Answer:
b. Increase of $40,000
Explanation:
Incremental Analysis of the Operating Profit arising from new TV commercial
Hint : Consider Incremental amounts Only
Operating Income ( $450,000 × 20 %) $90,000
Less Cost of new TV commercial ($50,000)
Incremental Income / (loss) $40,000
Conclusion :
There will be an increase in next month's net operating income from the current month of $40,000 .
rojects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A provides cash inflows of $32,000 a year for three years while Project B produces a cash inflow of $44,400 a year for two years. Which project(s) should be accepted if the discount rate is 10 percent
Answer:
Project A should be accepted.
Explanation:
The initial investment of project A = $78000
The initial investment of project B = $78000
The cash inflows of project A = $32000
The time period for project A = 3 years
The cash inflow of project B = $44400
The time period for project B = 2 years.
Interest rate (r ) = 10%
Now find the net present value of both project and then decide which one has to accept.
The net present value of project A:
[tex]=\frac{A(1-(1+r)^{-n})}{r} - \text{initial investment} \\= \frac{32000(1-(1+0.1)^{-3})}{0.1} - 78000 \\= 79579.26 – 78000 \\= $1579.26[/tex]
The net present value of project B:
[tex]=\frac{A(1-(1+r)^{-n})}{r} - \text{initial investment} \\= \frac{44400(1-(1+0.1)^{-2})}{0.1} - 78000 \\= - 942.14[/tex]
Project A should be accepted because project B has a negative net present value.
Exercise 9-2 Recording known current liabilities LO C2 Listed below are a few transactions and events of Piper Company. Piper Company records a year-end entry for $10,000 of previously unrecorded cash sales (costing $5,000) and its sales taxes at a rate of 4%. The company earned $50,000 of $125,000 previously received in advance and originally recorded as unearned services revenue. Prepare any necessary adjusting entries at December 31, 2017, for Piper Company's year-end financial statements for each of the above separate transactions and events. (Piper has the policy of recording cash received in advance in balance sheet accounts.)
Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, $10,400
To Sales $10,000
To Sales taxes payable $400
(Being the cash is recorded)
Here we debited the cash as it increased the assets and we credited the sales and sales tax payable as it increased the sales and the liabilities
2. Cost of goods sold Dr, $5,000
To Merchandise inventory $5,000
(Being cost of goods sold is recorded)
Here we debited the cost of goods sold as it increased the expenses and we credited the merchandise inventory as it reduced the assets
3. Unearned services revenue Dr, $50,000
To Earned services revenue $50,000
(Being unearned service revenue is recorded)
Here we debited the unearned service revenue as it decreased the liabilities and we credited the earned service revenue as it increased the revenue
Travers Company is contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units (the total capacity of their factory). Travers Company is presently manufacturing 7000 units in their factory.
Direct Materials $5
Direct Labor $10
Variable Overhead $7
Fixed Overhead $6
Poppins Company wants to purchase 2,000 units at a special unit price of $36. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $6250 in order to stamp the company’s logo on the product.
Required:
What is the amount of the incremental income (loss) from accepting the order?
Answer:
The amount of the incremental income from accepting the order is $21,750 .
Explanation:
Incremental analysis of Accepting Special Order
Hint : Consider Incremental Amounts Only
Sales (2,000 units × $36) $72,000
Less Expenses
Direct Materials ($5 × 2,000) ($10,000)
Direct Labor ($10 × 2,000) ($20,000)
Variable Overhead ($7 × 2,000) ($14,000)
Special stamping machine ($6250)
Incremental income/ (loss) $21,750
Note : There is excess capacity of 3,000 units (10,000 units - 7,000 units) to meet the Special Order. Hence
Fixed Overheads will be the same whether or not the special order is accepted, hence they are not included in the analysis.
Conclusion :
The amount of the incremental income from accepting the order is $21,750 .
Airco Company is tempted to consider support department costs to be facility-level costs that do not need to be applied to products. Which of the following explains what is misguided about this approach?
1. Product costs may be inaccurate because straight-line depreciation on factory equipment is treated as a genera and administrative expense on the income statement.
2. Product costs may be inaccurate because support department services may be used more heavily by some products than others.
3. Product costs may be inaccurate because incorrect cost drivers are used.
4. Product costs may be inaccurate because direct labor and direct materials are not correctly accounted for in thu product costing system.
Answer:
Option 2. Product costs may be inaccurate because support department services may be used more heavily by some products than others.
Explanation:
Option 1 is not a misguide about this approach as all the depreciation costs are considered as general or administration expenses.
Option 3 is incorrect because cost drivers of cost pools are always accurate, they can not be used inaccurately while using Activity Based Costing.
Option 4 is also incorrect because direct costs are prime cost which are easily attributable to products and in this scenario, the indirect costs are considered inappropriate to be assigned to the product cost.
Option 2 is correct because considering support department costs to be facility-level costs would result in inappropriate cost allocations to some products as a single appropriate basis would be used to allocate the support department services cost to each product. This means if appropriate basis is not chosen correctly then this would result in inaccurate allocation as some of the products will be using the support services heavily than others.
michael's Inc. just paid $2.75 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.9 percent. If you require a rate of return of 10.1 percent, how much are you willing to pay today to purchase one share of the company's stock?
Answer:
$69.33
Explanation:
Calculation for how much are you willing to pay today to purchase one share of the company's stock
Using this formula
P(0)=[Annual dividend *(Increase in future dividend)]/ (Rate of return- Increase in future dividend)
Let plug in the formula
P(0)=[$2.75*(1+0.059)]/(0.101-0.059)
P(0)=$2.75*1.059/0.042
P(0)=$2.91225/0.042
P(0)=$69.33
Therefore the amount you are willing to pay today to purchase one share of the company's stock will be $69.33
A newspaper advertisement for Cashmere Closet states "This Saturday 9 a.m., 1 Red Cashmere Scarf, worth $299.95… $10.00 First Come First Served." Which of the following statements is false?
A. The ad is clear and specific about what was being offered and asked for in exchange.
B. The ad lacks intent to constitute an offer.
C. The number of people who have the power of acceptance is limited.
Answer:
Option B
Explanation:
In simple words, The seller must have intention of making the offer. These are determined first from offeree 's place that there is intention to make an bid. When a fair person in the offerer 's position assumes that the terms or acts of the offeror represent an offer, that is an bid. It is an empirical, and not a moral, criterion for deciding that there is an desire to accept an bid.
Thus, from the above we can conclude that the correct option is B .
"Alou Company has 20,000 beginning finished goods units. Budgeted sales units are 160,000. If management desires 15,000 ending finished goods units, what are the required units of production
Answer:
155,000
Explanation:
The computation of the required units of production is shown below:-
Required units of production = Sales units + Ending finished goods - Beginning finished goods
= 160,000 units + 15,000 units - 20,000 units
= 155,000
Therefore for computing the required units of production we simply applied the above formula.
Which of the following completes the argument against deregulation of U.S. banks that began with the phrase: "if banks competed to pay higher rates of interest"?
a. they might also compete to make riskier loans, potentially imperiling the safety of the banking system.
b. they might also compete to make less riskier loans, potentially imperiling the U.S consumer's reliance on credit.
c. they will end up playing a large role in setting the regulations that they will follow.
Answer:
A. They might also compete to make riskier loans, potentially imperiling the safety of the banking system.
Explanation:
Banks may compete to make riskier loans if they had to pay higher interest rates, which might jeopardize the stability of the banking system. As a result, choice (A) is the appropriate response.
What is meant by loans?A loan is an act of one or more people, businesses, or other entities lending money to other people, businesses, or other entities. The recipient, or borrower, incurs a debt and is often responsible for both the main amount borrowed as well as interest payments on the debt until it is repaid.
The promissory note or equivalent document used to prove the debt will typically include information such as the principal borrowed amount, the interest rate being charged by the lender, and the due date. The subject asset is temporarily reallocated between the borrower and the lender as part of a loan.
The payment of interest encourages the lender to make the loan.
Hence, option (A) is accurate.
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Clark purchased a life insurance policy on himself and made his son, Russ, the beneficiary. Unfortunately, while Clark was taking a vacation with his wife, he was involved in a car accident and passed away. Russ did not find Clark's insurance policy until six months after Clark's death. Russ immediately contacted the insurance company to claim the money. The insurance company refused to pay him, claiming that he failed to notify it of Clark's death within three months of his death as required by the policy. Russ claimed that he was not bound to the time limitations because even though he knew his dad had insurance, he did not agree to that limitation and was not a party to the contract. Russ is a(n):_________.
1. intended creditor beneficiary
2. incidental beneficiary
3. delegatee
4. assignor
5. promisee
6. delegator
7. intended donee beneficiary
8. promisor
Answer: 7. intended donee beneficiary
Explanation:
Intended donee beneficiaries are people who are gifted the benefit of a contract they are not involved in by one of the contracting parties. The person who was involved in the contract that gave the gift does not owe the person that the gift was promised to any debts which makes it like a donation. Russ is an intended donee beneficiary who was meant to receive a benefit from a contract between Clark and the Insurance company even though he was not party to it.
A regression analysis was performed to determine the relationship between the costs of a product (y), the time to make the product (x1 ), the number of different materials used (x2), and the amount spent on marketing the product (x3). The estimated regression equation is . What is the estimated cost if the time to make the product is 5 hours, the number of different materials used is 4, and the amount spent on marketing is $100? a. 83 b. 205.4 c. 213 d. 185.4
Answer: d. 185.4
Explanation:
x1 = The time to make the product which is 5 hours
x2 = the number of different materials used which is 4
x3 = the amount spent on marketing the product which is $100
The Regression equation is given as;
y = [tex]83 - 2x_{1} + 0.6x_{2} + 1.1x_{3}[/tex]
Cost = 83 - 2(5) + 0.6(4) + 1.1 (100)
Cost = 83 - 10 + 2.4 + 110
Cost = 185.4
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.82 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $5.2 million, and is quoted at 103 percent of face value. The second issue has a coupon rate of 6.59 percent, a par value of $1,000 per bond, matures in 14 years, has a total face value of $9.5 million, and is quoted at 107 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt
Answer:
3.22%
Explanation:
we must first determine the yield to maturity of both bonds in order to determine their before tax cost of debt:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
YTM Bond₁ = {19.10 + [(1,000 - 1,030)/12]} / [(1,000 + 1,030)/2] = 16.6 / 1,015 = 0.01635 x 2 = 3.27%
YTM Bond₂ = {32.95 + [(1,000 - 1,070)/28]} / [(1,000 + 1,070)/2] = 0.0294 x 2 = 5.88%
firm's weighted after tax cost of debt = {[($5.2 / $14.7) x 3.27%] x (1 - 0.35)} + {[($9.5 / $14.7) x 5.88%] x (1 - 0.35)} = 0.75% + 2.47% = 3.22%
Sampson Company's accounting records show the following at the year ending on December 31, 2014. Purchase Discounts $ 5,600 Freight-In 7,800 Purchases 350,000 Beginning Inventory 23,500 Ending Inventory 28,800 Purchase Returns and Allowances 6,400 Using the periodic system, the cost of goods sold is:
Answer:
$340,500
Explanation:
From the above information, the below data are given;
Purchase discounts $5,600, freight in $7,800, purchases 350,000, beginning inventory $23,500, closing inventory $28,800, purchase returns and allowance $6,400
Therefore, using the periodic system,
Cost of goods sold .
Cost of goods sold using the periodic system is computed by adding beginning inventory and cost of goods purchased( purchases plus freight in minus purchases return minus purchases discount) and then subtracting ending inventory.
= $23,500 + ($350,000 +$7,800 - $6,400 -$5,600) - $28,800
= $340,500
Regarding the present value of an annuity, the present value of an annuity due will always be worth less compared to the present value of an ordinary annuity.
a) true
b) false
Answer: false
Explanation:
Annuity due is an annuity whereby the payment is normally due at the beginning of every period which can be annually, semi annually, monthly, or quarterly. Examples of payments with annuity due include rents and, leases.
In ordinary annuity, the main difference is that the payments have to be made at the end of every period.
It should be noted that the present value of an annuity due is typically worth more when it is compared to the present value of ordinary annuity.
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,700 and has $350,700 of accumulated depreciation to date, with a new machine that has a purchase price of $484,500. The old machine could be sold for $62,600. The annual variable production costs associated with the old machine are estimated to be $155,100 per year for eight years. The annual variable production costs for the new machine are estimated to be $102,300 per year for eight years. a.1 Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 29 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: Proceeds from sale of old machine $ $ $ Costs: Purchase price Variable productions costs (8 years) Profit (Loss) $ $ $ a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation
Answer:
1.Incremental loss $300
2.Alternative II Replacing the Old Machine is beneficial because we have Incremental Profit of $300
2b.$250,000
Explanation:
1. Preparation of the differential analysis dated May 29
Differential Analysis
Continue with old machine (Alternative I ) or Replace old machine (Alternative II )
Continue with Replace the Differential effect
Old Machine Old Machine
Alternative 1 Alternative 2 Alternative 2
Revenue:
Revenue from Sale of Old Machine
$0 $62,600 $62,600
Cost:
Purchase Cost
$0 $484,500 $484,500
Variable Production (8 Years)
$1,240,000 $818,400 -$422,400
Profit / (Loss) ($1,240,000) ($1,240,300) -$300
Incremental loss = $300
2. Calculation to Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
Alternative II Replacing the Old Machine is not beneficial because we have Incremental loss of $300
2b. Calculation for the sunk cost in this situation
The Sunk Cost will be the Book Value of Old Machine = $600,700-$350,700
= $250,000
Variable production workings
($155,100×8=1,240,800)
($102,300×8= 818,400)
Russell Retail Group begins the year with inventory of $45,000 and ends the year with inventory of $35,000. During the year, the company has four purchases for the following amounts.
Purchase on February 17 $200,000
Purchase on May 6 120,000
Purchase on September 8 150,000
Purchase on December 4 400,000
Calculate cost of goods sold for the year.
Answer:
COGS= $880,000
Explanation:
Giving the following information:
Beginning inventory= $45,000
Ending inventory= $35,000
Total Purchase= 870,000
To calculate the cost of goods sold (COGS), we need to use the following formula:
COGS= beginning finished inventory + cost of goods purchased - ending finished inventory
COGS= 45,000 + 870,000 - 35,000
COGS= $880,000
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $84, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $145 million, a coupon rate of 5 percent, and sells for 95 percent of par. The second issue has a face value of $130 million, a coupon rate of 4 percent, and sells for 107 percent of par. The first issue matures in 24 years, the second in 9 years. Both bonds make semiannual coupon payments
a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g. .1616.)
b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g. 1616.)
c. Which are more relevant, the book or market value weights?
Answer:
(a). Book value of equity is (6,000,000 * $5) = $30,000,000
Book value of debts ($145,000,000 + $130,000,000) = $275,000,000
Total book value of the corporation ($30,000,000 + $275,000,000) = $305,000,000
Weight equity ($30,000,000 / $305,000,000) = 0.0984
Weight debts ($275000000 / $305000000) = 0.9016
Equity / Value = 0.0984
Debt / Value = 0.9016
(b). Market value of equity is (6,000,000 * $84) = $504,000,000
Market value of debts ($145,000,000 * 0.95) + ($130,000,000 * 1.07)
= ($137,750,000 + $139,100,000)
= $276,850,000
Total market value of the corporation ($504,000,000 + $276,850,000) = $780,850,000
Weight equity ($504,000,000 / $780,850,000) = 0.6455
Weight debts ($276850000 / $780850000) = 0.3545
Equity / Value = 0.6455
Debt / Value = 0.3545
(C). Answer is Market value . As we know that market value weights are more relevant because such weights are on the basis of the prevailing market prices, hence such weights will show more accurate picture of the capital structure.
It is better to evaluate economic decisions at the marginal, where the decision has to be made as long as its marginal benefit exceeds its marginal cost, if not equal to its marginal cost.
A. True
B. False
Answer: True
Explanation:
Marginal benefit is the maximum amount that a consumer will be willing to pay for an extra product. It should be known that as consumption rises, the marginal benefit starts reducing.
The marginal cost is the extra cost that a producer incurs when an extra unit of a product is made. Economic decisions made by economic agents are typically based on marginal as it'll be possible to know the impact of an extra decision made on a variable.
Therefore, it is better to evaluate economic decisions at the marginal, where the decision has to be made as long as its marginal benefit exceeds its marginal cost, if not equal to its marginal cost.
For the following enumerative induction, identify following three components:_______.
(i) target group, (ii) sample, and (iii) relevant property:
University fraternities are magnets for all sorts of illegal activity. Last year several frat brothers were arrested at a frat-house party. And this year a fraternity was actually kicked off campus for violating underage drinking laws.
Answer:
i. Target Group - University Fraternities
The focus of the statement is all University fraternities as the person making the statement did not limit the number of Fraternities included by saying some or most.
ii. Sample - Several Frat Brothers and a Fraternity
In coming to their conclusion, the author of the text used a sample of several frat brothers who were arrested at a frat-house party as well as a fraternity which was kicked off campus for violating underage drinking laws.
iii. Relevant property - Illegal Activity
The relevant property that all University Fraternities seem to have in come is illegal activity and the author gets this from the several frat brothers as well fraternity that were punished for actions contravening the law.
Murray Company reports net income of $687,500 for the year. It has no preferred stock, and its weighted-average common shares outstanding is 250,000 shares. Compute its basic earnings per share.
Answer:
Its basic earnings per share is $2.75
Explanation:
Basic Earnings Per Share (BEPS) = Earnings Attributable to Holders of Common Stocks ÷ Weighted Average of Common Stocks Outstanding
= $687,500 ÷ 250,000 shares
= $2.75
Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit.
It is difficult to implement both of these policies at the same time because reducing taxes on private spending has the effect of the government budget deficit. What would you need to know about private saving to judge which of these two policies would be a more effective way to raise investment?
A. The elasticity of private saving with respect to the after-tax real interest rate
B. The response of private saving to changes in the government budget deficit
C. The elasticity of investment with respect to the interest rate
Answer:
1. Increasing
2. A. The elasticity of private saving with respect to the after-tax real interest rate
B. The response of private saving to changes in the government budget deficit
C. The elasticity of investment with respect to the interest rate
Explanation:
1. It is difficult to implement both of these policies at the same time because reducing taxes on private spending has the effect of Increasing the government budget deficit.
A Government budget deficit is acquired when the government spends more than it earns. The Government earns money from taxes and if it spends more than it receives in taxes, that will lead to a deficit. If taxes on Private spending are reduced, this will lead to less tax revenue for the government thereby increasing the Deficit.
2. All of the listed options are useful in determining which policy would be a more effective way to raise investment.
The elasticity of private saving with respect to the after-tax real interest rate refers to how much private saving changes in reaction to a change in the tax rates. This can enable one decide how much investment will be expected if the Government reduces or increases taxes.
The response of private saving to changes in the government budget deficit is also a useful factor to look at because private savings reduce when government deficits reduce.
Also how much does investment change by due to interest rates. This will be important to note in terms of Private Investment to see if it will be beneficial to use it over reducing the government budget deficit given a certain interest rate.
These statements relate to exchange rates. Label each statement as either True or False. The value of one currency in terms of another currency is called a currency rate. A real exchange rate takes into account differences in countries' price levels. A fried chicken dinner in Tennessee costs $10. Suppose Jared can convert $10 into 7.5 euros. He can purchase the same chicken dinner in Portugal for 7.5 euros. This relationship is called purchasing power parity. After her plane touches down in Moscow, Maggie notices that $1 is worth 25 rubles (Russia's currency). A week later, Maggie returns to the airport to go home and notices that $1 is worth 28 rubles. The ruble has appreciated in value against the dollar. The yen is Japan's currency. In the dollar/yen foreign exchange market, if more yen are being demanded than are being offered, the yen will depreciate in value relative to the dollar.
Answer:
Exchange Rates
Labelling each statement as either True or False:
1. The value of one currency in terms of another currency is called a currency rate.
True
2. A real exchange rate takes into account differences in countries' price levels.
True
3. A fried chicken dinner in Tennessee costs $10. Suppose Jared can convert $10 into 7.5 euros. He can purchase the same chicken dinner in Portugal for 7.5 euros. This relationship is called purchasing power parity.
True
4. After her plane touches down in Moscow, Maggie notices that $1 is worth 25 rubles (Russia's currency). A week later, Maggie returns to the airport to go home and notices that $1 is worth 28 rubles. The ruble has appreciated in value against the dollar.
False
5. The yen is Japan's currency. In the dollar/yen foreign exchange market, if more yen are being demanded than are being offered, the yen will depreciate in value relative to the dollar.
True
Explanation:
1. The meaning of currency rate can be illustrated with the US dollar exchange rate or currency rate with the Swiss francs. The rate tells the value of the dollar in relation to the Swiss francs.
2. Price levels in Country A and Country B determine the exchange rates between Country A's currency and Country B's. The price levels of these two countries are influenced by their economies' inflation and interest rates.
3. Purchasing Power Parity measures the prices of goods and services in different countries based on their dollar prices. It is a way of equalizing prices of goods and services in other countries with the dollar.
4. When US dollar increases in its rate relative to another Japanese yen, the US dollar has depreciated in value. But, the US dollar appreciates when the rate reduces relative to the Japanese yen.
5. Higher demand for the dollar by Japanese businesses than its supply depreciates a Japan's yen since according to the law of supply and demand, "the price (rate) goes up with increasing demand." The reverse is the case with higher supply than demand.
Nidal Company reported inventory in the 2020 year-end balance sheet, using the FIFO method, as $185,000. In 2021, the company decided to change its inventory method to average cost. If the company had used the average cost method in 2020, ending inventory would have been $171,000. What adjustment would Nidal make for this change in inventory method
Answer:
Dr Retained earnings $14,000
Cr Inventory $14,000
Explanation:
There is a need to make adjustment to the inventory . Therefore,
Adjusted inventory
= New method of $171,000 - Old method of $185,000
= $14,000 decrease
It is to be noted that a lower inventory will have high costs associated with goods sold hence reduces profit/net income for the previous year by $14,000.
Also, the net income reports to retained earnings account hence decreases retained earnings.
Having made the above adjustment, we can assume that the average cost method was used for 2020 books.
Answer:
Dr Retained earnings for $14,000
Cr Inventory for $14,000
Explanation:
Calculation of the adjustment that Nidal would make for this change in inventory method
Based of the information given the adjustment will records the decrease in inventory of $14,000 which is calculated as ( Inventory of $185,000 − Ending inventory of $171,000) as well as the decrease in retained earnings, just as if average cost had been used in 2020.]
Therefore the adjustment that Nidal would make for this change in inventory method will be:
Dr Retained earnings for $14,000
Cr Inventory for $14,000.
Andrew founded and operated a wedding planning agency, which specialized in celebrity weddings. When he died, his business was dissolved because there was no plan for control after his death.
Type of business:___________
Answer:
Sole proprietorship
Explanation:
The sole proprietor is a single owner of a business. He bears the loss of From the business alone and also enjoys gains from the business alone. There is no distinction between the business and it's owner. Such a business is easy to form and dismantle because the government has no involvement in it.
From the question since Andrews business was dissolved when he because there was no plan for control after his death, this signifies a sole proprietorship.
Astro Co.sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $200,000. The maximum output capacity of the company is 40,000 units per year.
ASTRO COMPANY
Contributed Margin Income Statement
For Year Ended December 31, 2017
Sales $ 1,000,000
Variable costs 800,000
Contribution margin 200,000
Fixed costs 250,000
Net loss $ (50,000)
Required:
1. Compute the break-even point in dollar sales for year 2017.
2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price.
3. Prepare the forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due.
Compute the sales level required in both dollars and units to earn $200,000 of target pretax income for 2018 with the machine installed and no change in unit sales price.
4. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 5. Assume no income taxes will be due. (Round your intermediate calculation and final answer to the nearest whole dollar.)
Answer:
1. $1,250,000
2. $750,000
3. Forecasted contribution margin income statement for 2018
Sales $ 1,000,000
Variable costs ($400,000 )
Contribution margin $600,000
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $150,000
Sales to meet target profit (dollars) = $1,083,333
4. Forecasted contribution margin income statement
Sales $1,083,333
Variable costs ($400,000 )
Contribution margin $683,333
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $233,333
Explanation:
Break even point is the level of activity where a firm neither makes a profit nor a loss.
Break-even point in dollar sales = Fixed Cost ÷ Contribution Margin Ratio
Where, Contribution Margin Ratio = Contribution margin ÷ Sales
= $200,000 ÷ $ 1,000,000
= 0.20
Thus, Break-even point in dollar sales = $250,000 ÷ 0.20
= $1,250,000
Predicted break-even point in dollar sales for year 2018
New Contribution Margin :
Sales $ 1,000,000
Less Variable Cost $800,000 × 50% ($400,000)
New Contribution Margin $600,000
New Contribution Margin Ratio
New Contribution Margin Ratio = $600,000 ÷ $ 1,000,000
= 0.60
New Break-even point in dollar sales
Break-even point in dollar sales = ($250,000 + $200,000) ÷ 0.60
= $750,000
Sales to meet target profit = (Fixed Cost + Target Profit) ÷ Contribution Margin Ratio
= ($450,000 + $200,000) ÷ 0.60
= $1,083,333
Forecasted contribution margin income statement
Sales $1,083,333
Variable costs ($400,000 )
Contribution margin $683,333
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $233,333
John is evaluating which investment would be best for his company. He wants to determine the future value of a certain investment that has the following information:
PV = $200
INT = 0.1 or 10%
N = 1 (years)
According to this information, what would be the future value of this investment?
a) $110.67
b) $200.50
c) $220
d) None of the above
Answer: $220
Explanation:
The following information can be derived from the question:
PV = $200
INT = 0.1 or 10%
N = 1 (years)
To calculate the future value of this investment, we will use the formula:
FV = PV( 1 + i)^n
FV = $200(1 + 0.1)
FV = $200(1.1)
FV = $220
The future value of this investment would be $220.
The amount of safety time needed to protect a particular path in a project is less than the sum of the safety times required to protect the individual activities making up the path.
a. True
b. False
Answer:
a. True
Explanation:
For computing the amount of safety time required for protecting a specific path we need to subtract the total of safety time in order to protect the individual activities who are making the path so that the path should be secure, safe and protected
Hence, the given statement is true
Therefore the correct option is a. True
Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2017, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Osawa sold 120,000 units of product at $40 per unit.
Required:
Osawa's 2017 operating income using variable costing is:________
(a) $ 620,000,
(b) $ 340,000,
(c) $ 200,000,
(d) $ 560,000, or
(e) none of these.
Show supporting calculations. Begin by selecting the labels used in the variable costing calculation of operating income and enter the supporting amounts. Perform the calculations in this step, but select the correct operating income in the next step.
Answer:
The correct answer is C.
Explanation:
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
We need to calculate the net operating income:
Sales= 120,000*40= 4,800,000
Total variable cost= (20 + 10)*120,000= (3,600,000)
Total contribution margin= 1,200,000
Fixed manufacturing costs= (600,000)
Fixed operating (nonmanufacturing) costs= (400,000)
Net operating income= 200,000
Gingrich Corporation issued $2,000,000 in bonds on January 1, 2020. The bonds have a coupon rate of 1.5% and pay interest semi-annually on July 1st and January 1st. The bonds have a 10 year term. The market rate at the issue date is 3.9%. What amount of interest expense will be recorded on July 1, 2020 (the first interest payment)
Answer:
$31,310.35
Explanation:
Face value = 2,000,000
Semiannual interest = 2,000,000 *0.015 * 6/12= 15,000
Semiannual yield = 3.9*6/12= 1.95%
Semiannual months = 10*2= 20
Issue price =[PVA 1.95%,20 * Interest] + [PVF 1.95%,20 * Face value]
Issue price = [16.43061*15,000]+ [ .67960* 2,000,000]
Issue price = 246459.10+ 1,359,200
Issue price = $1,605,659.10
The amount of interest expense to be recorded on July 1, 2020 (the first interest payment = Issued price * Semi annual yield
= $1,605,659.10 * 1.95%
=$1,605,659.10 * 1.95%
=$31,310.35
Thus, the amount of $31,310.35 will be recorded as the interest expense on July 1, 2020
An individual who believes that an action is ethical because others within his or her company and industry regularly engage in the activity is probably a(n)
probably a relativist
Suppose that, during a recession, the government borrows money to provide free movies as a distraction from the poor economy. Which of the following statements are correct?
A. The free movies as a distraction from the poor economy will likely raise interest rates as the government borrows more money to finance the purchase.
B. This policy will likely be accompanied by an impact lag as the policy takes time to make its way to the people.
C. The provision of free movies is an example of an automatic stabilizer.
D. The government is engaging in contractionary fiscal policy.
E. Crowding-out will occur as individuals choose to rely on free movies instead of purchasing their own.
Answer: A. . The free movies as a distraction from the poor economy will likely raise interest rates as the government borrows more money to finance the purchase.
B. This policy will likely be accompanied by an impact lag as the policy takes time to make its way to the people.
E. Crowding-out will occur as individuals choose to rely on free movies instead of purchasing their own
Explanation:
We are informed that during a recession, the government borrows money to provide free movies as a distraction from the poor economy.
The effect of this is that there will be a likely increase in the interest rates because the government borrows more money to finance the purchase of tickets.
Also, due to the free movies, there'll be an impact lag as the policy will take time before it make its way to the people and there will also be crowding-out because the individuals will rely on free movies instead of purchasing their own.