When determining the initial investment for opening a new store, the sushi chain should include the cost of the study conducted. This cost is considered a sunk cost and should be added to the total initial investment amount.
When conducting its capital budgeting analysis, the sushi chain should account for the cost of the study as part of the initial investment for the new store in Chicago.
Include the $500,000 study cost in the total initial investment amount.
This cost would be considered a sunk cost, meaning it has already been incurred and cannot be recovered.
By adding the study cost to the initial investment, the company gets a more accurate picture of the total funds needed to open the location in Chicago.
3. (1 point) Suppose a firm faces potential demand from two customer bases, H and L, with high and low valuation of the firm’s product, respectively. If the product has network externalities and all type H customers are currently purchasing the product, then the price that can be charged to L consumers ________. a. increases with the number of H consumers b. decreases with the number of H consumers c. is independent of the number of H consumers d. cannot be determined because the price charged to H is not known
Answer: A. increases with the number of H consumers.
Explanation: If all type H customers are currently purchasing the product, it means that its customer base is large and significant enough and as such the firm would prefer to sell all of its product to H, and also do to the fact that there is only so much supply that a firm can provide. But, fewer quantities of goods would remain for L if more and more goods are sold to H. Due to this lower quantity supplied to the L customer base, it then means that the firm can set the price higher for L. This is because at a higher price, quantity demanded reduces (which is expected for L) and it can therefore maintain supply to H which has more customers.
Corporations often distribute profits to their shareholders in the form of dividends, which are simply checks mailed out to shareholders. Suppose that you have the chance to buy a share in a fashion company called Rogue Designs for $35 and that the company will pay dividends of $2 per year on that share every year. What is the annual percentage rate of return?
Answer:
5.71%
Explanation:
Corporations annual percentage rate of return
Dividends of $2 per year ÷ Designs for $35
=0.0571
=0.0571×100
=5.71%
Therefore a yearly dividend of $2 on a $35 share of stock equals a 5.71% annual rate of return
The annual percentage rate of return for the $35 share in Rogue Designs, which pays a $2 dividend per year, is approximately 5.71%.
Explanation:In this scenario, we're asked to determine the annual percentage rate of return for an investment in a share of a company called Rogue Designs. This concept is a term from financial mathematics that refers to the annual percent change in an investment's value. The formula to calculate the annual return rate is: Annual Return Rate = (Annual dividend / Price of share) x 100%.
In the case you presented, Rogue Designs' share costs $35 and it pays a $2 dividend per year. Substituting these given values into the formula, we find the annual return rate equals: (2 / 35) x 100%. So, the annual return rate is approximately 5.71%.
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Oil wells and seasonal resorts will often shut down temporarily because Multiple Choice variable costs for pumping oil and operating resorts fluctuate significantly. fixed costs temporarily rise, making production unprofitable. prices for their output temporarily fall below their average variable costs of production. government regulations require seasonal shutdowns for maintenance purposes.
Answer:
Oil wells and seasonal resorts will often shut down temporarily because prices for their output temporarily fall below their average variable costs of production.
Explanation: If the price is below the minimum average variable cost, the firm would lose less money by shutting down. In contrast, in scenario 3 the revenue that the center can earn is high enough that the losses diminish when it remains open, so the center should remain open in the short run.
In economics, firms face the decision to shut down temporarily or continue operations when prices fall below their average variable costs. Shutting down can result in smaller losses compared to staying open and incurring fixed costs. Government regulations may also require seasonal shutdowns for maintenance purposes.
Explanation:In economics, fixed costs refer to the expenses a firm must incur before producing any output, while variable costs are the expenses incurred during the production process. When the price of a firm's output falls below its average variable costs, the firm is unable to generate enough revenue to cover its variable costs. In such cases, shutting down and producing no output would result in smaller losses compared to staying in operation and incurring fixed costs, in addition to some variable costs.
The point at which the average variable cost curve intersects with the marginal cost curve is called the shutdown point. If a perfectly competitive firm faces a market price above this point, it is at least covering its average variable costs. However, if the price falls below this point, the firm is not even covering its variable costs, and staying open would result in larger losses. In the case of oil wells and seasonal resorts, this can lead to temporary shutdowns.
Government regulations may also require seasonal shutdowns for maintenance purposes. By temporarily shutting down, firms can reduce their overall costs and avoid operating at a loss. It is important for firms to closely analyze their costs and prices to make informed decisions about shutting down temporarily or continuing operations.
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The following information is provided for Slickers, Inc. for year 2016: • Preferred stock, 5%, $20 par value, 1,500 shares issued and outstanding • Common stock, $50 par value, 3,000 shares issued and outstanding • Dividends in arrears for 2013, 2014, 2015 • Total dividends declared and paid during 2016 totaled $10,000 How much of the dividend is paid to the common stockholders during 2016 assuming the preferred stock is cumulative?
Answer:
The amount of dividends paid to common stockholders in 2016 is $4000
Explanation:
The cumulative preferred shares are the shares that accumulate dividends in case the dividends on these shares are not paid or paid partially in a year. The accumulated dividends will need to be paid first whenever the company declares dividends.
The amounts of dividends on preferred share for one year is,
Dividends - Preferred shares = 20 * 0.05 * 1500 = $1500
Thus, the accumulated dividends on these preferred shares at start of 2016 is,
Accumulated dividends - Preferred shares = 1500 * 3 = $4500
The common shares holders are paid after the preferred share holders have been paid. This means that we will deduct the amount of accumulated dividends on preferred shares and the dividends for this year on preferred shares from the total dividends to calculate the amount to be paid to common share holders as dividends.
Common stock dividends = 10000 - (4500 + 1500) = $4000
Cornett Company reported the following information: cash received from the issuance of common stock, $150,000; cash received from the sale of equipment, $14,800; cash paid to purchase an investment, $20,000; cash paid to retire a note payable, $50,000; and cash collected from sales to customers, $225,000. What amount should Cornett report on its statement of cash flows as net cash flows provided/used by investing activities
Answer:
The correct option is B,-$5,200 as found in the attached.
Explanation:
The net cash flows provided/used by investing activities are cash flows(both inflows and outflows) on assets that are capable of generating earnings directly or indirectly for the business.
By direct ,I mean assets that are used directly in the business to enhance the business earnings while indirect relates those that are not used in core business operations.
Cash flow from investing activities is computed:
Cash received from sale of equipment $14,800
cash paid to purchase investment ($20,000)
Cash flow used in investing activities ($5,200)
The correct option is B as found in the attached .
Skydiver Question. Several of your friends have offered to take you on a tandem skydiving adventure: Strapped together with a single set of parachutes (main and emergency), you will all jump out of an airplane and then either float to earth or crash. All your skydiving friends are equally skillful, and none of them has the thrill-seeker gene. You can ask each of them a single question.
a. Whats your question?
b. Provide the answer you re looking for in a skydiving mate.
Answer:
a. My question will be to ask them "do you have life insurance?"
Life insurance is defined as a form of indemnity against a future occurrence on the life of an individual . In any case of death, the insurance policy pays a sum of money to the beneficiary.
b. The answer i will be looking for in a skydiving mate will be an individual that has life insurance. This is because an individual with life insurance will be more careful.
Runaround Corporation sells running shoes and during January they ran production machines for 29 comma 000 hours total and incurred $ 10 comma 500 in maintenance costs. During July they ran production machines for 15 comma 000 hours total and incurred $ 8 comma 600 in maintenance costs. Based on this data, what will total maintenance costs be if the machines are run for 18 comma 500 hours? (Round intermediary calculations to the nearest cent.)
Answer:
$9,075
Explanation:
As we know that:
Variable cost per hour = Cost Difference / Units Difference
Variable cost per hour = ($10,500- $8,600) / (29,000 - 15,000)
= $00.1357142857142857 per hour
Which means:
Fixed Cost = $10,500 - (29,000 * $0.0.1357142857142857 per hour)
= $6,564
The total variable cost for 18,500 hours is calculated as under:
Total Variable Cost = 18,500 Unit * $0.1357142857142857 per hour
= $2,511
Total Maintenance Costs = $6,564 + $2,511 = $9,075
Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years, and 6.5%, compounded annually, for the last five years.
Required:
a)
What is the effective annual interest rate (EAR) you would get for your investment in the first 10
years?
b)
How much money do you have in your account today?
c)
If you wish to have $85000 now, how much should you have invested 15 years ago?
Answer:
Part A: 8.16%
Part B: $56,577.5
Part C: $39,700
Explanation:
Part A:
EAR = (1 + r / n )^ n - 1
Here
r is the nominal interest rate, which is 8%
n is the number of compounding periods in a year and here, for semiannual requirement it is 2.
So by putting values in the above equation, we have:
EAR = (1 + 8% /2) ^2 - 1
= 8.16 %
Part B:
Amount invested is $12500 which must be compounded for 10 years semi annually at the EAR. This means
The future value = Initial Investment + Interest Income for 10 year
Future Value after 10 years = $12500 + ( $12500 * 8.160%*10 years)
= $22,700
Similarly,
Amount invested for next 5 years is $42,700 ($22,700 and the additional $20,000 which was added to the account). This amount must be compounded for next 5 years at 6.5%. This means
Value Today = Initial Investment + Interest Income for 5 year
The Future Value = $42,700 + (42,700 * 6.5% * 5 years) = $56,577.5
Part C:
Let the initial amount that was deposited be "x".
As per the guidelines given in the question, for first 10 years the interest is EAR which is 8.16%.
Interest Earned = (x * 8.16% * 10 Years) = 0.816x
The same initial investment "x" would be investment for the next 5 years at 6.5% rate.
For next 5 years:
Interest Earned = (x * 6.5% * 5) = 0.325x
Future value of the investment at the end of the year 15 = $85,000
0.816x + 0.325x + x = $85,000
2.141x = $85,000
x = $85,000 / 2.141 = $39,700
Create a crows foot erd using a specialization hierarchy if appropriate. Granite sales company keeps information on its employees and the departments in which they work. For each department, the department name,internal mailbox server, and office phone extension are kept. A department can have many assigned employees, and each employee is assigned to only one department. Employees can be salaried, hourly, or work on contract. All employees are assigned an employee number, which is kept along with the employee's name and address. For hourly employees, hourly wages and target weekly work hours are stored; for example , the company may target 40 hours/ wekk for some employees, 32 for others, and 20 for others. Some salaried employees are salespeople who can earn comission percentage on sales and commission percentage on profit are stored in the system. For example, John is a salesperson with a base salary of $50,000 per year plus a 2 percent comission on the sales price for all the sales he makes, plus another 5 percent off the profit on each of those sales. For contract employees, the beginning date and end date of their contracts are stored along with the billing rate for their hours.
Answer:
Check the explanation
Explanation:
From the below attached image Crow Foot Notation, the relationship between Super class and Sub class is shown clearly, i.e
Employee is super class, and the different types of employees are represented by specialization of three types, there are Salary, Hourly and Contract based. Again the Salary based employee is super class of Sales Employee, representing partially participation.
From the below attached image notation, "d" represents distinct i.e distinct employees of type Salary, Hourly and contract.
And "O" represents, Overlapped, means same object is aggregating two specific outcomes which are overlapped.
They are Salary based and Sale wages based employee.
The Granite Sales Company can create a Crow's Foot ERD using a specialization hierarchy. The ERD will include entities for Department, Employee, and Employee Type, with specific attributes for each type of employee.
Explanation:Entity Relationship Diagram (ERD)A specialization hierarchy can be used to represent the different types of employees in the Granite Sales Company. The ERD will have three main entities: Department, Employee, and Employee Type. The Department entity will include attributes such as department name, internal mailbox server, and office phone extension. The Employee entity will include attributes like employee number, name, and address. The Employee Type entity will include attributes specific to each employee type, such as hourly wages and target weekly work hours for hourly employees, commission percentage on sales and profit for salespeople, and beginning and end dates of contracts and billing rate for contract employees.
Example of an ERD:Department(DepartmentID, DepartmentName, MailboxServer, PhoneExtension)
Employee(EmployeeID, Name, Address, DepartmentID, EmployeeType)
EmployeeType(EmployeeTypeID, HourlyWages, TargetWeeklyWorkHours, CommissionPercentageSales, CommissionPercentageProfit, BeginDate, EndDate, BillingRate)
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Analyzing Balance Sheet Accounts A review of the balance sheet of Dixon Company revealed the following changes in the account balances: Required: 1. Classify each change in the balance sheet account as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities, or a noncash investing and financing activity. a. Increase in retained earnings b. Increase in equipment c. Increase in interest receivable d. Decrease in bonds payable e. Increase in unearned rent revenue f. Decrease in prepaid insurance g. Decrease in long-term investment h. Increase in accounts payable 2. Indicate whether each of the changes in the balance sheet accounts produces an increase in cash, produces a decrease in cash, or is a noncash activity. a. Increase in retained earnings b. Increase in equipment c. Increase in interest receivable d. Decrease in bonds payable e. Increase in unearned rent revenue f. Decrease in prepaid insurance g. Decrease in long-term investment h. Increase in accounts payable
Answer:
Dixon Company Requirement 1: a. Increase in Retained Earnings b. Increase in Equipment c. Increase in interest receivable d. Decrease in Bonds Payable e. Increase in Unearned Rent Revenue f. Decrease in Prepaid Insurance g. Decrease in Long Term Investment h. Increase in Accounts Payable Non Cash Activity Investing Activity Operating Activity Financing Activity Operating Activity Operating Activity Financing Activity Operating Activity Requirement 2: a. Increase in Retained Earnings b. Increase in Equipment on Cash Activity Decrease in Cash
Explanation:
See attached image for the table
Oriole Sportswear manufactures a line of specialty T-shirts using a job order costing system. In March the company incurred the following costs to complete Job ICU2: direct materials, $14,000, and direct labor, $4,400. The company also incurred $1,580 of administrative costs and $5,400 of selling costs to complete this job. Job ICU2 required 800 machine hours. Factory overhead was applied to the job at a rate of $25 per machine hour. If Job ICU2 resulted in 6,000 good shirts, what was the cost of goods sold per shirt
Answer:
6.4
Explanation:
The computation of cost of goods sold per shirt is shown below:-
For computing the cost of goods sold per shirt first we need to find out the factory overhead applied and total production cost which is here below:-
Factory overhead applied = 800 × $25
= $20,000
Total Production cost = Direct material + Direct labor + Factory overhead applied
= $14,000 + $4,400 + $20,000
= $38,400
Per Unit Cost of Goods Sold = Total Production cost ÷ Number of Units Per JOB ICU 2
= $38,400 ÷ 6,000
= 6.4
Oceanic Company has 15,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $15 par common stock. The following amounts were distributed as dividends: 20Y1 $67,500 20Y2 22,500 20Y3 135,000 Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
Final answer:
The dividends per share for the preferred and common stock for each year are as follows: Preferred stock: 20Y1 - $4.50, 20Y2 - $1.50, 20Y3 - $9.00. Common stock: 20Y1 - $1.35, 20Y2 - $0.45, 20Y3 - $2.70.
Explanation:
To determine the dividends per share for the preferred and common stock for each year, we first need to calculate the total dividends distributed for each year. The formula to calculate the dividends per share is: Dividends per share = Dividends distributed / Total number of shares.
For the preferred stock:
20Y1: Dividends per share = $67,500 / 15,000 = $4.5020Y2: Dividends per share = $22,500 / 15,000 = $1.5020Y3: Dividends per share = $135,000 / 15,000 = $9.00For the common stock:
20Y1: Dividends per share = $67,500 / 50,000 = $1.3520Y2: Dividends per share = $22,500 / 50,000 = $0.4520Y3: Dividends per share = $135,000 / 50,000 = $2.70The dividends per share for each year are as follows:
Preferred stock: 20Y1 - $4.50, 20Y2 - $1.50, 20Y3 - $9.00Common stock: 20Y1 - $1.35, 20Y2 - $0.45, 20Y3 - $2.70The articles of partnership stipulate that profits and losses be assigned in the following manner: ∙ Each partner is allocated interest equal to 5 percent of the beginning capital balance. ∙ Bernard is allocated compensation of $18,000 per year. ∙ Any remaining profits and losses are allocated on a 3:3:4 basis, respectively. ∙ Each partner is allowed to withdraw up to $5,000 cash per year. Assuming that the net income is $60,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year?
Answer:
$80,700
Explanation:
A partnership begins its first year with the following capital balances:
Alfred, Capital $50,000 Bernard, Capital $60,000 Collins, Capital $70,000the partnership's net profits should be allocated the following way (drawings made by the partners should decrease their basis, but since the company made a profit they can be included in this distribution)
net income $60,000
partners' drawings plus salaries:
Alfred ⇒ $5,000 Bernard ⇒ $18,000 + $5,000 = $23,000Collins ⇒ $5,000interests owed to partners:
Alfred ⇒ $50,000 x 5% = $2,500Bernard ⇒ $60,000 x 5% = $3,000Collins ⇒ $70,000 x 5% = $3,500the remaining $18,000 should be distributed:
Alfred ⇒ $18,000 x 30% = $5,400Bernard ⇒ $18,000 + 30% = $5,400Collins ⇒ $18,000 x 40% = $7,200Collins's basis should increase by $3,500 + $7,200 = $10,700, ending balance = $70,000 + $10,700 = $80,700
Eilert Construction Company had a contract starting April 2018, to construct a $42,000,000 building that is expected to be completed in September 2019, at an estimated cost of $38,500,000. At the end of 2018, the costs to date were $17,710,000 and the estimated total costs to complete had not changed. The progress billings during 2018 were $8,400,000 and the cash collected during 2018 was $5,600,000. Eilert uses the percentage-of-completion method. [ What makes-up Construction in Process
Answer:
$20,790,000
Explanation:
Since the estimated total costs to complete had not change, the Construction is Process can be estimated as follows:
Construction in Process = Estimated total completion cost - Total costs of completion to date = $38,500,000 - $17,710,000 = $20,790,000
1) You are indecisive about which stock to buy Microsoft, which is selling for $173 a share; or Apple, which is selling for $285 a share. Microsoft stock promises to pay annual dividends of $4.00, $5.00, and $5.50 over the next three years respectively, and you estimate it can be sold for $190 at the end of the third year. You expect Apple to pay a dividend of $5.50 the first year, $8.50, and $10.50 over the next two years, respectively. You also expect Apple’s stock to be trading at $330 in three years. Which stock would you buy if stocks from computer manufacturers typically yield 10%?
Answer:
I would buy the APPLE stock
Explanation:
Microsoft stock price = $173
dividends earned = $4, $5 and $5.5
value after 3 years = $190
Apple stock price = $285
Dividends earned = $5.5, $8.5 and $10.5
value after 3 years = $330
Applying the dividend discount model
IVO = present value of dividend + present value of terminal price
for Microsoft
IVO = ( 4/1.1 + (5/(1.1/2)) + ( 5.5/(1.1/3)) + ( 190/(1.1/3))
= $154.65
for Apple
IVO = ( 5.5/1.1 + ( 8.5/( 1.1/2)) + (10.5/(1.1/3)) + ( 330/(1.1/3))
= $267.8
Note: the IVO's are less than the current price of the stocks ( IVO = the intrinsic value of the shares ) but Microsoft shares are overpriced compared to apple
Answer:
If decided to purchase, Apple will yield better
Explanation:
we solve for the present value of the future cashflow discounted at 10%
we will then compare against the current market price and pick with the better NPV
Microsoft:
[tex]\left[\begin{array}{ccc}#&Cashflow&Discounted\\1&4&3.64\\2&5&4.13\\3&195.5&146.88\\TOTAL&&154.65\\\end{array}\right][/tex]
154.65 - 173 = -18.36
Apple:
[tex]\left[\begin{array}{ccc}#&$Cashflow&$Discounted\\1&5.5&5\\2&8.5&7.02\\3&340.5&255.82\\&TOTAL&267.84\\\end{array}\right][/tex]
267.84 - 285 = -17.16
Now, as both are negative we must decide if we accep to receive less than 10% in which case, we will purchase stock as their net present alue is higher than microsoft.
Sepulvada Manufacturing Corporation produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $4 per pound, but a 2% discount is usually taken. Freight costs are $.15 per pound, and receiving and handling costs are $.10 per pound. The hourly wage rate is $9.00 per hour, but a raise which will average $.25 will go into effect soon. Payroll taxes are $1.00 per hour, and fringe benefits average $2.00 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct labor rate per hour is:
Answer:
$12
Explanation:
The standard direct labor rate is the budgeted direct labor cost per hour incurred in the manufacturing process. It is used to calculate the budgeted production costs:
the current hourly wage is $9.00 and we must add the payroll taxes per hour ($1.00) and the fringe benefits per hour ($2.00) = $9 + $1 + $2 = $12
Even though a pay raise will occur soon, until it does actually happen, it cannot be considered in the calculation of the standard labor rate.
Your colleague started to calculate the weighted average cost of capital for your company, but suddenly became ill and had to go home. The Vice President of Finance gives you the following information and asks you to complete the calculation of the weighted average cost of capital. The market values and after-tax costs are as follows: Debt, $42,000,000 and 7.65%; Preferred stock, $6,300,000 and 5.00%; Common stock, $50,000,000 and 17.80%. Your company's weighted average cost of capital is:
Answer:
12.64%
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs. weightage can be calculated by using the market value of the equity and debt.
The formula for WACC is
Weighted average cost of capital = ( Cost of Common Stock x Weightage of equity ) + ( Cost of debt x Weightage of debt ) + ( Cost of Preferred stock x Weightage of Preferred stock )
As per given data
Debt, $42,000,000 7.65%
Preferred stock, $6,300,000 5.00%
Common stock, $50,000,000 17.80%
Total $98,300,000
Placing Value in the formula
Weighted average cost of capital = ( 17.80% x $50,000,000 / $98,300,000 ) + ( 7.65% x $42,000,000 / $98,300,000 ) + ( 5.00% x $6,300,000 / $98,300,000 )
Weighted average cost of capital = 9.05% + 3.27% + 0.32 = 12.64%
Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a long position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to be?
Answer:
$2,325
Explanation:
$2,325 = $2,000 +¥12,500,000 *[(0.008011 - 0.008057) + (0.008057 - 0.007996) + (0.007996 - 0.007985)]
=$2,000 + ¥12,500,000 *)[(0.008011 - 0.007985)]
$0.8011/¥100 = $0.008011/¥
Hence:
$0.8057/¥100 = $0.008057/¥
With a required reserve ratio of 20%, explain in detail how an Open Market Purchase of $100,000 from an individual leads to an expansion in the money supply. I would like you to describe (at least) four different "rounds" in this process. By how much does the money supply increase during each round? What is the maximum the money supply can increase from this Open Market Purchase? What can lead to the actual increase being much lower than the above number?
Answer:
the answer is 500000
Explanation:
Solution
When bank gives out loan they don't reimburse them in cash rather they pit in amount into their demand deposit and deposit is also part of supply of money.
Normally, let's say bank give loan of 100000 to a first person.then bank will give the person 1 with the deposit demand in his account. based on requirements reserve ratio, the bank will keep 20% with them in cash and borrow the remaining 80000 to other person.
Again, the bank will deposit in person 2 or second person and lend 64000 o third person and keep 16000 as cash.
Importantly, in the explanation above when we say bank will deposit 80000 in persons account,its only refers to as book keeping, that is, it is written only in books and the account holder balance goes higher but the actual money stays with the bank.
Now,
Total amount of money supply bank can produce = the multiplier*high money powered =1/0.2*100000
=500000
Purchases Budget Rest Inn provides four-star accommodations for the vacation traveler. It is located just off a major interstate freeway. There are three other competing motels at the same exit. Hotel management is preparing its budget for the busiest three-month period of the year, June through August. To differentiate themselves from the competition, Rest Inn provides a complimentary spa package for each guest stay that includes specialty shampoo, conditioner, soap, lotion, toothpaste, lavender essential oil, slippers, earplugs, and a sleep mask. Rest Inn purchases the spa package from a local vendor that puts the Rest Inn private label on the products. The hotel follows a policy of purchasing enough spa packages to ensure that 40% of next month’s bookings are in the current month’s ending inventory. Rest Inn’s sales budget for guest stays for the next quarter is as follows:
June 2,300 guest stays
July 2,500 guest stays
August 2,100 guest stays
How many spa packages should Rest Inn budget for purchase in July?
Answer:
2,340
Explanation:
The computation of purchase to be made on July is shown below:-
Particulars June July August
Sales 2,300 2,500 2,100
Add: Closing Inventory 1,000 840
(40% of next month)
Less: Opening Inventory 1,000 840
(Closing of previous month)
Purchases to be made 3,300 2,340 1,260
Therefore the purchase to be made on July is 2,340
There is a raging debate at the IT consulting firm where you work. Some staff members believe that it is harder for experienced analysts to learn object-modeling techniques, because the analysts are accustomed to thinking about data and processes as separate entities. Others believe that solid analytical skills are easily transferable and do not see a problem in crossing over to the newer approach. What do you think, and why?
Answer:
I think that solid analytical skills are easily transferable. So, there is no problem in crossing over to the newer approach.
Explanation:
An experienced analyst possesses core analytical skills such as researching, critical thinking, adaptability, eye for detail and strategy.
Now, the introduction of object modelling which differs from their current procedure will require a general orientation and if need be a thorough training on their part to get used to.
A skilled analysts, they can easily cross over to the new approach of object modeling which involves designing and developing object oriented software modeled from objects in the real world.
Final answer:
Experienced analysts can transition to object-modeling techniques by refining analytical skills and embracing new perspectives through continuous learning and adaptation in the technology and business sectors.
Explanation:
Object-modeling techniques can pose a challenge for experienced analysts who are used to separating data and processes, as this new approach requires a different mindset. However, solid analytical skills are indeed transferable, and individuals skilled in analysis can adapt to object-modeling techniques by honing their critical thinking abilities and by embracing the shift in perspective.
By learning new skills through observation, practice, and adaptation, workers in various industries can navigate changes in technology and management styles. It is crucial to continuously refine both job-specific and transferable skills to stay relevant and adaptable in the evolving landscape of technology and business.
Calla Company produces skateboards that sell for $69 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,100 skateboards per year. Annual costs for 80,100 skateboards follow. Direct materials $ 937,170 Direct labor 680,850 Overhead 959,000 Selling expenses 549,000 Administrative expenses 475,000 Total costs and expenses $ 3,601,020 A new retail store has offered to buy 14,900 of its skateboards for $64 per unit. The store is in a different market from Calla's regular customers and would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following: Direct materials and direct labor are 100% variable. 40 percent of overhead is fixed at any production level from 80,100 units to 95,000 units; the remaining 60% of annual overhead costs are variable with respect to volume. Selling expenses are 60% variable with respect to number of units sold, and the other 40% of selling expenses are fixed. There will be an additional $2.90 per unit selling expense for this order. Administrative expenses would increase by a $810 fixed amount. Required: 1. Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. 2. Should Calla accept this order?
Answer:
I do not have the necessary space to prepare the three column analysis, but the answers to the questions are:
since the special order does not affect current normal sales, its analysis should only consider relevant expenses, not regular expenses:
A) Income statement without the special order
total revenue = $69 x 80,100 = $5,526,900
- COGS = ($2,577,020)
Direct materials $937,170Direct labor $680,850Overhead $959,000gross profit = $2,949,880
- SG&A = ($1,024,000)
Selling exp. $549,000
Administrative exp. $475,000
net income = $1,925,880
B) relevant revenue from special order = 14,900 x $64 = $953,600
- relevant costs:
direct materials = ($937,170 / 80,100 units) x 14,900 = $174,330direct labor = ($680,850 / 80,100 units) x 14,900 = $126,650overhead = ($575,400 / 80,100 units) x 14,900 = $107,034selling expenses = [($329,400 / 80,100 units) x 14,900] + ($2.90 x 14,900) = $74,952 + $48,330 = $104,484administrative expenses = $810total relevant costs = $513,308gain from special order = $953,600 - $513,308 = $440,292
C) Income statement with the special order
total revenue = $6,480,500
- COGS = ($2,985,034)
Direct materials $1,111,500Direct labor $807,500Overhead $1,066,034gross profit = $3,495,466
- SG&A = ($1,129,294)
Selling exp. $653,484Administrative exp. $475,810net income = $2,366,172
Answer:
Calla Company:
1. Comparative Income Statement:
This is attached.
a) Sales:
i) Normal = $69 * 80,100 = $5,526,900
ii) Special order = $64 * 14,900 = $953,600
iii) Combined = $6,480,500
b) Direct Materials Cost:
i) Normal = $937,170
ii) Special order = $174,330 ($937170/80,100 x 14,900)
iii) Combined = $1,111,500
c) Direct Labour Cost:
i) Normal = $680,850
ii) Special = $126,650 ($680,850/80,100 x 14,900)
iii) Combined = $807,500
d) Overhead Costs:
i) Normal - $959,000
ii) Special = $107,034 ((60% of $959,000)/80,100 x 14,900)
iii) Combined = $1,066,034
e) Selling Expenses:
i) Normal = $549,000
ii) Special = $61,274 (60% of $549,000)/80,100 x 14,900)
iii) Combined = $610,274
f) Administrative:
i) Normal = $475,000
ii) Special = $810
iii) Combined = $475,810
2. Advise:
Calla should accept this order. Income would increase by more than $400,000.
Explanation:
This is "an accept or reject" special order type of decision. To compute costs, only relevant costs, which will vary with the special order, are considered. Sunk costs, which do not make a difference, are not taken into account in arriving at the income for the special order.
This analysis is also called Incremental Analysis or Differential Analysis. It helps management to make a decision of whether to accept the special order or not. It is an important technique in managerial accounting.
Summer Manufacturing Company uses an average of 30 gallons of cleaning fluid a day. Usage tends to be normally distributed with a standard deviation of 3 gallons per day. Lead time is normally distributed averaging 7 days with a standard deviation of 4 days. The company hopes to keep the desired service level is 90 percent. What amount of safety stock is appropriate if a fixed order size of 600 gallons is used?
Answer:
Safety Stock = 153.94 [tex]\approx[/tex] 154 gallons
Solution:
Average Demand =[tex]D_{avg} = 30 gallons/day[/tex]
Standard deviation of demand = [tex]\sigma_{d} = 3 gallons[/tex]
Average Lead Time = [tex]LT_{avg} = 7 days[/tex]
Standard deviation of Lead Time= [tex]\sigma_{LT} = 4 days[/tex]
Service Level = 90%
For Service Level 90%, Z-Score = 1.28
Z-score is called Service Factor
Calculation of Safety Stock:
Safety Stock = [tex]Z \times \sqrt{[(LT_{avg}\times \sigma_{d}^2)+(\sigma_{LT}\times D_{avg})^2]}[/tex]
Safety Stock =[tex]1.28 \times \sqrt{[(7\times 3^2)+(4\times 30)^2]}[/tex]
Safety Stock = [tex]153.94 \approx 154 gallons[/tex]
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.
Last year, the company sold 36,000 of these balls, with the following results:
Sales (36,000 balls) $ 900,000
Variable expenses 540,000
Contribution margin 360,000
Fixed expenses 263,000
Net operating income $ 97,000
Required:
1. Compute the CM ratio and the break-even point in balls.
2. Compute the the degree of operating leverage at last year.
Answer: 15$ per ball and 60% is direct label cost! Ur answer’s are 15$ and 60% dlc!
Explanation:
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.
Mills Corporation acquired as an investment $300 million of 7% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Mills paid $340 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $325 million.Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
Answer and Explanation:
As per the data given in the question,
Journal entries on July 1 and Dec. 31,2021
July-01 Investment in bonds A/C Dr. $300 million
Premium on bonds A/c Dr. $40 million
To Cash A/c $340 million
Dec-31 Cash A/c Dr. $10.5 million
($300 × 3.5%)
To Premium on bonds A/c $2.00 million
To Interest Revenue A/c $8.5 million
($340 × 2.5%)
Carlos is risk-neutral and has an ancient farmhouse with great character for sale in Slaterville Springs. His reservation price for the house is $130,000. The only possible local buyer is Whitney, whose reservation price for the house is $150,000. The only other houses on the market are modern ranch houses that sell for $125,000, which is exactly equal to each potential buyer’s reservation price for such a house. Suppose that if Carlos does not hire a realtor, Whitney will learn from her neighbor that Carlos’s house is for sale and will buy it for $140,000. However, if Carlos hires a realtor, he knows that the realtor will put him in touch with an enthusiast for old farmhouses who is willing to pay up to $350,000 for the house. Carlos also knows that if he and this person negotiate, they will agree on a price of $300,000.
Answer:
The question is not complete, this part could complete the question:
"If Realtors charge a commission of 5 percent of the selling price and all Realtors have opportunity costs of $2,000 for negotiating a sale, will Carlos hire a Realtor? If so, how will total economic surplus be affected?"
The answer is, the total economic surplus increased from $20,000 to $248,000
Explanation:
Firstly it is important to understand what marginal cost, marginal benefit and Asymmetric information is. Marginal cost is the cost added from the spending of one more unit of resource while marginal benefit is considered as the benefit from spending one more unit of resource. Asymmetric information is a situation whereby one part of the transaction possess more information and material facts than other parts.
Carlos reservation price is $130,000. He wishes to sell to sell for $140,000 to Whitney who has a reservation price of $150,000. Therefore the surplus to Carlos is 140,000 - 130,000 = $10,000 and surplus to Whitney is 150,000 - 140,000 = $10,000. Therefore, the total economic surplus is $20,000
If Carlos sells through a realtor who charges 5% if the property is sold for $300,000 to someone with a reservation price of $350,000. The surplus will be:
5% × 300,000 - 2000 = $13,000.
Now, the surplus is 300,000 - 130,000 + 15,000 = $185,000
Therefore, the surplus to the buyer is
350,000 - 300,000 = $50,000
Hence, the total economic surplus increased from $20,000 to $248,000
The actual financial surplus grew from $20,000 to $248,000 in the last year.
To begin, it is necessary to comprehend the concepts of marginal cost, marginal gain, and asymmetric knowledge.
The expense of expending one more unit of material is referred to as marginal cost, and the benefit of expending one more unit of material is referred to as marginal benefit.
Carlos reservation price = $130,000
Wishes sales = $140,000
Whitney reservation price = $150,000
Carlos surplus = $140,000 - $130,000
Carlos surplus = $10,000
Whitney surplus = 150,000 - 140,000
Whitney surplus = $10,000
Total economic surplus = $10,000 + $10,000
Total economic surplus = $20,000
Carlos sells by realtor
New surplus = [5% × $300,000] - $2000
New surplus = $13,000
Total surplus = $300,000 - 130,000 + 15,000 = $185,000
Total new economic surplus = $185,000 + $13,000 + ($350,000 - $300,000)
Total new economic surplus = $248,000
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On January 1, 2018, M Company granted 99,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $11. An option-pricing model estimates the fair value of the options to be $3 on the date of grant.
If unexpected turnover in 2019 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2019?
Multiple Choice
$99,000
$33,000
$79,200
$49,500
Answer:
$79,200
Explanation:
The computation of the compensation expense for 2019 is shown below:
= Number of stock options × fair value of the options × remaining percentage × basis of share - Number of stock options
= [(99,000 × $3) × 90% × 2 ÷ 3] - 99,000
= $79,200
We simply applied the above formula so that the compensation expense for 2019 could come
Consider the assembly line of a laptop computer. The line consists of 12 stations and operates at a cycle time of 1.50 minutes/unit. Their most error-prone operation is step 1. There is no inventory between the stations, because this is a machine-paced line. Final inspection happens at station 12. What would be the information turnaround time for a defect made at station 1
Answer :
Information turnaround time = 16.50 minutes
Explanation :
As per the data given in the question,
Cycle time of whole line = 1.50 minutes/unit
which means 1 unit is made in 1.50 minutes. In the line of 12 stations 1st step is the most error prone.
Error made at step 1 means that unit must be processed by 11 other stations in order to be made and inspected at 12th station.
The information turnaround time = cycle time × number of stations after error is made
=1.50 × 11
= 16.50 minutes
The information turnaround time for a defect made at station 1 on an assembly line with a cycle time of 1.50 minutes/unit and final inspection at station 12 would be 16.5 minutes.
The information turnaround time for a defect made at station 1 on an assembly line producing laptop computers with the cycle time of 1.50 minutes/unit would be the time taken for the product to reach the final inspection stage at station 12. Since it's stated that this is a machine-paced line with no inventory between stations, we can calculate the turnaround time by multiplying the cycle time with the number of stations up to the inspection point. With 12 stations, including the station where the defect occurs and the final inspection station, the calculation would be:
Turnaround time = Cycle time x (Number of stations from the defective station to the inspection station)Turnaround time = 1.50 minutes/unit x (12 - 1)Turnaround time = 1.50 minutes/unit x 11Turnaround time = 16.5 minutesTherefore, the information turnaround time for a defect produced at station 1 and detected at station 12 would be 16.5 minutes.
Mayfield Company sells two products, Blue models and Plaid models. Blue models sell for $45 per unit with variable costs of $30 per unit. Plaid models sell for $50 per unit with variable costs of $25 per unit. Total fixed costs for the company are $19,950. Mayfield Company typically sells two Blue models for every three Plaid models. Required: What is the breakeven point in total units
Answer:
Break even point in total units is 950 units
Explanation:
The break even point in total units is the composite break even point considering both the products. This will give us one overall break even point for the company. The break even point in units is the number of units that must be sold in order for the total revenue to be equal to total costs.
To calculate the over all break even in units, we need to divide the fixed costs by the weighted average contribution per unit.
Weighted average contribution per unit = weight of product A in sales mix * contribution of product A + weight of product B in sales mix * contribution of product B
Sales mix = 2 + 3 = 5
Blue = 2 / 5 = 0.4
Plaid = 3 / 5 = 0.6
Weighted average contribution per unit = 2/5 * (45 - 30) + 3/5 * (50 - 25)
Weighted average contribution per unit = $21 per unit
Break even point in units = 19950 / 21 = 950 units
Day Corporation, an S corporation, reported a $73,000 ordinary loss for Year 1 (a non-leap year). Day uses the calendar year as its taxable year, as do all of its shareholders. Individual B owns 25% of the Day stock at all times during Year 1. B’s basis in his Day Corporation stock at the beginning of Year 1 was $10,000. B materially participates in Day’s business. At the end of Year 1, Day is liable for the following:
Third-party creditors $15,000
Individual B 3,000
Other shareholders 9,000
What amount of Day’s losses may be deducted by B in Year 1, and what amount of Day’s losses can be carried over by B to Year 2?
Individual B can deduct a total of $13,000 in losses from Day Corporation in Year 1. The remaining $5,250 of B's loss share can be carried over to Year 2.
Explanation:Individual B's deductible losses from Day Corporation are limited to the amount of B's basis in the stock and the amount of B’s at-risk amount.
At the beginning of Year 1, B’s basis was $10,000. In calculating the at-risk amount, we add to this basis any amount Day Corporation owes to B, which is $3,000, for a total of $13,000.
However, the ordinary loss reported by Day Corporation amounted to $73,000, and B's share of the loss, given that B owns 25% of the Day's stock, would be 25% of $73,000 = $18,250. Since $18,250 exceeds B's basis + at-risk amount of $13,000, B can only deduct up to $13,000 of these losses in Year 1.
The remainder, i.e., $18,250 - $13,000 = $5,250, can be carried over by B to Year 2 to be deducted from his income generated by Day Corporation in that year, provided he has sufficient basis and at-risk amount in Year 2.
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