate = 0.55%
Explanation:
DATA:
APR = 6.7%
Monthly interest percentage =?
Solution:
Basically APR means Annual percentage rate refers to annual rate of interest charged to borrowers and paid to investors.
Here we have asked to find the monthly interest percentage. In order to find that out, we need to divide APR by 12 months.
Monthly percentage rate = APR/12months
Monthly percentage rate = 6.7%/12months
Monthly percentage rate = 0.55%
A company uses the perpetual inventory system and recorded the following entry: Accounts Payable 2,500 Merchandise Inventory 50 Cash 2,450 This entry reflects a:
Answer:
The entry reflects a debit to the Accounts Payable and a credit to the Merchandise Inventory and Cash, signifying full settlement of debt with merchandise $50 and cash $2,450.
Explanation:
When Accounts Payable is debited, it means that it is being paid. In this case, there are two stated ways for the settlement. The supplier was paid $50 in goods and $2,450 in cash. While, the supplier was being owed the sum of $2,500, he agreed to accept merchandise at cost of $50 and the remainder in cash of $2,450. This entry also satisfies the accounting equation, keeping the two sides in balance, as Liabilities are reduced by $2,500 and Assets are reduced by the same amount.
Sunland Company had net credit sales of $13017000 and cost of goods sold of $10351500 for the year. The average inventory for the year amounted to $1545000. The inventory turnover for the year is
Answer:
Inventory turnover= 6.7
Explanation:
Giving the following information:
cost of goods sold= $10,351,500
The average inventory for the year amounted to $1,545,000.
To calculate the inventory turnover, we need to use the following formula:
Inventory turnover= Cost of goods sold/ average inventory
Inventory turnover= 10,351,500 / 1,545,000
Inventory turnover= 6.7
H. Tillman performed legal services for J. Laney. Due to a cash shortage, an agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $12500 by issuing 2900 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.80 per share. Given this information, the journal entry for J. Laney. to record this transaction is:
Answer:
The journal entry for J. Laney. to record this transaction is:
Legal Expenses $13,920 (debit)
Common Stock $2,900 (credit)
Share Premium $11,020 (credit)
Explanation:
The Common Stocks are carried at par value of $1. This means that any price paid in excess of the par value is accounted for in the Share Premium Account.
The Common stocks issued are measured at the price required to settle the legal expenses and are paid in excess of par value of $1.
Share Premium = ($4.80 - $1.00) × 2900 shares
= $3.80 × 2,900
= $11,020
One of your employees mentions to you that there is an active grapevine in your organization. Which of the following assumptions can you accurately make about how to manage the grapevine in this situation? can be 2 or more answers.
a. there are likely to be very few people who have access to the grapevine, and those people are usually chronically unhappy. Avoid interacting with them if possible.
b. employees are likely to have heard something from the grapevine before they talk with you about an issue.
c. develop a relationship with the person at the center of the grapevine so you can quickly spread and receive information throughout the organization
d. paying attention to what is said on the grapevine will give you a good serve of what employees are really thinking and feeling about the company.
Answer:
c. develop a relationship with the person at the center of the grapevine so you can quickly spread and receive information throughout the organization
d. paying attention to what is said on the grapevine will give you a good serve of what employees are really thinking and feeling about the company.
Explanation:
Grape wine is a rumor and informal channel of communication that spread throughout the organization in all directions irrespective of the authorities and develops due to various reasons. In order to manage this grape wine within the organization, the leaders may need o to defend the boundaries of grapevines and avoid the spread of rumors.The assumptions that can help you to manage the grapevine are:
develop a relationship with the person at the center of the grapevine so you can quickly spread and receive information throughout the organization paying attention to what is said on the grapevine will give you a good serve of what employees are really thinking and feeling about the company.The answers to this question can be gotten in options c and d. The concept of grapevine is the fact that communications are being passed around in the organization that are based on hearsay.
These are overhead conversations. It is an unofficial means of communicating in the work place.
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Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date.
The entity that promises to make the interest and maturity payments for a bond issue is called the:________.
Based on the information given in the following statement, answer the questions that follow: In July 2009, Walmart sold 100 billion yen of five-year samurai bonds. Lead managers in the deal were Mizuho Securities, BNP Paribas, and Mitsubishi UFJ Securities.
1. What type of bonds are these?
a. Government bonds
b. Municipal bonds
c. Corporate bonds
2. Who is the issuer of the bonds?
a. BNP Paribas
b. Walmart
c. Mitsubishi UFJ Securities
3. Which of the following statements is true about bonds?
a. When interest rates increase, the prices of U.S. Treasuries decline.
b. When interest rates increase, the prices of U.S. Treasuries increase.
4. Which of the following types of bonds has the least default risk?
a. Municipal bonds
b. Corporate bonds
c. Treasury bonds
Answer:
a. Issuer
The entity that promises to make payments on the bond is the entity that issued the bond and they are therefore known as the Bond Issuer.
1. c. Corporate bonds
When a private company issues bonds, these bonds are known as Corporate Bonds. They often offer the most return of the 3 options as they are the riskiest.
2. b. Walmart
Walmart are the issuers of the bond. The rest are Lead Managers who are often Investment banks who help in the facilitation of Bond Issuance.
3. a. When interest rates increase, the prices of U.S. Treasuries decline.
Bond prices and interest rates have an inverse relationship. This is because of the fixed interest payment that bonds offer which can either be attractive or not to investors depending on market rates. For instance, when interest rates are high, other investment vehicles will offer more returns than bonds and so people will divest from them which will reduce their price.
4. c. Treasury bonds
US Treasury and indeed Government bonds on average are the least riskiest of the options listed as they are backed by the full weight and faith of the central government and all its assets. If all else fails, the Central Government could simply print more money to pay off the bonds.
Say you own an asset that had a total return last year of 12 percent. If the inflation rate last year was 5 percent, what was your real return?
Answer:
Real rate of return= 0.07 = 7%
Explanation:
Giving the following information:
Say you own an asset that had a total return last year of 12 percent. The inflation rate last year was 5 percent.
The effect of the inflation rate is counterproductive to the rate of return. It diminishes purchasing power.
Real rate of return= nominal interest rate - inflation rate
Real rate of return= 0.12 - 0.05
Real rate of return= 0.07 = 7%
On January 2, abc co. purchased 10% of XYZ Co.’s outstanding common stock for $400,000, which equaled the carrying amount and fair value of 10% of XYZ’s net assets. ABC is the largest stockholder in XYZ and ABC has the majority of the seats on XYZ’s board of directors. XYZ reported net income of $500,000 for the current year and paid total cash dividends of $150,000. On its December 31 balance sheet, what amount should ABC report as its investment in XYZ?
A. $450,000.
B. $435,000.
C. $400,000.
D. $385,000.
Answer:
B. $435,000.
Explanation:
Sine ABC has significant influence over XYZ, it must use the equity method to record its investment.
January 2
Dr Investment in XYZ 400,000
Cr Cash 400,000
Dividends
Dr Cash 15,000
Cr Investment in XYZ 15,000
Net income
Dr Investment in XYZ 50,000
Cr Investment revenue 50,000
What must be the price of a $ 2 comma 000 bond with a 5.8% coupon rate, annual coupons, and 30 years to maturity if YTM is 10.1 % APR?
Answer:
Price of bond= $1,196
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond would be worked out as follows:
Step 1
Calculate the PV of interest payments
Annual interest payment
= 5.8% × 2,000× = 116
PV of interest payment
A ×(1- (1+r)^(-n))/r
A- 116
r- annual yield 5.8%
n = 30
= 116 × (1-(1.101)^(-30)/0.101
= 1084.465
Step 2
PV of redemption Value
PV = $2000 × (1.101)^(-30)
= 111.53
Step 3
Price of bond
= 111.53 + 1084.465159 = 1195.99
Price of bond= $1,196
The present value of free cash flows is $15 million and the present value of the horizon value is $100 million. Calculate the present value of the business.
A. $15 million
B. $100 million
C. $115 million
D. Cannot be determined.
Answer:
Option C, $115 million is the correct answer.
Explanation:
Given the present value (PV) of cash flow = $15 million
The present value of time horizon = $100 million
Now we have to calculate the present value (PV) of the business and this can be calculated by just adding the present value of free cash flows and the present value of horizon value.
The present value of the business = the present value (PV) of cash flow + The present value of the time horizon.
= 15 million + 100 million
= 115 million.
Therefore, option C. $115 million is correct.
A(n) ________ in U.S. interest rates will cause a decrease in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate.
Answer:
decrease decrease
Explanation:
if there is a decrease in U.S. interest rates, the return that investors would derive from investments in the US would be lower, as a result investors including foreign investors would demand less of the US dollars - there would be a decrease in demand for US dollars. this would lower the exchange rate per dollar.
Raphael's Performance Pizza is a small restaurant in Philadelphia that sells gluten-free pizzas. Raphael's very tiny kitchen has barely enough room for the three ovens in which his workers bake the pizzas. Raphael signed a lease obligating him to pay the rent for the three ovens for the next year. Because of this, and because Raphael's kitchen cannot fit more than three ovens, Raphael cannot change the number of ovens he uses in his production of pizzas in the short run.
However, Raphael's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Raphael lets them know how many workers he needs for each day of the week. In the short run, these workers are____________ inputs, and the ovens are_____________ inputs.
Answer:
However, Raphael's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Raphael lets them know how many workers he needs for each day of the week. In the short run, these workers are variable inputs, and the ovens are fixed inputs.
Explanation:
In the long run, all inputs are variable because eventually lease contracts expire, or they can move to new facilities. But on the short run, some inputs are fixed due to certain restraints. In this case, the restraints are the size of the kitchen and the lease contract for three ovens.
In the short run, the only input that Raphael can vary is the number of workers that he employs every week.
The market supply curve is: perfectly inelastic in the long run, but not the short run. more elastic in the long run than in the short run. less elastic in the long run than in the short run. perfectly elastic in the short run, but not the long run.
Answer:
The answer is B. more elastic in the long run than in the short run
Explanation:
Supply is usually more elastic in the long run than in the short run because it is a known fact factors of production(labor, capital etc.) can be utilised to increase supply in the long run whereas in the short run only labor can be increased.
And also, because because there is time for firms to enter or leave the industry.
Suppose you have $1,000,000 today and starting a year from now you intend to spend this money over the next 30 years. Assume the nominal rate of interest is 9.2%, inflation rate of 5% and the real rate of interest is 4%. How much can you spend annually in real dollar terms over the next 20 years to ensure constant spending in real terms?
Explanation:
Here Initial amount = $10,00,000
Nominal Interest Rate = 9.2%
inflation Rate = 5%
Real Interest Rate = 4%
in question it was asked to give in real then we will use the real discount rate to know annual spent amount
Present Value = PMT×PVIFA ( at 4% and 20 years)
Therefore, PMT = Present Value of Cash / PVIFA ( at 4% and 20 years)
= 1000000 / 13.5903
= $73581.75
Where, PMT = Annual Spent Amount
PVIFA = Present Value interest Factor Annuity
The Elle Corporation manufactures fingernail polish. Suzy buys a container of Elle's fingernail polish, applies it to her nails, and suffers a severe allergic reaction. She sues Elle under the implied warranty of merchantability. The test for determining whether Suzy will recover is whether:
Answer:
such a reaction in an appreciable number of consumers was reasonably foreseeable
Explanation:
In simple words, the given case can be related to the intent to fault or hiding the fault even after knowing about it. If in he given case it was proved that the product was allergic to a number of people then it would be stated that the company manufacturing it is the culprit of branding a harmful product.
However if it came to light that only Elle was allergic to the product due to some unique medical condition then there might not be any case to file.
Delta Company sells mini-flash drives. The selling price is $10 each and the variable costs are $8. If fixed costs are $3,000, how much in sales dollars must Delta have to break even
Answer:
Break-even point (dollars)= $15,000
Explanation:
Giving the following information:
The selling price is $10 each and the variable costs are $8.
Fixed costs are $3,000.
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 3,000 / [(10 - 8)/10]
Break-even point (dollars)= $15,000
4. (Compensating Balance) Quick Loan Bank offers your firm a line of credit at 8.25% annually up to $25 million. In addition, the bank requires you to maintain a 5% compensating balance against the amount you borrowed. What is the effective interest rate on this line of credit
Answer:
9.51%
Explanation:
In this question, we are interested in calculating the effective interest rate on this line of credit
Firstly, we calculate the interest value = 8.25% * 25 million = 2,062,500
Next is to calculate the compensating balance = 5% of 25 million = 1,250,000
Mathematically;
Effective interest rate = interest/(loan - interest - compensating balance)
Effective Interest rate = 2062500/(25000000-1250000-2062500)) = 0.0951
= 9.51%
The following information pertains to Lightning Inc., at the end of December: Credit Sales $ 20,000 Accounts Payable 10,000 Accounts Receivable 10,400 Allowance for Uncollectible Accounts 400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 21% of receivables up to 30 days past due, and 46% of receivables greater than 30 days past due. The accounts receivable balance of $10,400 consists of $7,500 not yet due, $1,600 up to 30 days past due, and $1,300 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense
Answer:
Lightning Inc.
Computation of Bad Debts Expense:
7% of $7,500 = $525
21% of $1,600 = 336
46% of $1,300 = 598
Total $1,459
Explanation:
a) Data and Calculations:
Credit Sales $ 20,000
Accounts Payable 10,000
Accounts Receivable 10,400
Allowance for Uncollectible Accounts 400 credit
Cash Sales 20,000
Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 21% of receivables up to 30 days past due, and 46% of receivables greater than 30 days past due.
The accounts receivable balance of $10,400 consists of $7,500 not yet due, $1,600 up to 30 days past due, and $1,300 greater than 30 days past due.
Age Analysis of Accounts Receivable balance of $10,400
Not yet due up to 30 days greater than 30
past due days past due
Percentage 7% 21% 46%
Balance $7,500 $1,600 $1,300
Bad debts $525 $336 $598
Bad debts Expense = $1,459
In the month of November, Carla Vista Co. Inc. wrote checks in the amount of $9,565. In December, checks in the amount of $11,465 were written. In November, $8,825 of these checks were presented to the bank for payment, and $10,285 in December. What is the amount of outstanding checks at the end of November? At the end of December?
Checks written in November $9,750
Less: Checks paid by bank in November $8,800
Checks outstanding at the end of November $950
Add: Checks written in December $11,762
Less: Checks paid by bank in December 10,889
Checks outstanding at the end of December $1,823
hope this helps!
- a random freshman
Classify the following costs incurred by a manufacturer of golf clubs as product costs or period costs. Also classify the product costs as direct materials or conversion costs.
a. Depreciation on computer in president's office
b. Salaries of legal staff
c. Graphite shafts
d. Plant security department
e. Electricity for the corporate office
f. Rubber grips
g. Golf club heads
h. Wages paid assembly line maintenance workers
i. Salary of corporate controller
j. Subsidy of plant cafeteria
k. Wages paid assembly line production workers
l. National sales meeting in Orlando
m. Overtime premium paid assembly line workers
n. Advertising on national television
o. Depreciation on assembly line
Answer:
a. Period Cost
b. Period Cost
c. Product Costs : conversion costs
d. Product Costs : conversion costs
e. Period Cost
f. Product Costs : direct materials
g. Product Costs : direct materials
h. Product Costs : conversion costs
i. Period Cost
j. Product Costs : conversion costs
k. Product Costs : conversion costs
l. Period Cost
m.Product Costs : conversion costs
n. Period Cost
o. Product Costs : conversion costs
Explanation:
Product Cost
Product Costs are included in Inventory/Product Valuation. All Manufacturing Costs are Product costs.
Direct Materials
The Costs of Materials that can be directly traced to the Cost Object (golf clubs)
Conversion Cost
Cost of Direct labor and Overheads cost incurred during the production of the cost object.
Period Cost
Period Costs are not included in Inventory or Product valuation. All non-manufacturing costs are period costs. These are expensed inthe period they are incurred.
Having the ability to effectively communicate is one of the most important skills a business executive can possess. As French businesswoman and author Mirelle Guilliano has said, "Intelligence, knowledge or experience are important and might get you a job, but strong communication skills are what will get you promoted." My own business experience supports this statement. By the time individuals have a few years of experience, they have great technical skills and can assemble, analyze, and categorize data to make solid business decisions. In the end, however, they are often unable to communicate the results of their analysis effectively. When I speak to senior executives and inquire about educational needs, the conversation invariably turns to communications. In accounting, by necessity, we focus on financial and quantitative data, but it is important to remember that as accountants we must be able to present the results of our analysis or studies to management. Through effective communications, accountants can truly impact business decisions and make their careers soar. The best way to get better at anything is to practice. That’s the basis for this assignment – to practice written communication.
Grayslake Novelty produces and sells a small novelty item through tourist shops in Chicago and other northern Illinois locations. Last year the company sold 198,400 units. The income statement for Grayslake Novelty for last year is shown below:
Sales $992,000
Less: Variable Expenses 545,600
Contribution Margin 446,400
Less: Fixed Costs 180,000
Net Operating Income $266,400
While the company has been profitable, as shown in the above income statement, sales began falling near the end of last year and have continued to decline this year. There is concern that new competitors are beginning to take market share from Grayslake Novelty. As a result, Sarah Burroughs, the company president, has asked you to provide some information to assist her in making decisions about the company’s strategy for this product. These alternatives should be evaluated individually as stated. You are free to offer your own alternative based on any of the parameters given in the data.
Required:
a. While the company is currently profitable, the president wants to know the contribution margin and the breakeven in both units and dollars using last year’s level of sales. Additionally, compute the margin of safety, margin of safety
ratio, and degree of operating leverage based on last year’s sales.
b. One of the possible strategies (Alt 1) is to reduce the current price by 8%. Using last year’s level of sales, what is the new contribution margin and break-even in units and dollars based on the price reduction? Additionally, compute
the margin of safety, margin of safety ratio, and degree of operating leverage based on last year’s sales.
c. A second strategy (Alt 2) is to reduce the current variable cost by 0.20 per unit. The company has identified available efficiencies that can be implemented without any additional changes to the current cost. What is the new
contribution margin and break-even in units and dollars based on the variable cost reduction of 0.20 per unit? Additionally, compute the margin of safety, margin of safety ratio, and degree of operating leverage based on last year’s
sales.
d. A third strategy (Alt3) is to decrease the current price by 8% and reduce the variable cost per unit by 0.20. What is the new contribution margin and break-even in units and dollars based on making both changes? Additionally,
compute the margin of safety, margin of safety ratio, and degree of operating leverage based on last year’s sales.
Answer:
Grayslake Novelty
Effective Communication by a business executive:
a. Using last year's level of sales:
a1. Contribution Margin:
= Selling price minus variable cost
= $5.00 - $2.75 = $2.25
a2. Breakeven in units:
= Fixed Costs/Contribution margin
= $180,000/$2.25 = 80,000 units
a3. Breakeven in dollars:
= Fixed Cost/Contribution margin ratio
= $180,000/45% = $400,000
a4. Margin of Safety:
= Current Sales - Break-even Point (in dollars)
= $992,000 - $400,000
= $592,000
a5. Margin of Safety Ratio:
= (Current Sales - Break-even Point (in dollars))/Sales x 100
= ($992,000 - 400,000)/$992,000 x 100
= 59.68% or 60%
a6. Degree of operating leverage:
= (Sales minus Variable)/(Sales minus Variable and Fixed Costs)
= ($992,000 - $545,600)/($992,000 - $545,600 - $180,000)
= $446,400/266,400 = 1.68
OR
= Contribution /Net Operating Income
= $446,400/$266,400 = 1.68
b: Alternative 1: Reduction of the current price by 8%:
b1.Contribution Margin:
= Selling price minus variable cost
= $4.60 - $2.75 = $1.85
b2. Breakeven in units:
= Fixed Costs/Contribution margin
= $180,000/$1.85 = 97,297 units
b3. Breakeven in dollars:
= Fixed Cost/Contribution margin ratio
= $180,000/40%
= $450,000
b4. Margin of Safety:
= (Current Sales - Break-even Point (in dollars)
= $912,640 - $450,000 = $462,640
b5. Margin of Safety Ratio:
= (Current Sales - Break-even Point (in dollars))/Sales x 100
= $912,640 - $450,000)/$912,640 x 100
= 51%
b6. Degree of operating leverage:
= Contribution /Net Operating Income
= $367,040/187,040 = 1.96
c: Alternative 2: Reduction of current variable cost by $0.20 per unit:
c1.Contribution Margin:
Selling price - variable cost
= $5.00 - $2.55 = $2.45
c2. Breakeven in units:
=Fixed cost/Contribution margin per unit
= $180,000/$2.45 = 73,469 units
c3. Breakeven in dollars:
=Fixed cost/Contribution margin ratio
= $180,000/49% = $367,347
c4. Margin of Safety:
= (Current Sales - Break-even Point (in dollars)
= $992,000 - $367,347
= $624,653
c5. Margin of Safety Ratio:
= (Current Sales - Break-even Point (in dollars))/Sales x 100
= $624,653/$992,000 x 100
= 63%
c6. Degree of operating leverage:
= Contribution /Net Operating Income
= $486,080/$306,080
= 1.59
d: Alternative 3: Reduction of Current price by 8% and Variable Cost by $0.20 per unit:
d1.Contribution Margin:
= Selling price - variable cost
= $4.60 - $2.55 = $2.05
d2. Breakeven in units:
= Fixed cost/Contribution margin per unit
= $180,000/$2.05
= 87,805 units
d3. Breakeven in dollars:
= Fixed cost/Contribution margin ratio
= $180,000/45%
= $400,000
d4. Margin of Safety:
= (Current Sales - Break-even Point (in dollars)
= $912,640 - $400,000
= $512,640
d5. Margin of Safety Ratio:
= (Current Sales - Break-even Point (in dollars))/Sales x 100
= $512,640/$912,640 x 100 = 56.2%
d6. Degree of operating leverage:
= Contribution /Net Operating Income
= $406,720/$226,720
= 1.8
Explanation:
1) Data and Calculations:
Last Year Alt 1 Alt 2 Alt 3
Sales $992,000 $912,640 $992,000 $912,640
Less: Variable Expenses 545,600 545,600 505,920 505,920
Contribution Margin 446,400 367,040 486,080 406,720
Less: Fixed Costs 180,000 180,000 180,000 180,000
Net Operating Income $266,400 $187,040 $306,080 $226,720
Unit selling price = Sales/Quantity sold = $992,000/198,400 = $5.00
Alternative 1, selling price = $5.00 x 92% = $4.40
Sales = $4.60 x 198,400 = $912,640
Last year's
Contribution Margin ratio = Contribution Margin/Sales Value = 45%
Contribution per unit = Selling price x Contribution margin ratio
= $5 x 45% = $2.25
Variable cost per unit = Selling price - Contribution per unit
= $5 - $2.25 = $2.75 or 55% of selling price.
Alt 1:
Contribution margin ratio = Contribution margin/Sales = 40.22%
Contribution per unit = $4.60 x 40.22% = $1.85
Variable cost = Selling price - Contribution per unit = $4.60 - $1.85 = $2.75
Alt 2:
Variable cost = $2.75 - $0.20 = $2.55
Contribution per unit = $5 - $2.55 = $2.45
Contribution margin ratio = $2.45/$5 x 100 = 49%
Alt 3: Alternative 3: Reduction of Current price by 8% and Variable Cost by $0.20 per unit:
Sales = 198,400 x $4.60 = $912,640
Variable Cost per unit = $2.75 - $0.20 = $2.55
Total Variable cost = 198,400 x $2.55 = $505,920
Contribution margin per unit = $4.60 - $2.55 = $2.05
Contribution margin ratio = $2.05/$4.60 x 100 = 45%
The above ratios on the financial performances of Grayslake Novelty under different scenarios communicate some information to the president about the outcome of each alternative. From the analysis, it is easier for management to make a choice of the strategy to pursue in order to achieve its objectives.
Note that the operating leverage measures how the operating income responds to changes in sales for Grayslake Novelty given the alternatives.
A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.
Answer:
non-tariff barrier
Explanation:
The non-tariff barrier refers to the barrier with respect to trade in which it restricts the import and export of goods and services with the help of methods that do not include the tariff imposed. It also excludes the custom tariff
As in the given situation, it is mentioned that one of the government inspectors inspected i.e available at the given period of time in case of imported goods
Therefore this situation represents the non-tariff barrier
The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 10,600 8,500 7,000 11,100 Each unit requires 0.35 direct labor-hours, and direct laborers are paid $20.00 per hour. Required: 1. Prepare the company’s direct labor budget for the upcoming fiscal year.
Answer and Explanation:
The preparation of the direct labor budget is presented below:
Particulars Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Required
Production 10,600 8,500 7,000 11,100 37,200
Multiply with
Direct labor
hours 0.35 0.35 0.35 0.35
Total
direct labors 3,710 2,975 2,450 3,885 13,020
Multiply with
Direct labor
cost $20 $20 $20 $20 $20
Total
direct labor
cost $74,200 $59,500 $49,000 $77,700 $260,400