Final answer:
The reorder point for Central Perk's organic coffee filters is 1,515 filters, which takes into account the lead time demand, desired service level, and safety stock.
Explanation:
To determine the reorder point, we need to consider the lead time demand and the desired service level. The lead time demand is the average number of filters used during the lead time (14 days), which is calculated by multiplying the average daily usage (80 filters) by the lead time (14 days). Therefore, the lead time demand is 80 filters/day * 14 days = 1120 filters.
Next, we need to account for the desired service level of 99%. This is done by considering the z-score associated with a 99% service level, which can be found using a standard normal distribution table or calculator. For a 99% service level, the z-score is approximately 2.33.
Finally, we calculate the reorder point by multiplying the lead time demand by the z-score and adding the safety stock. The safety stock is calculated by multiplying the standard deviation of the daily usage (5 days) by the z-score. Therefore, the reorder point is 1120 filters + (2.33 * 5 filters) = 1514.65, which rounds up to 1515 filters. So, the correct answer is option C: 1,515 filters.
The correct option is A. The reorder point for Central Perk is approximately 1,495.
To determine the reorder point for Central Perk's organic coffee filters, we need to calculate the lead time demand and include a safety stock based on the desired service level. Here's the step-by-step process to find the reorder point:
1. Calculate the average demand during the lead time:
- Daily demand ( D ): 80 filters
- Lead time ( L ): 14 days
[tex]\text{Average demand during lead time} = D \times L = 80 \times 14 = 1120 \text{ filters}[/tex]
2. Determine the standard deviation of demand during the lead time:
- Standard deviation of daily demand ( [tex]\sigma_D[/tex] ): 5 filters
- Standard deviation of lead time ( [tex]\sigma_L[/tex] ): 2 days
The standard deviation of demand during the lead time ( [tex]\sigma_{DL}[/tex] ) can be calculated using the formula:
[tex]\sigma_{DL} = \sqrt{L \cdot (\sigma_D^2) + (D^2 \cdot \sigma_L^2)}[/tex]
Substituting the values:
[tex]\sigma_{DL} = \sqrt{14 \cdot (5^2) + (80^2 \cdot 2^2)} \\\\\sigma_{DL} = \sqrt{14 \cdot 25 + 6400 \cdot 4} \\\\\sigma_{DL} = \sqrt{350 + 25600} \\\\\sigma_{DL} = \sqrt{25950} \\\\\sigma_{DL} \approx 161 \text{ filters}[/tex]
3. Calculate the safety stock:
- Desired service level: 99%
- Z-score corresponding to 99% service level (from the standard normal distribution): 2.33
[tex]\text{Safety stock} = Z \times \sigma_{DL} = 2.33 \times 161 \approx 375[/tex]
4. Calculate the reorder point:
[tex]\text{Reorder point} = \text{Average demand during lead time} + \text{Safety stock} \\\\ \text{Reorder point} = 1120 + 375 = 1495 \text{ filters}[/tex]
Since 1495 filters is not an exact match to the provided options, it is closest to:
A. 1,490 filters
Thus, the reorder point for Central Perk is approximately 1,495 filters, making option A the best choice.
What is the most important way the federal reserve ensures the United States money supply is safe and in circulation
Answer:
Federal Reserve increases the money supply in the hands of the public if it buys back issued securities from large banks.
Explanation:
Federal Reserve increases the money supply in the hands of the public if it buys back issued securities from large banks. Conversely, Federal Reserve decreases the money supply in the hands of the public if it sells securities. As a result, the money supply increases.
Federal reserve provides and maintains an effective and efficient payment system. It also regulates banking operations.
Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.90 pounds $60 per pound Direct labor 0.10 hours $30 per hour During June, Heavy Products produced and sold 19,000 containers using 1,200 pounds of direct materials at an average cost per pound of $63 and 17,100 direct manufacturing labor-hours at an average wage of $31.25 per hour. The direct manufacturing labor price variance during June is ________.
Answer:
$950,400 Favorable
Explanation:
The computation of direct manufacturing labor price variance is shown below:-
Standard quantity for production = 19,000 × 0.90
= 17,100
Direct Material flexible-Budget variance = Standard Quantity × Standard Price - Actual Quantity × Actual Price
= 17,100 × $60 - 1,200 × $63
= 1,026,000 - $75,600
= $950,400 Favorable
Therefore for computing the direct manufacturing labor price variance we simply applied the above formula.
Develop a worksheet that can be used to simulate the bids made by the two competitors. Strassel is considering a bid of $120000 for the property. Using a simulation of 1000 trials, what is the estimate of the probability Strassel will be able to obtain the property using a bid of $120000? Round your answer to 1 decimal place. Enter your answer as a percent.
Answer:
20%
Explanation:
Simulation is imitation of a situation that represents its operations overtime. Simulation is used for performance tuning. The use of simulation in business is gaining significance. Simulation is used to analyze current situation and predict future. Strassel is using 1000 trials for a bid of $120,000. The estimated probability that Strassel will get the property at a bid of $120,000 is 20%.
Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $78,000 and $132,000, net purchases at cost and retail were $324,000 and $492,000, and sales during the first six months totaled $502,000. The estimated inventory at June 30, 2021, would be: Multiple Choice $78,080. $64,880. $81,380. $73,130.
Answer:
$78,592
Explanation:
The computation of estimated inventory is shown below:-
Cost of Goods available for sale = Beginning inventory + Net purchases
= $78,000 + $324,000
= $402,000
Retail value of goods available for sale = Retail price of beginning inventory + Retail price of purchases
= $132,000 + 492,000
= $624,000
Cost to retail percent = Cost of Goods available for sale ÷ Retail value of goods available for sale
= $402,000 ÷ $624,000
= 64.42%
Estimated ending inventory at retail = Cost of Goods available for sale at retail - Sales
= $624,000 - $502,000
= $122,000
Estimated ending inventory at cost = Estimated ending inventory at retail × Cost to retail percent
= $122,000 × 64.42%
= $78,592
Therefore the correct answer is $78,592. So, in the given question the option is not available.
equired: 1. Which of the two basic reporting approaches for the cash flows from operating activities did The Home Depot use? Indirect Direct 2. What amount of income tax payments did The Home Depot make during the year ended January 29, 2017? $4,623 million $3,082 million $639 million $12 million 3. In the fiscal year ended January 29, 2017, The Home Depot generated $9,783 million from operating activities. Indicate where this cash was spent by listing the two largest cash outflows. Cash Dividends ($3,404 million) and Share Repurchase ($6,880 million) Long-Term Debt Repayments ($3,045 million) and Share Repurchase ($6,880 million) Share Repurchase ($7,000 million) and Cash Dividends ($3,404 million) Share Repurchase ($6,880 million) and Capital Expenditures ($1,621 million)
Answer:
find attached missing financial statements:
Indirect method
$4,623 million
$9,783 -$3404 million cash dividends and $6,880 million share buyback
Explanation:
The company used the indirect method of preparing cash flow because the net income was adjusted to reflect cash flow from operations
Income tax payment made during the year ended is $4,623 as shown under the supplemental disclosure in the attached financial statements missing from the question.
The cash of $9,783 million generated from operations was used in paying dividends of $3,404 million as well as buying back shares to the tune of $6,880 as contained in the financial activities section of the cash flow statement.
You are a self-employed profit-maximizing consultant specializing in monopolies. Five firms are currently seeking your advice, and although the information they have supplied to you is incomplete, your expert knowledge allows you to go back and make a definite recommendation in each case. Select one of the following recommendations for each firm in the short run.
a. remain at the current output level
b. increase output
c. reduce output
d. shut down
Answer:
The answer is option A) The short run recommendation for a monopolistic firm is to remain at the current output level
Explanation:
In the short run, monopolistic firms could record losses but still continue to run in anticipation of a sustainable profit in the long run.
A self-employed profit-maximizing consultant specializing in monopolies understands that the short run losses experienced in a monopoly is also an advantage in that it reduces the participation of more players in the same industry/ market segment.
The best recommendation would be to remain at the current output level during the short run to cut losses, sustain patronage and then develop a long term strategy that will guarantee profitability in the long run.
Columbus Company owns 25% of Zanesville Inc. and accounts for the investment using the equity method. During the year, Zanesville Inc. reports a net loss of $1,602,000 and pays total dividends of $73,800. Which of the following describes the change in Columbus’s investment in Zanesville during the year? Select one: A. The investment increases by $326,700. B. The investment decreases by $232,750. C. The investment decreases by $418,950. D. The investment decreases by $400,500. E. None of the above
Answer:
The correct option is C,the investment decreases by $418,950.
Explanation:
The equity method of accounting for stock investment requires that the investor should increase its investment value by the share of net income in a year and decrease same by the amount of cash dividends received from the investee company.
However,the opposite would be the case of net loss recorded in the year under review(share of net loss would be deducted from investment value) as shown below:
Share of net loss ($1,602,000*25%) ($400,500)
share of cash dividends($73,800*25%)($18,450)
total reduction in investment value ($418,950 )
Check my work Check My Work button is now enabledItem 6Item 6 10 points Walton Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $42. Variable costs Manufacturing $ 14 per unit Selling 6 per unit Fixed costs Manufacturing $ 162,000 per year Selling and administrative $ 132,800 per year Required Use the per-unit contribution margin approach to determine the break-even point in units and dollars. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $132,000. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 20,300 units, how much could it pay in salaries for salespeople and still have a profit of $132,000
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
A) Total Variable Cost = Variable Cost Manufacturing + Variable Cost Selling Per Unit
= $14+ $6
= $20
Contribution Margin (CM)= Sales - Total Variable Cost
= $42 - $20
= $22
Contribution Margin Ratio (CMR) = Contribution Margin ÷ Sales × 100
= $22 ÷ $42 × 100
= 52.38%
Total Fixed Cost = Fixed Manufacturing Cost + Fixed Selling And Administrative Cost
= $162,000 + $132,800
= $294,800
Break Even in Units = Total Fixed Cost ÷ Contribution Margin
= $294,800 ÷ $22
= $13,400
Break Even in Dollars = Total Fixed Cost ÷ Contribution Margin Ratio
= $294,800 ÷ 52.38%
= $562,810.23
B).
Particular Amount ($)
Desired Profit 132,000
Add: Total Fixed Cost 294,800
Total Amount 426,800
Break Even in Units (Total Amount ÷ CM) = $426800 ÷ $22 = 19,400
Break Even in Dollars(Total Amount ÷ CMR)
= $426800 ÷ 52.38%
= $814,814.81
C). Sales = Sale Unit × Selling Price Per Unit
= 20,300 × $42
= $852,600
Variable Cost = Sale Units × Variable Manufacturing Cost Per Unit
= 20,300 × $14
= $284,200
Fixed Cost = Sales - Variable Cost - Profit
= $852,600 - $284,200 - $132,000
= $436,400
Salaries for Sales People = Total Fixed Cost-Fixed Cost Manufacturing -Selling And Administrative Fixed Cost
= $436,400 - $162,000 - $132,800
= $141,600
Widget Corp. is expected to generate a free cash flow (FCF) of $1,835.00 million this year (FCF₁ = $1,835.00 million), and the FCF is expected to grow at a rate of 21.40% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 2.82% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Widget Corp.’s weighted average cost of capital (WACC) is 8.46%, what is the current total firm value of Widget Corp.? (Note: Round all intermediate calculations to two decimal places.) $44,347.57 million $53,217.08 million $55,008.09 million $5,705.25 million
Final answer:
The current total firm value of Widget Corp. is $39,643.09 million.
Explanation:
To calculate the current total firm value of Widget Corp., we need to find the present value of its future free cash flows. The formula for calculating the present value of a growing perpetuity is FCF / (WACC - g), where FCF is the free cash flow, WACC is the weighted average cost of capital, and g is the growth rate. Let's break down the calculation:
Year 1: Present value of FCF₁ = FCF₁ / (1 + WACC) = $1,835.00 million / (1 + 0.0846) = $1,692.49 million
Year 2: Present value of FCF₂ = FCF₂ / (1 + WACC)² = $1,835.00 million * (1 + 0.2140) / (1 + 0.0846)² = $1,835.00 million * 1.2140 / 1.0766 = $2,058.87 million
Year 3: Present value of FCF₃ = FCF₃ / (1 + WACC)³ = $1,835.00 million * (1 + 0.2140)² / (1 + 0.0846)³ = $1,835.00 million * 1.2140² / 1.0766³ = $2,268.86 million
After Year 3: Present value of perpetual cash flows = FCF₄ / (WACC - g) = $1,835.00 million * (1 + 0.0282) / (0.0846 - 0.0282) = $1,835.00 million * 1.0282 / 0.0564 = $33,623.87 million
Finally, we sum up the present values of the free cash flows:
Total firm value = Present value of FCF₁ + Present value of FCF₂ + Present value of FCF₃ + Present value of perpetual cash flows = $1,692.49 million + $2,058.87 million + $2,268.86 million + $33,623.87 million = $39,643.09 million
Therefore, the current total firm value of Widget Corp. is $39,643.09 million.
Which of the following combinations of actions by Congress and the Federal Reserve would be most effective in stimulating an economy that is operating below full employment? An increase in the money supply when personal income taxes decrease. An increase in the money supply when personal income taxes increase. An increase in the money supply when government spending decreases. An increase in interest rates when government spending increases. A decrease in interest rates when personal income taxes increase.
Answer:
The most effective combinations of actions by Congress and the Federal Reserve in stimulating an economy that is operating below full employment is An increase in the money supply when personal income taxes decrease.
Explanation:
The congress and Federal reserve can stimulate the economy with the applicable fiscal policies especially when the economy is operating below full employment.
Expansionary fiscal policy is a tool used by congress and Federal Reserve to increase money supply in circulation by reducing tax rates, this is will create more disposable income in households which will lead to increase in demand. Once demand increases, the ripple effect on the economy is increase in employment opportunities.
Therefore, the most effective combinations of actions by Congress and the Federal Reserve in stimulating an economy that is operating below full employment is an increase in the money supply when personal income taxes decrease.
Freemore Company has the following sales budget for the last six months of 2018: July $205,000 October $187,000 August 168,000 November 200,000 September 205,000 December 182,000 Sales are immediately due, however the cash collection of sales, historically, has been as follows: 55% of sales collected in the month of sale, 35% of sales collected in the month following the sale, 7% of sales collected in the second month following the sale, and 3% of sales are uncollectible. Cash collections for October are ________.
Answer:
Cash collections for October are $174,600
Explanation:
The following information are given for the amounts collected on sales:
month of sale = 55%
month following sale = 35%
second month following sale = 7%
sales uncollectible = 3%
For the month of October, the cash collections will be from July and October sales.
From July sales
October is the month following July sales, therefore, 35% of the sales from July will be collected in October.
July sales = $205,000
percentage collected in October = 35% = 35/100 = 0.35
∴ cash collected in October from July sales = 0.35 × 205,000 = $71,750
From October sales
55% of sales is collectible in the month of sales
Sales in October = $187,000
55% = 55/100 = 0.55
∴ cash collectible from October sales = 0.55 × 187,000 = $102,850
∴ Total cash collections in October = cash from July sales + cash from October sales
= 71,750 + 102,850 = $174,600
3. A car dealer must choose between two alternative forecasting techniques. Both techniques have been used to prepare forecasts for a six- month period. Using MAD as a criterion, which technique provides a more accurate forecast? Using MSE as a criterion, which technique provides a more accurate forecast? Month Demand Technique 1 Forecast Technique 2 Forecast 1 492 488 495 2 470 484 482 3 485 480 478 4 493 490 488 5 498 497 492 6 492 493 493
Answer:
From both criterion, MAD and MSE, technique 1 is more accurate forecast than technique 2 forecast.
Explanation:
First of all let's sort out this data:
Month . Demand . Technique 1 Forecast . Technique 2 Forecast
1 492 488 495
2 470 484 482
3 485 480 478
4 493 490 488
5 498 497 492
6 492 493 493
Now, first part is to check the accuracy of the forecast using MAD.
Where,
MAD = Mean Absolute Deviation.
Formula = (Sum of all absolute differences between demand and forecast)/ Time period
And the rule is, we will compare final MAD values of both the techniques and compare. The lower value will be considered as accurate forecast technique.
So, for Technique 1, we have:
Month . Demand(D). Technique 1 Forecast(F) |D-F|
1 492 488 4
2 470 484 -14
3 485 480 5
4 493 490 3
5 498 497 1
6 492 493 -1
(neglecting negative sign because of absolute) Total = 28
MAD = Total SUM / Time period
Time Period = 6
MAD = 28/6
MAD = 4.66
Now, let's do it for Technique 2:
Month . Demand . Technique 2 Forecast . |D-F|
1 492 495 -3
2 470 482 -12
3 485 478 7
4 493 488 5
5 498 492 6
6 492 493 -1
(neglecting negative sign because of absolute) Total = 34
MAD = Total SUM / Time period
Time Period = 6
MAD = 34/6
MAD = 5.66
Hence, Technique 1 is accurate forecast using MAD because it has lower MAD value.
Now, the second part of the question is to solve this by using MSE.
And the rule is, we will compare final MSE values of both the techniques and compare. The lower value will be considered as accurate forecast technique.
MSE = Mean Squared Error
Formula = (Sum of all squared differences between demand and forecast) /Time period
Let's do it for Technique 1:
Month . Demand(D). Technique 1 Forecast(F) (D-F) . (D-F)²
1 492 488 4 16
2 470 484 -14 . 196
3 485 480 5 . 25
4 493 490 3 9
5 498 497 1 1
6 492 493 -1 1
(Add all (D-F)² values for the total) Total = 248
MSE = Sum Total/ Time period
MSE = 248/6
MSE = 41.33
Similarly for Technique 2:
Month . Demand(D). Technique 2 Forecast(F) (D-F) . (D-F)²
1 492 495 -3 9
2 470 482 -12 . 144
3 485 478 7 . 49
4 493 488 5 25
5 498 492 6 36
6 492 493 -1 1
(Add all (D-F)² values for the total) Total = 264
MSE = Sum Total/ Time period
MSE = 264/6
MSE = 44
According to MSE as well, technique 1 forecast is accurate because it also has lower value than technique 2.
Perry Corporation produces and sells a single product. Data for that product are: Sales price per unit $275 Variable cost per unit $210 Fixed expenses for the month $640,000 Currently selling 10,500 units Upper management is considering using a biodegradable packaging which costs $12 more per unit but it produces less waste in the long run. Management plans to increase advertising by $11,000 per month to advertise this new feature to their packaging. They believe that environmentally friendly people will switch to their product resulting in an increase in sales of 2500 units per month. How many units would the company have to sell to maintain current operating income if these changes are implemented
Answer:
13,085 units
Explanation:
The computation of the units needed to sell is shown below:
But before that first we have to compute the current operating income which is shown below:
Current operating income = Sales - variable cost - Fixed cost
= ($275 - $210) × 10,500 units - $640,000
= $42,500
Now
Increased fixed cost is
= $640,000 + $11,000
= $651,000
And,
Increased variable cost per unit is
= $210 + $12
= $222
Now
Sales needed to maintain Current operating income is
= (Fixed cost + Current operating income) ÷ (Sales price per unit - Variable cost per unit)
= ($651,000 + $42,500) ÷ ($275 - $222)
= 13,085 units
rivack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Budgeted variable overhead cost per direct labor-hour $ 4.00 Total budgeted fixed overhead cost per year $ 528,180 Budgeted direct labor-hours (denominator level of activity) 75,455 Actual direct labor-hours 84,000 Standard direct labor-hours allowed for the actual output 82,000 Required: 1. Compute the predetermined overhead rate for the year. Be sure to include the total budgeted fixed overhead and the total budgeted variable overhead in the numerator of your rate. (Round your answer to the nearest whole dollar amount.) 2. Compute the amount of overhead that would be applied to the output of the period. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Answer:
Instructions are below.
Explanation:
Giving the following information:
Budgeted variable overhead cost per direct labor-hour $ 4.00
Total budgeted fixed overhead cost per year $ 528,180
Budgeted direct labor-hours= 75,455
Standard direct labor-hours allowed for the actual output 82,000
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= (528,810/75,455) + 4= $15.63 per direct labor hour
Now, we can allocate overhead based on standard hours allowed:
Allocated MOH= Estimated manufacturing overhead rate* Standard amount of allocation base
Allocated MOH= 15.63*82,000= $1,281,600
r. and Mrs. Chalk have three dependent children, ages 3, 6, and 9. Assume the taxable year is 2019. Compute their child credit if AGI on their joint return is $91,300. Compute their child credit if AGI on their joint return is $465,700. Compute their child credit if AGI on their joint return is $197,000 and assume that they have one non-child dependent who meets the requirements for the child credit.
Answer:
Compute their child credit if AGI on their joint return is $91,300.
Child tax credit for 2019 was $2,000 per qualifying child under 16
total child tax credit = $2,000 x 3 = $6,000
Compute their child credit if AGI on their joint return is $465,700.
Child tax credit for 2019 was $2,000 per qualifying child under 16, but if phases out after $400,000. For each $1,000 above the threshold, the tax credit is reduced by $50.
total child tax credit = $6,000 - (66 x $50) = $6,000 - $3,300 = $2,700
Compute their child credit if AGI on their joint return is $197,000.
Child tax credit for 2019 was $2,000 per qualifying child under 16, plus $500 per qualifying dependent that is not a child.
total child tax credit = $6,000 + $500 = $6,500
Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) 1) Acquired $1,300 of capital from the owners. 2) Purchased $330 of direct raw materials. 3) Used $230 of these direct raw materials in the production process. 4) Paid production workers $430 cash. 5) Paid $230 for manufacturing overhead (applied and actual overhead are the same). 6) Started and completed 250 units of inventory. 7) Sold 80 units at a price of $6 each. 8) Paid $70 for selling and administrative expenses. The amount of net income for the year was:
Answer:
Net Income $ 125.2
Explanation:
Capital acquired and the amount of material purchased is not accounted for. Only amount of material used is accounted for .
Newton Corporation
Income Statement
Sales 80* $ 6= $ 480
Less COGS $ 284.8
Gross Profit $ 195.2
Less Selling and Administrative Expense $ 70
Net Income $ 125.2
We calculate the COGS for number of the units sold.
Calculation Of Cost Of Goods Sold
Direct Material used $ 230
Direct Labor $ 430
Production Overheads $ 230
Total Manufacturing Costs $ 890
Total units completed 250
Cost of 1 unit = Total Cost/ Total Units= $ 890/250= $ 3.56 per unit
Cost of 80 Units = $ 3.56 * 80= $ 284.8
Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion and $10 billion respectively. Ford has a beta of 1.4, the market risk premium is 6% and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3 each year and trades at a price of $25 per share. Ford's debt trades with a yield to maturity of 8.5%. What is Ford's weighted average cost of capital if its tax rate is 35%
Answer:
WACC = 9.1%
Explanation:
The weighted Average cost of Capital(WACC) is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool.
cost of equity = Rf+ β×(Rm-Rf)
(Rm-Rf)= 6%, Rf- 4%, β- 1.4
=4% + (1.4×6%) = 12.4
Cost of preferred share = Dividend/price
= 3/25× 100= 12.0%
After tax cost of debt = Yield × (1-Tax rate) = 8.5%× (1-0.35)=5.53%
Type cost Market value Cost × Market Value
Equity 12.4% 7 0.868
Preferred 12% 4 0.48
Bond 5.53% 10 0.553
Total 21 1.901
WACC = 1.901 /21 × 100 =9.1%
WACC = 9.1%
The current stock price of Alcoa is $110, and the stock does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of Alcoco's stock is 30%. You want to purchase a put option on this stock with an exercise price of $115 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold __________ shares of stock per 100 put options to hedge your risk.
Explanation:
d_1 = (ln(S/K) + (r + (s^2)/2)t)/(s√(t))
d_2 = d_1 - s√(t))
where S= current stock price
K = option strike price
t = time to maturity
s = volatility
r = risk free rate
c = call premium
d_1 = (ln(70/75) + (0.06 + (0.40^2)/2)× 0.083)/0.40√(.0833)
= -0.49646
d_2 = -0.49646 - .40√(.0833)
= -0.61193
N(d_1) = can be found using the z -table and it is the call option's delta value.
N(d_1) = N(-0.49646) = 0.31
f hospitals decide to increase the price of emergency appendectomies (surgery operation to remove inflamed appendix) in order to increase its revenues, Question 5 options: A) It will be successful since the demand is inelastic. B) It will be successful since the supply is inelastic. C) It will be successful since the demand is elastic. D) Then the reason that it will NOT be successful is because the demand curve is downward sloping.
Answer:
A) It will be successful since the demand is inelastic
Explanation:
Elasticity of demand measures the responsiveness of quantity demanded to changes in price.
Demand is inelastic if a change in price has little or no effect on quantity demanded.
If demand is inelastic and prices increase, total revenue would increase because there would be a negligible change in quantity demanded.
Demand is elastic if a small change in price has a greater effect on the quantity demanded.
If demand is elastic and price is increased, Quanitity demanded would fall and revenue would fall
I hope my answer helps you
The hospitals will likely be successful in increasing revenues by raising the price of emergency appendectomies due to the inelastic demand for such urgent medical procedures.
Explanation:If hospitals decide to increase the price of emergency appendectomies with the expectation to increase revenues, the outcome will depend on the price elasticity of demand for the surgery. Option A is correct because emergency appendectomies have an inelastic demand, meaning consumers are relatively unresponsive to price changes due to the urgent and life-saving nature of the surgery. People with an inflamed appendix need the procedure regardless of the cost, and since alternatives are not available, demand is inelastic. Therefore, when prices increase, the hospital is likely to see increased revenues as the quantity demanded does not significantly decrease.
Learn more about Price Elasticity of Demand here:https://brainly.com/question/31293339
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The two most likely benefits realized from utilizing enterprise systems are improvements in ________. availability of information and increased interaction throughout the organization reduced inventory and reduced operating expenses improved compliance with standards and improved supplier integration improved customer interaction and improved supplier integration reduced lead times for manufacturing and improved customer interaction
Answer: availability of information and increased interaction throughout the organization
Explanation: An enterprise systems is described as an integrated suite of business applications for virtually every department, process, and industry, that allows companies and organizations to integrate information across operations on a company-wide basis by the use of one large database and as a result, there is an upward increase in the availability of information which leads to increased interaction across departments, processes, and industries throughout the organization.
Wellington Corp. has outstanding accounts receivable totaling $6 million as of December 31 and sales on credit during the year of $30 million. There is also a debit balance of $24,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense
Answer :
Balance in allowance = $480,000
Explanation :
As per the data given in the question,
Receivable totaling = $6 million
Credit = $30 million
Now the uncollectible amount is
= $6,000,000 × 8%
= $480,000
After adjustment, the amount is
= $480,000 + $24,000
= $504,000
Now the Adjusting entry is:
Ba debts expense $504,000
To allowance for doubtful debts $504,000
(Being the bad debt expense is recorded)
The debt has an interest rate of 8.50% (short term) and 10.50% (long term). The expected rate of return on the company's shares is 17.50%. There are 7.66 million shares outstanding, and the shares are trading at €36. The tax rate is 25%. Assume the company issues €50 million in new equity and uses the proceeds to retire long-term debt. Also assume the company's borrowing rates are unchanged and the short-term debt is permanent. Use the three-step procedure.a. Calculate the cost of equity after the capital restructuring
Answer:
Re = 16.02%
Explanation:
current stock price 36 x 7,660,000 = 275,760,000
cost of equity = 17.5%
current short term debt = 141,600,000
cost of short term debt = 8.5%
current long term debt = 210,600,000
cost of long term debt = 10.5%
total financing = 627,960,000
equity = 275,760,000 / 627,960,000 = 0.4391short term debt = 141,600,000 / 627,960,000 = 0.2255 long term debt = 210,600,000 / 627,960,000 = 0.3354WACC = (0.4391 x 0.175) + (0.2255 x 0.085 x 0.75) + (0.3354 x 0.105 x 0.75) = 0.0768 + 0.0144 + 0.0264 = 0.1176 or 11.76%
under the new structure:
total financing = 627,960,000
equity = 325,760,000 / 627,960,000 = 0.5188short term debt = 141,600,000 / 627,960,000 = 0.2255 long term debt = 160,600,000 / 627,960,000 = 0.2557assuming WACC remains unchanged:
0.1176 = (0.5188 x Re) + (0.2255 x 0.085 x 0.75) + (0.2557 x 0.105 x 0.75) = (0.5188 x Re) + 0.0144 + 0.0201 = (0.5188 x Re) + 0.0345
0.5188 x Re = 0.1176 - 0.0345 = 0.0831
Re = 0.0831 / 0.5188 = 0.1602 or 16.02%
The multiplier for a futures contract on a stock market index is $50. The maturity of the contract is 1 year, the current level of the index is 1,800, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per month. Suppose that after 1 month, the stock index is at 1,820. a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly. (Round intermediate calculations to 2 decimal places.)
Final answer:
The mark-to-market cash flow from the futures contract after the stock market index rises from 1,800 to 1,820 is $1,000. This is calculated using the multiplier of $50 and the change in the index level.
Explanation:
Understanding the Futures Contract
The student is seeking to calculate the mark-to-market cash flows of a futures contract on a stock market index with specific parameters given. Since the multiplier is $50, and after one month, the index has risen from 1,800 to 1,820, the mark-to-market gain would be the difference in the index levels multiplied by the multiplier. Therefore, the calculation would be (1820 - 1800) x $50 = $1,000. This would be the cash flow from the mark-to-market proceeds. A key concept to remember is that futures contracts are marked to market daily, meaning the change in value is settled between the parties at the end of each trading day.
The parity condition was also mentioned but no further calculation using this was required. Had it been necessary, the parity condition would ensure that the futures price adjusts considering the risk-free interest rate and the dividend yield on the index. However, to answer the student's question, this detail isn't needed.
Atkinson Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one indirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2016, Atkinson budgets 2017 assembly-support costs to be $8,800,000 and 2017 direct labor hours to be 220,000. At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017. Laguna Model Mission Model Construction period Feb–June 2017 May–Oct 2017 Direct material costs $106,550 $127,450 Direct labor costs $ 36,250 $ 41,130 Direct labor-hours 970 1,000 Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2017 actual assembly-support costs were $8,400,000, and the actual direct labor-hours were 200,000. MyAccountingLab Required assignment material 141 1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ
Answer:
a) Budgeted indirect cost rate is $40 per direct labor- hour.
b) Actual indirect cost rate is $42 per direct labor hour.
The two indirect cost rate per direct labor hour differs because, for the calculation of budgeted indirect cost rate both the budgeted direct labor-hours and indirect cost are considered. While calculating actual indirect cost rate both actual direct labor-hours and indirect cost are considered.
Explanation:
Actual Costing:
In actual costing, product cost is calculated considering actual cost of material, actual cost of labor and actual overhead incurred which is allocated using the allocation base for incurred cost during the period.
Normal Costing:
In normal costing, product cost is calculated considering actual cost of material, actual cost of labor and overhead are calculated using a standard overhead rate which is applied to actual usage of allocation base.
a.
Compute budgeted indirect cost rate:
Budgeted indirect cost rate = Budgeted indirect cost ÷ budgeted direct labor hour
= 8,800,000 ÷ 220,000
= 40 per direct labor hour
Therefore, budgeted indirect cost rate is $40 per direct labor- hour.
b.
Compute actual indirect cost rate:
Actual indirect cost rate = Actual indirect cost ÷ Actual direct labor hour
= $8400,000 ÷ 200,000 Hours
= $42 per direct labor hour
Therefore, actual indirect cost rate is $42 per direct labor hour.
Final answer:
The budgeted indirect-cost rate for Atkinson Construction is calculated at $40 per direct labor-hour, whereas the actual indirect-cost rate is found to be $42 per direct labor-hour. The difference arises from variations in actual expenses or direct labor-hours used compared to the budgeted amounts, caused by changes in labor efficiency or costs.
Explanation:
The question involves calculating the budgeted indirect-cost rate and the actual indirect-cost rate for Atkinson Construction's job-costing system and understanding why they might differ. To compute the budgeted indirect-cost rate, divide the total budgeted assembly-support costs by the total budgeted direct labor hours. This yields:
(a) Budgeted indirect-cost rate = $8,800,000 / 220,000 hours = $40 per direct labor-hour.
To find the actual indirect-cost rate, divide the actual assembly-support costs by the actual direct labor hours, resulting in:
(b) Actual indirect-cost rate = $8,400,000 / 200,000 hours = $42 per direct labor-hour.
The difference between these rates can occur due to variations in actual expenses or the actual amount of direct labor-hours used compared to what was budgeted. Reasons for such variations include changes in labor efficiency, fluctuations in the cost of materials or assembly support resources, and unexpected operational inefficiencies or improvements.
Step Up Ladders Company provides the following financial information: Income from operations $400,000 Interest expense 47,000 Gains/(losses) on sale of equipment 3,000 Net income 350,000 Total assets at Jan. 1 2,600,000 Total assets at Dec .31 3,400,000 Calculate return on investment based on the information given above. (Round your answer to two decimal places.)
Answer:
13.33%
Explanation:
Income from operations $400,000
Interest expense 47,000
Gains/(losses) on sale of equipment 3,000
Net income 350,000
Total assets at Jan. 1 2,600,000 Total assets at Dec .31 3,400,000
the formula used to calculate return on investment (ROI) is:
ROI = income from operations / average total assets
ROI = $400,000 / {($2,600,000 + $3,400,000) / 2} = $400,000 / $3,000,000 = 0.1333 or 13.33%
Return on investment measures the profitability of an investment during a period of time.
operation, 2,300 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $23.00 per unit Variable marketing costs $6.00 per unit Fixed manufacturing costs $15 per unit Administrative expenses, all fixed $21.00 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 500 units What is the contribution margin using variable costing
Answer:
$124,200
Explanation:
Contribution margin is net of sales value and variable cost. This value is available to cover the fixed cost of the business and profit after adjusting fixed cost.
As per given data
Price = $98
Numbers of units sold = 1,800
Total Sales = $98 x 1,800 = $176,400
Variable cost = $23 x 1,800 units = $41,400
Variable marketing cost = $6 x 1,800 = $10,800
Total Variable cost = $41,400 + $10,800 = $52,200
Contribution Margin = Total Sales - Total Variable cost
Contribution Margin = $176,400 - $52,200
Contribution Margin = $124,200
Answer:
$124,200
Explanation:
Swan Textiles Inc contribution margin using variable costing
Total sales = $98.00 × 1,800 = $176,400
Variable cost of goods sold = $23.00 × 1,800 = $41,400
Variable marketing costs = $6.00 × 1,800 = $10,800
Total variable costs ($41,400+ $10,800)= $52,200
Contribution margin = $176,400 - $52,200 = $124,200
Therefore the contribution margin using variable costing will be $124,200
Imperial Jewelers manufactures and sells a gold bracelet for $403.00. The company’s accounting system says that the unit product cost for this bracelet is $264.00 as shown below:
Direct materials $143
Direct labor 90
Manufacturing overhead 31
Unit product cost $264
The members of a wedding party have approached Imperial Jewelers about buying 22 of these gold bracelets for the discounted price of $361.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $454 and that would increase the direct materials cost per bracelet by $8. The special tool would have no other use once the special order is completed.
To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.Required:1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?2. Should the company accept the special order?
Answer:
a) Financial advantage $2,208
b) The company should accept the special order, as it will increase its profit by $2,208
Explanation:
The relevant costs for decision to accept the special order are
I Incremental Revenue from the special order
2. incremental variable cost
3. The cost of the special tool
Unit variable cost = 143 + 90 + 8 + 7 = $240
Note that that the increase in material cost of $8 and the variable manufacturing overhead of $7 are relevant to the special order decision. Hence they are added.
And the balance of manufacturing overhead would be incurred either way. Therefore , they are not relevant for the decision
$
Sales revenue from special order
(22× $361.00) 7942
Variable cost of special order
(22× $240 ) (5280 )
Cost of special tool (454)
Financial advantage 2,208
The company should accept the special order, as it will increase its profit by $2,208
Which of the following should be included in the cash flow projections for a new product? I. Money already spent for research and development of the new product II. Capital expenditures for equipment to produce the new product III. Increase in working capital needed to finance sales of the new product IV. Interest expense on the loan used to finance the new product launch
Final answer:
Cash flow projections for a new product should include capital expenditures, increases in working capital needed to finance the product's sales, and interest expense on loans. However, money spent on research and development, being sunk costs, are not included.
Explanation:
When projecting cash flows for a new product, several key elements must be considered to ensure the projections are realistic and cover all necessary aspects of the project financing and execution. These include:
Capital expenditures for equipment to produce the new product (II) - This involves the money spent on acquiring or upgrading physical assets like machinery, which is essential for manufacturing the new product.Increases in working capital needed to finance sales of the new product (III) - Additional funds may be required to manage day-to-day operational expenses as sales volumes of the new product increase.Interest expense on the loan used to finance the new product launch (IV) - If financing is obtained through loans, the interest expense is a recurring cost that affects cash flow and must be included.However, money already spent on research and development (I) are typically considered 'sunk costs' and should not be included in future cash flow projections as they do not affect the future inflows or outflows of cash related to the new product.
Final answer:
Cash flow projections for a new product should include capital expenditures for production equipment, increased working capital to finance sales, and interest expense on loans for product launch, but not money previously spent on research and development.
Explanation:
When projecting cash flows for a new product, certain elements should be included in the projections. Specifically, capital expenditures for equipment to produce the new product (II), the increase in working capital needed to finance sales of the new product (III), and the interest expense on the loan used to finance the new product launch (IV) are essential in your cash flow projections.
However, money already spent for research and development of the new product (I) is considered a sunk cost and is not typically included in forward-looking cash flow projections.
Warren Enterprises had the following events during Year 1: The business issued $21,000 of common stock to its stockholders. The business purchased land for $13,000 cash. Services were provided to customers for $17,000 cash. Services were provided to customers for $6,000 on account. The company borrowed $17,000 from the bank. Operating expenses of $13,000 were incurred and paid in cash. Salary expense of $900 was accrued. A dividend of $5,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, the amount of retained earnings as of December 31, Year 1 would be:
Answer:
$4,100
Explanation:
Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.
Net income is the difference between the sales and the cost incurred by an entity.
hence the net income of Warren enterprises
= $17,000 + $6,000 - $13,000 - $900
= $9,100
The amount of retained earnings as at end of December 31, Year 1
= $9,100 - $5,000
= $4,100
Crowder Company acquired a tract of land containing an extractable natural resource. Crowder is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows:
Land $9,000,000
Estimated restoration costs 1,500,000
If Crowder maintains no inventories of extracted material, what should be the depletion expense per ton of extracted material?
a. $2.10
b. $1.90
c. $1.80
d. $1.60
Answer:
B) $1.90
Explanation:
total reserves = 5,000,000 tons
value after restoration = $1,000,000
land cost:
land $9,000,000
restoration costs $1,500,000
total depreciable value = $9,000,000 + $1,500,000 - $1,000,000 = $9,500,000
using the units of depletion depreciation method, the depletion expense per ton = total depreciable value / total reserves = $9,500,000 / 5,000,000 tons = $1.90 per ton
this means that for every ton of extracted material, the company must record a $1.90 depletion expense.
Final answer:
The depletion expense per ton for the Crowder Company, considering the costs of the land and the estimated restoration costs against the recoverable reserves, is $2.10 per ton.
Explanation:
The student is asking how to calculate the depletion expense per ton of extracted material for the Crowder Company. The company acquired land with an extractable natural resource and is obliged to restore the land after extraction. We know the cost of the land is $9,000,000 and the estimated restoration costs are $1,500,000. We also know that the geological surveys estimated the recoverable reserves to be 5,000,000 tons. To calculate the depletion expense per ton, we need to sum the cost of the land ($9,000,000) and the restoration costs ($1,500,000), resulting in a total of $10,500,000. Then we divide this total cost by the recoverable reserves in tons to find the depletion expense per ton.
The formula is: Depletion Expense per Ton = (Land Cost + Restoration Costs) / Recoverable Reserves. So, Depletion Expense per Ton = ($9,000,000 + $1,500,000) / 5,000,000 tons = $2.10 per ton.