Answer:
$12,750
Explanation:
The computation of net differential income is shown below:-
For computing the net differential income first we need to find out the net income if equipment is sold and net income if offer lease is accepted which is given below:-
Net income if equipment is sold = Sales consideration - Commission
= $25,000 - ($25,000 × 7%)
= $25,000 - $1,750
= $23,250
Now,
Net income if offer lease is accepted = Lease amount - Repair, insurance and property tax expenses
= $46,000 - $10,000
= $36,000
So,
Net differential income from the lease alternative = Net income if offer lease is accepted - Net income if equipment is sold
= $36,000 - $23,250
= $12,750
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Units-beginning inventory................. 0
Units produced................................... 6,700
Units sold........................................... 6,500
Units-ending inventory..................... 200
Variable costs per unit
Direct materials................................ $47
Direct labor..................................... 44
Variable manufacturing OH........... 6
Variable selling and administrative expense $11
Fixed costs:
Fixed manufacturing overhead $52,500
Fixed selling and administrative expenses $3,800
What is the net operating income for the month under variable costing?
Answer:
Hi, your question is missing the selling price per unit, however important principles and calculations are explained below:
Variable Cost Product Costs = Only Variable Manufacturing Costs
Variable Cost Period Costs = Fixed Manufacturing Costs + All Non Manufacturing Costs.
Product Cost per unit = $47 + $44 + $ 6
= $97.00
Calculation of net operating income for the month under variable costing
Sales ($pp × 6,500) xxxxx
Less Costs of Sales
Opening Stock of Finished Goods 0 0
Add Cost of Goods Manufactured ($97.00×6,700) $649,900
Less Closing Stock of Finished Goods ($97.00×200) ($19,400) $630,500
Contribution xxxxx
Less Expenses
Fixed manufacturing overhead ($52,500 )
Fixed selling and administrative expenses ($3,800)
Variable selling and administrative expense ($11×6,700)
Net Income/(Loss) xxxxx
Explanation:
Adams Company produces a product that sells for $33 per unit and has a variable cost of $13 per unit. Adams incurs annual fixed costs of $120,000. RequiredDetermine the sales volume in units and dollars required to break even. (Do not round intermediate calculations.)Calculate the break-even point assuming fixed costs increase to $192,000. (Do not round intermediate calculations.)
Answer:
Instructions are below.
Explanation:
Giving the following information:
Adams Company produces a product that sells for $33 per unit and has a variable cost of $13 per unit. Adams incurs annual fixed costs of $120,000.
To calculate the break-even point both in dollars and units, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 120,000/ (33 - 13)
Break-even point in units= 6,000 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 120,000/ (20/33)
Break-even point (dollars)= $198,000
Now, for fixed costs= 192,000
Break-even point in units= 192,000/ (33 - 13)= 9,600 units
Break-even point (dollars)= 192,000/ (20/33)= $316,800
Mr. Smith employs a team of sales representatives whose primary task is to answer calls from prospective and current customers who have received their company catalog and are interested in making a purchase. He compensates his team using a competitive hourly rate, and he is able to keep costs low since these salespeople do not meet with clients and therefore have no expense account for travel, meals, etc. His salespeople are most likely:
Answer:
Inside sales representative.
Explanation:
A sales representative can be described as an individual that is responsible for selling goods and services to the customers.
A sales representative should be able to carry out the following functions:
1) He/she should be able to properly explain the different features of a product inorder to increase the brand loyalty.
2) The sales rep should be able to quickly respond to the different enquires that customers have about the product.
3) He/she must be able to carry out online transactions.
An inside sales representative is one who works inside the office, this type of sales rep do not transact business directly with the customers instead transaction is carried out through phone calls, email, skype.
b. Evaluate the statement in the case made by Toru Sakuragi that "… Toyota has been caught between a need to cut costs to overcome the strong yen and the need to improve quality to prevent recalls." And that "They are now pursuing both strategies but they are essentially at odds with one another." Is this a realistic strategy? Do you have suggestions for how the strategy might be improved?
Answer:
Both strategies can be at odds with each other, because cutting costs can reduce the quality of the cars produced and exported, leading to the undesired effect of increasing recalls, which is precisely the other thing that Toyota wants to reduce.
Explanation:
For this reason, Toyota should try instead to improve quality instead of cutting costs, so that its cars become so desirable that even a strong yen does not prevent consumers from buying.
This strategy can be contrasted with country-wide strategies when it comes to export goods: some countries depreciate their currency and/or rely on the export of cheap goods, these countries tend to be less competitive, and the strategy may not live up to expectations. Italy implemented this strategy until it adopted the euro, and could not devalue its currency anymore.
On the contrary, other countries aim for quality even if their currency is strong. This is the German strategy, which has maintained a healthy export economy when it had the mark, and now with the euro, both strong currencies.
In conclusion, Toyota should try to be more like Germany, and less like Italy.
Although challenging, Toyota can manage the strategy of balancing cost reduction and increasing quality. They can consider technological improvements or the use of revenue from non-impacted markets to subsidize their efforts in quality improvements.
Explanation:The statement by Toru Sakuragi implies that Toyota is grappling with two significant but conflicting strategies. The tension lies between reducing operational costs to counter the impact of a robust yen and enhancing product quality to prevent recalls from potentially damaging the brand's reputation. Though it may seem that these strategies oppose each other fundamentally, it is not impossible to pursue both; it is just incredibly challenging.
Essentially, Toyota must strike a balance between cost and quality. A potential improvement to this strategy could be the adoption of new technologies or process improvements that could reduce production costs without compromising product quality. Alternatively, Toyota could leverage some of its revenue from non-affected markets to subsidize quality improvements without the need for significant cost reductions.
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Rochester Industries expects free cash flow to the firm (FCFF) in the coming year of 300 million Canadian dollars ($). The company maintains an all-equity capital structure, and Rochester's required rate of return on equity is 8 percent. For the purposes of this problem, you can assume that FCFF will grow forever at a rate of 3 percent. Rochester Industries has 100 million outstanding common shares. Rochester's common shares are currently trading in the market for $60 per share.
Required:
a. If Rochester Industries’s free cash flow is expected to be $10 million in one year, what constant expected future growth rate is consistent with the firm’s current market value?
b. Estimate the value of Restex’s interest tax shield
Answer:
Explanation:
a. 10.8512%7% 10.408.42%1.851.85102201.854070.0842100.08425.96%407LWACCFCFVEDWACCggg
b. 10.85pretax WACC12%7%9.70%1.851.85FCF10$267 millionpretax WACC0.09700.0596PVInterest Tax Shield407267$140 millionUVg
Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $ 20,000 , direct labor $ 12,000 , and manufacturing overhead $ 16,000 . As of January 1, Job No. 49 had been completed at a cost of $ 90,000 and was part of finished goods inventory. There was a $ 15,000 balance in the Raw Materials Inventory account.
During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $ 122,000 and $ 158,000 , respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $ 90,000 on account.
2. Incurred factory labor costs of $ 70,000 . Of this amount $ 16,000 related to employer payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $ 17,000 ; indirect labor $ 20,000 ; depreciation expense on equipment $ 12,000 ; and various other manufacturing overhead costs on account $ 16,000 .
4. Assigned direct materials and direct labor to jobs as follows.
Job No.
Direct Materials
Direct Labor
50 $ 10,000 $ 5,000
51 39,000 25,000
52 30,000 20,000
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Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $840,000, direct labor costs of $700,000, and direct labor hours of 20,000 for the year. (Round answer to the nearest whole percent, e.g. 25%.)
Predetermined overhead rate
%
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Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50.
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Beg. $
$
$
Jan.
$
$
$
Cost of completed job
Direct materials $
Direct labor
Manufacturing overhead
Total cost $
Job No. 51
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan. $
$
$
$
$
$
Cost of completed job
Direct materials $
Direct labor
Manufacturing overhead
Total cost $
Job No. 52
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan. $
$
$
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Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation
Debit
Credit
(1)
(2)
(3)
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Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation
Debit
Credit
(1)
(2)
(3)
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Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry to record the completion of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
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Prepare the journal entries to record the sale of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation
Debit
Credit
(1)
(To record sale of jobs)
(2)
(To record cost of jobs)
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What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of?
Finished Goods Inventory $
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What is the amount of over- or underapplied overhead?
Manufacturing Overhead $
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Answer:
1. N = 840.66 RPM
2. 1023 w
Explanation:
See attached images
Dunstreet's Department Store would like to develop an inventory ordering policy with a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets. Demand for white percale sheets is 4,500 per year. The store is open 365 days per year. Every four weeks (28 days) inventory is counted and a new order is placed. It takes 6 days for the sheets to be delivered. Standard deviation of demand for the sheets is five per day. There are currently 190 sheets on-hand. How many sheets should you order
Answer:
277 sheets
Explanation:
As per the data given in the question,
Z at 95% = 1.64485
Safety stock = Z × Standard deviation × (Lead time + Period)^(1÷ 2)
= 1.64485 × 5 × (6+28)^(1÷ 2)
= 47.955
Daily demand = 4500 ÷ 365
= 12.33
Reorder point = (Daily demand × (lead time + period)) + safety stock
= (12.33 × (28 + 6)) + 47.955
= 467.175
Sheets to be ordered = Reorder point - sheets in hand
= 467.175 - 190
= 277.175
= 277 sheets
A customer has requested that Inga Corporation fill a special order for 2,400 units of product K81 for $29 a unit. While the product would be modified slightly for the special order, product K81's normal unit product cost is $23.10: Direct materials $ 6.00 Direct labor 6.00 Variable manufacturing overhead 3.10 Fixed manufacturing overhead 8.00 Unit product cost $23.10 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product K81 that would increase the variable costs by $1.60 per unit and that would require an investment of $14,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by:
Answer:
Inga Corporation
Special Order:
If the special order is accepted, the company's overall net operating income would decrease by $3,680.00.
Explanation:
a) We need to perform some calculations to get the relevant costs. Relevant costs are costs that are avoidable if a decision is taken. Fixed overhead is not a relevant cost because it is unavoidable, especially in this case.
Relevant Costs:
Unit Product cost = $23.10
less Fixed overhead = $8.00
Relevant unit cost = $15.10
b) An income statement is prepared to determine the Operating Income from Special Order:
Sales (2,400 x $29) = $69,600
less Relevant costs:
Unit (2,400 x $15.10) = $40,080
Special Equipment Cost = $14,000
Contribution = $15,520
less Fixed cost ($8.00 x 2,400) = $19,200
Net Operating Income ($3,680)
c) To accept or reject the special order should not be based solely on the net operating loss. The character of the allocated fixed cost should be investigated and analyzed to understand whether the amount that is avoidable or not. Avoidable fixed cost is relevant in making such decision.
If the government follows an easy monetary policy and the exchange rate is flexible, which of the following will likely be the result? A falling real interest rate but higher net exports. A strong currency, which will help stimulate net exports. Increases in the demand for the currency and decreases in the supply of the currency. A higher real interest rate but lower net exports.
Answer:
A falling real interest rate but higher net exports.
Explanation:
An easy monetary policy is a policy in which the interest rates decrease in order to increase the money supply and when interest rates are lower, there is an increase in spending and on net exports. Also, a flexible exchange rate is when the system allows the events on the market to determine the exchange rate.
According to this, the answer is that if the government follows an easy monetary policy and the exchange rate is flexible, the result will likely be a falling real interest rate but higher net exports.
"The potentially valid arguments for tariff protection are also the most easily abused. " What are those arguments? Why are they susceptible to abuse? Evaluate the use of artificial trade barriers, such as tariffs and import quotas, as a means of achieving and maintaining full employment. Answer fully and give necessary details.
Answer:
Trade barriers is also secured as being essential to shield local companies from foreign marketing, to shield supposed new firms, and to confirm satisfactory manufacture planes in segments believed to be necessary within the occasion of conflict. (The opinions about hypothetical will increase in local service, guard from external low-wage employment, and financial divergence aren't effective or are irrelevant to the pull economy.)
Every of those effective influences is commonly abused. Marketing cases by external companies within the US. are troublesome to evidence and occasional. Typically domestic manufacturers can privilege their external participants are marketing once the lower costs merely replicate a proportional benefit in external assembly. If this is often true the employment of anti- marketing responsibilities decreases the advantages of trade.
You are considering the purchase of a common stock that paid a dividend of $3.00 yesterday. You expect this stock to have a growth rate of 20 percent for the next 3 years and the long-run normal growth rate after year 3 is expected to be constant at 5 percent. If you require a 14 percent rate of return, the price per share that you should you be willing to pay for this stock is closest to:
Answer:
$50.8
Explanation:
As per given Data
Dividend Paid = $3
Worth of the stock is the present value of all the cash flows associated with the stock. Dividend is the only cash flow that a stock holder receives against its investment in the stocks. We need to calculate the present values of all the dividend payments.
Formula for PV of dividend
PV of Dividend = Dividend x ( 1 + growth rate )^n x ( 1 + r )^-n
1st year
PV of Dividend = $3 x ( 1 + 20%)^1 x ( 1 + 14% )^-1 = $3.16
2nd year
PV of Dividend = $3 x ( 1 + 20%)^2 x ( 1 + 14% )^-2 = $3.32
3rd year
PV of Dividend = $3 x ( 1 + 20%)^3 x ( 1 + 14% )^-3 = $3.50
After three years the dividend will grow at a constant rate of 5%, so we will use the following formula to calculate the present value
PV of Dividend = [ $3 x ( 1 + 20%)^3 x ( 1 + 5%) / ( 14% - 5% ) ] x [ ( 1 + 14% )^-3 ]
PV of Dividend = $40.82
Value of Stock = $3.16 + $3.32 + $3.50 + $40.82 = $50.8
What are the five basis principles of finance? Briefly explain them (no more than 250 words). (10 marks)
Answer:
1. Time Value Money
2. Agency Problem
3. Cash Flow Matters
4. Risk Should be Rewarded
5. Market Prices Reflect Information
Explanation:
Time Value of Money
A very important Principle in Finance. Time Value of money refers to the fact that what money is worth today is not what it will be worth tomorrow. Tomorrow, that money will probably be worth less due to the effects of inflation eroding it's value. For this reason it is therefore possible to invest in the present and expect a higher value in future because your money becomes stronger. For example, rent for a building could be $2,000 in 2015 but is now $3,000 in 2020. This is because Inflation we the value of the Dollar and so prices went up to compensate.
Agency Problem.
This principle states that the goals of management and the goals of shareholders may differ sometimes. When this happens there is a conflict of interest and the managers might just undertake actions that are not in the interest of the shareholders.
CashFlow Matters
Actual cash is needed in finance to run the business and engage in transactions that help move the business forward. Simply having potential income is not good enough and so cash is Paramount. For this reason there is a very important financial statement called the Cash Flow Statement which a company uses to see how much cash it actually has on hand.
Risk Should be Rewarded
In finance there is a basic premise that the more risk you undertake, the more you should be compensated. If the risk you are taking is high then the benefit must be high as well. This is why riskier financial instruments are ascribed higher rewards and lower risk instruments have a lower reward. For example, US T-bills are known as the safest of instruments and for this reason have very low rates.
Market Prices Reflect Information
Market Prices in finance are considered right because they reflect the information in the market surrounding the asset in question. This means that Financial markets regulate their own prices based on information available and so that is the price trades should be conducted at.
Blade Breeze Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct materials cost is $70, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows: Activity Allocation Base Predetermined Overhead Allocation Rate Materials handling Number of parts $ 0.08 Machining Machine hours 7.20 Assembling Number of parts 0.35 Packaging Number of finished units 2.80What is the cost of machining per ceiling fan
Answer:
cost of machining per ceiling fan= $18 per unit
Explanation:
Activity-based costing is a form of absorption costing where overheads are charged to product using cost drivers. Under this method, overheads are first analyzed and categorized by the activities responsible for them and then charged to product based on the amount of benefits enjoyed using cost drivers.
For example, the machining overhead would charged to each ceiling fan using the machining overhead rate per machine hours.
Cost of machining per ceiling fan = Machining hours × overhead rate per machine hours
= 2.50 × $7.20= $18 per unit
cost of machining per ceiling fan= $18 per unit
Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a dividend of $3.20 per share in 15 years, and you expect dividends to grow perpetually at 4.2 percent per year thereafter. If the discount rate is 15 percent, how much is the stock currently worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The stock is currently worth approximately $29.63, given an expected dividend of $3.20 in 15 years, growing perpetually at 4.2%.
To calculate the present value of the stock, we can use the Gordon Growth Model, also known as the Dividend Discount Model (DDM). The formula for the present value of a stock using the Gordon Growth Model is:
[tex]\[ P = \frac{D_1}{r - g} \][/tex]
Where:
[tex]- \( P \) = Present value of the stock[/tex]
[tex]- \( D_1 \) = Dividend expected in the next period[/tex]
[tex]- \( r \) = Discount rate[/tex]
[tex]- \( g \) = Growth rate of dividends[/tex]
Given:
[tex]- \( D_1 = \$3.20 \) (dividend expected in 15 years)[/tex]
[tex]- \( r = 15\% \) (discount rate)[/tex]
[tex]- \( g = 4.2\% \) (growth rate of dividends)[/tex]
Let's calculate the present value:
[tex]\[ P = \frac{\$3.20}{0.15 - 0.042} \][/tex]
[tex]\[ P = \frac{\$3.20}{0.108} \][/tex]
QRC Company is trying to decide which one of two alternatives it will accept. The costs and revenues associated with each alternative are listed below: Alternative A Alternative B Projected revenue $ 175,000 $ 230,000 Unit-level costs 33,000 44,000 Batch-level costs 20,500 32,000 Product-level costs 23,000 25,000 Facility-level costs 18,000 20,500 What is the differential revenue for this decision?
Answer:
$55,000
Explanation:
Differential Revenue
Alternative A Alternative B
Projected revenue $ 175,000 $ 230,000
Hence :
Alternative A - Alternative B = Differential Revenue
$ 175,000 - $ 230,000
=$55,000
Therefore the differential revenue for this decision will be $55,000
Jackson comma Inc. is a manufacturer of lead crystal glasses. The standard direct materials quantity is 0.9 pound per glass at a cost of $ 0.60 per pound. The actual result for one month's production of 7 comma 100 glasses was 1.2 pounds per glass, at a cost of $ 0.40 per pound. Calculate the direct materials cost variance and the direct materials efficiency variance.
Answer:
$426 Favorable
$1,278 Unfavourable
Explanation:
Direct material cost variance = Standard cost - Actual cost
= 65
7,100*0.9*0.60 - 7,100*1.2*0.40
=3,834-3,408
= $426 Favorable
Direct labor efficiency variance = (standard quantity - actual quantity)*standard price
= (7,100*0.9- 7,100*1.2)*0.60
=6,390-8,520*0.60
=-2,130*0.60
=$-1,278 Unfavourable
uses job order costing to measure and track product costs. Raleigh has determined that machine hours drive its manufacturing overhead costs. During the month of June, the following data were available for Product #95: Direct labor 350 hours at $10 per hour Direct materials 40 square yards at $25 per yard Machine hours used 1,000 hours If total manufacturing overhead costs during the month totaled $100,000 when a total of 25,000 machine hours were used, what will be the total manufacturing cost of Product #95?
Answer:
Allocated MOH= $4,000
Explanation:
Giving the following information:
Machine hours used 1,000 hours
If total manufacturing overhead costs during the month totaled $100,000 when a total of 25,000 machine hours were used
First, we need to calculate the estimated overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 100,000/25,000= $4 per machine hour
Now, we can allocate overhead to Product 95:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 4*1,000= $4,000
Eric was in the store and started looking at riding lawn mowers. He didn't come to this store for the purpose of purchasing one, but he started considering it once he was there. However, he did not purchase one on that trip. Instead he went to other stores to look at their mowers, he asked his neighbor and his brother-in-law about their mowers, and he searched the Internet before he decided on the brand to purchase. Which type of decision making did Eric undertake?
Answer:
Extended decision making
Explanation:
Decision making can be described as the process of making a choice between two or more alternatives. It involves analysing various alternatives and then identifying the right action to take.
Extended decision making involves the choices made by customers during the purchase of an unintended/unfamiliar product or a product with a high price. This type of decision making requires a prolonged thought and search effort inorder to arrive at a suitable choice.
Inorder for a brand to have a positive effect on extended decision makers, it is essential that they create a large social media presence where individuals can share their various views on the product.
You own a portfolio that is 22 percent invested in Stock X, 37 percent in Stock Y, and 41 percent in Stock Z. The expected returns on these three stocks are 12 percent, 15 percent, and 17 percent, respectively. What is the expected return on the portfolio?
Answer:
15.16%
Explanation:
The computation of expected return on the portfolio is shown below:-
Expected return on portfolio = (Return on Stock X × Weight of Stock X) + (Return on Stock Y × Weight of Stock Y) + (Return on Stock Z × Weight of Stock Z)
= (12% × 22%) + (15% × 37%) + (17% × 41%)
= 2.64% +5.55% + 6.97%
= 15.16%
So, for computing the expected return on the portfolio we simply applied the above formula.
Final answer:
To find the expected return on a portfolio, multiply the weight of each stock by its expected return and sum the results, resulting in an expected return of 18.13% for this portfolio.
Explanation:
The expected return on the portfolio can be calculated by multiplying the weight of each stock by its expected return and then summing the results.
Expected return = (0.22 x 0.12) + (0.37 x 0.15) + (0.41 x 0.17)
Expected return = 0.0554 + 0.0555 + 0.0704 = 0.1813 or 18.13%
Carper Company is considering a capital investment of $390,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $20,000 and $85,000, respectively. Carper has an 8% cost of capital rate, which is the required rate of return on the investment. Instructions (Round to two decimals.)
Answer:
1. 4.59
2. 5.13%
Explanation:
(1) the cash payback period
Pay back period = Capital investment / Annual net annual cash flows = $390,000 / $85,000 = 4.59, or 4 years and (0.58823529411765 * 12 months) = 4 years and 7 months.
(2) The annual rate of return on the proposed capital expenditure
Annual rate of return = Annual net income / Capital investment = $20,000 / $390,000 = 0.0513, or 5.13%.
Brief Exercise 9-17 Record early retirement of bonds issued at a premium (LO9-7)
Premium Pizza retires its 7% bonds for $53,000 before their scheduled maturity. At the time, the bonds have a face value of $50,700 and a carrying value of $54,965. Record the early retirement of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Bonds payable $50,700
Dr premium on bonds payable $4,265
Cr Cash $53,000
Cr gain on bonds retirement($50,700+$4,265-$53000) $1,965
Explanation:
The premium yet to be amortized on the bond at retirement is the carrying value minus face value i.e $54,965-$50,700=$4265
The premium on bonds payable would now be debited with $4265
The cash paid on retirement would be credited to cash account
The face value of the bonds payable of $50,700 would be debited to bonds payable in order to show that the obligation has been discharged.
Tim's gross pay for this month is $ 9 comma 050. His gross yearminustominusdate pay, prior to this month, totaled $ 113 comma 000. What is the amount of FICA tax withheld from Tim's pay for this month? (Assume an OASDI rate of 6.2%, applicable on the first $118,500 earnings, and a Medicare rate of 1.45%, applicable on all earnings. Do not round any intermediate calculations, and round your final answer to the nearest cent.)
Answer:
Total FICA Tax withheld $ 472.23
Explanation:
FICA Tax is comprised of OASDI rate of 6.2%, and a Medicare rate of 1.45%.
Given
Taxable Earnings $118,500
Earned Pay $ 113, 000
Calculated Data
Current Taxable Income $ 5,500 ( $118,500- $ 113, 000)
OASDI rate of 6.2%, is applicable on $ 5,500
A Medicare rate of 1.45%, is applicable on gross pay $ 9,050
Working
OASDI Tax= 6.2 % of $ 5,500= $ 341
Medicare tax = 1.45% of $ 9,050= $ 131.225= $ 131.23
Total FICA Tax withheld = $ 341+$ 131.23=$ 472.23
g You invest 56% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 49% for Stock A and 49% for Stock B. The correlation between the two stocks is 0.2. By how many percentage points does diversifying between these two stocks reduce your risk? Go out three decimals - for example, write 5.6% as .056.
Answer:
The risk will be reduced by 0.109
Explanation:
Standard deviation for stock A = 49%
Standard deviation for stock B = 49%
Correlation = 0.2
Let's use the standard deviation of portfolio equation:
[tex]= \sqrt{w_A^2 \sigma _A^2 + w_B^2 \sigma _B^2 + 2w_A w_B \sigma _A \sigma _B * C}[/tex]
Where[tex] w_B [/tex] = 100% - 56% = 44%
[tex]= \sqrt{(0.56^2 * 0.49^2) + (0.44^2 * 0.49^2) + (2*0.56*0.44*0.49*0.49)0.2}[/tex]
= 0.381 = 38.1%
The risk will be reduced by:
(0.56*0.49)+(0.44*0.49)-0.381
= 0.109
Ivanhoe Publications publishes a golf magazine for women. The magazine sells for $4 a copy on the newsstand. Yearly subscriptions to the magazine cost $45 per year (12 issues). During December 2019, Ivanhoe Publications sells 5,900 copies of the golf magazine at newsstands and receives payment for 7,500 subscriptions for 2020. Financial statements are prepared monthly. Prepare the December 2019 journal entries to record the newsstand sales and subscriptions received. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Answer:
Debit Cash with $361,100; credit Newsstand sales revenue with $23,600, and credit Subscription in advance with $337,500.
Explanation:
News stand sales revenue = $4 * 5,900 = $23,600
Subscription received for 2020 = $45 * 7,500 = $337,500
The December 2019 journal entries will be as follows:
Details Dr ($) Cr ($)
Cash 361,100
Newsstand sales revenue 23,600
Subscription in advance 337,500
To record cash received form newsstand and subscription for 2020
You are an investor evaluating a project which is going to take 8 years. The project will pay $500,000 at the beginning of each year starting a year from now. These payments will grow at 2% for the first two years, then 3.5% for the following two years and then stay consistent at 4% until the end of the project. In the last year of the project you will receive a lump sum of $1 million while also paying a lump sum of $200,000. If your expected retrun on this project is 12.5%, what is the PV of the project?
Answer:
Present Value of the project is $3,295,932
Explanation:
Present value is the discounted value of all the cash inflows and outflows of the project. It can be calculated using a required rate of return.
All the cash flows first grew at the specified growth rate each year and then discounted using required rate of return.
Working for present value of the project is attached please find it.
Tyron manages with McGregor's Theory X in mind, and, as a result, his employee, Cassie, is losing interest in her job. If Tyron could abandon his current beliefs, he might instead acknowledge that there is "no one best way" to manage. He might consider Cassie's values, goals, skills, and attitudes, along with other factors, both internal and external to the firm, to improve performance. If so, he would be using the
Final answer:
Tyron should consider using Theory Y approach to improve performance and employee satisfaction.
Explanation:
The approach that Tyron should consider using is Theory Y. Theory Y managers assume that employees seek inner satisfaction and fulfillment from their work, and they function better under leadership that allows them to participate in setting their personal and work goals. In a Theory Y workplace, employees are given more autonomy and are encouraged to provide input on matters of efficiency and safety. By adopting this approach, Tyron can improve performance, employee satisfaction, and overall organizational output.
15. Rick Barr Inc. is considering a new product line that has expected sales of $500,000 per year for each of the next 5 years. New equipment that is required to produce the new product will cost $800,000. The equipment has a useful life of 5 years and an $80,000 salvage value and will be sold at the end of year 5 for its salvage value. Total variable costs of the product line are $230,000 per year, total fixed costs (not including depreciation) will be an additional $100,000 per year and the initial working capital investment, to buy inventory, will be $10,000. The discount rate (interest rate) for the project is 10% and the company’s tax rate is 35%. What is the total cash flow of year 5 for the company? A. $250,900 B. $160,900 C. $240,900 D. $256,750
Answer: A.) $250,900
Explanation:
Given the following ;
Working Capital = $10,000
Salvage value = $80,000
Cost of equipment = 800,000
Tax rate = 35%
Number of useful years = 5 years
The formula for cash flow is = EBIT * (1 - tax rate) + Depreciation + Salvage Value + Working Capital released
Depreciation = (cost - Salvage value) ÷ Number of useful years
Depreciation = $(800,000 - 80,000)/5
Depreciation = $720,000÷5 = $144,000
EBIT = Sales - Variable costs - Fixed costs - Depreciation
EBIT = $500,000 - $230,000 - $100,000 - $144,000
EBIT = $26,000
Cash flow = $26,000(1 - 0.35) +$144,000 + $80,000 + $10,000
Cashflow = $250,900
The dual role of strategic alliance refers to the ________. constant requirement of resources and markets process of finding skilled personnel and training them to work efficiently conflict between cooperation and competition differences between home and host governments
Answer:
Conflict between cooperation and competition
Explanation:
A strategic alliance consists in a temporary union between two or more firms, with the goal of working closely, in a cordinated manner, in order to achieve a specific result.
Because a strategic alliance is not a formal or definitive union, and each member of the alliance remains an independent firm, a conflict between cooperation and competition may arise, because the independent firms, while desiring to cooperate in order to achieve the best results under the alliance, are expected to compete again at some point in time as independent entities once the alliance ends.
A company began a new development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $3,800,000 and costs incurred from June 30 to the product release date were $2,150,000. The 2019 revenues from the sale of the new software were $4,000,000, and the company anticipates additional revenues of $6,500,000. The economic life of the software is estimated at four years. Amortization of the software development costs for the year 2019 would be:
Answer:
$818,935
Explanation:
Percentage of-revenue method:
$4,000,000
($4,000,000 + 6,500,000) = $10,500,000
Hence;
$4,000,000/$10,500,000
= 38.09 %
Amortization = 38.09% ×$2,150,000
= $818,935
Therefore the amortization of the software development costs would be $818,935
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory 0 Units produced 2,900 Units sold 2,600 Units in ending inventory 300 Variable costs per unit: Direct materials $ 49 Direct labor $ 58 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 11 Fixed costs: Fixed manufacturing overhead $ 55,100 Fixed selling and administrative expense $ 18,200 What is the absorption costing unit product cost for the month
Answer:
$132
Explanation:
The computation of absorption costing unit product cost is given below:-
Absorption costing unit product cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed manufacturing overhead per unit
= $49 + $58 + $6 + ($55,100 ÷ 2,900)
= $49 + $58 + $6 + $19
= $132
So, for computing the Absorption costing unit product cost we simply applied the above formula.