Answer:
b. $225,000
Explanation:
The computation of the change in annual net operating income is shown below:
First we need to do following calculations
Sales of Division P is
= Sale Units × Sales Price Per Unit
= 60,000 × $100
=$6,000,000
Variable Cost is
= Sale Units × Variable Cost Per Unit
= 60,000 × $65
= $3,900,000
Now Current Operating Income is
= Sales - Variable Cost
= $6,000,000 - $3,900,000
= $2,100,000
Operating Capacity of Division P is 75,000 Units
If Division Q buy 30,000 wheel sets annually from Division P at $87 than Operating Income of Division P:-
= 75,000 - 30,000
= 45,000 Units
Sales is
= 45,000 Units × $100 + 30,000 units × $87
= $45,00,000 + $26,10,000
= $71,10,000
Variable Cost is
= 75,000 Units × $65
= $48,75,000
Post Operating Income is
= Sales - Variable Cost
= $7,110,000 - $4,875,000
= $22,35,000
Increase in Operating Income of Division P is
= Post Operating Income - Current Operating Income
= $2,235,000 - $2,100,000
= $135,000
Increase in Operating Income of Division Q is
= Sale Units × (Outside Supplier Cost Per Unit - Division P Cost Per Unit)
= 30,000 Units × ($90 - $87)
= $90,000
If Q buy the Wheel From Division P. Q saves $3 per wheel set.
Increase in Operating Income of Company is
= Increase in Operating Income of Division P + Increase in Operating Income of Division Q
= $135,000 + $90,000
= $225,000
GoSnow sells snowboards. Each snowboard requires direct materials of $128, direct labor of $53, and variable overhead of $63. The company expects fixed overhead costs of $301,000 and fixed selling and administrative costs of $229,000 for the next year. The company has a target profit of $189,800. It expects to produce and sell 11,800 snowboards in the next year. Compute the selling price using the variable cost method. (Round your answer to 2 decimal places.)
Answer:
Unitary selling price= $304.93
Explanation:
Giving the following information:
Unitary variable costs:
direct materials of $128
direct labor of $53
the variable overhead of $63.
Fixed costs:
The fixed overhead costs of $301,000
Fixed selling and administrative costs of $229,000
The company has a target profit of $189,800.
Units sold= 11,800 snowboards
First, we need to calculate the total contribution margin required:
Contribution margin= net profit + total fixed expense
Contribution margin= 189,000 + (301,000 + 229,000)
Contribution margin= $719,000
Now, we calculate the total variable expense:
Total variable cost= 11,800* (128 + 53 + 63)
TVC= 2,879,200
Finally, we calculate total sales and the unitary selling price:
Total sales= contribution margin + total variable cost
Total sales= 719,000 + 2,879,200= 3,598,200
Unitary selling price= 3,598,200/11,800= $304.93
Mike Derr and Mark Finger form a partnership by combining assets of their separate businesses. The following balance sheet is from Derr's sole proprietorship. The market value of Derr's equipment is $5,000 and the market value of land is $8,000. Balance Sheet Assets Liabilities Cash $ 1,000 Accounts payable $ 4,500 Supplies 3,000 Notes payable 3,100 Equipment $ 11,000 Total liabilities 7,600 Accumulated depreciation—Equip. (9,000 ) 2,000 Equity Land 4,000 M. Derr, Capital 2,400 Total assets $ 10,000 Total liabilities and equity $ 10,000 Prepare the partnership’s journal entry to record Derr’s investment.
Answer and Explanation:
According to the scenario, journal entry for the given data are as follows:
Cash A/c Dr. $1,000
Supplies A/c Dr. $3,000
Land A/c Dr. $8,000
Equipment A/c Dr. $5,000
To A/c Payable A/c $4,500
To Notes payable A/c $3,100
To M. Derr capital A/c $9,400 ($1000+$3000+$8000+$5000-$4500-$3100)
(Being Derr's investment is recorded)
Final answer:
To record Mike Derr's investment in the partnership with Mark Finger, adjust the equipment and land to their market values, remove accumulated depreciation, and prepare a journal entry with debits for assets added and credits for liabilities assumed and capital attributed.
Explanation:
When forming a partnership, the assets contributed by the partners must be recorded at their agreed-upon market value. In the case of Mike Derr's investment in the partnership with Mark Finger, we need to adjust the equipment and land values based on the market values provided and eliminate the accumulated depreciation on the equipment. Here is the journal entry for Derr's investment:
Cash $1,000Supplies $3,000Equipment $5,000 (market value, since the historical cost and accumulated depreciation are not relevant)Land $8,000 (market value)
These are debits to the new partnership's asset accounts. The credits to balance the entry will be:
Accounts Payable $4,500 (liability assumed by the partnership)Notes Payable $3,100 (liability assumed by the partnership)M. Derr, Capital $9,400 (calculated as total debits minus total credits already listed)
The entry records the assets Mike Derr is contributing to the partnership at their market value and the liabilities that the partnership is assuming.
Ari, Inc. is working on its cash budget for December. The budgeted beginning cash balance is $14,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements total $126,000. The desired ending cash balance is $40,000. Any borrowing is in multiples of $1,000 and interest is paid in the month following the borrowing.To attain its desired ending cash balance for December, the company needs to borrow:________.
A. $0.
B. $25,000.
C. $55,000.
D. $40,000.
Answer:
The company needs to borrow $25000 and option B is the correct answer.
Explanation:
If the ending amount of cash for the year is less than the desired ending balance, then the company will need to borrow to maintain the desired level of cash balance.
To calculate the amount needed to be borrowed, we first compute the ending cash balance for December. The ending cash balance will be,
Closing Balance = Opening Balance + Receipts - Payments
Closing Balance - December = 14000 + 127000 - 126000
Closing Balance - December = $15000
The difference between the closing cash balance and the desired closing cash balance is the amount that the firm will need to borrow.
Amount need to be borrowed = 40000 - 15000 = $25000
Ari, Inc. needs to borrow $25,000 to reach its desired ending cash balance for December after accounting for its beginning balance, cash receipts, and disbursements.
Explanation:To determine how much Ari, Inc. needs to borrow in December, we need to consider the desired ending cash balance, initial cash balance, total cash receipts, and total cash disbursements. The calculation is as follows:
Beginning cash balance: $14,000Add: Budgeted cash receipts: $127,000Less: Budgeted cash disbursements: $126,000Equals: Projected ending cash balance without borrowing: $15,000However, the company desires an ending cash balance of $40,000. Therefore, Ari, Inc. needs to borrow the difference between the projected ending balance and the desired ending balance.
Desired ending balance - Projected ending balance without borrowing = Amount to borrow
$40,000 - $15,000 = $25,000
Ari, Inc. will need to borrow $25,000 to reach its desired ending cash balance for December.
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Novak Corp. has 7400 shares of 6%, $50 par value, cumulative preferred stock and 148000 shares of $1 par value common stock outstanding at December 31, 2020, and December 31, 2019. The board of directors declared and paid a $14000 dividend in 2019. In 2020, $70000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2020?
Answer:
The dividends received by the preferred stockholders in 2020 are $30400.
Explanation:
The cumulative preferred stock is the form of preferred stock that accumulates or accrues dividends in case the company does not pay or partially pay dividends to preferred stock in a particular year. This means that the dividends are accrued and the company will need to pay these dividends first in the future whenever it declares dividends.
The total dividends per year on preferred stock is,
Preferred Stock dividends = 50 * 0.06 * 7400 = $22200 per year
The preferred stock dividend that was accrued at the end of 2019 after the dividend payment of $14000 is,
Accrued dividends - Preferred stock = 22200 - 14000 = $8200
In 2020 the company will need to pay this accrued dividend along with the dividend for 2020 on preferred stock. Thus, in 2020 the preferred stock holders will receive dividends of,
Preferred stock dividend to be paid in 2020 = 8200 + 22200 = $30400
Marissa, a product manager, thinks her company's InstaCup coffee maker is currently in the growth stage of the product life cycle. If so, the profits for the InstaCup coffee maker ___ and the number of competitors ____. a. are declining; is growing b. are negative; is growing c. have peaked; is declining d. are increasing; is growing e. are declining; is declining
Answer:
D.
Explanation:
A Product Life Cycle is a cycle of growth or decline that a product goes through in a market. The cycle defines the business and sales measures of the product. The cycle is divided into four stages: Introduction, Growth, Maturity, and Decline.
The stage at which Merissa's company InstaCup Coffee is the Maturity Stage.
In the stage, the growth of the sales reaches its highest peak while the product reaches its maximum. At this stage, while the product reaches it peak the competition also begins to increase. The profits of Marissa's InstaCup coffee maker are increasing as well as the number of competitors.
So, from the given options the correct one is D.
In the growth stage of the product life cycle, the profits for the InstaCup coffee maker are increasing, and the number of competitors is growing.
Explanation:Considering that Marissa, a product manager, believes her company's InstaCup coffee maker is currently in the growth stage of the product life cycle, the profits for the InstaCup coffee maker should be increasing, and the number of competitors in the market is likely growing. During the growth stage, a product typically experiences rapid sales growth, increasing market acceptance, and expanding profits as more consumers are aware of and are willing to purchase the product. Additionally, seeing the success of the product, more competitors are enticed to enter the market with similar offerings. Hence, the correct answer to her statement is 'd. are increasing; is growing'.
aurum Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below.
Small Medium Large
Unit selling price $400 $600 $1,200
Unit costs:
Variable manufacturing (220) (280) (500)
Fixed manufacturing (80) (130) (240)
Fixed selling and administrative (60) (75) (120)
Unit profit $ 40 $ 115 $340
Demand in units 100 120 100
Machine-hours per unit 20 40 100
The maximum machine-hours available are 6,000 per week.
Which of the three product models should be produced first of management incorporates a short-run profit maximizing strategy?
Answer:
The large application should be produced first by management in order to incorporate short run profit maximizing strategy.
Explanation:
In order to maximize profit in the short run by management, we need to calculate the unit profit per machine hour for each appliances. Using the following formulae, as shown below:
Unit Profit / Machine-hours per unit = Unit Profit per Machine hour
Small Application
40 / 20 = $2 per machine hour
Medium Application
115 / 40 = $2.875 per machine hour
Large Application
340 / 100 = $3.4 per machine hour
As per the above calculation the large application gives the highest profit per machine hour so should be produced first. Afterwards if any machine hour is left then medium application should be produced second and finally, small application third.
Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, Capital account balances were as follows:
Dancey, capital $ 72,000
Reese, capital 32,000
Newman, capital 52,000
Jahn, capital 24,000
Which one of the following statements is true for a predistribution plan?
A. The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments equally.B. The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios.C. The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments equally.D. The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments in their profit and loss sharing ratios.E. The first $20,000 would go to Newman. The next $8,000 would go to Dancey. The next $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $40,000 before all four partners share any further payments equally.
Answer:
0
Explanation:
-The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios First eliminate lowest value
J = $24,000 - $24,000 = 0
D = $72,000 - $48,000 = $24,000 - $16,000 = $8,000 - $8,000 = 0
R = $32,000 - $24,000 = $8,000 – $8,000 = 0
N = $52,000 - $24,000 = $28,000 – $8,000 = $20,000 – $4,000 = $16,000.
Damon Company receives its monthly bank statement, which reports a balance of $2,000. After comparing this to the company’s cash records, Damon’s accountants determine that deposits outstanding total $4,200 and checks outstanding total $4,450. Required: Calculate the reconciled bank balance for cash. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
The reconciled bank balance for cash is $1,750.
Explanation:
Bank reconciliation statement is prepared to reconcile the bank statement of a company to the balance per cash book (general ledger). The discrepancies between the two books are as a resulting of timing of transactions, outstanding checks, direct credit transfers to bank, among others.
The following is a way of reconciling the balance per bank statement to the cash book:
Damon Company
Bank reconciliation statement
Balance per bank statement $2,000
Add: Outstanding deposit $4,200
Less: Outstanding checks ($4,450)
Balance per cash book $1,750
Therefore, the reconciled bank balance for cash is $1,750.
John plans to make an investment today which promises to return to him $6,000 each year for five (5) years beginning one year from today. The investment account will earn 7% compounded annually. At the end of five years, the investment account balance will be zero.
What is the amount of John’s monthly payment?
Answer:
Give me a quick sec. Imma solve it out.
Explanation:
Imma solve it out. Gotta give me a sec
Nickel Inc. purchased a tract of land as a possible future plant site in 2013. Valuable sulfur deposits were discovered on the land in March of 2018 and the company immediately began explorations on its property. In December of 2018, after incurring $800,000 in exploration costs, which were accumulated in an expense account, Nickel Inc. had the sulfur deposits appraised at $4,500,000 which is more than the value of the land. What should the company do to record the discovery of the deposits
Answer:
Debit $ 800,000 to the Asset Account.
Explanation:
With the help of successful efforts process we will find the solution of the given problem .The successful efforts process stated that,if the company are upgrading only those expenses or the cost that are involved with the discovery of oil and the gas then reserves are identified.
The successful efforts process stated that when the cost of exploration is achieved then the cost of the exploration is capitalized .So the sulfur reserves were identified therefore $800,000 in exploration expenses would be debited to the Asset Account.Skysong, Inc., spent $50,400 in attorney fees while developing the trade name of its new product, the Mean Bean Machine. Prepare the journal entries to record the $50,400 expenditure and the first year’s amortization, using an 8-year life. Use the account title "Trade Names". (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer and Explanation:
The Journal entry is shown below:-
Trade Names Dr, $50,400
To Cash $50,400
(Being trade names is recorded)
Here we debited trade names as it increasing the assets and we credited the cash as decreasing the assets.
Amortization Expense Dr, $6,300
($50,400 ÷ 8)
To Trade Names $6,300
(Being amortization expenses is recorded)
Here, we debited the amortization expenses are increased the expenses and we credited the trade names as decrease the assets.
Final answer:
The expenditure on attorney fees for the trade name is recorded by debiting Trade Names and crediting Cash. The first year's amortization is recorded by debiting Amortization Expense and crediting Accumulated Amortization - Trade Names with $6,300, based on an eight-year life.
Explanation:
The expenditure and subsequent amortization of the trade name costs for Skysong, Inc. involve two separate journal entries. Initially, the expenditure for the attorney fees to develop the trade name must be recorded. Then, the amortization of the trade name cost over its useful life begins. Since the trade name has an eight-year life, the annual amortization expense would be calculated by dividing the initial cost by the number of years.
To record the $50,400 expenditure for developing the trade name, the entry would be:This represents an equal yearly distribution of the cost, which is ($50,400 divided by 8 years) = $6,300 per year.
Benjamin Company had the following results of operations for the past year: Sales (16,500 units at $16) $ 264,000 Direct materials and direct labor $ 165,000 Overhead (20% variable) 33,000 Selling and administrative expenses (all fixed) 28,050 (226,050) Operating income $ 37,950 A foreign company offers to buy 4125 units at $10.40 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $640 and selling and administrative costs by $580. Assuming Benjamin's productive capacity is 16,500 units per year and it accepts the offer, its profits will:
Answer:
profits will decrease by $1,220
Explanation:
Consider the Incremental Costs and Revenues that arise from accepting the offer.
Sales ( 4125 units×$10.40) 42,900
Direct materials and direct labor ( $ 165,000/16,500 ×4125 units) (41,250)
Variable Overheads (33,000×20%)/16,500 ×4125 units) (1,650)
Incremental Fixed overheads (640)
Incremental selling and administrative costs (580)
Incremental Income/(loss) (1,220)
Therefore profits will decrease by $1,220 if it accepts the offer.
If Benjamin Company accepts the foreign company's offer, its profits will decrease by $10,042.50.
Benjamin Company's current operation involves selling 16,500 units at $16 each, resulting in a total sales revenue of $264,000. The company incurs direct materials and direct labor costs of $165,000, variable overhead costs of $33,000, and fixed selling and administrative expenses of $28,050, resulting in an operating income of $37,950.
Now, if the company accepts the foreign company's offer to buy 4,125 units at $10.40 per unit, the new sales revenue from these units would be $42,840. However, this decision comes with additional costs. Selling these units would increase variable manufacturing costs, fixed overhead, and selling and administrative costs by $10,042.50 (calculated as $4.40 * 4,125 units + $640 + $580).
As a result, the overall effect on profits would be a decrease of $10,042.50. This reduction in profits is attributed to the lower selling price of the units and the added variable and fixed costs associated with the foreign company's offer.
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Equipment which cost $426,000 and had accumulated depreciation of $228,000 was sold for $222,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n):________.
A) deduction from net income of $24,000 and a $222,000 cash inflow from investing activities.
B) deduction from net income of $24,000 and a $198,000 cash inflow from investing activities.
C) addition to net income of $24,000 and a $222,000 cash inflow from financing activities.D) addition to net income of $24,000 and a $198,000 cash inflow from financing activities.
Answer:
A) deduction from net income of $24,000 and a $222,000 cash inflow from investing activities
Explanation:
The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.
The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.
The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.
When an asset is sold, the gain on disposals is a non cash items that will be deducted (or added where a loss was made on disposal) to the net income. The amount received from the disposal is recognized as an inflow in the investing section of the cash flow statement.
The gain/(loss) from disposal
= $222,000 - ($426,000 - $228,000)
= $24,000
Which of the following is an example of a task conflict? Sally and her manager have just had a heated argument because Sally feels she has been overlooked for a promotion that was her rightful due. Henry and Solomon have been reprimanded by their project lead for spending too much time using the Internet for personal use at work. Linda and Dorothy had a disagreement over which of their employees should be assigned to work on a high-priority project. The company head has resigned after longstanding conflict between him and his top management employees. Will and Hilda have been removed from the team they worked with after they were overheard making derogatory comments about one of their colleague's racial origin.
Answer:
Linda and Dorothy had a disagreement over which of their employees should be assigned to work on a high-priority project.
Explanation:
Linda and Dorothy having a disagreement over which of their employees should be assigned to work on a high-priority project is an example of a task conflict.
Task conflict occurs in a business or an organization when two staffs or employees aren't able to forge ahead on a task as a result of divergent and differing opinions, needs and attitudes.
Also, it could be conflict over procedures for executing a task, organizational policies and distribution of resources or the method of delegating a specific tasks thus limiting the achievement of set goals and objectives of the organization.
The task conflict is the conflict or the disagreement in the workplace between differing attitudes, and differing working style. It occur due to accomplishment of the work in the best possible manner.
The example of task conflict is:
Linda and Dorothy had a disagreement over which of their employees should be assigned to work on a high-priority project.
In the given case the task conflict occurred when two employees were unable to forge ahead on the task decided for occurring the result as a divergent and having differing opinions, needs, and attitudes.
The task conflict may occur over procedures for exercising the task.
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Which of the following is true? Internal equity is cheaper than external equity. The advantage of using debt for a firm is that it increases the chance of going bankruptcy. The chance of going bankruptcy tends to be very low for a firm, therefore, firms can ignore it when determining their capital structure. The before-tax and after tax cost of equity is different.
Answer:
Yes it is True that Internal equity is cheaper than external equity.
Explanation:
Internal equity compares the pay rates between colleagues in the same firm. It is used as standard to ensure fairness. It is the net income realized after subtracting tax and liabilities as well as expenses incurred.
External equity on the other hand is comparing the pay workers in different organizations. It helps to set a benchmark for payment of staff at the same grade level in different companies. It can be used as a yardstick to measure whether a particular company's pay rate competes favorably with other companies.
Internal equity also called retained earnings is generally less expensive than external equity for tax reasons among others.
You are valuing a company that is projected to generate a free cash flow of $10 million next year, growing at a stable 3.0% rate in perpetuity thereafter. The company has $22 million of debt and $8.5 million of cash. Cost of capital is 10.0%. There are 50 million shares outstanding. How much is each share worth according to your valuation analysis
Answer:
$2.67 per share
Explanation:
To start with,we calculate the present worth of the company using the below formula:
present worth of the company=free cash flow*(1+g)/r-g
g is the growth rate of the free cash flow which is 3.0%
r is the cost of capital of 10%
present worth=$10 million*(1+3%)/10%-3%
=10.3/7%
=$ 147.14 million
However ,the value of total equity is computed thus:
equity=present worth+cash-debt
cash is $8.5 million
debt is $22 million
equity=$ 147.14 +$8.5-$22
equity=$133.64 million
value of each share=equity value /number of shares
number of shares is 50 million
value of each=$133.64 million/50 million=$2.67 per share
Dorglass Incorporated reported the following information about the production and sale of its only product during the first month of operations: Selling price per unit $225 Sales $360,000 Direct materials used $176,000 Direct labor $100,000 Variable factory overhead $44,000 Fixed factory overhead $80,000 Variable selling and administrative expenses $20,000 Fixed selling and administrative expenses $10,000 Ending inventory, Direct Materials 0 Ending inventory, Work-in-process 0 Ending inventory, Finished Goods 400 units Under Variable Costing, the Product (Inventoriable) Cost per unit is ________. A. $225 B. $160 C. $200 D. $170
Answer:
B. $160
Explanation:
For computing the product cost per unit first we have to find out the total number of units which is
= $360,000 ÷ $225 + 400 units
= 1,600 units + 400 units
= 2,000 units
Now the product cost per unit is
= (Direct material used + direct labor + variable factory overhead) ÷ ( total units)
= ($176,000 + $100,000 + $44,000) ÷ (2,000 units)
= ($320,000) ÷ (2,000 units)
= $160
A machine can be purchased for $140,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied using a five-year life and a zero salvage value. Year 1 Year 2 Year 3 Year 4 Year 5 Net income $ 9,500 $ 23,500 $ 64,000 $ 35,500 $ 94,000 Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.)
Answer:
Payback is 4.08 years
Explanation:
The payback period is the number of years it take an initial investment outlay to repay itself.
When an even amount of cash flow is involved,the payback period is simply the initial investment divided by annual cash inflow.
However,an uneven cash flow situation like this is better handled using an excel approach where the payback year is the year prior to the year in which the cumulative cash inflow becomes positive plus a a fraction of the year tha follows as shown in the attached
Paney Company makes calendars. Information on cost per unit is as follows: Direct materials: $1.50 Direct labor: $1.20 Variable overhead: $0.90 Variable marketing expense: $0.40 Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. What is the break-even point in units?
Answer:
Break-even point in units= 8,000 units
Explanation:
Giving the following information:
Variable costs:
Direct materials $1.50
Direct labor 1.20
Variable overhead 0.90
Variable marketing expense 0.40
Total variable costs= 4
Fixed costs:
The fixed marketing expense totaled $13,000
The fixed administrative expense totaled $35,000.
Total fixed costs= $48,000
The price per calendar is $10.
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 48,000/ (10 - 4)
Break-even point in units= 8,000 units
Longhorn Company reports current E&P of $100,000 in 20X3 and a deficit of ($200,000) in accumulated E&P at the beginning of the year. Longhorn distributed $300,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $100,000. How is the distribution treated by the shareholder in 20X3?
Answer: Dividend of $100,000, Capital Gain of $100,000 and Tax Free Return on basis of $100,000
Explanation:
Longhorn Company reports current E&P of $100,000 in 20X3 and still distributed $300,000 to it's sole shareholder. Because it had $100,000 in current E&P, that is all it can declare as Dividends. For this reason, the shareholder will recognize $100,000 as Dividends.
The Shareholder has a basis of $100,000 in the stock of Longhorn. As a result of this, $100,000 of the Distribution will be termed a TAX FREE Return on Basis because he is receiving a return on his basis that is neither a dividend nor capital gain.
The remaining $100,000 will be considered a Capital Gain as it reflects a rise in his stock.
With practical illustrations discuss how managers can leverage on organizational behaviour component to maximize business success
Answer:
Leadership, Communication and culture are the components of organization structure.
(Check Explanation for how they can be used to maximize business success).
Explanation:
So, organization behaviour is an aspect of Psychology and sociology that deals with the ways in which workers and employees behave are act in a specific company or business organization.
Just as it is stated above; Leadership, Communication, structure and culture are the components of organization structure and these components can be to maximize business success.
CULTURE: A company's culture can be use in maximizing business success through the way the workers in the company are expected (from their culture) to treat their customers. The culture is used in the assessment of PERSONALITIES that are needed to be recruited for the role in the organization for efficiency in the role so as to maximize success.
LEADERSHIP: the style of leadership adopted by each organization determines the way in which success can be maximized. Whether through the style in which the workers' s talent are being nurtured and ideas are collected from the employers or through the leadership style in which the leader dictates it all.
STRUCTURE: knowing the structure of an organization helps in maximizing success that is to say the workers know how management and authority operates which will aid in efficient success maximization.
A firm's target capital structure is 40 percent debt and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm's marginal tax rate is 20 percent. The firm's policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium approach to find the cost of retained earnings (note that retained earnings is internally generated equity). The firm uses no preferred stock.
Required:
1. Calculate the firm's weighted average cost of capital (WACC).
Answer:
The firm's weighted average cost of capital (WACC) is 13.44%
Explanation:
According to the given data we have the following:
YTM = 12% = Pretax Cost of Debt
Cost of Equity = 12% + 4% = 6%
Therefore, to calculate the firm's weighted average cost of capital (WACC) we would have to use the following formula:
WACC = Weight of debt * Pretax cost of debt * (1 - Tax) + Weight of equity * Cost of Equity
WACC = 40% * 12% * (1 - 20%) + 60% * 16%
WACC = 13.44%
Which Brass instrument does not use valves?
(1 point)
Extra Content
T
A.
Trumpet
B.
Trombone
C.
French Horn
D.
Tuba
Answer:
Trombone- it's the only brass instrument that doesn't have valves
Explanation:
f currency in circulation is $600 billion, total reserves of the banking system are $800 billion, and total checkable deposits are $2 comma 900 billion, what is the maximum increase in the money supply that can result from the transaction in part (a)? (That is, the maximum increase after all actions resulting from the transaction in part (a) have occurred.) Be sure to use the realistic money multiplier, as opposed to the simple deposit multiplier, in the calculatio
Answer:
250
Explanation:
$600 billion +$2,900 billion /$600 billion +$800 billion
=$3,500 billion/$1,400 billion
=2.5
=2.5×100
=250
Jiminy’s Cricket Farm issued a 15-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 91 percent of its face value. The company’s tax rate is 38 percent. Suppose the book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 51 percent of par. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total book value $ What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total market value $ What is your best estimate of the aftertax cost of debt? (Round your answer to 2 decimal places. (e.g., 32.16)) Cost of debt %
Answer:
Find the answers below
Explanation:
The total book value of the debt is the sum of the two bonds book values
total book value=$60 million+$35 million=$95 million
Total market value of bonds is the sum of the two bonds market values
total market values=$60 million*91%+$35 million*51%
=$54.6 million+$17.85 million=$72.45 million
After tax cost of debt =pretax cost of debt*(1-t) where t is the tax rate of 38% or 0.38
For the first bond:
=rate(nper,pmt,-pv,fv)
nper is the number of interest the bonds would pay from now on,i.e (15-4)*2=22
pmt is the semiannual interest payment,which is:$60 million*10%/2=$3 million
pv is the market value of $54.6 million
fv is the book value of $60 million
=rate(22,3,-54.6,60)=5.73%
5.73% is the semiannual rate ,where 11.46% is the annual rate
after tax cost of debt=11.46%*(1-0.38)=7.11%
the second bond:
nper is 11 (11 years left to maturity)
pmt is nil since it is a zero coupon bond
pv is $17.85 million
fv is $35 million
=rate(11,0,-17.85,35)=6.31%
after tax cost of debt=6.31% *(1-0.38)=3.91%
The market price of a security is $25. Its expected rate of return is 12%. The risk-free rate is 4% and the market risk premium is 6.0%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Given Information:
Market price of security = $25
Expected rate = 12%
Risk-free rate = 4%
Market risk premium = 6%
Answer:
New market price of security = $15.03
Explanation:
The new market price of security can be calculated by,
P = Dividend/Expected return
Where Dividend is given by
Dividend = Market price*Expected rate
D = $25*0.12
D = 3$
Expected return is given by
Expected return = Risk-free rate + β*(market risk premium)
β can be calculated as
β = (Expected rate - Risk-free rate)/market risk premium
β = (12 - 4)/6
β = 1.33%
Since it is given that correlation coefficient with the market portfolio doubles, therefore, β will get doubled too because they are directly proportional.
β = 2*1.33%
β = 2.66%
So the Expected return is
Expected return = 4 + 2.66*(6)
Expected return = 19.96%
So the new market price of security is,
P = Dividend/Expected return
P = 3/0.1996
P = $15.03
You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar value of your positions in X, Y, and the T-bills, respectively, if you decide to hold a portfolio that has an expected outcome of $1,120? Group of answer choices a.$568; $54; b.$378 $108; c.$514; $378 d.$378; $54; e.$568 $568; f.$378; $54
Answer:
c)$568; $378; $54
Explanation:
($1,120 - $1,000)/$1,000 = 12%
(0.6)14% + (0.4)10% = 12.4%
12% = w5% + 12.4%(1 - w)
w = .054
1-w = .946
w = 0.054($1,000)
= $54 (T-bills)
1 - w = 1 - 0.054 = 0.946
0.946($1,000) = $946
$946 x 0.6 = $568 in X
$946 x 0.4 = $378 in Y.
Final answer:
To achieve an expected outcome of $1,120, invest $672 in X, $448 in Y, and $0 in T-bills.
Explanation:
The expected outcome of $1,120 can be achieved by investing in a T-bill, risky securities X and Y.
The dollar value of positions in X, Y, and T-bills would be $378, $54, and $688, respectively.
Calculations:
X position = $1,120 * 0.60 = $672
Y position = $1,120 * 0.40 = $448
T-bill position = $1,120 - $672 - $448 = $0
BBBC is considering a similar mail campaign in the Midwest where it has data for 50,000 customers. Such mailings typically promote several books. The allocated cost of the mailing is $0.65/addressee (including postage) for the art book, and the book costs $15 to purchase and mail. The company allocates overhead to each book at 45% of cost. The selling price of the book is $31.95. Based on the model, which customers should Bookbinders target? How much more profit would you expect the company to generate using these models as compare to sending the mail offer to the entire list.
Final answer:
Bookbinders should focus on profitable customers to increase overall profit.
Explanation:
Based on the given information, Bookbinders should target the customers who are most likely to generate the highest profit. To determine this, we need to consider the cost and revenue associated with the mail campaign.
1. Calculate the cost of sending the mail offer to the entire list:
- Number of customers in the Midwest: 50,000
- Cost per addressee: $0.65
- Total cost of mailing = Number of customers * Cost per addressee = 50,000 * $0.65 = $32,500
2. Calculate the cost and revenue for each book:
- Book cost (including mailing) = $15
- Overhead cost (45% of book cost) = 45% * $15 = $6.75
- Total cost per book = Book cost + Overhead cost = $15 + $6.75 = $21.75
- Selling price of the book = $31.95
3. Calculate the profit for each book:
- Profit per book = Selling price - Total cost per book = $31.95 - $21.75 = $10.20
In summary, Bookbinders should target customers who are most likely to generate profit, but without additional information such as customer preferences or response rates, it is not possible to determine which customers to target. Additionally, the expected additional profit cannot be calculated without the response rate and conversion rate.
The following information is provided for each division. Investment Center Net Income Average Assets Cameras and camcorders $ 4,500,000 $ 20,000,000 Phones and communications 1,500,000 12,500,000 Computers and accessories 800,000 10,000,000 Assume a target income of 12% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.)
Answer:
Cameras & Camcorders = $2,100,000
Phones & Communication = 0
Computers &Accessories = -$400,000
Explanation:
Computation of the given data are as follow:-
Target Income = Average Assets × Target Income Rate of Average Invested Assets
Cameras & Camcorders = $20,000,000 × 12÷100 = $2,400,000
Phones &Communication = $12,500,000 × 12÷100 = $1,500,000
Computers &Accessories = $10,000,000 × 12÷100 = $1,200,000
Residual Income = Net Income - Target Income
Cameras & Camcorders = $4,500,000 - $2,400,000 = $2,100,000
Phones & Communication = $1,500,000 - $1,500,000 = 0
Computers &Accessories = $800,000 - $1,200,000 = -$400,000
Final answer:
Residual income is calculated by subtracting the target income from the net income of each division. For Cameras and Camcorders, the residual income is $2,100,000. Phones and Communications breaks even, and Computers and Accessories has a negative residual income of -$400,000.
Explanation:
Calculating Residual Income
To calculate the residual income for each division, we first determine the target income by applying the target return rate (which is 12%) to the average invested assets. The residual income is then computed by subtracting this target income from the net income of each division.
For the Cameras and Camcorders division:
Target Income = 12% of $20,000,000 = $2,400,000
Residual Income = Net Income - Target Income
Residual Income = $4,500,000 - $2,400,000 = $2,100,000
For the Phones and Communications division:
Target Income = 12% of $12,500,000 = $1,500,000
Residual Income = Net Income - Target Income
Residual Income = $1,500,000 - $1,500,000 = $0
For the Computers and Accessories division:
Target Income = 12% of $10,000,000 = $1,200,000
Residual Income = Net Income - Target Income
Residual Income = $800,000 - $1,200,000 = -$400,000
Blue Corporation purchases a patent from Crane Company on January 1, 2020, for $41,000. The patent has a remaining legal life of 16 years. Blue feels the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Blue’s books is $32,800. In January, Blue spends $29,600 successfully defending a patent suit. Blue still feels the patent will be useful until the end of 2029. Prepare the journal entries to record the $29,600 expenditure and 2022 amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Final answer:
To record Blue Corporation's patent defense expenditure, debit the patent account and credit Cash. Then, calculate the patent's new carrying amount and record the 2022 amortization based on the remaining useful life.
Explanation:
When Blue Corporation purchased a patent from Crane Company, it was expected to be useful for 10 years. Spending $29,600 defending the patent suit is an additional investment into the patent, which effectively increases its carrying value. The patent's amortization should reflect the revised carrying amount over the remaining useful life from the date of the legal expenditure.
The journal entry to record the legal expenditure, assuming this adds value to the patent and is not immediately expensed, would be:
Patents (or Patent defense expenditure) Dr. $29,600
Cash Cr. $29,600
Next, to calculate the amortization for the year 2022, first, we adjust the carrying amount of the patent:
Carrying amount as of January 1, 2022: $32,800
Add: Patent defense expenditure: $29,600
New carrying amount: $62,400
Then we calculate the amortization expense:
Amortization for 2022 = New carrying amount / Remaining useful life of the patent (which is 8 years from 2022 to the end of 2029)
Amortization for 2022 = $62,400 / 8 = $7,800
The journal entry to record the amortization for 2022 would be:
Amortization Expense Dr. $7,800
Accumulated Amortization - Patents Cr. $7,800