Answer:
Provides a more direct incentive in small firms than in large firms.
Explanation:
Profit sharing plan can be defined as a contribution plan in which the management of a company shares part of its profit with the employees. This could motivate and inspire the employees to work efficiently towards the growth of the organisation.
Profit sharing plan gives the employees a sense of ownership, this would inspire them to work harder to ensure the success of the organisation.
Answer:
Statement "A" is correct.
Explanation:
Profit distribution delivers a a lot of direct motivation in little companies than bigger firms because of the dimensions of firms and range of individuals operating in it.
As the range of individuals is small, there's high official communication and also these strategies are a lot of direct in environment.
Therefore statement A is correct which identifies that the share range delivers a lot of direct incentive in small size companies than in huge firms.
These strategies are utilized with success in smaller companies thus statement B is incorrect. These aren't the same as distinct strategies thus statement C is also incorrect. These strategies aren't peripheral edges cost accounting 40% of staff thus statement D is not correct.
Cobe Company has already manufactured 28,000 units of Product A at a cost of $28 per unit. The 28,000 units can be sold at this stage for $700,000. Alternatively, the units can be further processed at a $420,000 total additional cost and be converted into 5,600 units of Product B and 11,200 units of Product C. Per unit selling price for Product B is $105 and for Product C is $70. 1. Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.
Answer:
The company should process further
Explanation:
The preparation of The company should process further or not is as follows:-
Sell as Process further
Sales $700,000 $1,372,000
(5,600 × $105 + 11,200 × $70)
Relevant cost
Process Cost to
further 0 $420,000
Total relevant
cost 0 $420,000
Income $700,000 $952,000
($1,372,000 - $420,000)
Incremental
Income $252,000
So, the company should process further
Judd Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. The allocation base for variable overhead costs is direct labor hours. At the beginning of the year, the static budget for variable overhead costs included the following data: Production volume 6 comma 100 units Budgeted variable overhead costs $ 15 comma 000 Budgeted direct labor hours 610 hours At the end of the year, actual data were as follows: Production volume 4 comma 000 units Actual variable overhead costs $ 15 comma 300 Actual direct labor hours 490 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Answer:
Variable overhead cost variance = $2,949.80
Explanation:
As per the data given in the question,
Actual overhead cost = $15,000
Actual hours = 490
Actual cost = $30.61 per hour
Standard overhead cost = $15,000
Standard hours = 610
Budgeted cost = $24.59 per hour
Variable overhead cost variance = Actual hours × (Actual cost per hour - Standard cost per hour)
= 490 × ( $30.61 - $24.59 )
= $2,949.80
A cell phone company offers two different plans. Plan A costs $96 per month for unlimited talk and text. Plan B costs $0.20 per minute plus $0.10 per text message sent. You need to purchase a plan for your 14-year-old sister. Your sister currently uses 1,800 minutes and sends 1,650 texts each month. (1) What is your sister’s total cost under each of the two plans? (2) Suppose your sister doubles her monthly usage to 3,600 minutes and sends 3,300 texts. What is your sister’s total cost under each of the two plans?
Answer:
1.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = $525
2.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = $1050
Explanation:
The total cost under Plan A is fixed. Thus it will not change whatever the number of texts and talk are for the month.
The total cost for Plan B is variable and will vary with change in number of talk and texts for the month. The total cost can be calculated by multiplying the cost per talk with the number of minutes per months plus the cost per text by the number of texts per month.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * talk minutes per month + 0.1 * texts per month
1.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * 1800 + 0.1 * 1650 = $525
2.
Plan A - Total Cost per month = $96
Plan B - Total Cost per month = 0.2 * 3600 + 0.1 * 3300 = $1050
Financial information is presented below: Operating Expenses$ 90,000 Sales Returns and Allowances18,000 Sales Discounts12,000 Sales Revenue320,000 Cost of Goods Sold174,000 The amount of net sales on the income statement would be
a.$290,000.
b.$302,000.
c.$308,000.
d.$320,000.
Answer:
a. $290,000
Explanation:
The relevant data provided in the question for computing the net sales is here below:-
Sales revenue = $320,000
Sales discounts = $12,000
Sales returns and allowances = $18,000
The computation of net sales on the income statement is shown below:-
The amount of net sales = Sales revenue - Sales discounts - Sales returns and allowances
= $320,000 - $12,000 - $18,000
= $320,000 - $30,000
= $290,000
Therefore for computing the amount of net sales we simply applied the above formula.
Martinez Corp. has 7,900 shares of common stock outstanding. It declares a $5 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
Nov. 1
Dr Cash Dividend 39,500
Cr Dividends Payable 39,500
Dec. 31
Dr Dividends Payable 39,500
Cr Cash 39,500
Explanation:
Martinez Corp Journal entries
Nov. 1
Dr Cash Dividend 39,500
(7,900 shares of common stock ×5 per shares)
Cr Dividends Payable 39,500
Dec. 31
Dr Dividends Payable 39,500
Cr Cash 39,500
For a recent 2-year period, the balance sheet of Blue Company showed the following stockholders’ equity data at December 31 (in millions). 2020 2019 Additional paid-in capital $ 970 $ 827 Common stock 560 555 Retained earnings 7,250 5,280 Treasury stock 1,620 868 Total stockholders’ equity $7,160 $5,794 Common stock shares issued 224 222 Common stock shares authorized 500 500 Treasury stock shares 36 28 (a) Answer the following questions. (1) What is the par value of the common stock? (Round par value to 2 decimal places, e.g. $3.15.) Par value of common stock $enter the par value of the common stock rounded to 2 decimal places
Final answer:
To find the par value of a common stock, subtract additional paid-in capital and common stock from total stockholders' equity, then divide the result by common stock shares issued.
Explanation:
The par value of the common stock is a nominal value per share set by the company. In this case, we can calculate it by subtracting the additional paid-in capital and the common stock from the total stockholders' equity and dividing the result by the common stock shares issued.
Calculate: $7,160 (Total stockholders' equity) - $970 (Additional paid-in capital) - $560 (Common stock) = $5,630Then, divide $5,630 by 224 (Common stock shares issued).The par value of the common stock is $25.09 rounded to 2 decimal places.Accounts Payable: $19,207
Accounts Receivable: 81,336
Cash: 98,324
Discount on Bonds Payable: 7,000
Sales Tax Payable: 3,512
Inventory: 95,816
Treasury Stock: 30,000
Stock Investments: 3,700
FICA Tax Payable: 3,200
Bonds Payable: 100,000
Accumulated Depreciation: 2,000
Note: Payable, due in two years 1,709 Equipment 54,128 Common Stock 100,000 Retained Earnings 102,808 Unearned Service Revenue 30,500 Supplies 10,512 Salaries and Wages Payable 17,880 Use the information above to answer the following question. What is the amount of Total Liabilities to be reported on the December 31, 2019?
Answer:
total liabilities = $169,008
Explanation:
total liabilities:
Accounts Payable: $19,207Discount on Bonds Payable: ($7,000) ⇒ contra liability accountSales Tax Payable: 3,512FICA Tax Payable: 3,200 Bonds Payable: 100,000Note Payable, due in two years 1,709Unearned Service Revenue 30,500 ⇒ must be reported as a liabilitySalaries and Wages Payable 17,880to determine the total liabilities we just have to add both current and long term liabilities, and subtract any contra liability accounts = $176,008 - $7,000 = $169,008
g The Sharpe Ratio measures: Select one: The risk of an investment The expected return of an investment The unexpected return; how much an investment over- or under-performed The extra return above the risk-free rate adjusted for systematic risk The extra return above the risk-free rate adjusted for total risk The extra return above the risk-free rate adjusted for unsystematic risk The raw return adjusted for the return on the market
Answer:
The extra return above the risk-free rate adjusted for total risk
Explanation:
The Sharpe Ratio was developed by William Sharpe, and it is used by investors to guage the return in an investment against risk.
To calculate it we find the excess return above risk free rate And divide it by the total risk.
This isolates the returns that are attributed to risk taking activity.
A risk free transaction for example is the yield on government treasury bills.
We use only returns associated with risk to get a better picture of risk adjusted return. The higher the ratio the better.
The following transactions for Wolfe Corporation relate to long-term bonds classified as available-for-sale: 2018 Jan. 1 Purchased $50,000 Lake Corporation 10% bonds for $50,000. July 1 Received interest on Lake bonds. Dec. 31 Accrued interest on Lake bonds. Dec. 31 Market value of the bonds $55,000, prepare the adjusting entry to record bonds at market value. 2019 Jan. 1 Received interest on Lake bonds. Jan. 1 Sold $25,000 Lake bonds for $26,650. July 1 Received interest on Lake bonds. a) Journalize the transactions.
Answer:
2018 Jan. 1 Purchased $50,000 Lake Corporation 10% bonds for $50,000.
Dr 10% bonds available for sale 50,000 Cr Cash 50,000available for sale
July 1 Received interest on Lake bonds.
Dr Cash 2,500 Cr Interest revenue on 10% bonds available for sale 2,500Dec. 31 Accrued interest on Lake bonds.
Dr Interest receivable 10% bonds available for sale 2,500 Cr Interest revenue 10% bonds available for sale 2,500Dec. 31 Market value of the bonds $55,000, prepare the adjusting entry to record bonds at market value. 2019
Dr 10% bonds available for sale 5,000 Cr Unrealized gain - other comprehensive income 5,000Jan. 1 Received interest on Lake bonds.
Dr Cash 2,500 Cr Interest receivable on 10% bonds available for sale 2,500Jan. 1 Sold $25,000 Lake bonds for $26,650.
Dr Cash 26,650Dr Unrealized gain - other comprehensive income 2,500 Cr 10% bonds available for sale 27,500 Cr Realized gain on 10% bonds available for sale 1,650July 1 Received interest on Lake bonds.
Dr Cash 1,250 Cr Interest receivable on 10% bonds available for sale 1,250If you were shopping for a new TV, would you prefer to buy one (a) under perfectly competitive market conditions, (b) from a regulated monopoly, (c) from an oligopoly or (d) under monopolistic competition market conditions? Explain your reasoning. What market structure would result in the lowest price? If you choose a market structure that doesn't offer the best price, why did you choose it? In your answer, also be sure to explain the characteristics of each of these four market structures. Do this to explain the market structure you chose, and the three you did not.
Answer:
One is buying a brand new T.V. then one can purchase the T.V. beneath the monopolistic market situation. this can be as a result of T.Vs are oversubscribed as differentiated product by diverse brands with diverse options in several brands of T.V. conjointly promotion and marketing also shows a vital part in T.V. market. though utterly viable variety of markets lead to lowest worth, however the market construction of noncompetitive kind are going to be chosen during this case as request for T'V is comparatively elastic and not utterly flexible as is that the circumstance in perfectly competitive markets and other people conform to pay higher costs for a lot of options and conditions.
It is not wise to shop for T.V. beneath monopoly because the worth are going to be terribly high and shopper additional will be low. Also, in oligopoly market arrangement the costs are going to be high and solely few companies will be marketing the merchandise with not a lot of selections accessible within the market.
Thus, the most effective sort of market arrangement to shop for T.V.is monopolistic competition.
Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.Sales $ 3,500,000Cost of sales: Direct Material $ 500,000 Direct labor 250,000 Variable Overhead 275,000 Fixed Overhead 600,000 1,625,000Gross Profit $ 1,875,000Selling and General & Admin. Exp. Variable 750,000 Fixed 250,000 1,000,000Operating Income $ 875,000The contribution margin ratio for the current year is:____________.a.) 53.6%.b.) 49.3%.c.) 46.4%d.) 25%.
Answer:
b. 49.3%
Explanation:
The computation of contribution margin ratio is shown below:-
For computing the contribution margin ratio first we need to find out the total contribution which is here below:-
Total Contribution = Sales - Direct Material - Direct labor - Variable Overhead - Variable
= $3,500,000 - $500,000 - $250,000 - $275,000 - $750,000
= $1,725,000
Contribution margin Ratio = Contribution ÷ Sales
= $1,725,000 ÷ $3,500,000
= 49.3%
So, for calculating the contribution margin ratio we simply divide total contribution by sales.
The United States has a large trade deficit. It has a trade deficit with each of its major trading partners, but the deficit is much larger with some countries (e.g., China) than with others. Suppose the United States eliminates its overall trade deficit (with the world as a whole). Do you expect the United States to have a zero trade balance with every one of its trading partners?
Answer:
Many policymakers as well as trade analysts, do not assume that trading deficits harm the country, and caution against attempting to "protect" the trading partnership with specific countries which are crucial for the domestic industries.
Others, nevertheless, think that persistent budget deficits due to trade problems are always a concern, and there is already is considerable debate about how much of the trade deficit is triggered by foreign governments, as well as what strategies should be implemented to minimise it, if any at all.
The logistics/supply chain network transformation team _____________________________. a. must be aware of the firm's overall business and corporate strategies and the supply chain in which it participates. b. will not consider the potential involvement of third-party logistics suppliers as part of their responsibilities. c. includes workers from divisional levels only. d. should not include outside consultants.
Answer:
a. must be aware of the firm's overall business and corporate strategies and the supply chain in which it participates.
Explanation:
A logistics/supply chain network transformation team should not only be knowledgeable about the specifics of the supply chain of the firm, but also about the firm's overal business strategy, in order to devise its own logistics/supply chain network transormation strategy, that is coherent with the general corporate strategy, and that improves upon it at the same time.
A 7-year bond of a firm in severe financial distress has a coupon rate of 12% and sells for $960. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Answer:
State Yield 12.9%
Expected Yield 8.8%
Explanation:
Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity. It is the long term yield which is expressed in annual term.
Use Following Formula to calculate YTM
P = C×(1 + r) -1 + C×(1 + r) -2 + . . . + C×(1 + r) -Y + B×(1 + r) -Y
As per given data
Face value = B = $1,000
Coupon payment = C = $1,000 x 12% = $120
Selling price = P = $960
Number of periods = Y = 7 years
Stated Yield
$960 = $120 × (1 + r) -1 + $120 × (1 + r) -2 + $120 × (1 + r) -3 + $120 × (1 + r) -4 + $120 × (1 + r) -5 + $120 × (1 + r) -6 + $120 × (1 + r) -7 + $1,000 × (1 + r) -7
$950,39 = [ $120 ( × (1 + r) -28 ] + [ $1,000 × (1 + r) -7]
r = 12.9%
Expected Yield
Revised Coupon Rate = 12% / 1.5 = 8%
Coupon Payment = $1,000 x 8% = $80
P = C×(1 + r) -1 + C×(1 + r) -2 + . . . + C×(1 + r) -Y + B×(1 + r) -Y
$960 = $80 × (1 + r) -1 + $80 × (1 + r) -2 + $80 × (1 + r) -3 + $80 × (1 + r) -4 + $80 × (1 + r)-5 + $80 × (1 + r) -6 + $80 × (1 + r) -7 + $1,000 × (1 + r) -7
$950,39 = [ $80 ( × (1 + r) -28 ] + [ $1,000 × (1 + r) -7]
r = 8.79%
Lance Brothers Enterprises acquired $720,000 of 3% bonds, dated July 1, on July 1, 2016, as a long-term investment. Management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Lance Brothers paid $600,000 for the investment in bonds and will receive interest semiannually on June 30 and December 31. Prepare the journal entries (a) to record Lance Brothers’ investment in the bonds on July 1, 2016, and (b) to record interest on December 31, 2016, at the effective (market) rate.
Answer:
A) July 1, 2016, 3% bonds are acquired as long term investment.
Dr Investment in 3% bonds 720,000
Cr Cash 600,000
Cr Discount on investment in 3% bonds 120,000
B) December 31, 2016, interest earned from investment in 3% bonds.
Dr Cash 10,800
Dr Discount on investment in 3% bonds 1,200
Cr Interest revenue 12,000
Explanation:
the bonds' face value is $720,000 but since the company paid only $600,000 for them, it means that it bought them at a discount price. Therefore, the discount, $720,000 - $600,000 = $120,000, must be recorded, and later amortized.
To calculate the amount of interest revenue that will be amortized as discount on investment:
(bonds' market price x market interest rate x 1/2) - (bonds' face value x coupon rate x 1/2) = ($600,000 x 4% x 1/2) - ($720,000 x 3% x 1/2) = $12,000 - $10,800 = $1,200
Answer:
(a)
July 1, 2016
Dr. Investment in Bonds $720,000
Cr. Discount on Bonds $120,000
Cr. Cash $600,000
(b)
December 31, 2016
Dr. Cash $10,800
Dr. Discount on Bonds $1200
Cr. Interest Income $12,000
Explanation:
Investment in the bonds with intention to hold the bond until maturity is classified as the fixed investment and reported in the fixed assets section of the balance sheet.
When the bond is purchased below the face value of the bond, it is issued on discount by the issuer. This discount will be recorded and amortized over the bond life to maturity. Amortized discount will be added to the interest received amount to adjust this value in interest income.
Interest Received = Face value x Coupon rate x 6/12 = $720,000 x 3% x 6/12 = $10,800 semiannually
Interest income = Carrying Balance of Bond x market Rate x 6/12 = $600,000 x 4% x 6/12 = $12,000 semiannually
Now we will calculate the difference between the interest received and interest income to determine the value of discount amortized.
Amortized Discount = $12,000 - $10,800 = $1,200
Sandhill Chemicals Company acquires a delivery truck at a cost of $30,800 on January 1, 2022. The truck is expected to have a salvage value of $3,700 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
Final answer:
Using the straight-line method, the annual depreciation for the first and second years for Sandhill Chemicals Company's delivery truck, which costs $30,800 and has a salvage value of $3,700 after 4 years, is calculated to be $6,775 per year.
Explanation:
The Sandhill Chemicals Company's delivery truck, which has a cost of $30,800 and a salvage value of $3,700 at the end of its 4-year useful life, requires an annual depreciation calculation using the straight-line method. To compute this, we first find the total depreciable amount by subtracting the salvage value from the cost of the truck:
Total depreciable amount = Cost - Salvage ValueTotal depreciable amount = $30,800 - $3,700Total depreciable amount = $27,100Then we divide this total depreciable amount by the useful life of the truck to find the annual depreciation:
Annual Depreciation = Total depreciable amount / Useful LifeAnnual Depreciation = $27,100 / 4 yearsAnnual Depreciation = $6,775Therefore, the annual depreciation for the first and second years using the straight-line method is $6,775 per year.
Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Teresa purchases stock in NanoSpeck, a biotech firm. Neha borrows money to build a new lab for her engineering firm. Sam takes out a loan and uses it to build a new cabin in Montana. Lorenzo purchases a corporate bond issued by a car company.
Teresa's and Lorenzo's purchases of stocks and bonds are classified as savings, while Neha's and Sam's borrowing for construction are considered investments according to macroeconomic definitions.
When analyzing economic activities like saving and investment, it is crucial to differentiate between the common usage of these terms and their macroeconomic definitions. In macroeconomics, saving typically refers to income that is not consumed immediately and is instead set aside for future use, which may be done through various financial instruments like bank deposits or the purchase of stocks and bonds. Investment, on the other hand, refers to the purchase of goods that will be used to produce more goods and services in the future, such as capital expenditures by businesses on equipment, factories, or new technology.
Given the examples provided in the question:
QS 18-12 Contribution margin income statement LO P2 Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. The company expects sales of 10,000 units. Prepare a contribution margin income statement for the year ended December 31, 2017.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Total fixed costs of $286,200.
Its single product sells for $163 per unit.
Unitary variable cost= $110 per unit. The company expects sales of 10,000 units.
Contribution margin income statement:
Sales= (10,000*163)= 1,630,000
Variable costs= (10,000*110)= (1,100,000)
Contribution margin= 530,000
Fixed costs= (286,200)
Net operating income= 243,800
Problem 10-16 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3] Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 6.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is applied to production on the basis of direct labor-hours. During March, 400 backpacks were manufactured and sold. Selected information relating to the month’s production is given below: Materials Used Direct Labor Variable Manufacturing Overhead Total standard cost allowed* $ 9,120 $ 5,040 $ 960 Actual costs incurred $ 5,520 ? $ 2,620 Materials price variance ? Materials quantity variance $ 1,920 U Labor rate variance ? Labor efficiency variance ? Variable overhead rate variance ? Variable overhead efficiency variance
Answer and Explanation:
Particulars Amount
Standard variable manufacturing overhead cost for march $960
Standard variable manufacturing overhead rate per direct labor hour $2
Standard direct labor hours for march
=960/2
= $ 480
Standard direct labor rate per hour
=$ 5,040/$480
= $ 10.5
The labor efficiency variance
Actual Cost per unit of back pack production
=(9,120+5,040+960)/(400)
=15,120/400
=$ 37.8
Total Number of produced Back packs 400
Total Actual cost of production $ 15,120
Less: Actual cost of materials $5,520
Actual cost of manufacturing Overhead 2,620
Actual cost of Direct Labor 6,980
Labor efficiency varaince = 5040-6980 = -$ 1940
Variable overhead rate variance=(Actual Hour*Actual Rate)-(Actual Hour of input*Standard Rate)
=(2620*2)
= $ 5240
Variable overhead rate variance = $ 5240
The question pertains to variance analysis, a tool used in managerial accounting to reveal the differences between actual and planned costs in a business' operations. The specific focus here is on understanding variable costs, which include direct materials, direct labor and variable manufacturing overhead and their respective variances.
Explanation:To analyze this variance report, we need to understand several components of cost behavior, specifically understanding what variable costs are. Variable costs are those costs that change in total in direct proportion to changes in production volume or activity. This includes items like direct materials, direct labor, and variable manufacturing overhead.
Let's define each variance reported. The materials price variance is the difference between the actual price paid for the materials and the standard price, multiplied by the quantity purchased. The materials quantity variance indicates the additional costs incurred due to using more materials than planned.
The labor rate variance is the difference between the actual hourly labor rate and the standard rate, multiplied by the actual hours worked. The labor efficiency variance shows how efficiently the labor hours were used in production. The variable overhead rate variance shows the difference between actual variable overhead costs and standard variable overhead costs, while the variable overhead efficiency variance indicates the difference between actual hours worked and standard hours allowed, multiplied by the standard variable overhead rate.
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Corona Co. is expecting to receive 100,000 British pounds in one year. Corona expects the spot rate of British pound to be $1.49 in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53 respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. Assume there are no transaction costs. What is the best possible hedging strategy and how many U.S. dollars Corona Co. will receive under this strategy
Answer:
Explanation:
1st strategy : Selling pound forward
The spot rate of the pound is quoted at $1.51.
The one-year forward rate exhibits a 2.65% premium.
The one-year forward rate = 1.51 ( 1+ 0.0265)
= $ 1.55
Dollars received = 100000 * 1.55 = $155000
2nd strategy : Buying put option
The strike price of put = $1.54
premium on option is $.03
Amount received per option = $ 1.54 - $ 0.03 =$1.51
Total Dollars received = 100000* 1.51 = $ 151000
the best possible hedging strategy is Selling pound forward and receiving $155000
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In its first month of operations, Multiplex Corporation purchased 40,000 pounds of material for $3.40 per pound. The company used 38,000 pounds of the material to produce 18,000 units of its only product. Multiplex uses a standard cost system and its standard quantity and price per unit are 2 pounds at $3.50 per pound. What was the material efficiency variance for the month
Answer:
$7,000 Unfavorable
Explanation:
data provided
Material in units = 18,000
Price per unit = 2
Actual hours = 38,000
Selling price = $3.50
The computation of material efficiency variance is shown below:-
Materials efficiency variance = (Standard hours - Actual hours) × Selling price
= (18,000 × 2 - 38,000) × $3.50
= $7,000 Unfavorable
Therefore for computing the material efficiency variance we simply applied the above formula.
Layton Company purchased tool sharpening equipment on October 1 for $29,160. The equipment was expected to have a useful life of three years or 3,780 operating hours, and a residual value of $810. The equipment was used for 700 hours during Year 1, 1,300 hours in Year 2, 1,100 hours in Year 3, and 680 hours in Year 4.
Answer:
Straight-line method
December 31, 2012: $9,450 x 3/12 = $2,362.5
December 31, 2013: $9,450
December 31, 2014: $9,450
December 31, 2015: $9,450 x 9/12 = $7,087.5
Unit-of-production method:
December 31, 2012: 700 hours x 7.5* = $5,250
December 31, 2013: 1,300 hours x 7.5 = $9,750
December 31, 2014: 1,100 hours x 7.5 = $8,250
December 31, 2015: 680 hours x 7.5 = $5,100
7.5*: ($29,160 - $810) / 3,780 operating hours
Double declining method:
December 31, 2012: $29,160 x 2/3 x 3/12= $4,860
December 31, 2013: ($29,160 - $4,860) x 2/3 = $16,200
December 31, 2014: ($29,160 - $4,860 - $16,200) x 2/3 = $5,400
December 31, 2015: ($29,160 - $4,860 - $16,200 - $5,400) x 2/3 x 9/12 = $1,350
Explanation:
Requirement of the question: Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method.
(a) Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($29,160 - $810) / 3 years = $9,450 yearly depreciation expense.
(b)The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
(c) The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/3 years = 33.33%, then 33.33% multiplied by 2 to give 66.67% or simply 2/3
Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows:Direct materials$ 53Direct labor40Variable overhead36Fixed overhead31Total costs$ 160Crayola Technologies Inc. has contacted Rubium with an offer to sell 7 comma 000 of the subassemblies for $ 145 each. Rubium will eliminate $ 85 comma 000 of fixed overhead if it accepts the proposal. Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Total Unit Cost of Making Product = Direct Material + Direct Labor + Variable Overhead + Fixed Overhead
= $53 + $40 + $36 + $31
= $160
Total Unit Cost of Buying Product = Fixed Cost + Purchase Cost
= $31 + $145
= $176
Particular Make product($) Buy product($)
Direct material(7,000 × $53) 371,000 -
Direct labor(7,000 × $40) 280,000 -
Variable overhead(7,000 ×$36) 252,000 -
Fixed overhead(7,000 × $31) 217,000 132,000
(217,000 - 85,000)
Purchase cost 7,000 × $145 = 1,015,000
Total cost 1,120,000 1,147,000
Difference between two alternatives
= $1,147,000 - $1,120,000
= $27,000
According to the analysis, rubium make the product because buying product cost is more than making the product.
Opal Production Company uses a standard costing system. The following information pertains to the current year: Actual factory overhead costs ($15,000 is fixed) $50,000 Actual direct labor costs (10,000 hours) $130,000 Standard direct labor for 6,000 units: Standard hours allowed 9,500 hours Labor rate $10.00 The factory overhead rate is based on an activity level of 12,000 hours. Standard cost data on an activity level of 12,000 hours is as follows: Variable factory overhead $18,000 Fixed factory overhead 12,000 Total factory overhead $30,000 What is the variable overhead efficiency variance for Opal Production Company?
Answer:
$750 Unfavorable
Explanation:
The calculation of variable overhead efficiency variance is shown below:-
Variable overhead efficiency variance = (Actual direct labor hours - Standard hours allowed) × (Variable factory overhead ÷ Factory overhead rate)
= (10,000 hours - 9,500 hours) × ($18000 ÷ 12000)
= 500 hours × $1.5
= $750 Unfavorable
Therefore for computing the variable overhead efficiency variance we simply applied the above formula.
Dermody Snow Removal's cost formula for its vehicle operating cost is $3,000 per month plus $330 per snow-day. For the month of December, the company planned for activity of 24 snow-days, but the actual level of activity was 26 snow-days. The actual vehicle operating cost for the month was $11,190. The spending variance for vehicle operating cost in December would be closest to:
Answer:
390 F
Explanation:
Spending variance is defined as the difference between the actual expenses and planned expenses. It is favorable when the actual expenses is less than planned and vice versa.
Operating cost $3000
Maintenance per snow day - $330
Budgeted snow day - 24
Actual snow day - 26
Actual operating cost - $11,190
Variance
((330*26)+3000 =11580
Actual operating cost = 11,190
Variance = 11580-11190= 390 F
Answer: 390F
Explanation:
Given Data;
Vehicle operating cost = $11,190
Vehicle operating cost ( removal monthly) = $3,000
Actual days = 26
Snow per day = $330
Therefore:
Spending variance for vehicles operation = flexible budget - actual
= $ ( 330 * 26 + 3000 ) - $11,190
= $11,580 - $11,190
= 390F
The spending variance for vehicle operating cost would be closer to 390F in December.
Reconsider the determination of the hedge ratio in the two-state model where we showed that one-third share of stock would hedge one option. The possible end-of-year stock prices, uS0 = $120 (up state) and dS0 = $80 (down state). a. What would be the call option hedge ratio for each of the following exercise prices: $120, $104, $93, $80, given the possible end-of-year stock prices, uS0 = $120 (up state) and dS0 = $80 (down state)?
Answer:
Exercise prices (Hedge ratio): $120 (0.000), $104 (0.400), $93 (0.675), $80 (1.000).
Explanation:
Upper state (uS0) = 120
Down State (dS0) = 80
Difference = 40
Exercise Price($) Hedge Ratio
120 120-120/40 = 0/40 = 0.000
104 120-104/40 = 16/40 = 0.400
93 120-93 = 27/40 = 0.675
80 120-80/40 = 40/40 = 1.000
As the option becomes more in the money, the hedge ratio increases to a maximum of 1.0.
Final answer:
Hedge ratios for call options with exercise prices of $120, $104, $93, and $80 are 0, 0.4, 0.675, and 1, respectively, when the stock price can either go up to $120 or down to $80.
Explanation:
When determining the hedge ratio for call options, one can establish the number of shares to hold for hedging one call option. The hedge ratio can be calculated using the change in option payoff against the change in stock price in each state.
Calculating Hedge Ratios
For a call option with exercise prices of $120, $104, $93, and $80, the possible up state ($uS_0$) is $120, and the down state ($dS_0$) is $80.Exercise price at $120: The call option payoff is $0 in both up and down states (since the stock price is equal to the exercise price in the up state and lower in the down state), resulting in a hedge ratio of 0.Exercise price at $104: The call option payoffs are $16 in the up state (120 - 104) and $0 in the down state. The hedge ratio is therefore (16 - 0) / (120 - 80) = 0.4.Exercise price at $93: Payoffs are $27 in the up state and $0 in the down state. The hedge ratio is (27 - 0) / (120 - 80) = 0.675.Exercise price at $80: Payoffs are $40 in the up state and $0 in the down state, giving a hedge ratio of (40 - 0) / (120 - 80) = 1.The hedge ratio provides the proportion of shares needed to hedge against the price movement of one call option.
Rego Circuits supplies microcomputer circuitry for customers that build super computers. Their annual demand is 36,000 units, with a setup cost of $25 per batch and a holding cost of $0.45 per unit per year. Their manufacturing facility can produce circuits at a rate of 300 units per day, and they are able to operate 360 days a year. (Total 10 Points) a) What is Cesar Rego’s economic production quantity? What is the maximum inventory level, the time between orders, the total setup cost, and the total holding cost for this EPQ? (5 Points) b) Please draw one inventory cycle of the saw tooth model for this EPQ. Do not forget to label the x and y axis on your model! (5 Points)
Answer:
EOQ = 2,000
Time between order = 10 days
Setup and Ordering Cost $450
ATTACHED GRAPH
Explanation:
[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]
Where:
D = annual demand = 36,000
S= setup cost = ordering cost = 25
H= Holding Cost = 0.45
[tex]Q_{opt} = \sqrt{\frac{2(36,000)(25)}{0.45}}[/tex]
EOQ = 2,000
2,000 / 300 unit per day = 6.67
Setup cost:
36,000 units / 2,000 per batch x $25 cost per batch = $ 450
Holding cost:
2,000 units / 2 x $0.45 per unit = $ 450
36,000 units / 360 days = 100 units per day
2,000 units / 100 unit = 20 days
IMPORTANT DISCLAMER
As we are given with no safety stock we assume is zero
If there was any, then we should draw a line at this stock and move the graph upwards.
he condensed product-line income statement for Dish N' Dat Company for the month of March is as follows: Dish N' Dat Company Product-Line Income Statement For the Month Ended March 31 Bowls Plates Cups Sales $71,000 $105,700 $31,300 Cost of goods sold 32,600 42,300 16,800 Gross profit $38,400 $63,400 $14,500 Selling and administrative expenses 27,400 42,800 16,700 Income from operations $11,000 $20,600 $(2,200) Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Dish N' Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued. a. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate a loss.
Answer and Explanation:
As per the data given in the question,
Differential analysis
Continue cup(Alt. 1) Discontinue cups(Alt 2)
Particulars Alt 1 Alt 2 Differential
Effect on income
Revenues $31,300 $0 $31,300
Costs:
Variable cost of goods sold $14,280 $0 $14,280
($16,800×(100%-15%)
Variable selling and admin expenses $10,020 $0 $10,020
($16,700(100%-40%)
Fixed cost $9,200 $9,200 $0
($16,800×15%+$16,700×40%)
Net income ($2,200) ( $9,200) ($7,000)
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