Answer and Explanation:
The Preparation of departmental contribution to overhead report is shown below:-
Departmental income statement for 2019
Sales $605,000
Less: Cost of goods sold ($425,000)
Less: Salaries ($112,000)
Less: Utilities ($14,000 )
Less: Depreciation ($42,000 )
Less: Office Expense ($20,000)
Net income (loss) ($8,000)
The Preparation of departmental contribution to overhead report is shown below:-
Sales $605,000
Less: Direct Expenses:
Cost of goods sold ($425,000)
Salaries ($97,000)
($112,000 - $15000)
Utilities ($11,000)
($14,000 - $3000)
Depreciation ($32,000)
($42,000 - $10,000)
Contribution to overhead $40,000
The Ski department of Jansen Company is profitable with a net income of $40,000 and contributes $48,000 to overhead costs. Therefore, it may not be beneficial for Jansen to consider eliminating it.
To prepare the departmental income statement for 2019, and the departmental contribution to overhead report for 2019 for Jansen's Ski department, we first need to separate the direct and indirect costs.
Here's the departmental income statement for 2019:
Sales: $605,000Cost of Goods Sold: $425,000Gross Profit: $180,000 (Sales - COGS)Direct Salaries: $97,000 ($112,000 - $15,000)Direct Utilities: $11,000 ($14,000 - $3,000)Direct Depreciation: $32,000 ($42,000 - $10,000)Net Income: $40,000 (Gross Profit - Direct Costs)And here's the departmental contribution to overhead report for 2019:
Indirect Salaries: $15,000Indirect Utilities: $3,000Indirect Depreciation: $10,000Office Expenses: $20,000Total Contribution to Overhead: $48,000Given the net income of $40,000 and the contribution to overhead of $48,000, it may not be beneficial for Jansen to consider eliminating the ski department.
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Chester's Elite product Cid has an awareness of 72%. Chester's Cid product manager for the Elite segment is determined to have more awareness for Cid than Andrews' Elite product Agape. She knows that the first $1M in promotion generates 22% new awareness, the second million adds 23% more and the third million adds another 5%. She also knows one-third of Cid's existing awareness is lost every year. Assuming that Agape's awareness stays the same next year (77%), out of the promotion budgets below, what is the minimum Chester's Elite product manager should spend in promotion to earn more awareness than Andrews' Agape product?
Final answer:
To surpass the competitor's product awareness of 77%, Chester's Elite product manager should spend a minimum of $2 million on promotions, achieving 93% awareness compared to the competitor's 77%.
Explanation:
The question is asking to calculate the minimum amount of promotion budget required to increase product awareness above that of a competitor's product. To solve this, we first calculate the loss of awareness due to the one-third attrition rate, and then incrementally add the incremental awareness percentages based on the promotion budget.
Chester's Cid starts with 72% awareness, and it loses one-third of it every year. To calculate the lost awareness:
Lost awareness = 72% / 3 = 24%Remaining awareness = 72% - 24% = 48%Now we add the new awareness based on promotion spending:
First $1M adds 22%: Total awareness = 48% + 22% = 70%Second $1M adds 23%: Total awareness = 70% + 23% = 93%Third $1M adds 5%: Total awareness = 93% + 5% = 98%Since Agape's awareness is 77%, the product manager needs to achieve more than this percentage. Spending the first million will lead to a total of 70% awareness, which is not enough. Spending the second million will bring total awareness to 93%, which is higher than 77%. Therefore, the minimum promotion budget to achieve a higher awareness level than Agape is $2 million.
An investment fund has the following assets in its portfolio: $40 million in fixed-income securities and $40 million in stocks at current market values. In the event of a liquidity crisis, it can sell its assets at a 96 percent discount if they are disposed of in two days. It will receive 98 percent if disposed of in four days. Two shareholders, A and B, own 6 percent and 8 percent of equity (shares), respectively. Market uncertainty has caused shareholders to sell their shares back to the investment fund. What will the two shareholders receive if the investment fund must sell all its assets in two days, in four days?1A. Two Days $_______millions.B. Two Days $_______millions.2A. Four Days $________millions.B. Four Days $________million.
Answer:
Sells with 2 days:
$ 4,608,000
$6,144,000
Sells within 4 days
$4,704,000
$6,272,000
Explanation:
The computation sell of two days and four days is shown below:-
Sells with 2 days:
Value of fixed-income securities = $40,000,000 × 0.96
= $38,400,000
Value of stock =$40,000,000 × 0.96
= $38,400,000
Total value = $76,800,000
Shareholder A gets from 6% of equity = $76,800,000 × 6%
= $ 4,608,000
Shareholder B gets from 8% of equity = $76,800,000 × 8%
= $6,144,000
Sells within 4 days
Value of fixed-income securities = $40,000,000 × 0.98
= $39,200,000
Value of stock =$40,000,000 × 0.98
= $39,200,000
Total value =$78,400,000
Shareholder A gets from 6% of equity = $78,400,000 × 6%
= $4,704,000
Shareholder B gets from 8% of equity = $78,400,000 × 8%
= $6,272,000
As an exporter, Delios Trading wants to be paid before a consignment is shipped. Correspondingly, its importer in Japan, Abe Imports, wants to pay only upon receipt of the consignment. These conflicting preferences of Delios Trading and Abe Imports are most likely a manifestation of
Answer:
Lack of trust
Explanation:
One of the key important assets to be managed in a business relationship is trust as it aids effective communication and ease the flow of business transaction.
However , trust is not guaranteed in every potential relationship considering the risks involved . That is the reason it is generally believed that one must work to earn a relationship.
In the situation where there is lack of trust , involved parties in a transaction will attempt to take maximum caution in order to mitigate or avoid the risks attached to the business transaction.
Waterway Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. (a) On July 1, (1) Waterway purchased $33,000 of inventory, terms 1/10, n/30, FOB shipping point. (2) Waterway paid freight costs of $1,105. (b) On July 3, Waterway returned damaged goods and received credit of $3,300. (c) On July 10, Waterway paid for the goods.
Answer:
The journal records to record the transactions are:
July 1, purchased merchandise on account, terms 1/10, n/30
Dr Merchandise inventory 34,105
Cr Accounts payable 33,000
Cr Cash 1,105 (freight costs paid in cash)
July 3, damaged goods are returned
Dr Accounts payable 3,300
Cr Merchandise inventory 3,300
July 10, invoice is paid within discount period
Dr Accounts payable 29,700
Cr Cash 29,403
Cr Purchase discounts 297
The 1% discount is applied only to the merchandise invoice and it must be recorded as a contra expense account (purchase discounts) with a credit balance because it reduces COGS.
Matthew company manufactures phones in a two-department process that involve assembly and finishing. the assembly department reported the follow data for the past month:
direct materials added $336,000
direct labor 460,320
factory overhead 204,000
total costs to account for $1,000,320
units started 80,000
units completed and transferred 67,200
units not complete 12,800
units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with respect to materials and 75 percent complete with respect to conversion costs. The unit cost of conversion costs is _______. show your work
a) $3.00
b) $6.00
c) $8.65
d) $9.00
Answer:
c) $8.65
Explanation:
Step 1 Calculate the Total Cost of Conversion
Total Cost of Conversion = Conversion Cost in Beginning Inventory + Added during the period
= 0 + 460,320 + 204,000
= $664,320
Step 2 Calculate the Total Equivalent unit for Conversion Cost
Total Equivalent unit for Conversion Cost
Units completed and transferred (67,200×100%) = 67,200
Units not complete( 12,800×75%) = 9,600
Total = 76,800
Step 3 Calculate unit cost of conversion
unit cost of conversion = Total Cost of Conversion / Total Equivalent unit
= $664,320 / 76,800
= $8.65
Therefore, The unit cost of conversion costs is $8.65
On January 31, 2013, B Corp. issued $600,000 face value, 12% bonds for $600,000 cash. The bonds are dated December 31, 2012, and mature on December 31, 2022. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should B report in its September 30, 2013, balance sheet?
Answer:
The accrued interest payable B should report in its September 30, 2013 is $54,000.
Explanation:
Bonds are long-term liability or debt, usually issued at face value, discount or premium.
The accrued interest payable on September 30, 2013 will be calculated as follows: Face value of the bond x Period interest rate (semi-annual).
Interest accrual: ($600,000 x 12% / 2) + ($600,000 x 12% / 2 x 3/6) = $54,000
Balance sheet and income statement data indicate the following: Bonds payable, 6% (issued 2000, due 2020) $1,200,000 Preferred 8% stock, $100 par (no change during the year) 200,000 Common stock, $50 par (no change during the year) 1,000,000 Income before income tax for year 340,000 Income tax for year 80,000 Common dividends paid 60,000 Preferred dividends paid 16,000.Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)?A) 5.72B) 6.83C) 4.72D) 4.83
Answer:
The correct option is A,5.72 times
Explanation:
The number of times that interest charges gives a sense of how financial stable is in its ability to pay interest on bonds as at when due.It is key consideration for prospective bondholders when assessing whether to buy bonds in a particular company
Number of times interest charges earned=net income before interest/interest
net income before interest charges=net income+interest charges
net income is $340,000
interest charges=$1,200,000*6%=$72,000
net income before interest charges=$340,000+$72,000=$412,000
number of times interest was earned=$412,000/$72,000=5.72
Ayayai Corp. lends Martinez industries $48000 on August 1, 2022, accepting a 9-month, 6% interest note. If Ayayai Corp. accrued interest at its December 31, 2022 year-end, what entry must it make to record the collection of the note and interest at its maturity date
To record the collection of the note and interest at its maturity, Ayayai Corp. first must calculate and record the accrued interest at the year-end, and then upon maturity, record the collection of the total amount received and credit the Notes Receivable and Interest Revenue.
Explanation:The first step is to calculate the accrued interest on December 31, 2022. The note was issued on August 1, so the time period until December 31 is 5 months. To calculate the accrued interest, use the formula principal x interest rate x time (in years).
For our case: $48000 x 0.06 x (5/12) = $1200. So, Ayayai Corp. must record an accrual of $1,200 in interest receivable on December 31, 2022. This is done with a debit to Interest Receivable and a credit to Interest Revenue.
When the note matures 9 months from August 1, which will be in May 2023, both the principal and the full interest are due. The interest for 9 months would be $48000 * 0.06 * (9/12) = $2160. Thus, upon collection, Ayayai would debit Cash for the total amount received (principal + full interest), debit Interest Receivable for $1200, credit Notes Receivable for the principal amount, and credit Interest Revenue for the remaining $960.
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hare Issuances for Cash Chase, Inc., issued 10,000 shares of $20 par value preferred stock at $50 per share and 8,000 shares of no-par value common stock at $20 per share. The common stock has no stated value. All issuances were for cash. a. Prepare the journal entries to record the share issuances. b. Prepare the journal entry for the issuance of the common stock assuming that it had a stated value of $10 per share. c. Prepare the journal entry for the issuance of the common stock assuming that it had a par value of $2 per share.
Answer:
a. Prepare the journal entries to record the share issuances.
Dr Cash 500,000 Cr Preferred stocks 200,000 Cr Additional paid in capital - preferred stocks 300,000Dr Cash 160,000 Cr Common stocks 160,000b. Prepare the journal entry for the issuance of the common stock assuming that it had a stated value of $10 per share.
Dr Cash 160,000 Cr Common stocks 80,000 Cr Additional paid in capital - common stocks 80,000c. Prepare the journal entry for the issuance of the common stock assuming that it had a par value of $2 per share.
Dr Cash 160,000 Cr Common stocks 16,000 Cr Additional paid in capital - common stocks 144,000Answer:
. Prepare the journal entries to record the share issuances.
Dr Cash 500,000
Cr Preferred stocks 200,000
Cr Additional paid in capital - preferred stocks 300,000
Dr Cash 160,000
Cr Common stocks 160,000
b. Prepare the journal entry for the issuance of the common stock assuming that it had a stated value of $10 per share.
Dr Cash 160,000
Cr Common stocks 80,000
Cr Additional paid in capital - common stocks 80,000
c. Prepare the journal entry for the issuance of the common stock assuming that it had a par value of $2 per share.
Dr Cash 160,000
Cr Common stocks 16,000
Cr Additional paid in capital - common stocks 144,000
Explanation:
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A major reason why it is difficult to lower the barriers to free trade is A. the loss of jobs without any gain of jobs from free trade. B. the uneven distribution of gains and losses from free trade. C. that total benefits are less than total costs from free trade. D. the inability to compensate losers from free trade. E. that the barriers allow us to compete with cheap foreign labor.
Answer:
B) the uneven distribution of gains and losses from free trade.
Explanation:
One of the most important reasons why governments impose trade barriers is to protect domestic jobs (and domestic industries). We are part of a society (country), and society's most important component is people, not money. Generally the economic gains of free trade are larger than the economic losses, but the economic losses hurt the most.
Imagine if no trade barriers actually existed, how many millions of jobs would be lost in the US. Trade barriers are nothing new, the current president didn't invent them. He just incinerated them.
How does a leader tell the people that 10 or 20 million must lose their jobs and probably will not be able to find any similar jobs in the future just because the rest of society will benefit from cheaper products. The lives of 20 million households (50-80 million people) would be destroyed, while 280 million people would benefit.
The amount of harm done to the people that lose their jobs is much greater than any individual benefit.
Last year, you purchased a stock at a price of $60.00 a share. Over the course of the year, you received $2.90 per share in dividends and inflation averaged 3.4 percent. Today, you sold your shares for $65.60 a share. What is your approximate real rate of return on this investment
Answer:
Real rate of return= 13.7%
Explanation:
The return on investment is the sum of the dividends earned and capital gains made during the holding period of the investment.
Dividend is the proportion of the profit made by a company which is paid to shareholders.
Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.
Therefore, we can can compute the return on the investment as follows:
The total return = (2.90) + (65.60-60)= 8.5
To determine the real return, we adjust the nominal return for the impact of inflation as follows:
Real total return ($) = 8.5/1.034=8.220
Total return in (%) = (8.220 /60)× 100= 13.7%
Answer:
1.1%
Explanation:
To calculate the approximate real rate of return on the investment, we first need to calculate the nominal rate of return. As shown below:
Nominal Return = (Price of Share Sold - Price of the Share + Dividend received on share) / Price of the Share x 100
Nominal return = ($65.60 - $60.00 + $2.90) / $60.00
= 0.045 x 100
= 4.5%
Then we deduct the inflation rate from the nominal return to get the approximate real rate. This calculate below:
Approximate real rate = Nominal Return - Inflation rate
Approximate real rate = 4.5% - 3.4%
= 1.1%
Hence, the approximate real rate on this investment is 1.1%.
If a country imports a small fraction of the world's supply, we expect it to face:____________. A. an upward-sloping residual supply curve B. a nearly perfectly elastic, horizontal residual supply curve. C. The type of supply curve it faces cannot be determined. D. a nearly perfectly inelastic, vertical residual supply curve.
Answer:
elastic
Explanation:
For a project, an initial cash outlay of $1.4 million is made. In year 1 the expected annual cash flow is $900,000, years 2-5 the expected annual cash flow is $1,000,000 and in year 6 the expected annual cash flow is $1.3 million. A cost of capital of 15% is used. The IRR (internal rate of return) is ________. A. 25.5% B. 12.5% C. 13.5% D. 65.8% E. 40.0%
Answer:
D. 65.8%
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR can be calculated using a financial calculator:
Cash flow in year zero = $-1.4 million
Cash flow in year one = $900,000
Cash flow each year from year two to five =$1,000,000
Cash flow in year 6 = $1.3 million.
IRR = 65.8%
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
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If the market price is $16, this firm will a. produce 4 units of output in the short run and exit in the long run. b. produce 5 units of output in the short run and exit in the long run. c. shut down in the short run and exit in the long run. d. produce 5 units of output in the short run and face competition from new market entrants in the long run
This question is incomplete, I got the complete one from google as:
Output Total cost
0 5
1 10
2 12
3 15
4 24
5 40
If the market price is $16, this firm will a. produce 4 units of output in the short run and exit in the long run. b. produce 5 units of output in the short run and exit in the long run. c. shut down in the short run and exit in the long run. d. produce 5 units of output in the short run and face competition from new market entrants in the long run
Answer:
Option D is correct- If the market price is $16, this firm will produce 5 units of output in the short run and face competition from new market entrants in the long run.
Explanation:
The fixed cost is $5, this indicates that when the market price is $16, the marginal cost is also $16.
When the 5th unit is produced, the total revenue received will be $80 while the total cost will be $40. This indicates that there will be a positive economic profit which will bring new firms in the long run.
Hence, option D is the correct answer - If the market price is $16, this firm will produce 5 units of output in the short run and face competition from new market entrants in the long run.
In a situation where the market price is $16, it should be noted that the firm will D. produce 5 units of output in the short run and face competition from new market entrants in the long run.
It should be noted that the fixed cost that's given in the question is $5. The marginal cost is $16. This is the cost that's incurred as a result of an additional purchase made.
Therefore, when the market price is $16, it should be noted that the firm will produce 5 units of output in the short run and face competition from new market entrants in the long run.
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g On January 1 the company had office supplies costing $2,700 recorded as an asset. During the year $9,600 of office supplies were purchased and recorded as an asset, but the company did not make any journal entries to record the use of supplies during the year. The physical count on December 31 revealed that supplies of $3,100 were remaining. What adjusting entry would be necessary on December 31
Answer:
Debit Supplies expense $9200
Credit Supplies account $9200
Explanation:
The adjustment required is for the recognition of supplies used. When supplies are purchased, Debit Supplies account, credit cash or accounts payable. On use of supplies, Debit Supplies expense, credit Supplies account
The movement in the balance of supplies at the start and end of a period is as a result of usage and purchases. While usage reduces the balance in supplies, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases - units used = closing balance
$2,700 + $9,600 - Units used = $3,100
Units used = $2,700 + $9,600 - $3,100
= $9,200
on september 1, best company began a contract to provide services to dilwood company for 6 months, with the total of $10800 payment to be made at the end of the six month period. equal services are provided each motnth. the firm usees the account fees receivable to reflect amounts due but not yet bulled. what propoer adjusting entry would best company make on devcember 31, the end of the accounting period (no previous adjustment has been made)
Answer:
Fee Receivable$7,200
To Service Fees Earned $7,200
(Being the service fess earned is recorded)
Explanation:
Th adjusting entry is shown below:
Fee Receivable$7,200
To Service Fees Earned $7,200
(Being the service fess earned is recorded)
For recording this we debited the fees receivable as it increased the assets and credited the services fees earned as it increase the revenues
Since the payment is made for 6 months but we have to recorded for 4 months i.e computed from September 1 to December 31
= $10,800 × 4 months ÷ 6 months
= $7,200
Final answer:
The correct adjusting entry for Best Company on December 31st to reflect four months of services provided to Dilwood Company would be a debit to Fees Receivable and a credit to Service Revenue for $7,200.
Explanation:
The student's question pertains to the area of accounting, specifically adjusting entries at the end of an accounting period. Since Best Company began providing services on September 1st for a 6-month contract at $10,800 total, and no invoice has been sent by December 31st, Best Company needs to recognize the revenue earned for services provided up to this point, despite not receiving payment yet. By December 31st, four months of service have been provided.
The revenue per month can be calculated by dividing the total contract amount by the number of months in the service period: $10,800 / 6 months = $1,800 per month. For four months of service, the total revenue earned but not yet billed is $1,800 x 4 = $7,200. Therefore, the adjusting entry on December 31st would be:
Debit Fees Receivable: $7,200
Credit Service Revenue: $7,200
This entry recognizes the revenue earned for services provided from September 1st to December 31st.
Which of the following is an example of countercyclical monetary policy posing a danger of overreaction? Select all that apply: Loose monetary policy seeking to end a recession goes too far and triggers inflation. Tight monetary policy seeking to reduce inflation goes too far and begins a recession. Tight fiscal policy seeking to reduce inflation goes too far and begins a recession. Loose fiscal policy seeking to end a recession goes too far and triggers inflation.
Question:
Which of the following is an example of countercyclical monetary policy posing a danger of overreaction?
Select all that apply:
A) Loose monetary policy seeking to end a recession goes too far and triggers inflation.
B) Tight monetary policy seeking to reduce inflation goes too far and begins a recession.
C) Tight fiscal policy seeking to reduce inflation goes too far and begins a recession.
D) Loose fiscal policy seeking to end a recession goes too far and triggers inflation.
Answer:
The correct choices are: A) and B)
Explanation:
When the Federal Reserve System wants to curtail a possible recession it tweakes the system to allow more inflow of money into the economy. When money circulation is about to go out of hand, it mops up excess money in the economy by tweaking interest rates among other monetar policy tools.
This cycle may go out of hand if the the Fed miscalculate their actions by either allowing too much money in circulation for a long time or if they mop up too much money at a given period.
Cheers!
Final answer:
The two examples of counter cyclical monetary policy posing a danger of overreaction are loose monetary policy that triggers inflation and tight monetary policy that causes a recession.
Explanation:
Counter cyclical monetary policy involves measures that the Federal Reserve (Fed) employs to counterbalance economic cycles. There are risks associated with implementing such policies, including the danger of overreaction. The examples provided indicate situations where policy adjustments may inadvertently lead to undesirable economic outcomes.
Loose monetary policy seeking to end a recession may be extreme, causing aggregate demand to spike and triggering inflation.Tight monetary policy with the intention to reduce inflation may overshoot, suppress aggregate demand excessively, and instigate a recession.Fiscal policy, though related, is distinct from monetary policy and involves government spending and tax actions.
Champs Sports Bar in State College, PA has decided to perform a total cost analysis on vodka suppliers. Consumption is currently 6,000 bottles per year. Demand is predicted to stay at that level for the next few years. The current supplier, Byron's, charges $9.50 per bottle and packs 288 bottles in a crate. The cost to ship the crate is $15. Another potential source of vodka is Pancho. Pancho charges $9.00 per bottle and ships 100 bottles in a crate at $20 per crate. Assume that a partial crate may be purchased. What is the total annual cost to supply vodka from the current supplier
Answer:
Annual total cost = $55,200
Explanation:
As per the data given in the question, computation are as follows:
Consumption = 6,000 bottles
Cost per bottle = $9
Cost = $9 × 6,000 bottles
= $54,000
Number of crates = 6,000 ÷ 100
= 60 crates
Cost per crate = $20
Total crate cost = $20 × 60 crates
=$1,200
Hence, Annual total cost = $54,000 + $1,200
= $55,200
Diamond Boot Factory normally sells its specialty boots for $21 a pair. An offer to buy 95 boots for $16 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $8, and special stitching will add another $2 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the orga
Final answer:
To determine the differential income or loss per pair of boots, subtract the sum of the variable cost and special stitching cost per pair from the special order price, resulting in a $6 differential income per pair.
Explanation:
The question involves calculating the differential income or loss when selling boots at a reduced price for a special bulk order. To determine the income or loss per pair, we need to compare the revenue from the special order with the total variable costs, including the additional special stitching cost.
We are given the following information:
Normal selling price: $21 per pairSpecial order price: $16 per pairVariable cost per boot: $8Additional cost for special stitching: $2 per pairTo calculate the differential income or loss:
Calculate the total cost per pair, which is the sum of the variable cost and special stitching ($8 + $2 = $10).Subtract the total cost per pair from the special order price ($16 - $10 = $6 differential income per pair).The differential income per pair is $6, indicating a profit when accepting the special order.Pacific Packaging's ROE last year was only 2%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 45%, which will result in annual interest charges of $175,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $535,000 on sales of $5,000,000, and it expects to have a total assets turnover ratio of 2.1. Under these conditions, the tax rate will be 40%. If the changes are made, what will be the company's return on equity
Answer:
16.511%
Explanation:
According to the scenario, computation of the given data are as follow:-
For computing the return on equity we need to do following calculation
Net Income = (EBIT - Interest Rate) × (1 -Tax Rate)
= ($535,000 - $175,000) × (1 - 40%)
= $360,000 × 60%
= $216,000
Profit Margin = Net Income ÷ Total Sales
= $216,000 ÷ $5,000,000
= 0.0432 or 4.32%
Assets turnover ratio = 2.1
Debt to capital ratio = 45% or 0.45
Equity Multiplier = 1 ÷ (1 - 0.45) = 1.82
As we know that
Return on Equity = Equity Multiplier × Profit Margin × Assets Turnover
= 1.82 × 4.32% × 2.1
= 16.511%
According to the analysis, the company Return on equity is 16.511%
Final answer:
The new return on equity (ROE) for Pacific Packaging after the proposed changes would increase to 15.37%. This is calculated by first determining the net income after interest and taxes, then finding the shareholder's equity from the total assets and the specified debt-to-capital ratio, and finally dividing the net income by shareholder's equity.
Explanation:
To calculate Pacific Packaging's new return on equity (ROE) assuming the changes are made, we can use the following formula:
Net income = EBIT - Interest charges - TaxesROE = (Net income) / (Shareholder's equity)First, calculate the net income:
EBIT: $535,000Annual interest charges: $175,000Tax rate: 40%Net income = $535,000 - $175,000 - (($535,000 - $175,000) * 40%)Net income = $216,000
Next, to find the shareholder's equity, we use the total assets turnover ratio and the sales figure:
Total assets turnover ratio = Sales / Total assets2.1 = $5,000,000 / Total assetsTotal assets = $5,000,000 / 2.1Total assets = $2,380,952.38 (which equals total invested capital since there's no preferred stock)Debt-to-capital ratio = Debt / (Debt + Shareholder's equity)0.45 = Debt / ($2,380,952.38 + Debt)Debt = $975,609.756Shareholder's equity = $2,380,952.38 - DebtShareholder's equity = $1,405,342.62Finally, we calculate the new ROE:
ROE = $216,000 / $1,405,342.62ROE = 15.37%
Hence, if Pacific Packaging implements the new operating plan, its ROE would increase to 15.37%.
Chrome File Edit View History Bookmarks People Window Help Bookmarks CP2-2 Recording Transactions (in a Journal and T-Accounts); Preparing and Interpre The following information applies to the questions displayed below. Performance Company (APC) was incorporated as a private company. The company's accounts Athletic included the following at July 1 Accounts Payable Building Cash Common Stock Equipment Land Notes Payable (long-term) Retained Earnings $ 4,500 242,000 12,200 348,000 25,500 95,000 28,250 6,050 During the month of July, the company had the following activities a. Issued 2,100 shares of common stock for $210,000 cash. b. Borrowed $53,000 cash from a local bank, payable in two years. c. Bought a building for $210,000; paid $59,000 in cash and signed a three-year note for the balance. d. Paid cash for equipment that cost $174,000. e. Purchased supplies for $16,000 on account References Section Break CP2-2 Recording Transactions (in a Journal and T-Accounts); Preparing and Interpreting the Balance Sheet [LO 2-2 LO 2-3, LO 2-4, LO 2-5
Answer:h
Explanation:
Huskie Manufacturing has two major product lines, Black and Red. Income statements for the two product lines follow: Black Red Revenues $500,000 $400,000 Variable costs 300,000 150,000 Product line fixed costs 130,000 100,000 Allocated corporate fixed costs 120,000 90,000 Operating income (loss) $(50,000) $60,000 If the Black product line were dropped, all of its product line fixed costs could be avoided. Should the Black product line be dropped, and why
Answer:
Black product line should not be dropped.
If the product line is dropped, this would reduce the Huskie's entire profit by $70,000.
Explanation:
To determine the the impact of dropping the Black product line, we will consider the relevant cash flows associated with decision. These include;
$
Lost contribution from dropping the product
(500,000 -300,000) (200,000)
Savings in line fixed cost 130,000
Net contribution lost (70,000)
Going by the above analysis, it is obvious that Product line contributes $70,000 toward the recovering of the allocated corporate fixed cost of 210,000 i.e. (120,000 +90,000).
Therefore, if the product kine is dropped, this would reduce the Huskie's entire profit by $70,000.
Black product line should not be dropped.
Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow:
Standard Quantity Standard (Rate) Standard Unit Cost
Silver 0.60 oz. $ 24.00 per oz. $ 14.40
Crystals 4.00 $ 0.45 per crystal 1.80
Direct labor 1.50 hrs. $ 14.00 per hr. 21.00
During the month of January, Crystal Charm made 1,500 charms. The company used 350 ounces of silver (total cost of $7,350) and 3.050 crystals (total cost of $701.50) and paid for 2,400 actual direct labor hours (cost of $34,800.00).Required:1. Calculate Crystal Charm's direct materials price and quantity variances for silver and crystals for the month of January. Indicate whether each variance is favorable or unfavorable.2. Calculate Crystal Charm's direct labor rate and efficiency variances for the month of January. Indicate whether each is favorable or unfavorable.
Answer:
silver
direct materials price variance = $1,050 favorable
direct materials quantity variance = $13,200 favorable
Crystals
direct materials price variance = $671 favorable
direct materials quantity variance =$1,327.50 favorable
direct labor
direct materials rate variance = $1,200 unfavorable
direct materials efficiency variance =$2,100 favorable
Explanation:
silver
direct materials price variance = (Aq×Ap)-(Aq×Sp)
= (350×$21,00)-(350×$24.00)
= $1,050 favorable
direct materials quantity variance = (Aq×Sp)-(Sq×Sp)
= (350×$24.00) -(1,500×0,60×$24.00)
= $13,200 favorable
Crystals
direct materials price variance = (Aq×Ap)-(Aq×Sp)
= (3,050×$0,23)-(3,050×$0.45)
= $671 favorable
direct materials quantity variance = (Aq×Sp)-(Sq×Sp)
= (3,050×$0.45) -(1,500×4.00×$0.45)
= $1,327.50 favorable
direct labor
direct materials rate variance = (Aq×Ap)-(Aq×Sp)
= (2,400×$14,50)-(2,400×$14.00)
= $1,200 unfavorable
direct materials efficiency variance = (Aq×Sp)-(Sq×Sp)
= (2,400×$14.00) -(1,500×1.50×$14.00)
= $2,100 favorable
Insigne Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $31,700, and its ending inventory on December 31 was overstated by $16,300. In addition, a purchase of merchandise costing $74,000 was incorrectly recorded as a $7,400 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:
Answer:
Taxable income understated by $82,000
Explanation:
Computation:
Particular Amount
Incorrectly recorded purchase $7,400
Add: Ending inventory overstated $16,300
$23,700
Less: Opening inventory overstated $31,700
Less: Purchase of inventory $74,000
Taxable income understated $82,000
Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 14 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
Answer:
$5.89
Explanation:
The computation of current dividend per share is shown below:-
(Dividend in One Year) ÷ Current Price
= 14% ÷ 2
= 7%
Dividend = Dividend yield × Stock currently sold per share
= 0.07 × $90
= 6.3
Current dividend per share = Dividend ÷ (1 + Dividend yield)
= 6.3 ÷ (1 + 0.07)
= 6.3 ÷ 1.07
= $5.89
Therefore for computing the current dividend per share we simply applied the above formula.
Parent Inc. purchased 30% of the common stock of Affiliate Co. on January 1, YR01 for $5,000 and appropriately accounted for this investment using the Equity Method. For the year ended December 31, YR01, Affiliate Co. reported net income of $1,000. Also, during YR01 the company declared and paid cash dividends totaling $200 to holders of its common stock. Given these facts, how will the Operating, Investing, and Financing sections of the statement of cash flows for Parent Inc. be affected (assume use of the indirect method of presentation)
Answer:
net cash from investing activities = -$4,940
operating and financing activities are not affected.
Explanation:
the journal entries should be:
January 1, socks purchased
Dr Investment in Affiliate 5,000
Cr Cash 5,000
December 31, dividends received
Dr Cash 60
Cr Investment in Affiliate 60
December 31, Affiliate reports net income
Dr Investment in Affiliate 300
Cr Revenue from investing activities 300
Only the cash flow from investing activities will be affected by Parent's investing in Affiliate. Since the company uses the equity method, the operating and financing cash flows are not affected.
The cash flow from investing activities will:
Decrease by $5,000 due to the purchase of stocks. Increase by $60 due to the dividends received. net cash from investing activities = -$4,940Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.
For example, an increase in the money supply, a _____(real/nominal) variable, will cause the price level, a _____(real/nominal) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a _____(real/nominal) variable. The distinction between real variables and nominal variables is known as the _____________(price neutrality/monetary neutrality/the quantity theory).
Answer:
Nominal;nominal;real;the quantity theory.
Explanation:
Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.
For example, an increase in the money supply, a nominal variable, will cause the price level, a nominal variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a real variable. The distinction between real variables and nominal variables is known as the quantity theory.
You produce widgets for sale in a perfectly com- petitive market at a market price of $10 per wid- get. Your widgets are manufactured in two plants, one in Massachusetts and the other in Connecticut. Because of labor problems in Connecticut, you are forced to raise wages there, so that marginal costs in that plant increase. In response to this, should you shift production and produce more in your Massachusetts plant?
Answer: No.
Explanation:
This is a Perfectly Competitive market and that means that you are a price taker who maximises output at a point where Marginal Revenue equals Marginal Cost ( MR = MC). As costs have gone up, it simply means that for the conditions to be satisfied, you need to produce less at the factory in Connecticut.
That does not mean that you have to produce more at the Massachusetts plant because it is already producing at capacity and increasing the marginal cost would violate the MR=MC rule as you have no control over the price so you cannot change Marginal Revenue. It is therefore better to keep the production level at the Massachusetts plant unchanged.
Sandhill Company is preparing its manufacturing overhead budget for 2020. Relevant data consist of the following. Units to be produced (by quarters): 10,700, 13,000, 14,900, 16,600. Direct labor: Time is 1.7 hours per unit. Variable overhead costs per direct labor hour: indirect materials $0.80; indirect labor $1.20; and maintenance $0.60. Fixed overhead costs per quarter: supervisory salaries $36,850; depreciation $17,010; and maintenance $13,350. Prepare the manufacturing overhead budget for the year, showing quarterly data. (Round overhead rate to 2 decimal places, e.g. 1.25. List variable expenses before fixed expense.) SANDHILL COMPANY Manufacturing Overhead Budget Quarter 1 2 3 4 Year $ $ $ $ $ $ $ $ $ $ Direct labor hours Manufacturing overhead rate per direct labor hour $
Answer :
Total manufacturing overhead = $512,824
Direct labor hours = 93,840
Manufacturing overhead rate per direct labor hour = $5.46
Explanation :
As per the data given in the question,
Sandhill company
Manufacturing Overhead Budget
Particulars Quarter
1 2 3 4 Year
Units produced 10,700 13,000 14,900 16,600 55,200
Variable cost:
Indirect material at $0.80 $14,552 $17,680 $20,264 $22,576 $75,072
indirect labor at $1.20 $21,828 $26,520 $30,396 $33,864 $112,608
Maintenance cost at $0.60 $10,914 $13,260 $15,198 $16,932 $56,304
Total variable cost $47294 $57,460 $65,858 $73,372 $243,984
Fixed cost:
Supervisors salary $36,850 $36,850 $36,850 $36,850 $147,400
Depreciation $17,010 $17,010 $17,010 $17,010 $68,040
Maintenance $13,350 $13,350 $13,350 $13,350 $53,400
Total fixed cost $67,210 $67,210 $67,210 $67,210 $268,840
Total manu. overhead $114,504 $124,670 $133,068 $140,582 $512,824
Direct labor hours 18,190 22,100 25,330 28,220 93,840
Manufacturing overhead rate per direct labor hour $5.46
Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $545,000. The corporation's basis in the Tea Company stock was $500,000. The land had a basis to Tea Company of $780,000. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives
Answer:
Gain recognized = $45,000
Basis in the land = $545,000
Explanation:
The computation of amount of gain and basis in the land it receives is shown below:-
This refers to taxable exchange. Therefore the Red Blossom would recognize a gain = Fair Market value - Basis in the Tea Company stock
= $545,000 - $500,000
= $45,000
and
The basis in the land it receives will be the fair value or
= Basis in the Tea Company stock + Gain
= $500,000 + $45,000
= $545,000