Answer:
$984,000
Explanation:
The computation of the budgeted total manufacturing cost is shown below:
Budgeted total manufacturing costs in March = Fixed cost + Variable cost
= $24,000 + ($16 × 60,000)
= $24,000 + $960,000
= $984,000
We simply added the fixed cost and the variable cost in order to find out the budgeted total manufacturing cost
Which of the following best describes an opportunity cost: Select one: a. it is a relevant cost in decision making, but is not part of the traditional accounting records. b. it is not a relevant cost in decision making, but is part of the traditional accounting records. c. it is a relevant cost in decision making, and is part of the traditional accounting records. d. it is not a relevant cost in decision making, and is not part of the traditional accounting records.
Answer:
a. it is a relevant cost in decision making, but is not part of the traditional accounting records.
Explanation:
An opportunity cost is a relevant cost in decision making, but is not part of the traditional accounting records.
The opportunity cost also known as the alternative forgone in accounting and can be defined as the potential benefit that is forgone when an alternative is selected over another.
For instance, the money and time you spend to go see a movie at the cinema, you can't spend the time reading a book at home and the money can't be spent on something else either.
The opportunity cost can be calculated by using the formula;
Opportunity cost (OC) = FO − CO
where:
FO = Return on alternative forgone.
CO = Return on the option chosen.
Data related to the inventories of Costco Medical Supply are presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling price $ 265 $ 132 $ 352 $ 159 Cost 163 100 252 159 Costs to sell 26 11 32 7 In applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at: Multiple Choice $163. $181.
Answer:
$163
Explanation:
The accounting standard for Inventory under IFRS IAS 2 requires that inventory be recognized at cost which includes all the cost incurred to bring the item of inventory to a state or place where the item of inventory becomes available for sale.
These costs includes cost of purchase, freight, Insurance cost during transit etc.
Subsequently, inventory is to be carried at the lower of cost or net realizable value. The net realizable value is the difference between the cost and cost to sell.
Given;
Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling price $ 265 $ 132 $ 352 $ 159
Cost $ 163 $ 100 $ 252 $ 159
Costs to sell $ 26 $ 11 $ 32 $ 7
Net realizable $ 239 $ 121 $ 322 $ 152
Applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at
= $163
Derby Inc. manufactures a product which contains a small part. The company has always purchased this motor from a supplier for $125 each. Derby recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the motor instead of buying it. The company prepared the following per unit cost projections of making the motor, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 150% of direct labor cost.Direct material $ 38Direct labor 50Overhead (fixed and variable) 75Total $ 163The required volume of output to produce the motors will not require any incremental fixed overhead. Incremental variable overhead cost is $21 per motor. What is the effect on income if Derby decides to make the motors
Answer:
Income will be higher by $16 per unit
Explanation:
As per the data given in the question,
Direct material = $38
Direct labor = $50
Overhead = $21
Total variable cost = $38 + $50 + $21
= $109
Cost of supply = $125
Income increased per unit = cost of supply - total variable cost
=$125 - $109
= $16
Because the cost of inhouse is lower therefore net income will be more by $16 per unit
You just graduated and landed your first job in your new career. You remember that your favorite finance professor told you to begin the painless job of saving for retirement as soon as possible. You decide to put away $5,000 at the end of each year in a Roth IRA. Your expected annual rate of return on the IRA is 6%. The amount you will have accumulated at retirement after 40 years of investing is closest to:
Answer :
Money accumulated at retirement after 40 year = $773,809.83
Explanation :
As per the data given in the question,
Present value of future deposits = $5,000 ÷ (1+6%) + $5,000 ÷ (1+6%)^2+... +$5,000 ÷ (1+6%)^40
= $75,231.48
Future value of deposit is
= Present value × (1 + interest rate)^number of years
= $75,231.48 × (1+6%)^40
= $773,809.83
Hence, Money accumulated at retirement after 40 year = $773,809.83
Answer:
The answer is $7,73,810
Explanation
Solution
To solve this question, we use a table or tabular form shown below:
Rate (I) Rate per period 0.06
NPER Total no of payments 40
PMT Payment per second $5,000
PV Present Value $0.00
TYPE Ending (0), Beginning (1) 0
Future value $ 7,73,810
(-FV (rate, nper, pmt, pv, type))
On December 31, 2017, the Bennett Company had 105,000 shares of common stock issued and outstanding. On July 1, 2018, the company sold 21,000 additional shares for cash. Bennett's net income for the year ended December 31, 2018, was $590,000. During 2018, Bennett declared and paid $85,000 in cash dividends on its nonconvertible preferred stock. What is the 2018 basic earnings per share?
Answer:
$5.84
Explanation:
The calculation of basic earnings per share is shown below:-
Earnings available for equity share holders = Net income- Preference dividend
= $590,000 + $85,000
= $675,000
Equivalent shares outstanding = Common stock share + (Additional shares × From July to Dec 31 months)
= 105,000 + (21,000 × 6 ÷ 12)
= 105,000 + 10,500
= 115,500
So, Basic earning per share = Earnings available for equity share holders ÷ Equivalent shares outstanding
= $675,000 ÷ 115,500
= $5.84
Therefore for computing the basic earning per share we simply applied the above formula.
There is a 3 percent error rate at a specific point in a production process. If an inspector is placed at this point, all the errors can be detected and eliminated. However, the inspector is paid $8 per hour and can inspect units in the process at the rate of 30 per hour. If no inspector is used and defects are allowed to pass this point, there is a cost of $10 per unit to correct the defect later on. Should an inspector be hired?
To determine if an inspector should be hired, compare the costs of fixing defects with and without the inspector. If the cost of hiring is less than the cost of fixing defects, then an inspector should be hired.
Explanation:To determine whether an inspector should be hired or not, we need to compare the cost of fixing defects with and without an inspector. With a 3 percent error rate, without an inspector, the cost of fixing a defect later on is $10 per unit. However, if an inspector is placed and all errors are detected and eliminated, the cost can be avoided. The inspector is paid $8 per hour and can inspect 30 units per hour. So, the cost of hiring the inspector is $8 per 30 units, which is $0.27 per unit. If $0.27 is less than $10, it is more cost-effective to hire an inspector.
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Hiring an inspector is more cost-effective because the inspection cost per unit ($0.27) is lower than the expected cost to fix defects later ($0.30 per unit) given the 3 percent error rate.
The student is asking whether it is cost-effective to hire an inspector for quality control in a production process with a known error rate of 3 percent. The cost to hire an inspector is $8 per hour, and the inspector can inspect 30 units per hour. If a defect passes through without inspection, it will later incur a correction cost of $10 per unit.
To decide whether to hire the inspector, we must compare the cost of inspection versus the cost of defects. Inspecting 30 units in an hour at $8 per hour costs approximately $0.27 per unit ($8 divided by 30 units). Since 3% of units are defective, the expected cost to fix these defects without an inspector is $0.30 per unit (3% of units times $10 per unit correction cost). Therefore, it is cheaper to hire the inspector to detect and eliminate errors immediately, rather than fixing defects later on.
n an economy, the working-age population is 400 million. Of this total, 320.0 million workers are employed. 12.0 million workers are unemployed. 56.0 million workers are not available for work (homemakers, full-time students, etc.). 8.0 million workers are available for work but are discouraged and thus are not seeking work. 4.0 million workers are available for work but are not currently seeking work due to transportation or childcare problems. The labor force participation rate in this economy is
Answer: 83%
Explanation:
The Labour Force Participation Rate is a measure that checks the activeness of a nation's workforce.
It is calculated by dividing the segment of the population that are either working or ACTIVELY seeking employment by the total number of working age people in the economy that are not in prison.
It is assumed that unemployed people are Actively seeking employment.
In the above scenario therefore, the active population are,
= (320 million employed + 12 million unemployed )/400 million
The rest of the population are either unavailable for work or not actively seeking employment.
= 332/400
= 0.83
= 83%
The labor force participation rate in this economy is 83%
Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 1 Year 2 Revenues 129.5 151.4 COGS and Operating Expenses (other than depreciation) 32.9 65.7 Depreciation 20.4 36.7 Increase in Net Working Capital 2.7 7.4 Capital Expenditures 33.1 40.1 Marginal Corporate Tax Rate 35% 35% a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2?
Answer:
a)
incremental earnings year 1 = $49.53 million
incremental earnings year 2 = $31.85 million
b)
free cash flow year 1 = $34.13 million
free cash flow year 2 = $21.05 million
Explanation:
Year 1 Year 2
Revenues 129.5 151.4
COGS & Oper. Exp. (not depreciation) 32.9 65.7
Depreciation 20.4 36.7
Increase in Net Working Capital 2.7 7.4
Capital Expenditures 33.1 40.1
Marginal Corporate Tax Rate 35% 35%
incremental earnings year 1 = (revenues - COGS - depreciation) x (1 - tax rate) = (129.5 - 32.9 - 20.4) x (1 - 35%) = $49.53 million
incremental earnings year 2 = (revenues - COGS - depreciation) x (1 - tax rate) = (151.4 - 65.7 - 36.7) x (1 - 35%) = $31.85 million
free cash flow year 1 = incremental earnings + depreciation - increase in net working capital - capital expenditures = [(129.5 - 32.9 - 20.4) x (1 - 35%)] + 20.4 - 2.7 - 33.1 = $34.13 million
free cash flow year 2 = incremental earnings + depreciation - increase in net working capital - capital expenditures = [(151.4 - 65.7 - 36.7) x (1 - 35%)] + 36.7 - 7.4 - 40.1 = $21.05 million
Year 1 and Year 2 incremental earnings are 49.53 million and 31.85 million respectively. Year 1 and Year 2 free cash flows are 31.83 million and 1.47 million respectively.
Explanation:To calculate the incremental earnings, you need to subtract the operating expenses and taxes from the revenue. Similarly, free cash flows can be calculated as an after-tax profit plus depreciation minus any increase in net working capital and capital expenditure.
For Year 1, the incremental earnings are 129.5 million (revenues) - 32.9 million (COGS and operating expenses) - 20.4 million (depreciation) = 76.2 million pre-tax. After applying the 35% marginal corporate tax rate, the net earnings are 49.53 million.
For Year 2, the calculations yield incremental earnings of 151.4 - 65.7 - 36.7 = 49 million pre-tax. After applying the 35% tax rate, the net earnings are 31.85 million.
To calculate free cash flows, firstly, we find the after-tax profit by multiplying the pre-tax profit by (1 - tax rate). Then, we add depreciation, and finally subtract the increase in net working capital and capital expenditures. For Year 1, the free cash flows are (76.2 * (1 - 0.35)) + 20.4 - 2.7 - 33.1 = 31.83 million. For Year 2, the free cash flows come out to be 1.47 million.
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ay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 23,000 units at a price of $350 each. Product costs include: Direct materials $74.00 Direct labor $42.00 Variable overhead $11.00 Total fixed factory overhead $549,200 Variable selling expense is a commission of 6 percent of price; fixed selling and administrative expenses total $97,200. Required: 1. Calculate the sales commission per unit sold. If required, round your answers to the nearest dollar. Use rounded answers in subsequent computations.
Answer:
$21
Explanation:
The computation of the sales commission per unit sold is shown below:
= Selling price per unit × sales commission percentage
= $350 × 6%
= $21
By multiplying the selling price per unit with the sales commission percentage we can get the sales commission per unit and the same is shown above in the calculation part.
All other information is not relevant. Hence, ignored it
Two firms compete by advertising. Given the payoff matrix to this advertising game, identify each firm's best response to its rival's possible actions. If Firm 2 does not advertise, then Firm 1 should ▼ advertise not advertise and if Firm 2 advertises, then Firm 1 should ▼ not advertise advertise . If Firm 1 does not advertise, then Firm 2 should ▼ not advertise advertise and if Firm 1 advertises, then Firm 2 should ▼ not advertise advertise . Does either firm have a dominant strategy? Firm 1's dominant strategy is to ▼ not advertise advertise and Firm 2's dominant strategy is to ▼ not advertise advertise . What is the Nash equilibrium? A. The Nash equilibrium is for both firms to advertise. B. The Nash equilibrium is for Firm 1 to advertise and Firm 2 to not advertise. C. This game has no Nash equilibria. D. The Nash equilibrium is for both firms to not advertise. E. The Nash equilibrium is for Firm 1 to not advertise and Firm 2 to advertise.
Answer:
If Firm 2 does not advertise, Firm 1 should advertise
If Firm 2 advertises, then Firm 1 should also advertise
Firm 1 dominant strategy is to advertise
Firm 2 dominant strategy is to advertise
1. A. Nash equilibrium is for both Firms to advertise.
Explanation:
Nash equilibrium is a state where interactions by different firms in a matrix is involved. No firm can gain by a unilateral change of strategy if other firm does not changes its strategy. It is a situation where there is optimal when there is no deviation from the initial strategy. Here firm 1 can by advertise and Firm 2 can also optimize by advertising.
Mather Company purchased equipment on January 1, 2018 at a total invoice cost of $336,000; additional costs of $6,000 for freight and $30,000 for installation were incurred. The equipment has an estimated salvage value of $12,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2019 if the straight-line method of depreciation is used is
Answer:
$144,000
Explanation:
The computation of accumulated depreciation is shown below:-
Total cost = Invoice cost + Freight + Installation
= $336,000 + $6,000 + $30,000
= $372,000
Depreciation as per SLM = (Total Cost - Salvage Value) ÷ Estimated useful life
= (372,000 - 12,000) ÷ 5
= $72,000
The amount of accumulated depreciation (after 2 years) = Depreciation as per SLM × Years
= 72,000 × 2
= $144,000
So, for computing the accumulated depreciation we simply applied the above formula.
At the beginning of 2018, England Dresses has an inventory of $75,000. However, management wants to reduce the amount of inventory on hand to $35,000 at December 31. If net sales for 2018 are forecast at $220,000 and the gross profit rate is expected to be 22%, compute the cost of the merchandise which management should expect to purchase during 2018. (Hint: First compute the expected cost of goods sold.)
Answer:
$136600
Explanation:
Given:
inventory of $75,000amount of inventory on hand to $35,000net sales for 2018 at $220,000gross profit rate: 22%We need to find the gross profit via the given information of net sales and gross profit rate
<=> gross profit = net sales*gross profit rate
= $220,000* 22%
= $48,400
Moreover, Cost of goods sold is = sales - gross profit
<=> Cost of goods sold = $220,000 - $48,400 = $171,600
But Cost of goods sold = opening inventory + purchases - closing inventory
<=> purchases = Cost of goods sold - opening inventory + closing inventory
= $171,600 - $75,000 + ($75,000 - $35,000)
= $136600
Answer:
The cost of the merchandise which management should expect to purchase during 2018: $131,600
Explanation:
Net sales for 2018 are forecast at $220,000 and the gross profit rate is expected to be 22%.
The expected Gross profit = 22% x $220,000 = $48,400
The expected Cost of goods sold = Net sales - The expected Gross profit = $220,000 - $48,400 = $171,600
The cost of the merchandise expected to purchase during 2018 = Inventory on hand at December 31 + The expected Cost of goods sold in 2018 - Inventory at the beginning of 2018 = $35,000 + $171,600 - $75,000 = $131,600
There are two closing entries. The first one is to close revenues and expenses to_____. and the second one is to close _____ to Retained Earnings. r
A forward contract is described by:_______.
a. agreeing today to buy a product today at its current price.
b. agreeing today to buy a product at a later date at a price to be set
in the future.
c. agreeing today to buy a product if and only if its price rises above the
exercise price today at its current price.
d. agreeing today to buy a product at a later date at a price set today.
Answer:
Agreeing today to buy a product at a later date at a price set today.
Explanation:
Forward contract can be described as a type of contract that exists between two parties. Both parties agree on a specific and defined price to buy and sell their assets at a later date. The specific price agreed upon by the both the buyer and seller is known as forward price.
It is necessary for the buyer and seller to ensure the forward contract is completed before the fixed date to prevent problems that might arise. The advantages of this type of contract include: consistency in the price agreed upon by both parties, downside risks are prevented due to the ability to determine future rate.
Peter and Blair recently reviewed their future retirement income and expense projections. They hope to retire in 35 years and anticipate they will need funding for an additional 26 years. They determined that they would have a retirement income of $64 comma 000 in today's dollars, but they would actually need $88 comma 241 in retirement income to meet all of their objectives. Calculate the total amount that Peter and Blair must save if they wish to completely fund their income shortfall, assuming a 4 percent inflation rate and a return of 9 percent.
Answer:
Peter and Blair need to save 4,105.10 USD per year for 35 years until retirement.
Explanation:
Peter and Blair actually need 88,241 USD in retirement income to meet all of their objectives.
Current amount they have = 64,000 USD
Time period of Retirement = 35 years
Additional Years = 26 years
Inflation rate = 4%
Rate of return = 9%
So, we have all of that data to solve the problem. Then let's do it.
Our first step is to calculate the real rate of return by incorporating the inflation rate into it. Note: we have been given rate of return not the real rate of return.
Real Rate of Return = ( 1 + ROR given)/(1+ inflation rate) - 1
Real Rate of Return = ( 1+ 0.09)/(1 + 0.04) -1
Real Rate of Return = 0.048 x 100 = 4.80%
So, the real rate of retunr is = 4.80%
Now, let's find out the what is the additional fund required in total:
Additional funds required = Required - Available
Additional funds required = 88,241 - 64,000
Additional funds required = 24,241 USD
Now, we have to calculate the Present value of this additional funds required for the time period of 26 years.
Present value can be calculated by using the finance calculator online.
You have to put these data into the calculator to calculate the present value of the money.
PMT = 24241
Interest Rate (I/Y) = 4.80
Number of Periods (N) = 26 years
By plugging in these numbers, you will the present value of 24,241 USD:
Present Value = 355,770.28 USD
Now, we have to calculate the amount of money Peter and Blair need to save every year till their retirement after 35 years.
For that, I have used that finance calculator this time solving for PMT.
You need to put following data into the calculator:
Future Value = 355,770.28
Number of periods(N) = 35 years
Interest Rate (I/Y) = 4.80%
Annual Payment (PMT) = 4105.10 USD
It means Peter and Blair need to save 4,105.10 USD per year for 35 years until retirement.
A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at %5 per year thereafter. The expected rate of return on the stock is 12%.
a) What is the expected price of the stock in a year?
b) Show that the expected return, 12%, equals dividend yield plus capital appreciation.
Answer:
(a) = 57.14
(b) Shown below
Explanation:
According to the scenario, computation of the given data are as follow:-
Expected Rate of Return(R) = 12%
Growth Rate(g) = 5%
P2 = Div. Per Share × (1+g) ÷ (R-g)
P2 = 4 × 1.05 ÷ (0.12 - 0.05) = 60
One Year Stock’s Expected Price = Div. Per Share ÷ (1+R)t + P2 / (1+R)t
a). Expected price (P1) = 4 ÷ (1+0.12)1 + 60 ÷ (1+0.12)1
= 3.57 + 53.57
= 57.14
b).
One Year Dividend (P0) = 2 ÷ (0+0.12) + 4 ÷ (1+0.12)2 + 60÷(1+0.12)2
= 1.79 + 3.19 + 47.83
= 52.81
Dividend Yield Plus Capital Appreciation= Share Dividend in One Year ÷ Current Price Per Share
= 2 ÷ 52.81 = 0.0379 or 3.79%
Capital Gain = ( P1 - P0 ) ÷ P0
= ( 57.14 - 52.81) ÷ 52.81
= 0.0820 or 8.20%
Total = Dividend Yield Plus Capital Appreciation + Capital Gain
= 3.79% + 8.20%
= 11.99% or 12%
n 2018, Warehouse 13 had net credit sales of $750,000. On January 1, 2018, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2018, $29,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivable basis). If the accounts receivable balance at December 31 was $150,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2018
Answer:
$28,000
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Given that Past experience indicates that the allowance should be 10% of the balance in receivables
Allowance = 10% * $150,000
= $15,000
Since during 2018, $29,000 of uncollectible accounts receivable were written off
Balance in allowance account before adjustment
= $29,000 - $16,000
= $13,000 (Debit)
Required adjustment for Doubtful Accounts at December 31, 2018
= $13,000 + $15,000
= $28,000
BTC, a consulting company with offices across the United States, began an employee discussion forum on its website. A few employees began criticizing the company on the forum and undermining its morale. BTC does not want to limit employee interaction, but at the same time, it would like to limit what employees can write. Which of the following features of a discussion forum will help them achieve this?a) tele-presence.b) anonymity.c) moderators.d) version control.
Answer:
c) moderators.
Explanation:
Since BTC doesn't want to limit employee interaction, but at the same time, it would like to limit what employees can write. The use of moderating features of a discussion forum through the service of a moderator will help them achieve this effectively and efficiently.
A moderator is a neutral individual who has the sole responsibility and skill set to preside and regulate discussions, by ensuring participants do not stray off from the subject matter and the time allotted to them.
The Box Manufacturing Division of the Allied Paper Company reported the following results from the past year. Shareholders require a return of 4%. Management calculated a weightedminusaverage cost of capital (WACC) of 3%. Allied's corporate tax rate is 40%.Sales$ 400 comma 000Operating income60 comma 000Total assets1 comma 100 comma 000Current liabilities900 comma 000What is the division's sales margin?
Answer:
The division's sales margin is 15%
Explanation:
In order to calculate the division's sales margin we would have to use the following formula:
sales margin=operating income/sales
operating income= $60,000
sales=$400,000
Therefore sales margin=$60,000/$400,000
sales margin=0.15
sales margin=15%
The division's sales margin is 15%
was organized on January 1, 2021. The firm was authorized to issue 170,000 shares of $5 par value common stock. During 2021, Ginger Hardware had the following transactions relating to stockholders' equity: Issued 51,000 shares of common stock at $7 per share. Issued 34,000 shares of common stock at $8 per share. Reported a net income of $170,000. Paid dividends of $85,000. What is total paid-in capital at the end of 2021
Answer:
Balance sheet extract as at 31st December,2021
Common stock($255,000+$155,000) $410,000
Paid in capital in excess of par($102,000+$93000) $195,000
Total paid in capital $605,000
Retained earnings($170,000-$85,000) $85,000
Shareholders equity $690,000
Explanation:
The issue of 51,000 shares issue would result in cash proceeds of $357,000 with $255,000 recorded in Common stock account and the balance of $102,000 shown in paid-in capital in excess of par.
The issuance of 34,000 shares would increase cash account by $248,000 while the common stock account and paid-in capital in excess of par would witness increase of $155,000 and $93,000 respectively.
The net income would be reduced by the amount of dividends declared .
Many academic institutions offer a sabbatical policy. Every seventh year a professor is given a year free of teaching and other administrative responsibilities at full pay. For a professor earning $70,000 per year who works for a total of 42 years, what is the present value of the amount she will earn while on sabbatical if the interest rate is 6% (EAR)? Note: Assume that the sabbatical annual salary is paid in one lump sum every 7 years.
Final answer:
The present value of the amount a professor will earn while on sabbatical is $266,996.60.
Explanation:
To calculate the present value of the amount a professor will earn while on sabbatical, we can use the formula for present value of a future sum of money. The formula is:
PV = FV / (1 + r)^n
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.
In this case, the professor earns $70,000 per year and will work for 42 years. The sabbatical salary is paid in one lump sum every 7 years. So, the number of payments is 42 / 7 = 6.
Using the formula, the future value of the sabbatical salary is $70,000 * 6 = $420,000. The interest rate is 6% (EAR), so r = 0.06. And the number of years is 6.
Substituting the values into the formula, we have:
PV = $420,000 / (1 + 0.06)₆ = $266,996.60
Therefore, the present value of the amount the professor will earn while on sabbatical is $266,996.60.
The present value of the amount the professor will earn while on sabbatical is approximately $175,607.76
To solve this problem, we need to calculate the present value of the sabbatical earnings for a professor who works for a total of 42 years and receives a sabbatical every seventh year. The professor's annual salary is $70,000, and the interest rate is 6% (EAR).
First, we determine how many sabbaticals the professor will receive over the 42-year period. Since the professor receives a sabbatical every seventh year, we divide the total number of years worked by 7:[tex]\[ \text{Number of sabbaticals} = \frac{42}{7} = 6 \][/tex]
Next, we calculate the future value of the sabbatical salary received every seventh year. Since the salary is paid in one lump sum at the end of each sabbatical period, we can use the formula for the future value of a lump sum:
[tex]\[ FV = PV \times (1 + r)^n \][/tex]
where [tex]\( FV \)[/tex] is the future value, [tex]\( PV \)[/tex] is the present value (in this case, the sabbatical salary of $70,000), [tex]\( r \)[/tex] is the interest rate per period, and [tex]\( n \)[/tex] is the number of periods.
However, since the sabbatical salary is received at the end of each sabbatical period, we need to find the present value of each sabbatical salary. The formula for the present value of a lump sum received in the future is:
[tex]\[ PV = \frac{FV}{(1 + r)^n} \][/tex]
For each sabbatical, the number of periods \( n \) will be 7 years, and the interest rate \( r \) is 6% per year. We calculate the present value for each sabbatical and then sum them up to get the total present value of all sabbaticals:
[tex]\[ PV_{\text{total}} = \sum_{i=1}^{6} \frac{70000}{(1 + 0.06)^{7i}} \][/tex]
Now, we calculate the present value for each sabbatical and sum them up:
[tex]\[ PV_{\text{total}} = \frac{70000}{(1 + 0.06)^7} + \frac{70000}{(1 + 0.06)^{14}} + \frac{70000}{(1 + 0.06)^{21}} + \frac{70000}{(1 + 0.06)^{28}} + \frac{70000}{(1 + 0.06)^{35}} + \frac{70000}{(1 + 0.06)^{42}} \]\\[/tex]
After calculating the above expression, we get the total present value of the sabbatical earnings.
Using the given interest rate of 6%, the present value of the sabbatical earnings over the 42-year period is approximately $175,607.76. This is the amount that, if invested today at an annual interest rate of 6%, would grow to be enough to cover the sabbatical salaries paid out every seventh year over the professor's 42-year career.
Kronos Inc., a car manufacturer, makes a car called Hover that runs on the force generated by super magnets. Kronos is the first company to use super-magnet technology in automobile manufacturing, aiming to reduce dependency on non-renewable fuels. If Kronos plans to release television advertisements about Hover, what kind of advertising objective should it pursue when introducing the new product into the market
Answer:
The objective is to build primary demand.
Explanation:
As Hover is introducing a car that has a new technology, it should use informative advertising because this type of advertising has a focus on the product information to influence potential customers and it is used when companies introduce a new product to inform people about the characteristics of it. According to this, the objective that Hover should pursue when introducing the new product into the market is to build primary demand as this is a new technology and Hover needs to create interest in this type of products by letting people know the features as it is the first company to use super-magnet technology in automobile manufacturing.
Mary owns 100 percent of a gift shop with an equity value of $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week, EBIT increases to $92,000 annually. Mary needs an additional $50,000 which she can raise today by either selling stock or issuing debt at an interest rate of 7 percent. The principal amount would be repaid at the end of the fifth year. Ignore taxes. What will be the cash flow for this year to Mary if she issues debt, remains open 6 days a week, and distributes all the residual cash flow to the shareholders?
Answer:
$88,500
Explanation:
The computation of the residual cash flow for the year is shown below:
= EBIT - interest
where,
EBIT is $92,000
And, the interest on debt is
= $50,000 × 7%
= $3,500
So the residual cash flow is
= $92,000 - $3,500
= $88,500
We simply deduct the interest on debt from the EBIT so that the residual cash flow could come
When deducting the interest on the debt from the EBIT the residual cash flow could come is = $88,500
Computation of Cashflow
Now, The computation of the residual cash flow for the year is shown below:
Then = EBIT - interest
where,
EBIT is $92,000
And also, the interest on debt is
Then = $50,000 × 7%
Now, = $3,500
So the residual cash flow is
Then = $92,000 - $3,500
Therefore, = $88,500
Then We deduct the interest on the debt from the EBIT so that the residual cash flow could come
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The exclusive Swink Golf Driving Range has had a standard price of $16.00 per hour. The facility has 30 golfing stations, with average usage of 40%, 9 hours a day, 7 days a week. Morgan Swink, the owner, would like to enhance revenue. He proposes new pricing at $12 per hour on weekdays and $23 per hour on weekends. He estimates that weekday usage will increase to 50% and weekend usage will remain at 40%, even with the price increase. Variable cost is a consistent $3 per hour. Which strategy is better? Total revenue under the current pricing is $ nothing (round your response to the nearest dollar).
Answer:
The strategy of total revenue under new pricing is better because it has $ 972 more than current pricing policy
Explanation:
Total revenue under current pricing per week = Average usage % * Number of golfing station* Price per hour * number of hours per day * number of days per week
= [tex]\frac{40}{100}[/tex] * 30 * $16 * 9 * 7
= $ 12,096
Total revenue under new pricing per week = Weekday revenue + Weekend revenue
= (Average usage % * Number of golfing station* Price per hour * number of hours per day * number of weekdays per week) + (Average usage % * Number of golfing station* Price per hour * number of hours per day * number of weekends per week)
= ([tex]\frac{50}{100}[/tex] * 30 * $12 * 9 * 5) + ([tex]\frac{40}{100}[/tex] * 30 * $23 * 9 * 2)
= $ 8,100 + $ 4,968
= $ 13, 068
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that cost $6.00 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $5.00 each and then sold for the full price of $9.10 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
Answer:
The company should rework and sell defective products because profits are higher
Explanation:
We need to find the profit that will be generated when the defective goods are sold as scrap and when they are reworked.
Selling as scrap
Profit from scrap= Unit sales price * quantity
Profit from scrap= 3.10 * 13,000
Profit from scrap= $40,300
Reworking the defective products
Profit from rework= Sales revenue - cost of rework
Profit from rework= (9.1* 13,000) - (5* 13,000)
Profit from rework= 118,300 - 65,000
Profit from rework= $53,300
As profit from rework is higher we should rework and sell the defective products
The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31.
1) On July 31, the company’s Cash account has a $25,699 debit balance, but its July bank statement shows a $28,207 cash balance.
2) Check No. 3031 for $1,570, Check No. 3065 for $561, and Check No. 3069 for $2,338 are outstanding checks as of July 31. Check No. 3056 for July rent expense was correctly written and drawn for $1,260 but was erroneously entered in the accounting records as $1,250.
3) The July bank statement shows the bank collected $9,000 cash on a note for Branch. Branch had not recorded this event before receiving the statement.
4) The bank statement shows an $805 NSF check. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
5) The July statement shows a $14 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.
6) Branch’s July 31 daily cash receipts of $10,132 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.
Required:
1. Prepare the bank reconciliation for this company as of July 31, 2017.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Bank Reconciliation Statement as of July 31, 2017
Balance at Bank as per cash book (up to date) $35,480
Add Unpresented Cheques :
No. 3031 $1,570
No. 3065 $561
No. 3069 $2,338
Less Lodgements not yet credited ($10,132)
Balance as per Bank Statement $29,817
Explanation:
Step 1 Bring the Cash Book (Bank Balance ) up to date
Debit :
Balance as at July 31 $25,699
Note Payable $9,000
Evan Shaw $805
Totals $35,504
Credit:
Check No. 3056 Understated $10
Bank service charge $14
Balance (Up to date) $35,480
Totals $35,504
Step 2 Prepare a bank reconciliation for this company
Bank Reconciliation Statement as of July 31, 2017
Balance at Bank as per cash book (up to date) $35,480
Add Unpresented Cheques :
No. 3031 $1,570
No. 3065 $561
No. 3069 $2,338
Less Lodgements not yet credited ($10,132)
Balance as per Bank Statement $29,817
All industrialized countries have become "service economies." Which factor helps explain this shift? Group of answer choices Information age and labor saving innovation in manufacturing. Trade unionism and failure of the manufacturing sector to grow. Non availability of industrial labor with required skills. Absence of competition in the service sector.
Answer:
Information Age and labor saving innovation in manufacturing.
Explanation:
The Service economy can be defined as the economy which centers at giving the service than producing goods. A country that provides a service economy is able to earn more from the service sector than other sectors such as manufacturers.
The investment in the service economy is cheaper than other sectors and is comprised of freelancers and entrepreneurs such as doctors, lawyers, professors, etc.
The factor that has led to this shift in countries to a service economy is because of the increase in demand for services in education and Information Technology. And also because of the labor-saving innovations.
Thus the correct answer is the first option.
Identify the type of unemployment for the following scenarios:
1) Caroline just graduated from college and is looking for a full-time position with an investment banking firm.
2) Frances is a real estate agent. House sales in her area have declined because the region has been going through a recession. She has no clients and is currently looking for a new full-time job.
3) Antonio recently lost his job as a waiter at a local restaurant. A recent increase in the minimum wage keeps local employers from adding more of the low-skill positions for which he qualifies, so he has been unable to find work. He continues to look for a job, but he's considering going back to school for vocational training.
a) Structural
b) Frictional
c) Cyclical
Final answer:
Caroline's job search represents frictional unemployment, Frances's job loss in a recession is an example of cyclical unemployment, and Antonio's unemployment due to changes in legislation is structural unemployment.
Explanation:
Each scenario described represents a different type of unemployment:
Caroline searching for a job post-graduation is an example of frictional unemployment. This occurs as she takes the time to find a position that matches her qualifications and desires.
Frances, the real estate agent experiencing a downturn due to a recession, is facing cyclical unemployment. This is linked to the economic cycle and temporary downturns in demand within her industry.
Antonio, who lost his job due to a rise in the minimum wage and is considering additional training, is experiencing structural unemployment. This is due to changes in the economic structure that affect the demand for certain skills, such as wage legislation influencing employer hiring practices.
These scenarios are all based on key concepts in understanding the labor market and economic health. Frictional unemployment reflects short-term transitions, cyclical unemployment is tied to economic downturns, and structural unemployment stems from deeper changes in the economy.
The common stock of Blasco Books has a standard deviation of 16.4 percent as compared to the market standard deviation of 12.7 percent. The covariance of this stock with the market is .0217. What is the beta of Blasco Books' stock?
Answer:
1.35
Explanation:
For determining the beta first we have to compute the correlation which is shown below:
= Market standard deviation ÷ common stock standard deviation × covariance
= 16.4% ÷ 12.7% × 0.217
= 1.04187
Now the beta of the stock is
= correlation × Market standard deviation ÷ common stock standard deviation
= 1.04187 × 16.4% ÷ 12.7%
= 1.35
We simply applied the above formulas
Wildhorse Co. purchases a patent for $333,000 on January 2, 2019. Its estimated useful life is 10 years. Prepare the journal entry to record amortization expense for the first year. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
Debit Amortization expense $33,300
Credit Accumulated amortization $33,300
(To record amortization expense for the first year)
Explanation:
Using the straight-line amortization, the applicable formula is: Cost / Estimated useful life
Amortization = $333,000 / 10 years = $33,300
The accumulated amortization and the amortization expense will be the same in the first year. So, the net book value of the patent is $333,000 - $33,300 = $299,700