Answer:
a) ROI = Net operating income / Operating assets
Computation of ROI of each division
Division Working ROI
Trucking ROI $116,000 / $600,000 0.1933 or 19.33 %
Seafood ROI $66,000 / $250,000 0.264 or 26.40 %
Construction ROI $63,000 / $350,000 0.18 or 18 %
b) Residual Income = Net operating Income - ( Operating Asssts * Desired ROI )
Where , Minimum level = ( Operating Asssts * Desired ROI )
Minimum level for Trucking = ($600,000*10 %) = $60,000
Minimum level for Seafood = ($250,000*10 %) = $25,000
Minimum level for Construction = ($350,000 * 10 %) = $35,000
Computation of Residual Income for each division
Details Trucking($) Seafood($) Construction($)
Net operating income 116,000 66,000 63,000
Minimum level 60,000 25,000 35,000
Residual income 56,000 41,000 28,000
Purple Corporation acquired 75 percent of Socks Corporation’s common stock on January 1, 20X8, for $435,000. At that date, Socks reported common stock outstanding of $300,000 and retained earnings of $200,000, and the fair value of the noncontrolling interest was $145,000. The book values and fair values of Socks's assets and liabilities were equal, except for other intangible assets, which had a fair value $80,000 more than book value and a 10-year remaining life. Purple and Socks reported the following data for 20X8 and 20X9
Socks Corporation Purple Corporation
Year Net Income Comprehensive income Dividends paid Operating income Dividens paid
20X8 $40,000 50,000 15,000 $120,000 $70,000
20X9 60,000 65,000 30,000 140,000 70,000
Required:
Compute consolidated comprehensive income for 20X8 and 20X9.
20X8 20X9
Consolidated comprehensive income
Answer:
20X8 = 162,000
20X9 = $197,000
Explanation:
The calculation of the consolidated comprehensive income for the year 2008 and 2009 is shown below:
Consolidated comprehensive income
Particulars 20X8 20X9
Purple Corporation
Operating Income $120,000 $140,000
Add: Net Income
from Socks Corporation $40,000 $60,000
Less: Amortization of differential
($80,000 ÷ 10 Years) ($8,000) (8,000)
Consolidated net income $152,000 $192,000
Add: Comprehensive income
reported by Socks Corporation $10,000 $5,000
Consolidated
comprehensive income $162,000 $197,000
The following transactions are for Crane Company. 1. On December 3, Crane Company sold $513, 500 of merchandise to Sheridan Co., terms 3/10, n/30. The cost of the merchandise sold was $318, 300. 2. On December 8, Sheridan Co. was granted an allowance of $24, 700 for merchandise purchased on December 3. 3. On December 13, Crane Company received the balance due from Sheridan Co.
(a) Prepare the journal entries to record these transactions on the books of Crane Company. Crane Company uses a perpetual inventory system. (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.)
(b) Assume that Crane Company received the balance due from Sheridan Co. on January 2 of the following year instead of December 13, Prepare the journal entry to record the receipt of payment on January 2. (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.)
Answer:
a) December 3, 202x, merchandise sold to Sheridan Co., terms 3/10, n/30
Dr Accounts receivable 513,500
Cr Sales revenue 513,500
Dr Cost of goods sold 318,300
Cr Merchandise inventory 318,300
December 8, merchandise allowance
Dr Sales returns and allowances 24,700
Cr Accounts receivable 24,700
December 13, invoice collected from Sheridan Co.
Dr Cash 474,136
Dr Sales discounts 14,664
Cr Accounts receivable 488,800
b) January 2, invoice collected from Sheridan Co.
Dr Cash 488,800
Cr Accounts receivable 488,800
What is the purpose of the color coded tape located at the front entrance of
Dollar General stores?
A. It assists store maintenance with code compliance
B. You use it to determine the average height of new employees
ОО
C. It helps you estimate the height of someone who commits a crime in your store
D. None of the above
SUBMIT
Answer:
D. None of the above
Explanation:
The color-coded tape are used at the front entrance of Dollar General stores is a way to attract the customers in the store.
The color-coded tape attracts customers and shows the safety information to customers directly at the point.
Hence, the correct option is "D. None of the above".
It should be noted that none of the options serves as the purpose of the color coded tape located at the front entrance of Dollar General stores.
According to the question, we are to discuss the purpose of the color coded tape located at the front entrance of Dollar General stores.
As a result of this we can see that color coded tape gives the identification of the the type of hazard, and this employee so they can identify the level of severity.
Therefore, option D is correct because, none of the options serves as the purpose of the color coded tape located at the front entrance of Dollar General stores.
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The Quick Buck Company is an all-equity firm that has been in existence for the past three years. Company management expects that the company will last for two more years and then be dissolved. The firm will generate cash flows of $860,000 next year and $1,340,000 in two years, including the proceeds from the liquidation. There are 38,000 shares of stock outstanding and shareholders require a return of 11 percent. a. What is the current price per share of the stock
Answer:
$49.01 per Share
Explanation:
We can find the value of the unit share of company that will be dissolved at the end of year 2 by using the following formula:
Current Price per Share = Value of Firm Today (Step1) / Number of Shares
= $1,862,345 / 38,000 shares
= $49.01 per Share
Step 1: Find the value of the firm in today's price by using the discounting technique
Value of Firm Today = Cash Flow for Year 1 / (1+r)^1 + Cash Flow for Year 2 / (1+r)^2
= $860,000 / (1 + 11%)^1 + $1,340,000 / (1 + 11%)^2
= $774,774 + $1,087,571
= $1,862,345
On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $286,000. The machine is expected to last five years and have a salvage value of $43,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the straight-line method.
Answer:
2016 - $36,450
2017 - $48,600
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($286,000 - $43,000) / 5 = $48,600
the depreciation expense each year would be $48,600 except in 2016 because it the machine was only used for 9 months
Depreciation expense in 2016 = (9 / 12) x $48,600 = $36,450
An investor is in a 30% tax bracket. If corporate bonds offer 9% yields, what must municipals offer for the investor to prefer them to corporate bonds?
Answer:
6.30%
Explanation:
For offering for the investor to prefer them to the corporate bond we need to calculate the after tax return which is shown below
After tax return is
= Before tax return × (1 - tax rate)
= 0.09 × (1 - 0.30)
= 0.063 or 6.30%
As the after tax return is 6.30% the same is to be offered for the investor
Hence, the correct answer is 6.30%
Recently, the Boeing Commercial Airline Group (BCAG) recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain is output volume, this Boeing division combines efforts of capital and more than 90,000 workers. Suppose the European company, Airbus, enjoys a similar production technology and produces a similar number of air craft, but that labor costs (including fringe benefits) are higher in Europe than in the United states. Would you expect workers at Airbus to have the same marginal product as workers at Boeing? Explain carefully.
Answer: Airbus Employees have a Higher Marginal Product than Boeing
Explanation:
Marginal Product of Labor refers to the extra unit produced by adding an extra unit of labor. For firms to maximise their profits, they produce at a mix of labor and Capital where [tex]\frac{MPK}{r} = \frac{MPL}{w}[/tex] with MPK being Marginal Product of capital and r being cost of capital and w being cost of labor.
Assuming both Boeing and Airbus are producing at the maximising expression. It is said that Airbus has the same [tex]\frac{MPK}{r}[/tex] as Boeing. They however has a higher w than Boeing which means that for it to equal the Capital side of the expression, the w must be dividing a higher Marginal Product of labor which shows that Airbus has a higher Marginal Product of labor.
For example,
Boeing MPK = 12
Boeing r = 4
Boeing MPL = 9
Boeing w = 3
Maximising level = 3
Airbus MPK = 12
Airbus r = 4
Airbus w = 6
Airbus MPL = ??
With a labor cost of 6, Airbus MPL will have to be 18 to be able to get to the equilibrium maximising level of 3.
Because risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profits. True or False?
Answer:
True
Explanation:
Remember, business persons are profit oriented, and so they are willing to make needed organisational decisions to achieve their profit goals while reducing their liability (loses).
For example, an organization may choose the hierarchical structure; where instructions flows from top level management to bottom instead of the divisional structure, which allows a spread of authority if deems it to limit their liability while allowing them to take risks that may lead to greater profits.
Piedmont Hotels is an all-equity company. Its stock has a beta of .82. The market risk premium is 6.9 percent and the risk-free rate is 4.5 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.7 percent to the project's discount rate. What should the firm set as the required rate of return for the project?
Answer:
11.86%
Explanation:
Piedmont hotels can be described as an all-equity company
Its stock has a beta of 0.82
The market risk premium is 6.9%
The risk free rate is 4.5%
The adjustment is 1.7%
Therefore, the required rate of return can be calculated as follows
Required rate of return= Risk free rate of return + ( beta×market risk premium) + adjustment
= 4.5% + (0.82×6.9%) + 1.7%
= 4.5% + 5.658 + 1.7%
= 11.86%
Hence the required rate of return for the project is 11.86%
Adrian T. Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. Sales units 5000 10000 Cost of goods sold $117000 $193000 Selling and Administrative costs $588000 $637000 Selling price per unit $170 $170 Q: The best estimate of the net operating income if 6620 units are sold is:
Answer:
net operating income = $379,900
Explanation:
we can use the high-low cost method to determine the fixed and variable manufacturing costs:
variable cost per unit = (highest activity cost - lowest activity cost) / (highest activity units - lowest activity units) = ($193,000 - $117,000) / (10,000 - 5,000) = $76,000 / 5,000 = $15.20 per unit
fixed costs = highest activity cost - (variable cost per unit x highest activity units) = $193,000 - ($15.20 x 10,000) = $193,000 - $152,000 = $41,000
cost of goods sold for 6,620 units = (6,620 x $15.20) + $41,000 = $141,624
now we do the same for the administrative expenses:
variable cost per unit = ($637,000 - $588,000) / (10,000 - 5,000) = $49,000 / 5,000 = $9.80
fixed costs = $637,000 - ($9.80 x 10,000) = $637,000 - $98,000 = $539,000
S&A expenses for 6,620 units = (6,620 x $9.80) + $539,000 = $603,876
net income = $1,125,400
- COGS = $141,624
gross profit = $983,776
- S&A expenses = $603,876
net operating income $379,900
Osterman Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $33,100 for the period. The pension plan requires a contribution to the plan administrator equal to 6% of employee salaries. Salaries were $354,000 during the period, and the full amount due was contributed to the pension plan administrator. On December 31, provide the journal entry for the (a) vacation pay on page 11 of the journal and (b) pension benefit on page 12 of the journal.
Answer:
sorry l don't know the answer please forgive me
One implication of the bird-in-the-hand theory of dividends is that a given reduction in dividend yield must be offset by a more than proportionate increase in growth in order to keep a firm's required return constant, other things held constant.
a. True
b. False
Answer:
False ANSWER: True o One implication of the bird-in-the-hand theory of dividends is that a given reduction in dividend yield must be ...
Explanation:
follow mw
On September 11, 2016, Home Store sells a mower for $450 with a one-year warranty that covers parts. Warranty expense is estimated at 9% of sales. On July 24, 2017, the mower is brought in for repairs covered under the warranty requiring $32 in materials taken from the Repair Parts Inventory.
Prepare the September 11, 2016, entry to record the mower sale, and the July 24, 2017, entry to record the warranty repairs.
Answer:
Date Accounts Titles and Explanations Debit Credit
Sept, 11 Cash $450
2016 Sales $450
(To record the Cash Sales)
Sept, 11 Warranty Expenses $40.50
2016 ($450 x 9%)
Estimated Warranty Payable $40.50
(To record the Warranty Expenses)
July, 24 Estimated Warranty Payable $32
2017 Repairs Parts Inventory $32
(To record the material taken from Inventory)
Sandy purchases a perpetuity-immediate that makes annual payments. The first payment is 100, and each payment thereafter increases by 10. Danny purchases a perpetuity-due which makes annual payments of 180. Using the same annual effective interest rate, i > 0, the present value of both perpetuities are equal. Calculate i.
Answer:
The value of i = 10.2%
Explanation:
The complete working including all the steps have been done and attached as an image herewith. I will attempt to elaborate on those steps below:
Put down Sandy's and Danny's purchases first and equate them. Write down the expression for [tex]d[/tex] and substitute. You will obtain a quadratic equation that you can simply solve by applying the formula.
A union contract agreement calling for an immediate 4 percent increase in production worker wages was signed. No changes were made in the standards.
Indicate which of the following standard cost variances would be affected.More than one variance will be affected in some areas.
a. Materials price variance
b. Materials quantity variance
c. Labor rate variance
d. Labor efficiency variance
e. Variable overhead spending variance
f. Variable overhead efficiency variance
g. Fixed overhead budget variance
Answer:
4 percent Increase in Production Worker Wages
Indication of the standard cost variances affected:
c. Labor rate variance
e. Variable overhead spending variance
Explanation:
An increase in production workers wages as a result of workers' union agreement with management will affect the labor rate variance and the variable overhead spending variance. Production workers are factory or manufacturing workers. The expenses incurred on them include the direct labor costs and the indirect labor costs. Direct labor cost is a function of the rate of pay and hours worked or any other parameter used for paying their wages. Indirect labor cost is influenced by the wages of indirect labor in the production unit, like factory supervisors.
Spartan Corporation discovered these errors in August of Year 3: Reported Net Income for Year 1 was $20,000. Reported Net Income for Year 2 was $18,000. The correct Year 2 Net Income is:
Answer:
Net income year 2 = $21,300
Explanation:
I looked for the missing information and found this:
Year Depreciation overstated Prepaid expense omitted
1 $2,500 $2,000
2 $4,000 $2,700
If your question doesn't include the same values, just adjust the answer.
Year 2's net income = net income (year 2) + overstated depreciation (year 2) + omitted prepaid expenses (year 1) - omitted prepaid expenses (year 2) = $18,000 + $4,000 + $2,000 - $2,700 = $21,300
You are an stock analyst hired to follow Jones Kenesyian Consulting (whose ticker is JK), the firm recently paid a dividend of $2 per share, and you expect JK to grow at 10% for the next 3 years afterwhich you make an assumption that it will grow at a constant rate of 5%. You required rate of return is 12%. What do you believe the intrisic value of the stock is today
Answer:
Price of stock today = $45.58
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.
If dividend is expected to grow at a given rate , the value of a share is calculated using the formula below:
Price=Do (1+g)/(k-g)
Do - dividend in the following year, K- requited rate of return , g- growth rate
Step 1 : PV of dividend from year 1 to 3
PV = D × (1+r)^-n
D- dividend payable in a particular year
r- required rate of return
n- year
Year PV of Dividend
1 2 × 1.1^1 × 1.12^(-1) = 1.96
2 2 × 1.1^2× 1.12^(-2) = 1.93
3 2 × 1.1^3 × 1.12^9-3)= 1.89
Step 2 : PV of dividend from year 4 to infinity
PV (in year 3 terms) of dividend= 2 × 1.1^3× 1.05/(0.12-0.05) = 55.90
PV in year 0 terms = 55.90 × 1.12^(-3) = 39.789
Total present Value = 1.96 +1.93 +1.89 + 39.789= 45.58
Price of stock today = $45.58
The information below relates to the Cash account in the ledger of Novak Company.
Balance September 1—$17,160; Cash deposited—$64,240.
Balance September 30—$17,664; Checks written—$63,736.
The September bank statement shows a balance of $16,682 on September 30 and the following memoranda.
Credits Debits
Collection of $1,623 note plus interest $37 $1,660 NSF check: Richard Nance $555
Interest earned on checking account $52 Safety deposit box rent $72
At September 30, deposits in transit were $4,580, and outstanding checks totaled $2,513.
A. Prepare the bank reconciliation at September 30. (List items that increase cash balance first. Reconcile cash balance per bank first.)
B. Prepare the adjusting entries at September 30, assuming (1) the NSF check was from a customer on account, and (2) no interest had been accrued on the note.
Answer:
A) account reconciliation
Bank account reconciliation:
Bank account balance $16,682
+ deposits in transit $4,580
- outstanding checks $2,513
reconciled bank account $18,749
Cash account reconciliation:
Cash account balance $17,664
+ Note collected $1,660
+ Interest revenue $52
- NSF check (R. Nance) $555
- Bank fees (safety deposit box rent) $72
reconciled cash account $18,749
B) Adjusting entries
September 30, NSF check
Dr Accounts receivable 555
Cr Cash 555
September 30, collection of notes receivable
Dr Cash 1,660
Cr Notes receivable 1,623
Cr Interest revenue 37
The Gerding Company discovered these errors made in year 3: Failed to record Unearned Revenue: $15 Failed to record Accrued Interest Expense: $7 Year 4 Net Income will be:
Answer:
Overstated $8
Explanation:
Calculation for Gerding Company Net income
Using this formula
Net income =Failure to record Unearned Revenue - Failure record Accrued Interest Expense
Let plug in the formula
Net income =$15-$7
Net income =$8
Therefore Gerding Company Net income will be an overstated of the amount of $8
Wesimann Co. issued 12-year bonds a year ago at a coupon rate of 7.8 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.1 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
Price of bond =1,143.18
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 for Wesimann Co can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 7.8% × 1000 × 1/2 = 39
Semi-annual yield = 6.1%/2 = 3.05 % per six months
Total period to maturity (in months)
= (2 × 12) = 24 periods (Note it was sold 12 years ago)
PV of interest =
39 × (1- (1+0.0305)^(-24)/) 0.0305 = 656.94
Step 2
PV of Redemption Value
= 1,000 × (1.0305)^(-24) = 486.237
Price of bond
= 656.94 +486.23 = 1,143.179
Price of bond =1,143.18
An adviser with $133,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri. Which statement is TRUE regarding registration of the adviser
Answer: The adviser must register in all the states i.e Illinois, Wisconsin, Missouri and Indiana.
Explanation:
From the question, we are told that an adviser with $133,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri.
Based on th above scenario, the adviser has to register in all the states where it has offices.
Estimating Allowance for Doubtful Accounts
Evers Industries has a past history of uncollectible accounts, as follows.
Age Class Percent Uncollectible
Not past due 1%
1-30 days past due 3
31-60 days past due 12
61-90 days past due 30
Over 90 days past due 75
Estimate the allowance for doubtful accounts, based on the aging of receivables information provided in the chart below. Evers Industries Estimate of Allowance for Doubtful Accounts Total recelvables Percentage uncollectible Allowance for doubtful accounts Balance 1,124,500 Not Past Due 607,400 196 Days Past Due 1-30 Days Past Due 31-60 Days Past Due 61-90 Days Past Due Over 90 233,000 121600 12% 96500 30% 66000 75%
Answer:
Allowance for doubtful accounts $ 106106 using the aging method
Explanation:
Evers Industries
Estimate of Allowance for Doubtful Accounts
Balance Not Past Past Due (days)
Due (1-30) (31-60) (61-90) (Over 90)
Total
Receivables 1,124,500 607,400 233,000 121600 96500 66000
Percentage
Uncollectible 1% 3% 12% 30% 75%
Allowance for 6074 6990 14592 28950 49500
doubtful accounts 106106
We multiply each percent with the amount given and then add them all to get the total which is $106106 based on aging method.
The estimation of the Allowance for doubtful accounts should be $106,106 using the aging method.
Calculation of the estimation of the Allowance for doubtful accounts:Balance Not Past Past Due (days)
Due (1-30) (31-60) (61-90) (Over 90)
Total
Receivables 1,124,500 607,400 233,000 121600 96500 66000
Percentage
Uncollectible 1% 3% 12% 30% 75%
Allowance for 6074 6990 14592 28950 49500
doubtful accounts 106106
We multiply each percent by the amount given and then add them all to get the total which is $106106 based on aging method.
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Jewel Service anticipates the following sales revenue over a five-month period: The company's sales are 40% cash and 60% credit. Its collection history indicates that credit sales are collected as follows: How much cash will be collected in January? In February? In March? For the quarter in total? Complete the cash budget to determine how much cash will be collected in January, February, March and for the quarter in total. (Round your answers to the nearest whole dollar.)
Answer:
I looked up the missing information, hopefully it's the same as your question. If not you can adjust the answer.
Its collection history indicates that credit sales are collected as follows:
25% in the month of the sale 50% in the month after the sale 15% two months after the sale 10% are never collectedsales revenue:
November $16,100 December $10,400 January $15,600 February $12,400 March $14,400Jewel Services
Cash Collections budget
For the months of January, February, and March
cash collected from sales January February March Quarter
from November sales $2,415 $2,415
from December sales $5,200 $1,560 $6,760
from January sales $3,900 $7,800 $2,340 $14,040
from February sales $3,100 $6,200 $9,300
from March sales $3,600 $3,600
Total $11,515 $12,460 $12,140 $36,115
On January 1, 20X6, Plus Corporation acquired 90 percent of Side Corporation for $180,000 cash. Side reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Side reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Side at the date of acquisition had a remaining economic life of five years. Plus uses the equity method in accounting for its investment in Side.
1. Based on the preceding information, the increase in the fair value of patents held by Side is:
a. $20,000
b. $25,000
c. $15,000
d. $5,000
2. Based on the preceding information, what balance would Plus report as its investment in Side at January 1, 20X8?
a. $230,400
b. $180,000
c. $234,000
d. $203,400
Answer:
1) b) $25,000
2) d. $203,400
Explanation:
1)
Ref Particulars Amount
a Fair value of entity 200,000
b Total value without patent 175,000
c=a-b Patent 25,000
Therefore, the increase in the fair value of patents held by Side is;
b) $25,000
Fair value of consideration given:
Ref Particulars Amount
Stock 0
Cash 180,000
a Total consideration 180,000
b Stake acquired 90%
c=a/b Fair value of subsidiary 200,000
d=100%-b Minority interest 10%
e=c*d Fair value of minority interest 20,000
On acquisition date
Value of subsidiary without patent
Common stock 100,000
Paid in capital -
Retained earnings 60,000
Fair value adjustment:
Patent -
Equipment 10,000
Land 5,000
Fair value without patent 175,000
2)
Particulars Investment
Acquisition date 180,000
Add: share of net income 54,000
Less: Dividends 18,000
Less: Fair value amortization 12,600
Balance Jan 1, 20X8 203,400
{Share of earnings for 2 years = 30,000 × 2 × 90% = 54,000 }
{Share of dividends for 2 years = 10,000 × 2 × 90% = 18,000 }
{Fair value amortization for 2 years = 7,000 × 90% × 2 = 12,600}
Therefore Balance as at Jan 1, 20X8 is
d) $203,400
Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 41% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 20 Factory overhead (41% of direct labor) 8.2 Total cost per unit $52.2 If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs. a. Prepare a differential analysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effects (Alternative 2) Unit costs: Purchase price $ $ $ Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit costs $ $ $ b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.
Answer:
A. Total units cost for Make =$47
Total units cost for Buy=$57
B) I would advice that Decision Somerset Computer Company should manufacture because the Total units cost for Make which is Alternative 1 is cheaper or lesser than that of Buy which is Alternative 2.
Explanation:
A. Preparation of the differential analysis to determine whether the company should make (Alternative 1) or (Alternative 2)
DIFFERENTIAL ANALYSIS for Decision Somerset Computer Company
Particulars Make Buy Difference
Purchase price $0 $57 $57
Direct material $24 $0 ($24)
Direct labor $20 $0 ($20)
Variable factory overhead (15% of Labor) $3.00 $0 ($3.00)
Fixed factory overhead $0 $0 $0
Total unit costs $47.00 $57 $10.00
B) I would advice that Decision Somerset Computer Company should manufacture because the Total units cost for Make which is Alternative 1 is cheaper or lesser than that of Buy which is Alternative 2.
Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets The budget director of Gourmet Grill...
Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets
The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July is summarized as follows:
a. Estimated sales for July by sales territory:
Maine:
Backyard Chef 310 units at $700 per unit
Master Chef 150 units at $1,200 per unit
Vermont:
Backyard Chef 240 units at $750 per unit
Master Chef 110 units at $1,300 per unit
New Hampshire:
Backyard Chef 360 units at $750 per unit
Master Chef 180 units at $1,400 per unit
b. Estimated inventories at July 1:
Direct materials:
Grates 290 units
Stainless steel 1,500 lbs.
Burner subassemblies 170 units
Shelves 340 units
Finished products:
Backyard Chef 30 units
Master Chef 32 units
c. Desired inventories at July 31:
Direct materials:
Grates 340 units
Stainless steel 1,800 lbs.
Burner subassemblies155 units
Shelves 315 units
Finished products:
Backyard Chef 40 units
Master Chef 22 units
d. Direct materials used in production:
In the manufacture of Backyard Chef:
Grates 3 units per unit of product
Stainless steel 24 lbs. per unit of product
Burner subassemblies 2 units per unit of product
Shelves 4 units per unit of product
In the manufacture of Master Chef:
Grates 6 units per unit of product
Stainless steel 42 lbs. per unit of product
Burner subassemblies 4 units per unit of product
Shelves 5 units per unit of product
e. The anticipated purchase price for direct materials:
Grates $15 per unit
Stainless steel $6 per lb.
Burner subassemblies $110 per unit
Shelves $10 per unit
f. Direct labor requirements:
Backyard Chef:
Stamping Department 0.50 hr. at $17 per hr.
Forming Department 0.60 hr. at $15 per hr.
Assembly Department 1.00 hr. at $14 per hr.
Master Chef:
Stamping Department 0.60 hr. at $17 per hr.
Forming Department 0.80 hr. at $15 per hr.
Assembly Department 1.50 hrs. at $14 per hr.
Required:
1. Prepare a sales budget for July.
Gourmet Grill Company
Sales Budget
For the Month Ending July 31
Product and Area Unit Sales
Volume Unit Selling
Price Total Sales
Backyard Chef:
Maine $ $
Vermont
New Hampshire
Total $
Master Chef:
Maine $ $
Vermont
New Hampshire
Total $
Total revenue from sales $
2. Prepare a production budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Gourmet Grill Company
Production Budget
For the Month Ending July 31
Units
Backyard Chef Master Chef
3. Prepare a direct materials purchases budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31
Grates
(units) Stainless Steel
(lbs.) Burner Sub-
assemblies
(units) Shelves
(units) Total
Required units for production:
Backyard Chef
Master Chef
Desired inventory, July 31
Total
Estimated inventory, July 1
Total units to be purchased
Unit price $ $ $ $
Total direct materials to be purchased $ $ $ $ $
4. Prepare a direct labor cost budget for July.
Gourmet Grill Company
Direct Labor Cost Budget
For the Month Ending July 31
Stamping
Department Forming Department Assembly Department Total
Hours required for production:
Backyard Chef
Master Chef
Total
Hourly rate $ $ $
Total direct labor cost $ $
Answer:
Gourmet Grill Company
1. Sales Budget for July:
Gourmet Grill Company
Sales Budget
For the Month Ending July 31
Product and Area Unit Sales
Volume Unit Selling Price Total Sales
Backyard Chef:
Maine 310 $700 $217,000
Vermont 240 $750 180,000
New Hampshire 360 $750 270,000
Total 910 $ 667,000
Master Chef:
Maine 150 $1,200 $ 180,000
Vermont 110 $1,300 143,000
New Hampshire 180 $1,400 252,000
Total 440 $575,000
2. Production Budget for July:
Gourmet Grill Company
Production Budget for the Month Ending July 31
Units
Backyard Chef Master Chef
Units sold 910 440
Ending inventory 40 22
less beginning inventory -30 -32
Units to be produced 920 430
3. Direct Materials Purchase Budget for July:
Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31
Grates (units) 5,390 units
Stainless Steel (lbs.) 40,440 lbs
Burner Sub- assemblies (units) 3,545 units
Shelves (units) 5,805 units
Total Required units for production:
Backyard Chef Master Chef Total for prodn.
Grates 2,760 units 2,580 units 5,340 units
Stainless steel 22,080 lbs 18,060 lbs 40,140 units
Burner subassemblies 1,840 units 1,720 units 3,560 units
Shelves 3,680 units 2,150 units 5,890 units
Total used July 31 Total July 1 Purchases
for prodn. Desired Estimated
Grates 5,340 340 5,680 290 5,390
Stainless steel 40,140 1,800 41,940 1,500 40,440
Burner subassemblies 3,560 155 3,7`15 170 3,545
Shelves 5,830 315 6,145 340 5,805
Grates Stainless Burner Shelves
Steel sub-assembly
Total units to be purchased 5,390 40,440 3,545 5,805
Unit price $15 $6 $110 $ 10
Total direct materials
to be purchased $80,850 $242,640 $389,950 $58,050
Total cost of direct materials to be purchased = $771,490
4. Direct labor cost budget:
Stamping Forming Assembly Total
Hours used:
Backyard Chef 460 552 920 1,932
Master Chef 258 344 645 1,247
Total hours used 718 896 1,565 3,179
Hourly rate $17 $15 $14
Total cost $12,206 $13,440 $21,910 $47,556
Explanation:
1) Data for July:
a) Sales by territory
Maine Vermont New Hampshire
Backyard Chef (units) 310 240 360 910
Master Chef (units) 150 110 180 440
Backyard Chef (prices) $700 $750 $750
Master Chef (prices) $1,200 $1,300 $1,400
Sales Value:
Backyard Chef $217,000 $180,000 $270,000
Master Chef 180,000 143,000 252,000
Total sales $397,000 $323,000 $522,000
b. Estimated Inventories at July 1:
Direct materials: Beginning Purchases Desired Ending Used
Grates 290 units 5,390 340 units 5,340
Stainless steel 1,500 lbs. 40,440 1,800 lbs 40,140
Burner subassemblies 170 units 3,545 155 units 3,560
Shelves 340 units 5,805 315 units 5,830
c. Cost of Materials: Units unit costs Total costs
Grates 5,390 $15 $80,850
Stainless steel 40,440 $6 $242,640
Burner subassemblies 3,545 $110 $389,950
Shelves 5,805 $10 $58,050
Total $771,490
d. Labor Cost
Labor cost per hour Hours Required
Backyard Master
Stamping Department $17 0.50 hr 0.60 hr
Forming Department $15 0.60 hr 0.80 hr
Assembly Department $14 1.00 hr 1.50 hrs
Units produced 920 430
Stamping Department total hours 460 hrs 258 hrs
Forming Department 552 hrs 344 hrs
Assembly Department 920 hrs 645 hrs
Direct labor Cost :
Stamping department $7,820 $4,386 $12,206
Forming department $8,280 $5,160 13,440
Assembly department $12,880 $9,030 21,910
Total $28,980 $18,576 $47,556
or
Stamping department cost $8.50 $10.20
Forming department cost 9.00 12.00
Assembly department cost 14.00 21.00
Direct labor cost per unit $31.50 $43.20
Units produced 920 430
Total direct labor cost $28,980 $18,576 $47,556
e. Materials Usage
Backyard Chef Master Chef Total
Units produced 920 430 1,350
Materials used:
Grates 2,760 units 2,580 units 5,340 units
Stainless steel 22,080 lbs 18,060 lbs 40,140 lbs
Burner subassemblies 1,840 units 1,720 units 3,560 units
Shelves 3,680 units 2,150 units 5,830 units
f) Finished products: Beginning Production Desired Ending Units Sold
Backyard Chef 30 units 920 units 40 units 910 units
Master Chef 32 units 430 units 22 units 440 units
Black Friday, the day after Thanksgiving, is the largest shopping day of the year. Do the early shoppers, who often wait in line for hours in the cold to get doorbuster sale items, have elastic or inelastic demand?
Answer:
Early shoppers have elastic demand because of the quantity demanded. That changes significantly as the result of a price change. Elastic means ‘sensitive’. Which means shoppers are responding to Black Friday deals currently happening so they can buy products they/want/need at the prices they wish to spend.
Answer: I personally would say the shoppers who wait in line for hours have an elastic demand.
Explanation: The reason why they have an elastic demand is because an elastic demand means when an elastic product is defined as one where a change in the price of the product leads to a significant change in the demand for that product. Which the people waiting outside are buying the item due to the change in price.
If Jacques's Fire Engines were a competitive firm instead and $80,000 were the market price for an engine, decreasing its price from $80,000 to $60,000 would result in a decrease in the production quantity, but an increase in total revenue.
a) true
b) false
Answer:
The correct answer is:
false (b)
Explanation:
Reduction in the price of a good or service in a competitive market leads to an increase in quantity demanded, which in turn leads to an increase in the production quantity, to cater for the increase in the volume of demand. Hence the reduction in the price of Jacques's fire engines will increase demand and in effect increase the production quantity. With respect to the total revenue, depending on the extent of demand increase, the total revenue might increase or even decrease. If the total demand exceeds the previous demand to make up for the reduction in price, the total revenue will increase, if not so, the total revenue will decrease.
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports - the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 64 students enrolled in those two courses. Data concerning the company's cost formulas appear below:
Fixed Cost per Month Cost per Course Cost per Student
Instructor wages $2,910
Classroom supplies $310
Utilities $1,250 $55
Campus rent $4,900
Insurance $2,100
Administrative expenses$3,600 $42 $3
For example, administrative expenses should be $3,600 per month plus $42 per course plus $3 per student. The company's sales should average $870 per student.
The actual operating results for September appear below:
Actual
Revenue $52,780
Instructor wages $10,920
Classroom supplies $19,690
Utilities $1,880
Campus rent $4,900
Insurance $2,240
Administrative expenses $3,386
Required:
1. The Gourmand Cooking School expects to run four courses with a total of 64 students in September. Complete the company's planning budget for this level of activity.
2. The school actually ran four courses with a total of 56 students in September. Complete the company?s flexible budget for this level of activity.
3. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Answer:
The Gourmand Cooking School
1. Planning Budget for 4 courses and 64 students:
Fixed Cost Cost Cost Total
per month per Course per Student
Instructor wages $2,910 x 4 $11,640
Classroom supplies $310 x 64 19,840
Utilities $1,250 $55 x 4 1,470
Campus rent $4,900 4,900
Insurance $2,100 2,100
Administrative
expenses $3,600 $42 x 4 $3 x 64 3,960
Total expenses $43,910
Sales Revenue $870 x 64 $55,680
Operating profit $11,770
2. Flexible Budget for 4 courses and 56 students:
Fixed Cost Cost Cost Total
per month per Course per Student
Instructor wages $2,910 x 4 $11,640
Classroom supplies $310 x 56 17,360
Utilities $1,250 $55 x 4 1,470
Campus rent $4,900 4,900
Insurance $2,100 2,100
Administrative
expenses $3,600 $42 x 4 $3 x 56 3,936
Total expenses $41,406
Sales Revenue $870 x 56 $48,720
Operating profit $7,314
3. Flexible Budget Performance Report for September:
Actual Flexible Budget Variance
Cost Revenue Cost Revenue
Revenue $52,780 $48,720 $4,060 F
Instructor
wages $10,920 $11,640 720 F
Classroom
supplies 19,690 17,360 2,330 U
Utilities 1,880 1,880 0 None
Campus rent 4,900 4,900 0 None
Insurance 2,240 2,240 0 None
Administrative
expenses 3,386 3,386 0 None
Total
expenses $43,016 43,016 $41,406 41,406 1,610 U
Operating income $9,764 $7,314 2,450 F
Explanation:
a) Data:
1. Cost Formulas:
Fixed Cost Cost Cost Total
per month per Course per Student
Instructor wages $2,910
Classroom supplies $310
Utilities $1,250 $55
Campus rent $4,900
Insurance $2,100
Administrative
expenses $3,600 $42 $3
Sales Revenue $870
2. Actual operating results for September:
Revenue $52,780
Instructor wages $10,920
Classroom supplies 19,690
Utilities 1,880
Campus rent 4,900
Insurance 2,240
Administrative expenses 3,386
Total expenses $43,016 43,016
Operating income $9,764
3. Budget planning is an important aspect of managing The Gourmand Cooking School. It helps to make some educated forecasts about its future activities, performance, and position. With it, actual performances and positions can be compared and across different units of the organization. Budget planning and its performance reporting aid management in controlling the organization towards achieving its goals. It also creates motivation, propelling the organization toward a better future.
Joey's Lawn cutting Service rents office space from Joey's dad for $300 per month. Joey's dad is thinking of increasing the rent to $400 per month (but will not change the cost of mowing an additional lawn). As a result, after the rent hike, Joey's marginal cost of cutting grass will a. increase by $100 divided by the amount of grass cut. b. increase by $100. c. decrease by $100. d. not change.
Answer:
not change
Explanation:
marginal cost is the change in cost by increasing production by one unit. Joey's marginal cost would be unaffected by the increase in rent because Joey has not increased the amount of grass he cuts.
the rents constitutes a fixed cost. Fixed cost is cost that does not vary with production