Answer:
DR Cash $589
DR Credit Card expense $31
CR Sales $620
(To record sales via credit card)
Working
Cash
= 620 * ( 1 - 5%)
= $589
Credit Card Expense
= 620 * 5%
= $31
____ act as the export sales department for a manufacturer. Group of answer choices International freight forwarders Shippers associations Export management companies Export trading companies
Answer:
Export management companies
Explanation:
Export management companies acst as the export sales department for a manufacturer.
Export management companies refers to firms that helps in the distribution of goods produced by other firm's in the international market. They export goods on behalf of other firm's.
Export management companies are independent companies that provides support services for other firms engaged in exporting. Services rendered by export management companies includes: insuring, billing, shipping, warehousing among others.
They also help to provide important information that will improve the quality of product to firms who hire them.
You write a call option on Google. The current price of one share of Google is $400, the option strike price is $410, and the option premium is $5 (all prices are per share). On the expiration day, the price of Google is $425. The following statement is true:
A) The call is in the money
B) your payoff is negative
C) your payoff is positive and equal to 10
D) A and B
E) A and C
Answer: E) A and C
Explanation:
A Call option is an option to buy a security at a certain price in future. The option is only exercised if the market price of the security is higher than the option price of the security. When this happens the Call is said to be in the money. On expiration day, the price of Google is $425 which is higher than the option price of $410 so the Call is in the money. Option A is correct.
The option premium is the amount paid for the option contract and so is an expense. Payoff is calculated as;
= Market Value - (Option Price + Option premium)
= 425 - ( 410 + 5)
= $10
Option C is correct as well.
Brothern Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the most recently completed year appear below: Estimates made at the beginning of the year: Estimated machine-hours 40,600 Estimated variable manufacturing overhead $ 6.54 per machine-hour Estimated total fixed manufacturing overhead $ 944,762 Actual machine-hours for the year 36,700 The predetermined overhead rate for the recently completed year was closest to:
Answer:
The predetermined overhead rate is 29.81 per machine hour
Explanation:
Fixed predetermine overhead rate = Estimated fixed manufacturing overhead / Estimated machine hour
Fixed predetermine overhead rate = $944,762 / 40,600
Fixed predetermine overhead rate = $23.27 per machine hour
Total predetermine overhead rate = Fixed predetermine overhead rate + Estimated variable manufacturing overhead
= $23.27 + $6.54
= 29.81 per machine hour
Paragon Properties built a shopping center at a cost of $50M in year 2010. The company started leasing space in July of 2014. The land was purchased for $5M. Determine the depreciation charges through 2017 if the property was sold in November 2017.
Year = 2014
Cost= $50 M - $5 M = $45 M
Rate =1.177%
Depreciation= 1.177% * $45 M = $529,650
Year=2015
Cost = $45 M
Rate= 2.564%
Depreciation= $45 M * 2.564% = $1,153,800
Year = 2016
Cost = $45 M
Rate =2.564%
Depreciation= $45 M * 2.564% = $1,153,800
Year = 2017
Cost = $45 M
Rate =2.564%
Depreciation= $45 M * 2.564% = $1,153,800
therefore, total depreciation= $1,153,800 + $1,153,800 + $1,153,800 + $529,650 = $3,991,050
Depreciation charges through 2017 = $3,991,050 .
The Depreciation charges through 2017, if property was sold in November 2017 will be $3,991,050.
DepreciationIn the following question we are provided with information as follows:
The Value of the Property in the year 2010 = $50M. The Company started leasing space in July of 2014.
Land was purchased for $5M, which means the Cost of property is now $50M - $5M = $45M. The Depreciation rate in 2014 is 1.17%,
Depreciation value in 2014 = $45M × 1.17 =Depreciation rate in 2016 = 2.5%, Depreciation value = $45M × 2.5% = $529,650
Depreciation rate in 2015 = 2.5%, which give Depreciation value in 2015 = $45M × 2.5% = $1,153,800.
Depreciation rate in 2016 = 2.5%, Depreciation value = $45M × 2.5% = $1,153,800.
Depreciation rate in 2017 = 2.5%, Depreciation value = $45M × 2.5% = $1,153,800.
Therefore, Total Depreciation value in 2017 = $529,650 + $1,153,800 + $1,153,800 + $1,153,800 = $3,991,050
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Zisk Co. purchases raw materials on account. Budgeted purchase amounts are: April, $99,000; May, $129,000; and June, $139,000. Payments are made as follows: 70% in the month of purchase and 30% in the month after purchase. The March 31 balance of accounts payable is $41,000. Prepare a schedule of budgeted cash payments for April, May, and June.
Answer and Explanation:
The preparation of a schedule of budgeted cash payment for the three months i.e April, may and June is presented below:
Particulars April May June
Purchase $99,000 $129,000 $139,000
Payment made in
Latest Month (70%) $69,300 $90,300 $97,300
Payment made in
Next Month (30%) $29,700 $38,700 $41,700
Cash Disbursements
Particulars April May June
Payment made in
Current Month (70%) $69,300 $90,300 $97,300
Add:
Last Month
Purchases (30%) $41,000 $29,700 $38,700
Budgeted
Cash Payments $110,300 $120,000 $136,000
Maurer, inc.,has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If yoy require a return of 10 percent on the company's stock, how much will you pay for a share today?
Answer:
Price of stock = $44.05
Explanation:
The price of a share can be calculated using the dividend valuation model
According to this model the value of share is equal to the sum of the present values of its future cash dividends discounted at the required rate of return.
To determine the price of the stock to , we calculate the present value for each of the dividend payable for the next five years and then sum them.
The formula below would help
PV = G× (1+r)^(-n)
PV = Present Value, r required rate of return - 10%, n- the year, G- dividend payable in a particular year
Year PV of dividend
1 2+6 ×× 1.1^-1 = 7.27
2 10 × 1.1^-2 = 8.26
3 12× 1.1^-3 = 9.02
4 14 × 1.1^-4 =9.56
5 16 × 1.1^-5 = 9.93
Total Present Value of dividend = 7.27 + 8.26 +9.02 +9.56 +9.93 = 44.05
Price of stock = $44.05
Maurer, inc.,has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If yoy require a return of 10 percent on the company's stock, how much will you pay for a share today?
Answer:
Price of stock = $44.05
Explanation:
The price of a share can be calculated using the dividend valuation model
According to this model the value of share is equal to the sum of the present values of its future cash dividends discounted at the required rate of return.
To determine the price of the stock to , we calculate the present value for each of the dividend payable for the next five years and then sum them.
The formula below would help
PV = G× (1+r)^(-n)
PV = Present Value, r required rate of return - 10%, n- the year, G- dividend payable in a particular year
Year PV of dividend
1 2+6 ×× 1.1^-1 = 7.27
2 10 × 1.1^-2 = 8.26
3 12× 1.1^-3 = 9.02
4 14 × 1.1^-4 =9.56
5 16 × 1.1^-5 = 9.93
Total Present Value of dividend = 7.27 + 8.26 +9.02 +9.56 +9.93 = 44.05
Price of stock = $44.05
QUESTION 2
You spend RM 50,000 a year with e-book website and has done so for many years and now you are having some issues with the publisher. In your meeting with an e-book publisher representative, a particular e-book from the website has become too expensive at RM 50 a month, and it caused you to earn some extra income. You are going to unsubscribe if they do not change the subscription plan. What would you do if the representative suggested for a "free" subscription for your customer for a few months?
Answer:
would accept the offer
Explanation:
Yes, this appears to be a cost-effective decision because the fact is that, I have been spending for years with this particular e-book website and by offering me a "free" subscription for a few months gives me ample time to adjust to the new subscription fee. I it even caused me to earn some extra income.
It a common practice for some businesses to offer free subscription plans to all or some of their customers for a brief time period after which they will start paying.
How does management use coded data for decision support
Discuss how medical staff an departments use coded data and give example a. How does management use coded data for decision support and management decisions?
Answer:
yes
Explanation:
Decision making involves a carefully thought out process about the best course of action, and medical staffs often rely on them in their decision making.
For example, medical staff can evaluate the quality and efficiency of the care they provide by monitoring negative tends that may appear on coded data, Meanwhile management can use their findings from coded data to draft out better health policies for their organization.
You want to have $12,500 in 10 years for a dream vacation. If you can earn an interest rate of .3 percent per month, how much will you have to deposit today?
Answer:
$8,778
Explanation:
To find the amount of money that you will have to deposit today, you have to use the formula to calculate the present value:
PV=FV/(1+i)^n
PV= present value
FV= future value= 12,500
i= interest rate= 0.003*12(to calculate the rate per year)= 0.036
n= number of periods of time= 10
PV=12,500/(1+0.036)^10
PV=12,500/1.424
PV=8,778
According to this, you will have to deposit today $8,778.
The following information is available for Wildhorse Co. for the month of January: expected cash receipts $59,320; expected cash disbursements $66,850; and cash balance on January 1, $11,890. Management wishes to maintain a minimum cash balance of $8,230. Prepare a basic cash budget for the month of January.
Answer:
Ending cash balance$8,230
Explanation:
Preparation of basic cash budget for the month of January.
Wildhorse Co CASH BUDGET for the month of January
Beginning cash balance$11,890
Add: Cash receipts $59,320
Total cash available $71,210
($59,320+$11,890)
Less: Cash disbursements ($66,850)
Excess of available cash over cash disbursements $4,360
Financing needed $3,870
($8,230-$4,360)
Ending cash balance$8,230
Therefore the basic cash budget for the month of January will be $8,230
The closing entries show a debit to retained earnings of $350, and a credit to retained earnings of $750. There was also a credit to dividends payable of $100. This company had a:
Answer:
net income = $400
Explanation:
closing entries:
Dr Retained earnings 350
Cr Income summary 350
Dr Income summary 750
Cr Retained earnings 750
Dr Retained earnings 100
Cr Dividends 100
net income = $750 - $350 = $400
Dividends reduce retained earnings, but net income must exist before any dividends can be distributed.
In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008–2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example:________.
In January 2009, American electronics retailer Circuit City Inc. closed all of its stores and sold all of its merchandise.
The above is an example of:______.
A. Reorganization
B. Liquidation.
Answer:
B. Liquidation.
Explanation:
Liquidation is and aftermath of the inability of a company or establishment to meet up with her obligations at the required moment. Thus, the company folds-up, lay off her staff and stop operating. While reorganization is a form of restructuring in a company or establishment. It may involve change of positions and duties among capable staff.
The example in the given scenario is that of liquidation because it ceased from operation.
Cheyenne Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Aug. 2 Invested $11,290 cash and $2,740 of equipment in the business. 7 Purchased supplies on account for $450. (Debit asset account.) 12 Performed services for clients, for which $1,303 was collected in cash and $689 was billed to the clients. 15 Paid August rent $634. 19 Counted supplies and determined that only $263 of the supplies purchased on August 7 are still on hand. Date Account Titles and Explanation Aug. 12
Answer:
1200
Explanation:
The bank deputy controls the money so then cheyenne repair shop fixes the money through the transactions with the amounting equivalent to the equilibrium of the bank and the transactions so you end up with 1200
On October 1, 2017, Waterway, Inc. assigns $1,160,700 of its accounts receivable to Wildhorse National Bank as collateral for a $747,900 note. The bank assesses a finance charge of 3% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entries for both Waterway and Wildhorse.
Answer:
Waterway, Inc.
General Journal Debit Credit
Cash $713,079
Interest Expense ($1,160,700 * 3%) $34,821
Notes Payable $747,900
Wildhorse National Bank
General Journal Debit Credit
Notes Receivable $747,900
Cash $713,079
Interest Revenue ($1,160,700 * 3%) $34,821
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
Answer:
Trade secret
Explanation:
A trade secret refers to things like a process, formula or design that a company owns that have an economic value and provide a competitive advantage and that are known only by certain people inside the organization. According to this, the answer is that in the business world, a trade secret is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms because trade secrets refer to intellectual property that allows the organization to have a competitive advantage and they are maintained as a secret to avoid competing firms to copy its methods.
Mary buys an annuity that promises to pay her $1,500 at the end of each of the next 20 years. The appropriate interest rate is 7.5%. What is the value of this 20-year annuity today?
Answer:
PV= $15,291.74
Explanation:
Giving the following information:
Annual cash flow= $1,5000
Number of years= 20
Interest rate= 7.5%
To calculate the present value, first, we need to determine the future value using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {1,500*[(1.075^20) - 1]} / 0.075
FV= $64,957.02
Now, we can calculate the present value:
PV= FV/(1+i)^n
PV= 64,957.02/(1.075^20)
PV= $15,291.74
Pumped Up Company purchased equipment from Switzerland for 140,000 francs on December 16, 20X7, with payment due on February 14, 20X8. On December 16, 20X7, Pumped Up also acquired a 60-day forward contract to purchase francs at a forward rate of SFr 1 = $0.45. On December 31, 20X7, the forward rate for an exchange on February 14, 20X8, is SFr 1 = $0.475. The spot rates were
Answer:
Kindly check the explanation section because the answer is long.
Explanation:
(1). Date: December 16.
Details: Equipment = 140,000 × .46 = 64,400.
Accounts payable(Sfr) = 140,000 × .46 = 64,400.
Foreign currency received from broker(Sfr) = 140,000 × .45 = 63,000.
Dollar payable to exchange broker($) 140,000 × .45 = 63,000.
(2). Date: December 31.
Details= foreign currency transaction loss = 140,000 × ( .48 - .46) = 2,800
Revaluation of Accounts payable(Sfr) = 140,000 × ( .48 - .46) = 2,800
Foreign currency received from broker (Sfr) = 140,000 × (.475 - .45) = 3,500.
Foreign currency transaction gain= 140,000 × (.475 - .45) = 3,500.
(3). Date : February 14.
Details: Foreign currency transaction loss = 140,000 × (.475 - .47) = 700
Foreign currency receivable from broker = 140,000 × (.475 - .47) = 700
Account payable = 140,000 × (.47 - .48) = - 1,400 = 1,400.
Foreign currency transaction Gain= 140,000 × (.47 - .48) = - 1,400 = 1,400
Dollars payable to exchange broker = 140,000 × .45 = 63,000
Cash = (140,000 × .45) = 63,000
Foreign currency uni(Sfr) = 140,000 × .47 = 65,800.
Foreign currency receivable from broke(Sfr) = 140,000 × .47 = 65,800.
Accounts payable(Sfr) =140,000 × .47 =65,800.
Foreign currency units(Sfr) = 140,000 × .47 = 65,800.
Live Preview, found in the Font group, uses which method for seeing different font sizes without committing to them?
double-clicking the sizes on the Size drop-down list
pointing the mouse pointer to the sizes on the Size drop-down list
Oright-clicking the cell and clicking Preview Size on the drop-down list
clicking the sizes on the Size drop-down list
Answer:
pointing the mouse pointer to the sizes on the Size drop-down list
Live preview is the feature inbuilt in various new gadgets, Words, and Excel. It enables the user to preview the type of font, the color, the table style, the cell style, the number style, and many more without making the changes in the existing files.
The correct option is "pointing the mouse pointer to the sizes on the Size drop-down list".
The method or the way by which the font group can be live previewed is by simply pointing the mouse pointer over the toolbar where the font group is displayed under the Home tab. The pointer is simply dragged to various font sizes to see the live preview of each font style.
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Ceteris paribus, if personal taxes are increased, consumer spending will ____________ and the aggregate demand curve will shift to the ______________.
Answer:
decrease, left
Explanation:
In simple words, when the authorities increase personal taxes in the community the disposable income of the individuals decrease. Disposable income refers to the net income that individuals get in hand for their spending on utilities.
Thus, due to less disposable income the spending will decrease which will further lead to decrease in demand, theretofore, shifting the demand curve to the left.
Fernando Designs is considering a project that has the following cash flows and WACC data. What is the project's discounted payback period? (6 points) What is the project’s modified internal rate of return?
Answer:
Discounted Payback period 3 years
Modified Internal rate of return 4.833%
Explanation:
Fernando Designs has following cash flows ,
year 1 : -$900
Year 2 : $500
Year 3 : $500
Year 4 : $500
Using 10% discount factor the cashflows will be,
discounted values
Year 1 : -900
Year 2 : 454.54
Year 3 : 445.45
Year 4 : 4132231
Payback period is -900 + 454.54 +445.45 = 3 years.
Modified Internal rate of return; [tex]\sqrt[n]{\frac{FV of cash inflows}{PV of cash outflow} }[/tex]
[tex]\sqrt[4]{\frac{1314}{900} }[/tex] = 4.833%
"An OTC equity trader has received a large influx of sell orders for ABC stock and, to fill them, has taken an extremely large long position in the firm's inventory account. The dealer would most likely:"
Answer:
decrease the bid price in the OTCBB
Explanation:
Given that, the dealer's Bid price is too high, this is believed to be the reason behind the sellers trying to make orders. Hence, to reduce the orders, the dealer will lower the Bid price.
Hence, in this case, the best answer or alternative to be considered is that, the dealer would most likely decrease the bid price in the OTCBB, this is specifically to discourage the sellers.
The following accounts are from last year’s books at Sharp Manufacturing: Raw Materials Bal 0 (b) 154,000 (a) 164,000 10,000 Work In Process Bal 0 (f) 510,000 (b) 132,000 (c) 168,000 (e) 210,000 0 Finished Goods Bal 0 (g) 460,000 (f) 510,000 50,000 Manufacturing Overhead (b) 22,000 (e) 210,000 (c) 26,000 (d) 156,000 6,000 Cost of Goods Sold (g) 460,000 Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the amount of cost of goods manufactured for the year?
Answer:
$510,000
Explanation:
Calculation for the amount of cost of goods manufactured for the year
Two method can be used in calculating the cost of goods manufactured for the year
METHOD 1
Using this formula
Cost of goods manufactured= Beginning Balance Cost of goods sold + Ending Balance Finishing goods ending balance
Where,
Beginning Balance of Cost of goods sold = $460,000
Ending Balance Finishing goods = $510,000 -$460,000 = 50,000
Let plug in the formula
Cost of goods manufactured=$460,000+$50,000
Cost of goods manufactured=510,000
OR METHOD 2
Calculation for the cost of good manufactured for the year
Beginning work in process $0
Direct material $132,000
Direct labor $168,000
Manufacturing overhead $210,000
Less: Ending work in process $0
Cost of goods manufactured $510,000
Therefore the amount of cost of goods manufactured for the year will be $510,000
A firm selling its product for $25,000 has overproduced, increasing inventory by 40,000 units at a cost of $15,000 per unit. What is the impact of the inventory change on cash flow?
Answer:
Increasing Inventory by 40,000 units at a cost of $15,000 per unit
The Cost of producing 40,000 units extra = $40,000 *$15,000 = $600,000,000
Conclusion: As this is an additional cost incurred by the firm by increasing inventory by 40,000 unit at $15,000 per unit, it will be term as cash outflow. The impact of the inventory change on cash flow is outflow.
Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,100 units in 2016 and 1,550 units in 2017. Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method.
Answer:
Annual depreciation= $4,000
Explanation:
Giving the following information:
The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of estimated 5-year life.
To calculate the depreciation expense, we need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (29,000 - 9,000)/5
Annual depreciation= $4,000
Alternative price indexes
Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator.
The GDP deflator for this year is calculated by dividing the
______________ using _____________ by the
______________ using_____________ and multiplying by 100. However, the CPI reflects only the prices of all goods and services _________
Indicate whether the price change described in each scenario may affect the GDP deflator or the CPI for the United States.
Scenario Show up in the..
GDP Deflator CPI
An increase in the price of a Japanese-made phone that is popular
among U.S. consumers
A decrease in the price of a Fisher King deep-water reel, a popular
recreational fishing product built in Rarington, Indiana
Answer:
-value of all goods and services produced in the economy this year
-this year's prices
-value of all goods and services produced in the economy this year
-the base year's prices
-bought by consumers
-the first scenario would have effect on the GDP deflator
-the second scenario would have effect on the GDP deflator
Explanation:
The GDP deflator is used in measuring inflation in the economy by measuring changes in prices of goods in the economy. It is used together with other indices such as consumer price index in arriving at a more accurate or balanced measurement of inflation I'm the economy. The GDP deflator would be affected above because it is more comprehensive in it's calculation or measurement as it doesn't take into account only a basket of goods and services like the Consumer price index does
Clark Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $12 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio
Answer:
contribution margin ratio= 0.4
Explanation:
Giving the following information:
Selling price per unit= $20
Unitary variable cost= $12
To calculate the contribution margin ratio, we need to use the following formula:
contribution margin ratio= (selling price - unitary variable cost) / selling price
contribution margin ratio= (20 - 12) / 20
contribution margin ratio= 0.4
The contribution margin ratio is 0.4.The contribution margin ratio is the difference between company sales and variable costs, expressed as a percentage.
What is the contribution margin ratio?The total margin generated by an entity represents the amount of revenue available to cover fixed costs and generate profits.
The contribution margin ratio of a donation is the difference between a company’s sales and variable costs, expressed as a percentage. This ratio shows the amount of money available to cover fixed costs.
Giving the following information:
Selling price per unit is $20
Unitary variable cost is $12
To calculate the contribution margin ratio, we need to use the following formula:
[tex]\rm\,Contribution \;Margin\; Ratio= \frac{(Selling\; Price - Unitary Variable Cost)}{selling \;price} \\contribution \;margin\; ratio= \dfrac{ (20 - 12)}{20}\\Contribution\, margin\, ratio\, = 0.4[/tex]
Hence, the contribution margin ratio is 0.4.
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A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.
A. True
B. False
Answer:
false
Explanation:
If political influences, independent of any economic forces, lead to a larger government budget deficit, what will be the effect on the loanable funds market
Answer:
The government budget deficit will cause the interest rate to rise, reducing both saving and investment.
Another effect will be the crowding-out of the loanable funds market to private investment. This is because a government in deficit will need to issue more debt in the market, taking up many funds that could have been otherwise invested in private companies.
Dorpac Corporation has a dividend yield of 1.3 %1.3%. Its equity cost of capital is 7.4 %7.4%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac's dividends? b. What is the expected growth rate of Dorpac's share price?
Answer:
(A) 6.1%
(B) 6.1%
Explanation:
Dorpac corporation has a dividend yield of 1.3%
Its equity cost of capital is 7.4%
(a) The expected growth rate of Dorpac dividend can be calculated as follows
= Equity cost of capital-Dividend yield
= 7.4%-1.3%
= 6.1%
(b) Since the dividend is expected to grow at a constant growth rate then, the expected growth rate of Dorpac's share price is 6.1%
A guitar manufacturer is considering eliminating its electric guitar division because its $100,280 expenses are higher than its $94,300 sales. The company reports the following expenses for this division.
Avoidable Unavoidable
Expense Expense
Cost of goods sold $56, 000
Direct expenses 9,250 $1,250
Indirect expenses 470 1, 600
Service department costs 6,000 1,430
Should the division be eliminated?
Electric Guitar Division is: Kept Eliminated
Sales 72,000
Expenses:
Direct expenses 1,250
Indirect expenses 1,600
Service department costs 1,430
Cost of goods sold 56,000
Total expenses 56,000 4,280
Net income (loss) 4,280
Revenues from electric guitar division
Avoidable expenses
Revenues are greater than (less than) avoidable expenses by
The electric guitar division should be:________.
Answer:
The electric guitar division should be: KEPT.
Explanation:
Avoidable Unavoidable
Expense Expense
Cost of goods sold $56, 000
Direct expenses $9,250 $1,250
Indirect expenses $470 $1,600
Service department costs $6,000 $1,430
total $71,720 $4,280
I believe that the $100,280 expenses and $94,300 sales are wrong, because total costs = $76,000. I looked up for more information and the correct sales number was $72,000.
differential analysis
division kept division sold differential
amount
revenues $72,000 $0 $72,000
COGS -$56, 000 ($56,000)
direct expenses -$9,250 -$1,250 ($8,000)
indirect expenses -$470 -$1,600 $1,130
service costs -$6,000 -$1,430 ($4,570)
total $280 -$4,280 $4,560