Answer:
$9,400
Explanation:
For computing the maximum contribution margin we need to do following calculations
Contribution Margin
Product A = ($12 ÷3) = 4
Product B = ($5 ÷ 1) = 5
Product C = ($9 ÷ 2) = 4.50
So, the ranking order would be product B > product C > product A
Now
Total machine hours available = 2,100 hours
And,
Time for making 500 units of B
= 500 × 1
= 500 hours
For making 500 units of C, the time taken is
= 500 × 2
= 1000 hours
So the remaining hours left is
= 2,100 hours - 1,000 hours - 500 hours
= 600 hours
So, for A the manufactured is
= 600 ÷ 3
= 200
And, finally the Maximum contribution margin is
= (200 × $12) + (500 × 5) + (500 × 9)
= $2,400 + $2,500 + $4,500
= $9,400
The accounting records for Eisner Manufacturing Company included the following cost information relating to its first year of operations: Direct materials $ 52,000 Direct labor $ 80,000 Fixed manufacturing overhead $ 91,000 Variable manufacturing overhead $ 25,000 Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $184,000. The cost per unit under variable and absorption costing would be, respectively: Multiple Choice $18.70 and $28.80. $13.70 and $8.80. $4.70 and $9.80. $15.70 and $24.80.
Answer:
Option (d) : $24.8 and $15.7
Explanation:
As per the data given in the question,
Number of units produced = 10,000
Number of units sold = 6,000
Cost per unit = Amount/ 10,000
Absorption Variable
Direct material $5.2 $5.2
Direct Labor $8 $8
Variable manufacturing overhead $2.5 $2.5
Fixed manufacturing overhead $9.1 $9.1
Unit product cost $24.8 $15.7
Beach Runner makes running shoes and they are anticipating the incurrence of the following manufacturing overhead costs during the upcoming year: Cost Indirect materials...........$4,000 Indirect Labor .......................$70,000 Utilities...................................$42,000 Insurance.................................$7,000 Taxes.........................................$9,000 Depreciation on equipment $20,000 What will Beach Runner budget for cash disbursements related to manufacturing overhead? (1 Point)
Answer:
Beach Runner
Manufacturing Overhead Budget for Cash Disbursements:
Indirect materials = $4,000
Indirect labor = $70,000
Utilities = $42,000
Insurance = $7,000
Taxes = $9,000
Total = $132,000
Explanation:
Cash disbursement will not be incurred in respect of Depreciation on equipment. This is why depreciation is excluded.
Depreciation of a capital asset is not a cash flow item. Depreciation is an accounting technique or measure used to spread the cost of a capital asset over its useful life in accordance with the matching principle.
Desert Company reports the following Income Statement accounts on its Trial Balance for the year ended December 31, 2020: Sales Revenue $280,000 Cost of Goods Sold 170,000 Administrative Expenses 20,000 Loss on Disposal of Equipment 8,000 Sales Commission Expense 12,000 Interest Revenue 7,000 Loss from Discontinued Operations 32,000 Bad Debt Expense 4,000 What should Desert report for Income from Continuing Operations before Income Taxes on its 2020 Income Statement?
a. $73,000
b. $41,000
c. $81,000
d. $66,000
Answer:
a. $73,000
Explanation:
According to the scenario, computation of the given data are as follow:-
Desert company income statement
Particular Amount ($)
Total Revenue (sales revenue + interest revenue) 287,000
Total expenses excluding loss from discontinuing operation
($246,000 - 32,000) -214,000
Income from continuing operations before income tax 73,000
Working notes:
Total Revenue =Sales Revenue + Interest Revenue
= $280,000 + $7,000
= $287,000
Total Expenses = Cost of Goods Sold + Administrative Expenses + Loss on Disposal of Equipment + Sales Commission Expense + Loss From Discontinued Operations + Bad-Debt Expense
= $170,000 + $20,000 + $8,000 + $12,000 + $32,000 + $4,000
= $246,000
On December 31, 2017, Blair Company issued $600,000 of 20‑year, 11 percent bonds payable for $554,861, yielding an effective interest rate of 12 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and discount amortization on December 31, 2018. Round amounts to the nearest dollar.
Answer:
No Account and explanation Debit Credit
Dec 31 Cash 554861
Discount on bonds payable 45139
Bonds payable 600000
(To record issuance of bonds)
June 30 Bond interest expense 33292
(554861*12%*6/12)
Discount on bonds payable 292
Cash (600000*11%*6/12) 33000
(To record first semiannual interest)
Dec 31 Bond interest expense 33309
(555153*12%*6/12)
Discount on bonds payable 309
Cash 33000
(To record interest)
The appropriate journal entries to reflect the issuance of the bonds and the semiannual interest payment and discount amortization are:
Blair Company Journal entries
a. Dec 31
Debit Cash $554,861
Debit Discount on Bonds payable $45,139
($600,000-$554,861)
Credit Bonds payable $600,000
(To record issuance of bonds)
b. Jun 30
Debit Bond interest expense $33,292
($554,861×12%/2)
Debit Discount on Bonds payable $292
($33,000-$33,292)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
c. Dec 31
Debit Bond interest expense $33,309
[($554,861+$292)×12%/2]
Credit Discount on Bonds payable $309
($33,000-$33,309)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
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Minneapolis Federal Reserve Bank economist Edward Prescott estimates the elasticity of the U.S. labor supply to be 3. Given this elasticity, what would be the impact of funding the Social Security program with tax increases on the number of hours worked and on the amount of taxes collected to fund Social Security? Because labor supply is elastic, raising the tax rate will the percent of hours worked by than the percent decrease in wages paid. That is, total income will and total revenue collected by taxes will . Social Security be financed by increasing tax rates.
Answer:
The impact of funding the Social Security program with tax increases on the number of hours worked and on the amount of taxes collected to fund Social Security would be:
Because labor supply is elastic, raising the tax rate will reduce the percent of hours worked by more than the percent decrease in wages paid.
Explanation:
The reason behind this answer is that in the first place labor supply is elastic in other words it has no strict guidelines. Therefore, it can be executed in many different ways even after following the federal law of employment. Also, the tax rate replacement will be bigger than the percent decreased in wages aid because the company can find different turns to distribute it even when executing the funding of the program without exceeding it. Because social security can't be increase by raising taxes. The income will fall and the income from taxes will increase.
With a labor supply elasticity of 3, funding Social Security with tax increases would likely decrease the number of hours worked more so than the percentage decrease in wages, leading to a decrease in total income and possibly lower tax revenues for Social Security.
Given an estimated labor supply elasticity of 3, if the U.S. government were to fund Social Security through tax increases, the impact on the labor market may have several implications. First, the labor supply curve is responsive to wage changes. With a higher elasticity value, like 3, a percentage decrease in after-tax wages, from an increased tax burden, would lead to a more substantial percentage decrease in the hours worked. In other words, workers would reduce their labor supply more significantly due to the higher cost of working.
Based on this elastic labor supply, raising taxes to finance Social Security will decrease the percent of hours worked by more than the percent decrease in wages paid to workers. As a result, total income will decrease as workers choose more leisure over labor due to reduced after-tax wages. Consequently, total revenue collected from these taxes for Social Security might also decrease rather than increase because the reduced hours worked will lead to less taxable income overall.
This situation relates to the concept of tax incidence, which considers that regardless of who is legally responsible for paying a tax, the economic burden is distributed according to the relative elasticities of supply and demand. If labor supply is relatively elastic while labor demand is inelastic, workers suffer more from the tax burden. This is also linked to the concept of distortionary effects which suggests that taxes can alter individuals' behavior, possibly leading them to work less.
While proponents of supply-side economics may argue that lowering taxes could incent workers to work more, leading to increased tax revenues, this argument seems inapplicable in the scenario with high labor supply elasticity and increased taxes. Instead, any tax increase might result in the opposite effect, with reduced labor supply leading to lower total tax revenues.
You want to buy industrial ethanol and you have $125USD to spend. The domestic price is $0.7USD per liter. You can also buy ethanol with free shipping from Canada and Mexico. The price in Canada is $0.5CD and the price in Mexico is 10 pesos per liter. The spot US-CA exchange rate is $0.85 USD and the CA-MX exchange rate is 16₱. From what country should you buy your ethanol and how much can you afford to buy?
Answer:
Canada.
Explanation:
The exchange rates is given below;
=> Mexican Peso to Canadian dollar = 16.
=> USD to Canda = 0.85.
=> The Cross rate for USD to Mexican Peso = 0.053125.
=> Cross rate for USD to Mexican Peso = 0.85/16.
In the United States of America Available funds in domestic currency =
125.00, 125.00.
In the United States of America the Domestic price per litre = 0.7.
US Litres purchased = 178.57.
For Canada and Mexico, the Available funds in domestic currency,
125/0.85; 147.06(Canada)
125/0.053125; 2,352.94 (Mexico).
For Canada and Mexico, the Domestic price per litre;
0.50(Canada) 10.00(Mexico).
Litres purchased for Canada and Mexico;
294.12(Canada) 235.29(Mexico).
You should buy your ethanol from Canada and you can afford to buy 294 liters."
To determine from which country you should buy the ethanol and how much you can afford, we need to calculate the cost per liter of ethanol in USD for each country and then compare the results.
First, let's calculate the cost per liter in USD for each country:
1. Domestic price: $0.7 USD per liter.
2. Canadian price: $0.5 CD per liter.
To convert to USD, we use the US-CA exchange rate: $0.5 CD * $0.85 USD/CD = $0.425 USD per liter.
3. Mexican price: 10 pesos per liter.
To convert to USD, we first convert pesos to Canadian dollars using the CA-MX exchange rate, and then convert Canadian dollars to USD using the US-CA exchange rate:
10₱ * 1/16 CD/₱ = $0.625 CD per liter.
Then, $0.625 CD * $0.85 USD/CD = $0.53125 USD per liter.
Now that we have the cost per liter in USD for each country, we can compare them:
- Domestic: $0.7 USD/liter
- Canada: $0.425 USD/liter
- Mexico: $0.53125 USD/liter
The Canadian price is the cheapest.
Next, let's calculate how much ethanol you can afford to buy with $125 USD from Canada:
Amount of ethanol you can buy = Total budget / Cost per liter
= $125 USD / $0.425 USD/liter
= 294.11765 liters
Since you cannot buy a fraction of a liter, you can afford to buy 294 liters of ethanol from Canada.
Therefore, the best option is to buy the ethanol from Canada, and you can afford to buy 294 liters with your budget of $125 USD.
The answer is: You should buy your ethanol from Canada and you can afford to buy 294 liters."
Ziff Corp. has a very attractive credit policy, and none of its customers pays in cash when the firm makes a sale. Ziff Corp. sells to its customers on credit terms of 1/10, net 30. If a customer bought $150,000 worth of goods and paid the firm cash eight days after the sale, how much cash would Ziff Corp. get from the customer? (Note: Round your answer to the nearest whole dollar.) $138,750 $157,500 $148,500 $123,750
Answer:
$148,500
Explanation:
Data given
Sales = $150,000
Rate of discount = 10
The computation of Ziff Corp. cash received from customer is shown below:-
Total collection = Sale × (1 - Rate of discount)
= $150,000 × (1 - 0.01)
= $150,000 × 0.99
= $148,500
Therefore for computing the total collection we simply applied the above formula.
According to the efficient market theory, A. prices of actively traded stocks can only be over-valued in an efficient market B. prices of actively traded stocks do not differ from their true values in an efficient market C. prices of actively traded stocks can be under- or over-valued in an efficient market, and bear searching out D. prices of actively traded stocks can only be under-valued in an efficient market
Answer: B. prices of actively traded stocks do not differ from their true values in an efficient market
Explanation: The efficient market theory postulates that the market is generally efficient with prices of actively traded stocks do not differ from their true values in an efficient market. As a result, prices of securities such as stocks reflect all available information, thus making it needles to engage in stock picking with hopes to "beat the market" on a risk-adjusted basis. This is because the market only reacts to new information.
Mary traded furniture used in her business to a furniture dealer for some new furniture. Mary originally purchased the furniture for $40,000 and it had an adjusted basis of $20,000 at the time of the exchange. The new furniture had a fair market value of $35,000. Mary also gave $5,000 to the dealer in the transaction. What is Mary's adjusted basis in the new furniture
Answer:
$25,000
Explanation:
In the case of exchange of asset the adjusted basis of new asset will be equals to the the adjusted basis of old assets at the time of exchange and any consideration payment resulted from exchange of assets.
In this question the old furniture has adjusted basis of $20,000 at the time of exchange and Mary paid additional $5,000 for the exchange of furniture.
Adjusted Basis = Adjusted basis of old furniture at the time of exchange + Consideration for the exchange of furniture
Adjusted Basis = $20,000 + $5,000 = $25,000
Mary’s adjusted basis in the new furniture is $25,000, calculated by adding the adjusted basis of the old furniture ($20,000) plus the cash paid ($5,000).
This question involves a like-kind exchange, which is common in business when trading assets. To determine Mary's adjusted basis in the new furniture, we use the following calculation:
Initial adjusted basis of old furniture: $20,000Cash paid: $5,000Total adjusted basis for the new furniture: $20,000 + $5,000 = $25,000The new furniture's fair market value does not affect this calculation directly.
has a target capital structure of 50% debt and 50% common equity. Davola funds debt by issuing 20-year, 8.6% semi-annual coupon bonds that currently sell for $900. Davola Inc. expects to pay a $1.75 dividend at the end of this year, its expected constant growth rate is 5%, and its common stock sells for $25. Their tax rate is 25%. 1. What is Davola’s component cost of debt? 2. What is Davola’s component cost of equity? 3. What Davoloa’s WACC?
Answer:
Cost of debt after tax is 7.3%
cost of equity is 12.35%
WACC is 9.83%
Explanation:
The cost of debt can be computed using the rate formula in excel.
The rate formula=rate(nper,pmt,-pv,fv)
the nper is the number of coupon payments the bond would make over its entire bond life i.e 20 years*2=40
pmt is the semiannual coupon=$1000*8.6%/2=$43
pv is the current price of $900
fv is the face value of $1000
=rate(40,43,-900,1000)=4.87%
yield =4.87%*2=9.74%
after tax cost=9.74%*(1-tax rate)=9.74%*(1-0.25%)=7.3%
The cost of equity:
share price=D*(1+g)/r-g
D is the dividend expected
g is the dividend growth rate
r is the cost of equity
r=(D*(1+g)/share price)+g
r=($1.75*(1+5%)/$25)+5%=12.35%
WACC=Ke*E/V+Kd*D/V
Ke is the cost of equity of 12.35%
E is 50% or 0.5
D is 50% or 0.5
V=0.5+0.5=1
Kd(after tax) =7.3%
WACC=(12.35%*0.5/1)+(7.3%*0.5/1)=9.83%
On June 1 of the current tax year, Elisha and Ezra (who are equal partners) contribute property to form the Double E Partnership. Elisha contributes cash of $227,520. Ezra contributes a building and land with an adjusted basis and fair market value of $379,200, subject to a liability of $151,680. The partnership borrows $23,700 to finance construction of a parking lot in front of the building. At the end of the first year (December 31), the accrual basis partnership owes $9,480 in trade accounts payable to various creditors. The partnership reported net income of $35,550 for the year that they share equally. Assume that Elisha and Ezra share equally in partnership liabilities. How much is Elisha's basis in the partnership interest on December 31
Answer:
Elisha's basis in the partnership interest on December 31 is $339,525
Explanation:
In order to calculate Elisha's basis in the partnership interest on December 31 we would to calculate the following formula as follows:
Elisha’s basis=cash contributes + liability/2 +reported net income/2 + partnership borrowship/2 + partnership obligations/2=
Elisha’s basis= $227,520+ $151,680/2 + $35,550/2 + $23,700/2 + $9,480/2
Elisha’s basis=$339,525
Elisha's basis in the partnership interest on December 31 is $339,525
You have just won the lottery and you will receive 10 annual beginning-of-year payments of $5 million each. If you expect to earn a 9% compounded semi-annually, what will be the current value of the lottery payments?
Answer:
Current value of lottery=$ 33,983,233.98
Explanation:
The value of the lottery is the Present of the annual cash flow discovered at the discount rate of 9% compounded semi annually.
Semi-annual rate = 9%/2 = 4.5%
PV =A × (1- (1+r)^(-n)/r
A- 5,000,000/2= 2,500,000. r- 4.5%, n- 2 × 10 = 20
The first payment is already in its present value term, hence it is already discounted.
The balance of 19 payments would be discounted as follows
PV = 2,500,000 × (1- (1.045)^(-19)/0.045
= 31,483,233.98
Current value of lottery = 2,500,000 + 31,483,233.98
=$ 33,983,233.98
There are many buyers who value high-quality used cars at the full-information market price of p1 and lemons at p2. There are a limited number of potential sellers who value high-quality cars at v1 less than or equals p1 and lemons at v2 less than or equals p2. Everyone is risk neutral. The share of lemons among all the used cars that might potentially be sold is theta. Assume Upper P 1 greater than Upper P 2 comma v 1 greater than v 2, and there are no transaction costs. Under what conditions are all cars sold?
Answer:
Cars would be sold when P2 > V1,
Explanation:
Given Data
Cars = P1
Lemons = P2
Sellers who value high quality cars = V1 ≤
P1
Sellers who value high quality lemons = V2 ≤ P2
Share of lemons among used cars that might be sold = θ
EP = P1 ( θ ) + P2 ( θ ) > V1 > V2
Under which conditions are cars sold
1. Cars would be sold when P2 > V1,
2. Only lemons would be sold when P1 < V1
3. No cars would be sold if P2 is < V1
Final answer:
All cars in a used car market can be sold when there is alignment between the buyers' perceived quality (based on market price) and the sellers' valuations of their cars. This hints on clear information about the quality and proportion of lemons in the market, allowing for an informed and confident buying decision. Seller reputation, warranties, and certifications can also help to bridge the gap of imperfect information and allow all cars to be sold.
Explanation:
The condition under which all cars would be sold in a market where buyers base their assessment on market price, and where imperfect information about the quality of goods exists, revolves around the notion of adverse selection. For all cars to sell, both high-quality used cars (not lemons) and lemons must align with buyers' valuation such that the asking price matches the perceived quality. This assumes that the full-information market prices p1 (for high-quality cars) and p2 (for lemons) are equal to or greater than the valuations v1 and v2 set by sellers, respectively. The market must reach a point where buyers trust that the price reflects the quality, ensuring that cars valued at p1 are indeed high-quality and not lemons, and that cars priced at p2 provide value consistent with their lower quality.
In essence, an equilibrium is reached when the proportion of high-quality cars and lemons, represented by theta, is well-known to buyers and sellers, enabling them to adjust their expectations and price settings accordingly. This creates a transparent market where purchasers can make informed decisions, eliminating fears of inadvertently purchasing a lemon. Without assurance about car quality, mechanisms such as warranties, certifications, or well-established seller reputations might be needed to provide the buyer with sufficient confidence to proceed with a purchase despite the risk associated with imperfect information.
A broker advertised in his local newspaper that a home was for sale for $50,000 when it was really for sale for $500,000. A buyer called in and was told that this was simply a typing error and that the correct price was $500,000. The buyer was angry that the associate was so arrogant on the phone and the buyer filed a written complaint with the FREC. The most serious determination by the FREC would be to:
Answer: Punish the broker with an administrative fee of $1000 up to a one-year suspension
Explanation: In situations such as described in the question, the most serious determination by the Florida Real Estate Commission (FREC) in response to a complaint by a buyer who filed a written complaint concerning the arrogance of the associate would be to punish the broker with an administrative fee of $1000 up to a one-year suspension.
A loom operator in a textiles factory earns $16.00 per hour. By contract, the employee earns $24.00 (time and a half) for overtime hours. The operator worked 44 hours during the first week of May, and overtime is paid after the usual 40 hours.1) Compute the loom operator's compensation for the week.2) Calculate the employee's total overtime premium for the week.3) How much of the employee's total compensation for the week is direct-labor cost? How much is overhead?
Answer:
1) $736
2) $24
3) Total compensation for direct labor = $736 -$24 = $712
Overhead = $24
Explanation:
(1) Normal wages for the week = Normal hours * normal hourly rates
= 40 hours * $16 per hour = $640
Overtime hours = Total time - Normal hours = 44 - 40
= 4 hours
overtime wages = overtime hours * overtime hourly rates
= 4 hours * $24 = $96
Operators compensation for the week = $640 + $96
= $ 736
(2) Employee's total overtime premium
= (overtime rate - normal time rate) * (Total hours - normal hours)
= ($24 - $16) *(44 - 40)
= ($8) * (4)
=$24
(3) Total compensation for direct labor = $736 -$24 = $712
Overhead = $24
1. The computation of the loom operator's compensation for the week is $736 ($16 x 40 + $24 x 4).
2. The calculation of the employee's total overtime premium for the week is $32 ($8 x 4).
3. The amount of the employee's total compensation for the week that is direct-labor cost is $704 ($16 x 44).
4) The amount of the employee's total compensation for the week that is overhead is $32 ($8 x 4).
Data and Calculations:
Earnings per hour = $16
Overtime rate = $24
Overtime premium = $8 ($24 - $16)
Number of hours worked = 44 hours
Normal work hours = 40 hours
Thus, loom operator earns a total of $736 per week with an overtime premium of $32.
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$320,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $54,000 per year to operate and maintain, but would save $95,000 per year in labor and other costs. The old machine can be sold now for scrap for $32,000. The simple rate of return on the new machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Noreen_5e_Rechecks_2019_10_16 Multiple Choice 6.56% 29.69% 14.58% 7.29%
Answer:
7.29%
Explanation:
The computation of simple rate of return on the new machine is shown below:-
For computing thee simple rate of return first we need to find out the annual accounting return and investment which is here below:-
Annual accounting return = Savings - Cost - Depreciation
= $95,000 -$ 54,000 - (320,000 ÷ 16)
= 95,000 - 54,000 - 20,000
= $21,000
Investment = 320,000 - 32,000
= 288,000
Simple rate of return = Annual accounting return ÷ Investment
= $21,000 ÷ $288,000
= 7.29%
Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 80,000 units, 60% complete as to materials and 20% complete as to conversion. Units started and completed: 250,000. Units completed and transferred out: 330,000. Ending Inventory: 30,000 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $37,200. Costs in beginning Work in Process - Conversion: $79,700. Costs incurred in October - Direct Materials: $646,800. Costs incurred in October - Conversion: $919,300. Calculate the equivalent units of conversion.
Answer:
Equivalent units of conversion cost = 317,000 units
Explanation:
The equivalent unit is the notional whole units which represent incomplete work and is used to apportion cost between cost between work in progress and completed units
Item units Equivalent units
Opening WIP 80,000 (80,000× 80%) = 64,000
Fully worked 250,000 (250,000× 100) = 250,000
Closing WIP 30,000 (30,000× 10%) = 3,000
Total equivalent units 317,000.
1. DOC for opening inventory is 80%, that is 100%-20%. Remember that 20% work has been done in the previous period, so the balance is to be done in this current period
2. Fully work represent the units of inventory introduced in the current period and completed in the same period. Meaning 100% work was achieved in October .
3. Closing work is only 10% completed. This represent work started this period but not yet completed.
Colassard Industries has the following data available for preparation of its statement of cash flows: Sales revenue $385,800 Cost of goods sold 203,100 Wages expense 62,400 Insurance expense 13,780 Interest expense 15,150 Income taxes expense 27,400 Accounts receivable, decrease 15,600 Inventory, increase 8,710 Prepaid insurance, increase 1,550 Accounts payable, increase 3,680 Notes payable, increase 40,000 Interest payable, increase 1,240 Wages payable, decrease 6,700 Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. Use a minus sign to indicate any decreases in cash or cash outflows.
Answer:
Cash flows from operating activities section
Net Income before tax (385,800-203,100- 62,400-13,780-15,150) 91,370
Adjustment of Working Capital items :
Decrease in Accounts Receivable 15,600
Increase in Inventory (8,710)
Increase in Prepaid insurance (1,550)
Increase in Accounts payable 3,680
Increase in Notes payable 40,000
Increase in Interest payable 1,240
Decrease in Wages payable (6,700)
Net Cash flow from operating activities 134,940
Explanation:
The Indirect method of determining cash flows from operating activities adjust the net income against non-cash items included i income statement and working capital adjustments.
Trio Company reports the following information for the current year, which is its first year of operations.
Direct materials $ 11 per unit
Direct labor $ 16 per unit
Overhead costs for the year
Variable overhead $ 2 per unit
Fixed overhead $ 100,000 per year
Units produced this year 25,000 units
Units sold this year 19,000 units
Ending finished goods inventory in units 6,000 units
Requried:
1. Compute the product cost per unit using absorption costing.
Answer:
Unitary product cost= $33
Explanation:
Giving the following information:
Direct materials $ 11 per unit
Direct labor $ 16 per unit
Overhead costs for the year
Variable overhead $ 2 per unit
Fixed overhead $ 100,000 per year
Units produced this year 25,000 units
Under the absorption costing cost method, the unitary product cost is calculated using the direct material, direct labor, and total unitary overhead.
First, we need to calculate the unitary fixed overhead:
Unitary fixed overhead= 100,000/25,000= $4
Unitary product cost= 11 + 16 + (2 + 4)= $33
Your firm is a U.K.-based importer of bicycles. You have placed an order with an Italian firm for €1,000,000 worth of bicycles. Payment (in euro) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a pound-denominated receivable with a one-year maturity.
Contract Size Country U.S. $ equiv. Currency per U.S. $
£ 10,000 Britain (pound) $ 1.9600 £ 0.5102 interest APR
12 months forward $ 2.0000 £ 0.5000 rates
€ 10,000 Euro $ 1.5600 € 0.6410 i$ = 1 %
12 months forward $ 1.6000 € 0.6250 i€ = 2 %
SFr. 10,000 Swiss franc $ 0.9200 SFr. 1.0870 i£ = 3 %
12 months forward $ 1.0000 SFr. 1.0000 iSFr. = 4 % The following were computed without rounding. Select the answer closest to yours.
A. £803,721.49
B. €800,000
C. £780,312.13
D. £72,352.94
Answer:
( A) £803,721.49
Explanation
==> Present value of €1,000,000 = 1000000/1.02 = €980,392.16
===> Converting Euro into US Dollar using spot exchange rate
€980,392.16×1.56 = $1,529,411.77
===>Converting US Dollar into Pounds using spot exchange rate
$1,529,411.77/1.96 = £780,312.13
===> investing this amount in UK
==>the amount of €1,000,000 is collected from French firm and it is used to repay the Euro loan
Step – 5 maturity value of pounds investment is received
£780,312.13 × 1.03 = £803,721.49
Therefore the answer is £803,721.49
Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 20% weight in equity, 5% in preferred stock, and 75% in debt. The cost of equity capital is 12%, the cost of preferred stock is 9%, and the pretax cost of debt is 8%. What is the weighted average cost of capital for Ford if its marginal tax rate is 35%?
Answer:
The WACC is 6.75%
Explanation:
The weighted average cost of capital, also called WACC, is the cost of a firm's capital structure. The capital structure is made up of debt, preferred stock and common stock.
The formula for WACC is,
WACC = wD * rD * (1 - tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each component in the capital structure or value of each component as a proportion of total assetsr represents the cost of each componentwe take after tax cost of debt. So we multiply cost of debt by (1 - tax rate)The WACC is:
WACC = 0.75 * 0.08 * (1 - 0.35) + 0.05 * 0.09 + 0.20 * 0.12
WACC = 0.0675 or 6.75%
8. Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required. 9. All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up. 10. Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel. a. For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records). b. For each internal control, identify the transaction-related audit objective(s) to which it applies. c. For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective. d. For each control, list a specific misstatement that could result from the absence of the control. e. For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control. 12-21 (Objectives 12-1, 12-2, 12-3, 12-6) Lew Pherson and Vera Collier
Answer:
Part 8
a) Particular Control Action: acceptable agreement of actions and businesses.
b) Operation related audit: Presence of logged transactions.
c) Prevented particular mis-statement: The management avoids research of an unsuitable check for a worker who functioned for the association once.
d) Particular mis-statement in control deficiency: A worker who is previously terminated might still stay on the workforce and somebody else could acquire the payments in his name.
e) Audit test: Amazement payoff ought to be achieved wherever the auditor himself books for and issues the paychecks to the workers when they supply their credentials.
Part 9
a) Particular Control Action: Physical regulator on the archives and possessions, and enough isolation of responsibilities.
b) Operation related audit: Presence of logged transactions.
c) Prevented particular mis-statement: The management avoids research of checks for workers on holiday or absent and missing staffs.
d) Particular mis-statement in control deficiency: If the regulator isn't there the payments ready for absent staff may well be lost or might be taken by the worker chargeable for delivery of the payments.
e) Audit test: The auditor ought to examine the off payments to verify that every payment is supported befittingly, and therefore the worker for who the payment has been ready remains operating for the association.
Part 10
a) Particular Control Action: The transactions are accurately licensed and responsibilities are sufficiently divided.
b) Operation related audit: The logged transactions occur and are expressed at right amounts.
c) Prevented particular mis-statement: The management avoids research of payments within the name of false staff or at unapproved wage charges.
d) Particular mis-statement in control deficiency: If an equivalent staff are particular the duties of record possession and coming into new worker variety into the main file, it's doable that a false bank check is managed within the name of a false worker.
e) Audit test: The auditor ought to conceive to access the staff main file exploitation an illegal parole.
The management of Jeremynt Inc., a public relations firm, gives each of its teams the responsibility of increasing their productivity through measures developed by the team members and approved by the respective team managers. The company then measures the team-level productivity, and the cost savings resulting from the improvements in productivity are split among its employees. In this scenario, Jeremynt Inc. is most likely using a group incentive system called _____.
Answer:
gainsharing incentive
Explanation:
In simple words, A gainsharing system on a theoretical level is essentially a group reward program-a productivity pay pro- gram-in which workers as a collective receive incentives to collaborate to boost plant efficiency. In comparison to something like a profit-sharing system, incentives are much more directly related to the success of individual workers or teams of workers in a gain-sharing opportunity.
Marsh Corporation purchased a machine on July 1, 2015, for $1,500,000. The machine was estimated to have a useful life of 10 years with an estimated salvage value of $84,000. During 2018, it became apparent that the machine would become uneconomical after December 31, 2022, and that the machine would have no scrap value. Accumulated depreciation on this machine as of December 31, 2017, was $354,000. What should be the charge for depreciation in 2018 under generally accepted accounting principles
Answer:
$229,200
Explanation:
The carrying value of the machine as of December 31, 2017, was $1,500,000 (purchase cost) - $354,000 (accumulated depreciation) = $1,146,000.
Since the machine's useful remaining life was reduced by 3 years, the depreciation amount should reflect this. The remaining useful life of the machine is 5 years (2018 - 2022), so the company can increase the depreciation expense per year to $1,146,000 / 5 = $229,200.
That way at the end of 2022 the carrying value will be $0, since the machine has no salvage value.
Consider two products, X and Y, that have identical cost, retail price, and demand parameters and the same short selling season (the summer months from May through August). The newsvendor model is used to manage inventory for both products. Product X is to be discontinued at the end of the season this year and the leftover inventory will be salvaged at 75 percent of the cost. Product Y will be reoffered next summer, so any leftovers this year can be carried over to the next year while incurring a holding cost on each unit left over equal to 20 percent of the product's cost. The quantity of each product is selected to maximize expected profit. How do those quantities compare?
Answer: b. stocking quantity of product B is higher.
Explanation:
We are using the Newsvendor model and are told that the products have identical cost, retail price, and demand parameters and the same short selling season.
Using this model, it is important to understand 2 terminologies for this question, Overage cost and Underage costs.
Overage Costs is the cost of unused inventor and is calculated by subtracting Salvage Value from the cost price.
Underage costs are costs arising from unmet Demand. In this scenario they are the same because both products share the same demand.
The Overage costs for the products are,
Overage cost for Product X =100-75
=25%
Overage cost for Product Y = 20%
When deciding which product to stick more of we look at the one with the higher CRITICAL RATIO.
The formula of which is,
= Cu/(Cu+Co)
Where,
Cu is the Underage cost,
Co is the Overage cost
As earlier mentioned, both have the same Underage cost meaning that B will give a higher CRITICAL ratio as it's Co is smaller.
Product B should therefore be stocked more than Product A.
Answer:
Stocking quantity of product B is higher
Explanation:
Overage cost for Product A(Co)=100-75=25%
Overage cost for Product B (Co)=20%
The underage cost (Cu) for both the products is same hence critical ratio i.e, Cu/(Cu+Co) is lower for product A than Product B which means product B should will be stocked more compare to product A
So the correct answer will be stocking quantity of product B is higher
Brief Exercise 23-1 Lopez Company uses both standards and budgets. For the year, estimated production of Product X is 534,000 units. Total estimated cost for materials and labor are $1,441,800 and $1,762,200. Compute the estimates for (a) a standard cost and (b) a budgeted cost. (Round standard costs to 2 decimal places, e.g. 1.25.) Materials Labor (a) Standard cost $ $ (b) Budgeted cost $ $
Answer:
a. $6
b. $3204000
Explanation:
Given:
Product X is 534,000 unitscost for materials $1,441,800cost for labour: $1,762,200(a) a standard cost
As we know standard cost is the cost of producing 1 unit and is recorded in a standard cost card. However, the cost of labor, materials and overhead are used to make a single unit, so
standard cost = unit variable cost = the total cost / the total number of unit.
In this situation, the overheading cost is not gven, so the total cost:
= The cost of labor + materials
= $1,441,800 + $1,762,200
= $3204000
=> standard cost = $3204000 / 534,000 = $6
(b) a budgeted cost represents the total costs
The total number of units * standard cost
= 534,000 * 6
= $3204000
CarPro is an automobile dealer selling only new cars. CarPro sells three types of vehicles: sedans, SUVs and trucks. CarPro places orders to the car manufacturers only when customers have decided to purchase. The ordering cost (per unit) of sedan, SUV and truck are $18,000, $20,500 and $19,000, respectively. The sales price (per unit) of sedan, SUV and truck are $20,000, $23,000, and $21,500, respectively. The base salary for a sales person is $100/day. In addition, a sales person gets a commission of 5% on the selling price of cars he sells. Each sales person works 8 hours a day. A sales person spends two hours selling a sedan, three hours selling an SUV, and two-and-a-half hours selling a truck. CarPro can spend a maximum of $300,000 per day on ordering cars. How many of each type of car should CarPro sell to maximize profits?
Answer:
14 truck and 1 suv produce 21,800 profit
Explanation:
We have to solve for the contribution margin considering the constraing resourse which, is the ordering cost:
[tex]\left[\begin{array}{cccc}&sedan&SUV&truck&\\$NRV&19000&21850&20425&\\$Cost&-18000&-20500&-19000&\\$CM&1000&1350&1425&\\$Constrain resource&18000&20500&19000&\\$CM per constrain&0.05556&0.0659&0.075&\\\end{array}\right][/tex]
The card models revenue is calcualted using the net realizable value for each card, which is their sales price less the 5% sales commission.
Then we solve for how many truck will it purchase:
300,000 / 19,000 = 15,78
So the company will purchase 15 trucks
giving 15 x 1,425 = 21,375
This will require 2.5 x 15 = 37.5 hours thus 5 sales man (40 labor)
This creates 2.5 hours unsured
and also 300,000 - 15,000 x 19,000 = 15,000 dollar which are not productive
So, we will try to make a better use to purchase the SUV which is the second best option instead of the 15th truck:
giving 14 x 1,425 + 1350 = 21,300
we subtract the 500 dollar of sales man and get a 21,800 profit
with less unproductive dollar. So this will be the answer
The following amounts were taken from the financial statements of Ando Company: 2017 2016 Total assets $800,000 $1,000,000 Net sales 720,000 650,000 Gross profit 352,000 320,000 Net income 108,000 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $42 $39 The price-earnings ratio for 2017 is
Answer:
35 times
Explanation:
The price-earnings ratio is the financial ratio that compares the market price of a share with its earnings in order to determine whether the share gives earnings that makes it a good buy.
Price-earnings ratio=market price per share/earnings per share
market price per share for 2017 is $42
earnings per share=net income-dividends/average common stock outstanding
net income is $108,000
dividends is nil
average number of common stock is 90,000
earnings per share=$108,000-$0/90,000=$1.2
price earnings ratio=$42/$1.2=35 times
Cooperton Mining just announced it will cut its dividend from $4 to $2.50 per share and use the extra funds to expand. Prior to the announcement, Cooperton’s dividends were expected to grow at a 3% rate, and its share price was $50. With the planned expansion, Cooperton’s dividends are expected to grow at a 5% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton’s risk.) Is the expansion a good investment?
Answer: Share price after announcement is $41.67.
The Expansion is not a good investment.
Explanation:
To solve this we would need to first calculate the cost of equity. Given the Initial stock price as well as the dividend and growth rate, we are able to calculate the cost of equity using the Gordon Growth Formula which is,
Sp = D1/ (r - g)
Where,
Sp is stock price
D1 is the next dividend
r is cost of equity
g is growth rate.
Inserting the figures we have,
50 = 4 / ( r - 3%)
50 ( r - 3%) = 4
r = 4/50 + 3%
r = 11%
Given that we now know r, we can calculate the new stock price using the same formula,
Sp = D1/ ( r - g)
Sp = 2.5 ( 11% - 5%)
Sp = $41.67
The stock price after the announcement became $41.67.
The Expansion is NOT a good investment as it leads to a reduction in Stock Price.
The LaGrange Corporation had the following budgeted sales for the first half of the current year:
Cash Sales Credit Sales
January $ 80,000 $ 180,000
February $ 85,000 $ 200,000
March $ 46,000 $ 160,000
April $ 41,000 $ 126,000
May $ 51,000 $ 230,000
June $ 110,000 $ 200,000
The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on sales:
45% in month of sale
50% in month following sale
5% in second month following sale
The accounts receivable balance on January 1 of the current year was $81,000, of which $55,000 represents uncollected December sales and $26,000 represents uncollected November sales.
The total cash collected during January by LaGrange Corporation would be ______.
Answer:
The LaGrange Corporation
The total cash collected during January by LaGrange Corporation would be $237,000.
Explanation:
January Collections:
1. January cash sales = $80,000
2. 45% January sales = $81,000
3. 50% December sales = $50,000 *
4. 5% November sales = $26,000
Total = $237,000
* Uncollected December sales = $55,000. This represents 55% (50% collectible in January and 5% collectible in February). Therefore January collection will be equal to $55,000/55 * 50 = $50,000.