Answer: 9.08%
Explanation:
Using the Gordon Growth model, a required return on a stock can be calculated if the stock price, next dividend and constant growth rate is given.
Stock Price = [tex]\frac{Next Dividend}{Required return - growth rate}[/tex]
37 = [tex]\frac{1.88}{r - 0.04}[/tex]
37(r - 0.04) = 1.88
r - 0.04 = 1.88/37
r = 1.88/37 + 0.04
r = 9.08%
Compute the missing amounts. (Enter the contribution margin ratio to nearest percent, X%.)
A B C
Sales price per unit $200 $4,000 $5,220
Variable costs per unit 80 1,000 2,088
Total fixed costs 73,200 660,000 3,758,400
Target profit 266,760 3,000,000 3,132,000
Calculate:
Contribution margin per unit
Contribution margin ratio
Required units to break even
Required sales dollars to break even
Required units to achieve target profit
Answer:
Contribution margin per unit
A = $120
B = $3,000
C = $3,132
Contribution margin ratio
A = 60%
B = 75%
C = 60%
Units to break even
A = 610 units
B = 220 units
C = 1,200 units
Sales dollars to break even
A = $122,000
B = $880,000
C = $6,264,000
Units to achieve target profit
A = 2,833 units
B = 1220 units
C = 2,200 units
Explanation:
Contribution margin per unit
Contribution margin = Sales - Variable Costs
A B C
Sales price per unit $200 $4,000 $5,220
Variable costs per unit ($80) ($1,000) ($2,088)
Contribution Margin $120 $3,000 $3,132
Contribution margin ratio
Contribution margin ratio = Contribution / Sales × 100
A = $120 / $200 × 100
= 60%
B = $3,000 / $4,000 × 100
= 75%
C = $3,132 / $5,220 × 100
= 60%
Units to break even
Units to break even = Fixed Cost ÷ Contribution margin per unit
A = $73,200 ÷ $120
= 610 units
B = $660,000 ÷ $3,000
= 220 units
C = $3,758,400 ÷ $3,132
= 1,200 units
Sales dollars to break even
Units to break even = Fixed Cost ÷ Contribution margin ratio
A = $73,200 ÷ 60%
= $122,000
B = $660,000 ÷ 75%
= $880,000
C = $3,758,400 ÷ 60%
= $6,264,000
Units to achieve target profit
Units to achieve target profit = Fixed Cost + Target Profit ÷ Contribution margin per unit
A = $73,200 + 266,760 ÷ $120
= 2,833 units
B = $660,000 + 3,000,000 ÷ $3,000
= 1220 units
C = $3,758,400 + 3,132,000 ÷ $3,132
= 2,200 units
The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 40 percent chance of success. For $171,000, the manager can conduct a focus group that will increase the product's chance of success to 55 percent. Alternatively, the manager has the option to pay a consulting firm $386,000 to research the market and refine the product. The consulting firm successfully launches new products 70 percent of the time. If the firm successfully launches the product, the payoff will be $1.86 million. If the product is a failure, the NPV is zero.
1. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567.)
2. Which action should the firm undertake?
A. Consulting firm
B. Focus group
C. Go to market now
Answer:
1. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567.)
go to market now = $744,000focus group = $852,000consulting firm = $916,0002. Which action should the firm undertake?
A. Consulting firmThe NPV is higher than the rst of the options.
Explanation:
expected payoffs:
option 1 (go to market now) = (40% x $1.86 million) + 0 = $744,000option 2 (focus group) = (55% x $1.86 million) + 0 = $1,023,000option 3 (consulting firm) = (70% x $1.86 million) + 0 = $1,302,000expected NPVs:
option 1 (go to market now) = $744,000option 2 (focus group) = $1,023,000 - $171,000 = $852,000option 3 (consulting firm) = $1,302,000 - $386,000 = $916,000go to market now
Marin Inc. issues $2, 084, 300 of 10% bonds due in 13 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 11%. What amount will Marin receive when it issues the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458, 581.) Amount received by Marin when bonds were issued $________________
Answer:
$1,943,618.62
Explanation:
the current market price of the bond = present value of the face value + present value of coupon payments
present value of face value = $2,084,300 / (1 + 11%)¹³ = $536,736.96
present value of coupon payments = $208,430 x 6.7499 (annuity factor, 11%, 13 years) = $1,406.881.66
market value of the bonds = $1,943,618.62
the journal entry to record the issuance of the bonds:
Dr Cash 1,943,618.62
Dr Discount on bonds payable 140,681.38
Cr Bonds payable 2,084,300
I have recently received from your office a request to conduct evaluations this month on three of my employees. As you probably know, I was promoted to this supervisory position just one week ago as a result of the former supervisor’s termination. I don’t feel that I can presently conduct a fair evaluation of these employees. Do you want me to do them anyway?
Explanation:
Since this is a performance appraisal problem I say it's best we commend the employee for been honest and bold in sharing his concerns.
However, I do feel you are capable of carrying out this responsibilities, although you may need to get some tips. Why don't you check by my office tomorrow and we'll discuss for 15 minutes.
The Green Balloon just paid its first annual dividend of $0.49 a share. The firm plans to increase the dividend by 3.7 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $17.2 a share
Answer:
3.80%
Explanation:
The computation of the cost of equity is shown below:
Cost of equity is
= Annual dividend paid × (1 + growth rate) ÷ Stock price + Growth rate
where,
Annual dividend paid is $0.49
Growth rate is 3.7%
And, the stock price is $17.2
Now placing these values to the above formula
So, the cost of equity is
= $0.49 × (1 + 0.037) ÷ $17.20 + 0.037
= 0.00105 + 0.037
= 3.80%
California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $23 per share. Later in the year, the company decides to purchase 100 shares at a cost of $26 per share.
Required:
Record the transaction if California Surf resells the 100 shares of treasury stock at $28 per share.
Answer:
Treasury stock = Number of shares repurchased × Cost of repurchased share
=100 Shares×$26
=$2,600
Additional paid-in-capital= Number of shares repurchased × (Reissue price - Cost)
=100 Shares × ($28−$26)
=$200
Hence, the treasury stock and additional paid in capital to be recorded in the journal entry will be $2,600 and $300 respectively.
Date Account Title Debit Credit
Cash (100 shares * $28) $2,800
Treasury stock (100 shares * $26) $2,600
Additional paid in capital ( 100 shares * $2) $200
(To record the reissue of treasury stock shares)
On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $33,600. The drill press is expected to last 10 years and has a residual value of $6,400. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 27,000 and 88,000 units, respectively, were produced.
Required:
Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the sum-of- the-years'-digits method is used.
Answer:
2018 = $4,945.46
2019 - $4,450.91
Explanation:
sum-of- the-years'-digits depreciation expense =( number of useful lives remaining / sum of the years ) x (Cost of asset - residual value)
sum of the years = 1 +2 +3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 = 55
depreciation expense in 2018 = (10 / 55 ) x ( $33,600 - $6,400) = $27,200 X 0.181818 = $4,945.46
depreciation expense in 2018 = (9 / 55 ) x ( $33,600 - $6,400) = $27,200 X 0.163636 = $4,450.91
Mary, a merchant, was in the business of selling flowers to local florists. Melissa was the owner of Little Flower, Inc. and she regularly purchased her flowers from Mary. One day, Melissa called Mary and ordered 20 dozen roses, 15 dozen carnations, 10 dozen daisies, baby breaths, 6 dozen tulips, and some plants. Everything totaled $1,200, and was to be delivered in 14 days. After the two ended their call, Mary sent Melissa an e-mail detailing the order and her acceptance. Melissa never responded to the e-mail. Eleven days later, Mary delivered the merchandise to Melissa, but she refused shipment. Mary sued Melissa for breach of contract. What is the likely result?
Answer:
Generally UCC rules establish that contracts involving the sale of goods worth more than $500 must be in writing and signed. But this rule doesn't apply to merchants that are involved in routine buy/sell activities. In this case, both Mary and Melissa are considered merchants and the phone call and the email are enough proof against Melissa for breach of contract. In my opinion, Mary would win the lawsuit.
On April 1, Garcia Publishing Company received $3,258 from Otisco, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?
Answer:
$814.50
Explanation:
The computation of the amount of revenue recorded by using a calender year is shown below:
= Received amount × number of months ÷ total number of months in a year
= $3,258 × 9 months ÷ 36 months
= $814.50
The nine months should be considered from April 1 to December 31 and the same is to be considered for this computation part
Prepare journal entries to record the following four separate issuances of stock. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has a $1 per share stated value. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has no stated value. A corporation issued 2,500 shares of $25 par value preferred stock for $98,500 cash.
Answer: Please see explanation column for answers
Explanation:
Accounts and explanation Debit Credit
1 Cash $240,000
Common Stock (10,000 X 20) $200,000
Paid in Excess of Par- Common Stock
($240,000- 200,000) $ 40,000
(Being common shares issued for cash)
2. Organisation Expenses $36,000
Common Stock (5000x1) $5000
Paid in Excess of Par- Common Stock = 36,000-5000 $31,000
(Being common shares issued to promoters)
3 Organisation Expenses $36,000
Common Stock $36000
Since There is no stated value, paid in excess of par will not be calculated
4 Cash $98,500
Preferred Stock (2500 x 25) $62,500
Paid in Excess of Par- Preferred Stock
(98,500- 62,500) $36,000
(Being preferred shares issued for cash)
A 20-year, $1,000 par value bond has a 6.5% annual payment coupon. The bond currently sells for $950. If the yield to maturity remains at its current rate, what will the price be 5 years from now
Answer:
Explanation:
First we need the calculate the YTM
Use following Following formula
Price of the bond = C x ( 1 - ( 1 + r )^-n / r + F / ( 1 + r )
Where
C = Coupoon Payment = $1,000 x 6.5% = $65
n = numbers of periods = 20
F =Face value = $1,000
Priec of the bond = $950
r = YTM = ?
Placing values in the formula
$950 = $65 x ( 1 - ( 1 + r )^-20 / r + $1,000 / ( 1 + r )
r = 6.971%
Now calculte the price after 5 years
n = numbers of periods = 20 - 5 = 15 years
r = Yield to maturity = 6.971%
Placing values in the formula
Price of the bond = $65 x ( 1 - ( 1 + 6.971% )^-15 / 6.971% + $1,000 / ( 1 + 6.971% )
Price of the bond = $957.02
Which of the following theories suggests that employee motivation is influenced by what other people contribute to and receive from the organization?
a. Expectancy theory
b. Equity theory
c. Needs-based theory
d. Need theory
e. Goal setting theory
Explanation:
good good morning everyone in the wind blows when Devon bless the wind blows the pic which snap on snap grip cycle Godfather lead in the cord few questions
The theory that suggests that employee motivation is influenced by what other people contribute to and receive from the organization is Equity theory. Thus option (b) is correct.
What is an organization?An organization is a group of individuals who work together in a structured and coordinated manner to achieve a common goal or objective.
It can be a formal entity, such as a corporation, or nonprofit organization, or an informal group, such as a sports team, community group, or social network.
They can operate in various industries and sectors, including finance, healthcare, education, manufacturing, and technology. The success of an organization depends on its ability to effectively manage its resources, achieve its goals, and adapt to changes in its environment.
The equity theory states that an employee gets motivation by what other people contribute to and receive from the organization is Equity theory.
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some of the ways that unfair and fraudulent practices can arise in financial transactions include _________________________________________________, deception, and churning
Answer:
Corruption, bribery
Explanation:
Hope im correct
Brief Exercise 5-12 Crane Beverage Company reported the following items in the most recent year. Net income $48,300 Dividends paid 6,320 Increase in accounts receivable 11,860 Increase in accounts payable 7,470 Purchase of equipment (capital expenditure) 8,710 Depreciation expense 4,470 Issue of notes payable 22,850 Compute net cash provided by operating activities, the net change in cash during the year
Answer:
Crane Beverage Company
Statement of Cash Flows
Particulars Details Amount
Cash Flow from Operating Activities:
Net Income $48,300
Adjustments to reconcile net income to
cash flow from operating activities:
Depreciation $ 4,470
Increase in Accounts receivable -$11,860
Increase in Accounts payable $7,470 $80
Net Cash Flow From Operating Activities (A) $48,380
Cash Flow from Investing Activities:
Purchase of Equipment -$8,710
Net Cash Flow From Investing Activities (B) -$8,710
Cash Flow from Financing Activities:
Issue of note payable $22,850
Dividend paid -$6,320
Net Cash Flow From Financing Activities (C) $16,530
Net Change in Cash (A + B+ C) $56,200
Free Cash flow = Net cash provided by operating activities - Purchase of equipment - Dividend paid
= $48,380 -$8,710 - $6,320
= $33,350
Duerr company makes a $75,000, 60-day, 11% cash loan to Ryan Co. The maturity value of the loan is: (Use 360 days a year.)
Answer:
The maturity value of the loan is $76,375.00
Explanation:
The maturity value of the loan comprises of the face value of the loan plus the interest accrued over the 60-day period as shown below:
face value of the loan=$75000
interest=$75000*11%*60/360
interest on loan=$1375
maturity value=$75000+$1375
maturity value=$76,375.00
First, spend a couple of sentences summarizing the Concepts in Action video you watched this week. Then, answer the following. In the Concepts in Action video you watched this week, the speaker mentioned that for a small business, having payment terms is like using "free money" for a while. What do you think this means? And in your personal financial life, can you think of a situation where you also have access to using free money for a little while every month?
Answer:
The essence of the particular question is demonstrated in the following subsection on the interpretation.
Explanation:
The free stuff towards smaller businesses applies to the allowance which isn't charged for a certain duration of time by either the small businessman. Small businesses, in the meantime, may reinvest the money with some other professional reasons, such as capital expenditures, to operated everyday duties.
For example:
A small scale manufacturing business buys raw materials and components but hasn't charged meaning it buys the building resources on collateral which is considered easy cash the business has unlimited suppliers worth value for such a brief amount of time.Throughout my private situation, I could high inventory turnover such as when I take loans through my relative to buy something, and afterward return next months or defined period. An even more predicament where I have been to the consumption shops of my friend as well as buy the products and therefore pay a few other percentages, as well as the entire balance, is kept in his registration appears to mean financing.The Sisyphean Company's common stock is currently trading for $ 28 per share. The stock is expected to pay a $ 2.9 dividend at the end of the year and the Sisyphean Company's equity cost of capital is 12%. If the dividend payout rate is expected to remain constant, then the expected growth rate in the Sisyphean Company's earnings is closest to:
Answer:
1.24%
Explanation:
The Sisyphean company's common stock is currently being traded at $28 per share
The dividend is $2.9
The company's equity cost of capital is 12%
= 12/100
= 0.12
Therefore, the expected growth rate is calculated as follows
Growth rate= Equity cost of capital-(Dividend/Current price)
= 0.12-(2.9/28)
= 0.12-0.103571
= 0.01243×100
= 1.24%
Hence the expected growth rate is Sisyphean company's earning is closest to 1.24%
Cooley Company's stock has a beta of 1.40, the risk-free rate is 25%, and the market risk premium is 5.50%. What is the firm's required rate of return
Answer: 12.2%
Explanation:
Given the variables available, the required rate of return can be computed using the Capital Asset Pricing Model with the formula;
Required Return = Risk-free rate + beta ( Market risk premium)
Required return = 4.25% + 1.4 * 5.5%
Required return = 4.25% + 7.7%
Required return = 12.2%
Note; The actual question says the Risk-free rate is 4.25%.
Southland Company is preparing a cash budget for August. The company has $16,300 cash at the beginning of August and anticipates $124,200 in cash receipts and $133,800 in cash payments during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:
A corporation in a 40% tax bracket invests in the preferred stock of another company and earns a 5% pretax rate of return. An individual investor in a 20% tax bracket invests in the same preferred stock and earns the same pretax return. The after-tax return to the corporation is ________, and the after-tax return to the individual investor is
Answer:
The after-tax return to the corporation is __3%______, and the after-tax return to the individual investor is 4%.
Explanation:
A. The after-tax return is the return that is earned by the corporation or individual after the deduction of income tax. Since the corporation and the individual are in different tax brackets, you will normally expect them to earn different after-tax returns.
B. Calculation of the after-tax returns:
After-tax return = Pre-tax return minus income tax
1. Corporation = (100% - 40%) x 5% = 3%
2. Individual = (100% - 20%) x 5% = 4%
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Per Unit 15,000 Units Per Year Direct materials $ 14 $ 210,000 Direct labor 10 150,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead, traceable 6 * 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $ 42 $ 630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
2. Should the outside supplier’s offer be accepted?
3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
Answer:
1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
financial disadvantage = $525,000 - $435,000 = $90,0002. Should the outside supplier’s offer be accepted?
No, it shouldn't be accepted3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
financial advantage = -$90,000 + $150,000 = $60,0004. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
Yes, it should be acceptedExplanation:
outside vendor offer: cost per unit $35 x 15,000 = $525,000
production costs:
direct materials $14 x 15,000 = $210,000
Direct labor $10 x 15,000 = $150,000
Variable manufacturing overhead $3 x 15,000 = $45,000
Fixed manufacturing overhead, traceable $6 x 15,000 = $90,000 ($60,000 are non-avoidable)
Fixed manufacturing overhead, allocated $9 x 15,000 = $135,000 (all are non-avoidable)
Total cost $42 x 15,000 = $630,000
avoidable production costs = $435,000
The requirements are detailed as follows:
1. Make Buy Difference
Direct materials $ 210,000
Direct labor 150,000
Variable manufacturing overhead 45,000
Fixed manufacturing overhead, traceable 60,000
Total cost $465,000 $525,000 $60,000
Thus, the financial disadvantage of buying 15,000 carburetors from the outside supplier is $60,000.
2. The outside supplier's offer should not be accepted as it costs more.
3. Based on the new assumption of obtaining segment margin of $150,000 from alternative use of capacity, the financial advantage of buying 15,000 carburetors from the outside supplier is $90,000.
4. Based on the new assumption, the outside supplier's offer should be accepted.
Data and Calculations:
Outside supplier's price per unit = $35
Per Unit 15,000 Units Per Year
Direct materials $ 14 $ 210,000
Direct labor 10 150,000
Variable manufacturing overhead 3 45,000
Fixed manufacturing overhead, traceable 6 90,000
Fixed manufacturing overhead, allocated 9 135,000
Total cost $ 42 $ 630,000
Supervisory salaries = $30,000 ($90,000 x 1/3)
Depreciation of special equipment = $60,000 ($90,000 x 2/3)
Outside supplier's cost = $525,000 ($35 x 15,000)
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The next dividend payment by Savitz, Inc., will be $1.44 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $26 per share.
a. What is the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the expected capital gains yield? (Enter your answer as a percent.)
Answer:
Dividend yield = 5.54%
The expected capital gains yield = 6%
Explanation:
Next Dividend (D1) = $1.44
Growth rate (g) = 6%
Required return (Ke) = 6% + 5.54% = 11.54%
Ke-g = 11.54% - 6% = 5.54%
Price = D1 / (ke / g) = 1.44 / 5.54% = $25.9927 = $26
a. Dividend yield = D1 / Price = $1.44 / $26
Dividend yield = 0.05538
Dividend yield = 0.0554
Dividend yield = 5.54%
b. The expected capital gains yield = Required return (Ke) - Dividend yield
The expected capital gains yield = 11.54% - 5.54%
The expected capital gains yield = 6%
During 2018, Skechers USA had Sales of $1,846.4, Gross profit of $818.8 million and Selling, General and Administration expenses of $730.7 million. What was Skechers' Cost of sales for 2018
Answer:
The answer is $1,027.6 million
Explanation:
Gross profit = Sales - Cost of Sales(cost of goods sold)
Gross profit = $818.8 million
Sales of $1,846.4 million.
To find Cost of Sales, we rearrange the formula to now be:
Sales - Gross profit
$1,846.4 million - $818.8 million
=$1,027.6 million
Therefore, Skechers' Cost of sales for 2018 is $1,027.6 million
Paul Company completed the salary and wage payroll for March 2011. The Payroll provided the following details:
Salary and Wages earned: $200,000
Employee Income Taxes withheld: 40,000
Insurance Premiums withheld: 1,000
FICA payroll taxes*: 15,000
15,000 each for employer and employee
Required:
1. Give the Journal entry to record the payroll for March, including employee deductions.
2. Give journal entry to record the employer's payroll taxes.
3. Give a combined journal entry to show the payment of amounts owed to governmental agencies.
Answer:
1. Journal Entry
Date Account Titles and Explanation Debit Credit
March Salary and Wage Expenses $200,000
2011 Liability for income tax withheld - $40,000
Employee
Liability for insurance premium $1,000
withheld - employee
FICA taxes payable - Employees $15,000
Cash $144,000
(Payroll for February including employee deductions)
2. Journal Entry
Date Account Titles and Explanation Debit Credit
March Payroll tax expenses $15,000
2011 FICA taxes payable - Employer $15,000
(Employer Payroll taxes on February payroll)
3. Journal Entry
Date Account Titles and Explanation Debit Credit
March Liability for income tax withheld $40,000
2011 - Employee
Liability for insurance premium $1,000
withheld - employee
FICA taxes payable - Employees $15,000
FICA taxes payable - Employers $15,000
Cash $71,000
(Remittance of payroll taxes and deduction for February payroll)
Assume that both labor and capital exhibit diminishing returns. Suppose you can hire an additional unit of labor for $10, and she can product 50 units. You could also buy an additional machine at the cost of $200, and that machine would allow you to produce 1000 units.
If your main concern is minimizing average cost, what should you do?
a) Buy the machine, because it will allow you to produce more
b) Nothing, because you are already minimizing cost
c) There is not enough information to make a legitimate response
d) Hire more labor, because it is cheaper
Answer:
b) Nothing, because you are already minimizing cost
Explanation:
cost of producing one additional unit by hiring more workers = $10 / 50 units = $0.20 per unit
cost of producing one additional unit by buying the machine = $200 / 1,000 units = $0.20 per unit
Since labor exhibits a diminishing return, the next unit of labor will produce less than 50 units. This means that if you want to increase production, you should buy the machine.
Using the same logic, the previous units of labor were able to produce more than 50 units, which means that the average total cost was lower using labor than the machine. So if the company's concern is to minimize costs, then they are already doing so.
Effect of Inventory Errors During the taking of its physical inventory on December 31, 20Y3, Sellers Company incorrectly counted its inventory as $303,295 instead of the correct amount of $327,560 Indicate the effect of the misstatement on Sellers's December 31, 20Y3, balance sheet or income statement for the year ended December 31, 20Y3. For each, select if the amount is overstated or understated. Then, input the over or under amount, entered as a positive value
Cost of goods sold
Current assets
Gross profit
Inventory
Net income
Stockholders' equity
Total assets
Answer:
Cost of goods sold = overstated : $24,265
Current assets = understated : $24,265
Gross profit = understated : $24,265
Inventory = understated : $24,265
Net income = understated : $24,265
Stockholders' equity = understated : $24,265
Total assets = understated : $24,265
Explanation:
Inventory was understated by $24,265 ($327,560 - $303,295). Since inventory is an Asset, also it is a Income Statement element and consequently affects Retained Earnings (Distributions to Shareholders) , the effect is shown above.
Compute the payback for each of these two seperate investments:
a. A new operating system for an existing machine is expected to cost $250000 and have a useful life of 6 years. The system yields an incremental after-tax income of $72115 each year after deducting its straight line depreciation. The predicted salvage value of the system is $10000.
b. A machine costs $200,000, has a $13,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation.
Answer:
a. 2.23
b. 3.21
Explanation:
a. Answer to Part A
Payback Period = Investment / Annual Cash Inflow
= 250000 / 112115
= 2.23
Answer to Part B
Payback Period = Investment / Annual Cash Inflow
= 200000 / 62375
= 3.21
Working Note
Particulars Case A Case B
After Tax Income 72115 39000
Add: Depreciation 40000 23375
Cash Inflow 11,2115 62375
Particulars Case A Case B
Cost of Machine 250000 200000
Less: salvage Value 10000 13000
Depreciable Value 240000 187000
Life of the Asset 6 8
Annual Depreciation 40000 23375
Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $186,700 $517,500 Variable costs 74,900 310,500 Contribution margin $111,800 $207,000 Fixed costs 68,800 92,000 Income from operations $43,000 $115,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. Bryant Inc. b. How much would income from operations increase for each company if the sales of each increased by 20%
Answer:
a. Operating leverage = Contribution Margin / Income for operation
Beck Inc. = $111,800 / $43,000 = 2.6 times
Bryant Inc = $207,000 / $115,000 = 1.8 times
b. Increase on Income from operations for each company if the sales of each increased by 20%? will be:
Beck Inc = 2.6 * 10%
=0.52
=52%
Bryant Inc = 1.8 * 20
=0.36
=36%
Beginning inventory, purchases, and sales data for hammers are as follows:
Mar. 3 Inventory 12 units at $15
11 Purchase 13 units at $17
14 Sale 18 units
21 Purchase 9 units at $20
25 Sale 10 units
Assuming the business maintains a perpetual inventory system, complete the subsidiary inventory ledger and calculate the cost of merchandise sold and ending inventory under the following assumptions:
(a) First-in, first-out
Purchases Cost of Merchandise Sold Inventory
Date Qty Unit Total Qty Unit Total Qty Unit Total
Cost Cost Cost Cost Cost Cost
Mar. 3
11
14
21
25
Balances
Cost of merchandise sold $
Ending Inventory $
(b) Last-in, first-out
Purchases Cost of Merchandise Sold Inventory
Date Qty Unit Total Qty Unit Total Qty Unit Total
Cost Cost Cost Cost Cost Cost
Mar. 3
11
14
21
25
Balances
Cost of merchandise sold $
Ending Inventory $
Answer:
a) under FIFO
COGS = $461
ending inventory = $120
b) under LIFO
COGS = $491
ending inventory = $90
Explanation:
inventory:
March 3 Inventory 12 units at $15
March 11 Purchase 13 units at $17
March 14 Sale 18 units
March 21 Purchase 9 units at $20
March 25 Sale 10 units
under FIFO COGS:
March 14
Dr Cost of goods sold 282
Cr Merchandise inventory 282
March 25
Dr Cost of goods sold 179
Cr Merchandise inventory 179
under LIFO COGS:
March 14
Dr Cost of goods sold 296
Cr Merchandise inventory 296
March 25
Dr Cost of goods sold 195
Cr Merchandise inventory 195
The Destin Company has one temporary difference of $160 caused by accelerated tax depreciation on 12/31/14. The difference will reverse evenly over the next four years. Tax Rates are 20% in 2014, 30% in 2015, and 40% in 2016 and beyond. Pretax book income in 2014 is $1,000. What is 2014 Income Tax Expense?
Answer: = $168
Explanation:
Destin Company had a $1,000 income in 2014 but also a temporary difference of $160.
This means that they were taxed on the income less the temporary difference.
= 1,000 - 160
= $840
Tax Expense = 840 * 20%
= $168