4. College logo T-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it can sell 50 T-shirts per week. a. What is the price elasticity of demand for the logo t-shirts? b. Indicate if the price elasticity of demand for the logo T-shirt is perfectly elastic, relatively elastic, relatively inelastic, or perfectly inelastic
Answer: PED = -1.665
The price demand elasticity is relatively elastic because PED is greater than 1..(ignore the minus sign)
Explanation:
Using the formula PED = % change in quantity/ % change in price
PED = ((Q1 - Q0)/(Q1 + Q0))/((P1 -P0)/(P1+P0))...EQU 1 where Q1 = 50 is quantity of product at Price P1 =10 and Q0 = 25 is quantity of product at Price P0 = 15 and PED is price of elasticity
Substituting figures into equ1
PED = ((50 - 25)/(50+25)) /((10 -15)/(10+15))
PED = -1.665
The price elasticity of demand for the logo T-shirts is 3.0, indicating that the demand is relatively elastic.
To find the price elasticity of demand for the college logo T-shirts, we follow these steps:
Identify initial and new prices:Initial Price (P1) = $15 New Price (P2) = $10
Identify initial and new quantities sold:Initial Quantity (Q1) = 25 T-shirts New Quantity (Q2) = 50 T-shirts
Calculate the percentage change in price and quantity sold:Percentage Change in Price = (P2−P1) / P1 ×100
(10−15)/ 15 ×100
−5/ 15×100= −33.33%
Percentage Change in Quantity = (Q2−Q1)/ Q1 ×100(50−25)/ 25 ×100
25/ 25×100 =100%
Calculate the price elasticity of demand (Ed):Price Elasticity of Demand = Ed =Percentage Change in PricePercentage Change in Quantity
−33.33%/ 100%
This simplifies to Ed=−3.0
Since we are interested in the absolute value, we consider ∣Ed∣=3.0.
Interpret the elasticity:An elasticity of 3.0 indicates that the demand for the college logo T-shirts is quite elastic. This means that a 1% decrease in price results in approximately a 3% increase in the quantity demanded. Based on the value of the elasticity, we categorize it as:Elastic (> 1): The demand is relatively sensitive to price changes.
Higher income taxes cause a ____________ shift of the labor supply curve, which then produces __________ Real GDP. a. leftward; more b. rightward; less c. rightward; more d. leftward; less
Answer:
Option (d) is correct.
Explanation:
If there is an increase in the income taxes then as a result there is a leftward shift in the labor supply curve and we know that labor supply curve indicates the the amount of labor hours workers devoted towards the production of the goods. Hence, this will lead to a reduction in the real GDP as there will be less working hours devoted by the workers because of the higher income taxes.
Andrews Corp. ended the year carrying $100,338,000 worth of inventory. Had they sold their entire inventory at their current prices, how many more dollars of contribution margin would it have brought to Andrews Corp.?
To find the additional contribution margin that Andrews Corp. would have earned if they sold their entire inventory, multiply the value of the inventory by the contribution margin percentage.
Explanation:In order to calculate the additional contribution margin that Andrews Corp. would have earned if they sold their entire inventory, we need to know the contribution margin percentage. The contribution margin is the difference between the selling price and the variable cost per unit. Let's assume that the contribution margin percentage is 40%. To find the additional contribution margin, we multiply the value of the inventory by the contribution margin percentage: $100,338,000 x 0.40 = $40,135,200.
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Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price:
A) and output are too low to be optimal.
B) and output are too high to be optimal.
C) is too low to be optimal, and equilibrium quantity is too high.
D) is too high to be optimal, and equilibrium quantity is too low.
E) is optimal, but there is an excess supply.
Final answer:
The presence of air pollution, an external cost not accounted for in the price of dry-cleaning services, results in an equilibrium price and quantity that are too high to be optimal. Implementing a pollution-control program would likely increase costs and reduce output, moving the market towards a more socially optimal outcome.
Explanation:
When a market neglects external costs, such as pollution, it tends to result in an equilibrium that does not reflect all societal costs. This phenomenon, known as a negative externality, means the market output and price are higher than what would be socially optimal because the external cost of pollution is not included in the supply curve. Therefore, if the dry-cleaning industry's air pollution is unchecked, the equilibrium price and quantity would be too high to be optimal. In response to part 6, the current price and output of dry-cleaning services benefit from ignoring the cost of air pollution, which implies that the industry is producing more than the socially optimal output at a lower price than it should if the costs of pollution were internalized. If a pollution charge is introduced, as discussed in the scenarios provided, it would increase the costs for dry-cleaning firms, which would likely lead to higher prices and reduced output, moving the market toward a more socially optimal level. To address the critics of pollution charges in part 7, while it's true that firms may pass on the extra costs to customers, the overall pollution level could still change. The higher prices may reduce demand for dry-cleaning services, leading to lower overall production and, consequently, less pollution.
Albert Company discovers in 2017 that its ending inventory at December 31, 2016, was $5,000 understated. What effect will this error have on:
Answer:
The error will make the net profit at 31 December, 2016 to be understated while a net loss at the same date will be overstated.
Explanation:
The issue is that a higher closing inventory lead to a higher profit while a lower closing inventory will lead to a lower profit.
Marsden Company has three departments occupying the following amount of floor space: Department 1 15,000 sq. ft. Department 2 10,000 sq. ft. Department 3 25,000 sq. ft. How much store rent should be allocated to Department 3 if total rent is equal to $200,000?
The Marsden Company has three different departments which acquire different floor spaces. The premises is a rental premise and the rent have to be divided based on the area in square feet.
Given
Total rent is $200,000
Area of D1 is 15,000 sq. ft.
Area of D2 is 10,000 sq. ft.
Area of D3 is 25,000 sq. ft.
We have to find the rent of Department 3 which has the area of 25,000 sq.ft.
Calculations[tex]\rm Rent\: per\: square\: feet=\dfrac{Total\:rent}{Total\:area} \\\\Rent\: per\: square\: feet= \dfrac{\$200,000}{D1+D2+D3} \\\\Rent\: per\: square\: feet=\dfrac{\$200,000}{50,000 sq.fr.} \\\\Rent\: per\: square\: feet= \$4[/tex]
Area of D3 multiplied by Rent per square feet will give us the rent of D3.
Thus , [tex]25,000 x \$4 = \$100,000[/tex]
Therefore the rent of department 3 of Marsden Company is $100,000.
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Department 3 occupies 50% of the total floor space of Marsden Company. Thus, it should be allocated 50% of the total store rent, which is $100,000 out of the $200,000 total rent.
To determine how much store rent should be allocated to Department 3 when the total rent is $200,000, we use a method based on the proportion of floor space each department occupies. First, let's calculate the total amount of floor space in the company:
Department 1: 15,000 sq. ft.Department 2: 10,000 sq. ft.Department 3: 25,000 sq. ft.The total floor space is the sum of the space occupied by all departments, which equals 15,000 + 10,000 + 25,000 = 50,000 sq. ft.
Next, we calculate the percentage of the total floor space that Department 3 occupies:
Percentage of space for Department 3 = (Space occupied by Department 3 / Total space) * 100 = (25,000 / 50,000) * 100 = 50%
Now, we allocate the rent based on this percentage:
Allocated rent for Department 3 = Total rent ×Percentage of space for Department 3 = $200,000 × 50% = $100,000
Therefore, Department 3 should be allocated $100,000 out of the total $200,000 store rent.
External setup time refers to:______________.
a. The time it takes workers to set up a machine during scheduled maintenance
b.The time to complete setup activities that do not require that the machine be stopped
c.The time it takes equipment vendors to set up the machine
d. None of the above
Answer: The correct answer is "b.The time to complete setup activities that do not require that the machine be stopped".
Explanation: External setup time refers to the time to complete setup activities that do not require that the machine be stopped.
External setup is the term used to refer to when workers can perform maintenance without stopping the production process. The term "external" is used because maintenance can be performed "external" to the production process.
When competing against other energy drinks like Red Bull and Monster, 5-Hour Energy is thinking through how to get its brand to occupy a clear, distinctive, and desirable place in its target customers’ minds. What problem is it trying to solve?
-Promotion
-Targeting
-Segmentation
-Positioning
Answer:
promotion
Explanation:
It is a problem of "positioning" which we're trying to solve.
Attempting to conflate with each other and creating a conceptual position within that mainstream consciousness regarding that your organization, its commodities, as well as capabilities, is considered as Positioning.
The other three alternatives, such as:
Promotion -This references to that of a worker's advancement together in the hierarchical system. Targeting - A marketing approach that entails establishing unique personalities or audiences for certain types of information. Segmentation - To split the market into various sections.They aren't related to the given scenario. Thus the above answer i.e., "Option 1" is the correct solution.
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When exchange rates change:
Multiple Choice:
O U.S. firms that produce domestically and sell only to domestic customers will be unaffected.
O U.S. firms that produce domestically and sell only to domestic customers can be affected if they compete against imports.
O U.S. firms that produce domestically and sell only to domestic customers will be affected, but only if they borrow in foreign currency to finance their domestic operations.
O U.S. firms that produce domestically and sell only to domestic customers will be unaffected, and U.S. firms that produce domestically and sell only to domestic customers can be affected if they compete against imports.
Answer:
Correct answers:
B)U.S. firms that produce domestically and sell only to domestic customers can be affected if they compete against imports - If the dollar gains value against other curriencies, for example, the Euro, European products might become cheaper than American products.
C) U.S. firms that produce domestically and sell only to domestic customers will be affected, but only if they borrow in foreign currency to finance their domestic operations. - For example, If the dollar loses value against the Euro, an American company with debts in euros will have to pay more capital and interest, and this will likely result in a worse financial position.
if there is no direct evidence of an agreement to manipulate the competitive market between two CEOs, a prosecutor may use their calendars and subsequent actions that were not in the usual course of business as circumstantial evidence to prove the ________ requirement of an antitrust violation
a) meeting-of-the-minds
b) price-fixing
c) vertical restraint
d) horizontal restraint
Answer:
a) meeting-of-the-minds
Explanation:
Meeting-of-the-minds denotes intention of the parties entering into the contract.
Note: The previous concept is also referred to as mutual agreement. is a phrase in contract law used to describe the intentions of the persons forming the contract.
It refers to the situation where there is a common understanding in the formation of the contract.
Given the following historical returns, what is the variance?Year Return1 7 percent2 3 percent3 19 percent4 -11 percent5 -1 percentA) .009664B) .012080C) .034018D) .039644E) .048322
Answer:
option (B) 0.01208
Explanation:
Data provided in the question:
Year Return
1 7% = 0.07
2 3% = 0.03
3 19% = 0.19
4 -11% = -0.11
5 -1% = -0.01
Now,
Mean = [ Sum of all observations ] ÷ [Total number of observations]
or
Mean = [ 0.07 + 0.03 + 0.19 - 0.11 - 0.01 ] ÷ 5
or
Mean = 0.034
data data-mean (data - mean)²
0.07 0.036 0.001296
0.03 -0.004 0.000016
0.19 0.156 0.024336
-0.11 -0.144 0.020736
-0.01 -0.044 0.001936
=========================================
∑ (Data - mean)² = 0.04832
variance = [tex]\frac{ \sum{\left(x_i - \overline{X}\right)^2 }}{n-1}[/tex]
or
variance = [tex]\frac{0.04832}{5-1}[/tex]
or
Variance = 0.01208
Hence,
The correct answer is option (B) 0.01208
Answer:
i literly have that question n there is no answe rhere
Explanation:
An office manager is concerned with declining productivity. Despite the fact that she regularly monitors her clerical staff four times each day—at 9:00 AM, 11:00 AM, 1:00 PM, and again at 3:00 PM—office productivity has declined 30 percent since she assumed the helm one year ago. What would you recommend that the office manager do to improve office productivity in the future?
Answer:
Absolutely Not, recommend that the office manager invest more time monitoring the productivity of her clerical staff.
Explanation:
As clerical staff know the timings of monitoring. So, at that time they just show her that they are doing their work with dedication. But just after her monitoring, they known that she will not come before 2 hours. So, basically this is the actual problem in this case. Despite the four times monitoring each day, it does not result in higher productivity, instead productivity has declined 30 percent since she assumed the helm one year ago.
The best way to overcome this problem, office manager should not fix their time of monitoring. So that, clerical staff does not know the time when she come for monitoring. This will lead to improvement in the productivity level.
Suppose that the economy is at equilibrium at $1,000 billion, and potential output is $1,200 billion. If the marginal propensity to consume (MPC) is 0.9, then government spending must increase by $_____ billion to reach potential output.
Answer:
20
Explanation:
The computation of the increase in the government spending is shown below:
= (Economy is at equilibrium point - potential output) ÷ (Multiplier)
= ($1,000 billion - $1,200 billion) ÷ (10)
= $200 billion ÷ 10
= $20 billion
The multiplier is computed below:
= (1) ÷ (1 - MPC)
= (1) ÷ (1 - 0.9)
= 1 ÷ 0.1
= 10
We simply first apply the multiplier formula, than calculate the government spending increment
Woody Corp. had taxable income of $7,825 in the current year. The amount of MACRS depreciation was $2,850, while the amount of depreciation reported in the income statement was $750. Assuming no other differences between tax and accounting income, Woody's pretax accounting income was:
Answer:
+65+95+95
Explanation:6468
The following financial information is available for Monty Corporation. (in millions) 2022 2021 Average common stockholders’ equity $2,500 $2,600 Dividends declared for common stockholders 300 638 Dividends declared for preferred stockholders 30 30 Net income 500 550Calculate the payout ratio and return on common stockholders’ equity for 2022 and 2021.
For the year 2022, the payout ratio is 0.06 and the common stock is 0.2 and for the year 2022, the payout ratio is 0.055 and the common stock is 0.21.
What is common stock?Common stock is a security that represents ownership in a corporation. The holders of common stock elect the board of directors and vote on corporate policies. This form of equity ownership typically yields higher rates of return long term but in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders, and other debt holders are paid in full.
There are different varieties of stocks traded in the market. For instance, value stocks are stocks that are lower in price than their fundamentals. Growth stocks are companies that tend to increase in value due to growing earnings.
Common stock is reported in the stockholder's equity section of a company's balance sheet.
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Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2014 for $3,750,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2015, the expected future cash flows expected from the patent were expected to be $300,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom’s market interest rate, is $1,800,000. At what amount should the patent be carried on the December 31, 2015 balance sheet? $3,750,000 $3,000 $2,400,000 $1,800,000
Answer:
$1,800,000
Explanation:
Please see attachment.
Explain whether you agree with the following statement:
"The dynamic aggregate demand and aggregate supply model predicts that a recession caused by a decline in AD will cause the inflation rate to fall. I know that the 2007 − 2009 recession was caused by a fall in AD, but the inflation rate was not lower after the recession. The prices of most products were definitely higher in 2008 than they were in 2007, so the inflation rate could not have fallen."
A. The statement is wrong because there must have been a supply shock if prices rose and there was a recession.
B. The statement is wrong because it is confusing the price level with the inflation rate.
C. The statement is correct as prices rose in 2008.
D. The statement is wrong because AD must have increased if prices were higher.
Answer:
B. The statement is wrong because the author is confusing the price level with the inflation rate.
Explanation:
To say that inflation rate falls only when price falls is a false assumption because fall in inflation rate clearly occured when the prices rose at a relatively slower speed than the previous year.
A marketing manager has developed a regression model to predict quarterly sales of his company's down jackets based on price and amount spent on advertising. An intern suggests that he include an indicator (dummy) variable for the fall quarter. a) How would you code such a variable? (What values would it have for each quarter? b) Why does the intern's suggestion make sense? c) Do you think a regression with the indicator variable for fall would model down jacket sales better than one without that predictor?
Answer
The answer and procedures of the exercise are attached in a the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Bruce is a salaried nonexempt employee who earns $42,500 annually, paid semimonthly, plus a 0.25% commission on all regional sales, paid monthly on the first pay date of the following month. During the month of May, the regional sales were $103,500. What was his gross pay for the first half of June?
(Do not round intermediate calculations. Round final answer to 2 decimal places.)A. $2,029.58B. $1,770.83C. $1,634.62D. $1,893.37
Answer:
A. $2,029.58
Explanation:
The computation of the gross pay for the first half of June is shown below:
= Regional sales × commission percentage + earning × number of months ÷ total number of months in a year
= $103,500 × 0.25% + $42,500 ÷ 12 months × 2 months
= $258.75 + $1,770.83
= $2,029.58
Since it is given that semi monthly, so we take 24 months.
If the actual price level increases beyond the long-run equilibrium price level, all of the following will tend to occur except A. an accumulation of unsold inventories. B. the price level falling. C. actual GDP exceeding total planned real expenditures. D. firms offering fewer services than people wish to purchase.
Answer:
The answer is letter D
Explanation:
All of the following tend to occur except firms offering fewer services than people wish to purchase.
Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?
a. the expected rate of return on U.S. assets rises
b. the exchange rate falls
c. the expected rate of return on U.S. assets falls
d. the exchange rate rises
Answer:
The right answers are either b. or d., or both.
Explanation:
When the dollar loses value, there is higher demand for foreign imports in a country because they become cheaper. When the dollar gains in value, a foreign country´s exports increase. Changes in the value of currencies reflect changes in demand and supply. An increase in exports will shift the demand curve of the dollar higher. A reduction of imports will have a contrary effect.
When there is a shift in the supply of dollar for foreign currency exchange to the right, the exchange rate rises.
What is an Exchange rate?This is the rate in which a particular currency would exchange another currency. In most cases, these currencies are national currencies paired against another national currency.
When dollar loses value, there woukd be a high demand for import in a country because they tend to become cheaper. When the dollar gains, the foreign currency increases.
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The U.S. Internal Revenue Service (IRS) has the authority to impose penalties on companies that significantly underpay taxes as a result of inappropriate transfer pricing. Acme Company transfers a product to a foreign affiliate at $15 per unit, and the IRS determines the correct price should have been $65 per unit. The adjustment results in an increase in U.S. tax liability of $1,250,000. Due to this change in price, what amount of penalty for underpayment of taxes will Acme Company pay?
Answer:
$500000
Explanation:
Please see attachment
During the fall of 2007, the United States economy began a descent into deep recession. As a result, the federal government and the Federal Reserve took action to stimulate economic growth. Which of the following would have been an appropriate fiscal policy? Choose one or more:
A. the federal government spending more money to build more infrastructure
B. the federal government increasing its regulation of banks
C. the federal government beginning to close failing banks
D. the federal government providing tax refunds to many taxpayers
E. the Federal Reserve increasing the money supply to reduce the interest rate
Answer:
A. the federal government spending more money to build more infrastructure and D. the federal government providing tax refunds to many taxpayers
Explanation:
Please see attachment.
A client was brought by ambulance into the emergency department. The client appears disoriented, pale, tachycardic, and hypotensive. There is excessive bleeding from the head and bruises across the check and abdomen. What is the priority step in managing this client?
Answer and Explanation: Here, in the given case/scenario the first and the main step in managing this particular client is to provide him or her with the basic life support in order for him/her to sustain while also soliciting to treat their hypovolemic shock. Hypovolemic shock is referred to as or referred to as an situation under which an individual tends to loose severe blood or fluid thus further making the heart unable to circulate enough blood.
The Flamingo Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash flow cycle. Last year, the company’s sales (all on credit) were $180,000 and it COGS were 85% of the sales. Inventory was turned around 8 times during the year and accounts receivable turnover was 10. Flamingo’s payables deferral period was 30 days. Calculate CCC. Compute the average balances in accounts receivables, accounts payable and inventory.
b. Interpret and analyze the CCC for this company. Why is CCC important?
Answer:
a. 52.125 days
b.CCC is important because it measure of company operational cash flow, it measures liquidity .Current 52.125 days is average ( actually it depends on industry)
Explanation:
Please see attachment .
A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing.
For the students of the college, the visual appearance of the campus is (non-rival/rival) and (non-excludable/excludable). Thus, the visual appearance would be classified as a public good.
Suppose the college administrators estimate that the beautification initiative will cost $8,160. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 490 students, asking each of them their willingness-to-pay for the beautification project. The average willingness-to-pay, as revealed by the survey, is $17.
The benefit of the beatification initiative, as suggested by the survey, is $___. Because the estimated benefit is (less/greater) than the cost, the college administrators (should/should not) undertake the beautification initiative.
The calculation of the benefit of the beatification initiative relied on the ability of the administrators to accurately capture the true willingness-to-pay of each student.
Which of the following scenarios would cause the survey used by the college administrators to yield misleading willingness-to-pay data? Check all that apply.
_ Students are surveyed at random, using conventional survey and data-gathering methods.
_ Students believe that if the initiative does not happen, the funds for the initiative will not be spent elsewhere.
Answer:
Students believe that if the initiative does not happen, the funds for the initiative will not be spent elsewhere.
Explanation:
The visual appearance is both non rival and non excludable I.e. Pure public good
Benefit is 17*490=8.330
Benefit is greater than cost so college administrators should undertake the beautification initiative
The college administrators should undertake the beautification initiative as the estimated benefit is greater than the cost. The survey used may yield misleading data if students are surveyed randomly or if they believe the funds will not be used elsewhere.
Explanation:The benefit of the beautification initiative, as suggested by the survey, is calculated by multiplying the average willingness-to-pay ($17) by the number of students (490). Therefore, the benefit is $8,330. Since the estimated benefit is greater than the cost ($8,160), the college administrators should undertake the beautification initiative.
The survey used by the college administrators would yield misleading willingness-to-pay data if the students were surveyed at random, using conventional survey and data-gathering methods. This is because random sampling may not accurately capture the true willingness-to-pay of each student. Additionally, if the students believe that if the initiative does not happen, the funds for the initiative will not be spent elsewhere, their willingness to pay may be lower, leading to misleading data.
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A firm is considering financing its $20 million dollars of assets with one of two plans. Plan A consists of $3 million of debt with an interest rate of 6.6%, and 1.7 million shares of common stock. Plan B consists of $10 million dollars in debt with an interest rate of 7.2%, and 1 million shares of common stock. The firm’s tax rate is 30%. Calculate the EBIT-EPS breakeven point, and then calculate the earnings per share at this level of EBIT.
Answer:
Please see attachment
Explanation:
Please see attachment
Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117¼. Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1.
Answer:
The journal entry for the issue of bond for cash is shown below:
Explanation:
January 1
Cash A/c..........................................Dr $281,400
Bonds Payable A/c....................................Cr $240,000
Premium on Bonds Payable A/c...........Cr $41,400
Working Notes:
Cash = Bonds Par Value × Selling Price
= $240,000 × 117.25 %
= $281,400
Premium on bonds payable = Cash - Bonds Payable
= $281,400 - $240,000
= $41,400
The issuance of Garcia Company's 15-year, 10% annual bond, with a $240,000 par value and semiannual payments, sold at 117.25% of par would be recorded in a journal entry with a Debit: Cash = $281,400, Credit: Bonds Payable = $240,000, and Credit: Premium on Bonds Payable = $41,400.
Explanation:
Garcia Company is issuing a 10% per annum, 15-year bond with a par value of $240,000 that pays semi-annually. Hence, the semi-annual bond interest amount will be $240,000 * 10% / 2 = $12,000. The bond was sold at a price of 117.25% of the par value which equals $240,000 * 117.25% = $281,400.
The journal entry for the issuance of these bonds on January 1 would be:
Debit: Cash = $281,400Credit: Bonds Payable = $240,000Credit: Premium on Bonds Payable = $41,400The premium on bonds payable indicates that the bonds were sold at higher than face value because the stated interest rate (10%) was more attractive to investors than the prevailing market rate (8%).
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Transfer Pricing Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, it expects to produce and sell only 40,000 dressers for $60 each next year. The Furniture Division incurs variable costs of $15 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? $ Which division sets it? 2. What is the minimum transfer price? $ Which division sets it? 3. Suppose that the two divisions agree on a transfer price of $31. What is the benefit for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole? Benefit to Furniture Division $ Benefit to Motel Division $ Benefit to company $ Check My Work3 more Check My Work uses remaining. Previous
Answer:1. Maximum transfer price is $60 and it's to be set by the Motel division.
This is the maximum price they will need to get it in the market if they are not buying in-house and it needs to be set by them because it determines the maximum profit it can make from the transaction.
2. The minimum transfer price is $29 and it's to be set by the Furniture division.
This is the production cost and it's still profitable since it has meet his fixed cost at 40,000 unit and the variable cost is $15. The Furniture set the price because it determines the maximum profit it makes from the transaction.
3. Benefit to Motley division is additional profit of $16 per unit for 10,000 units ($31-$15)
Benefit to Furniture division is a reduction in cost of $29 per units on 10000 unit ($60-31)
Benefit to company is the combination of the benefits from both Motly and Furniture division.
A control is appropriate if :
1) it will keep hackers out of sensitive systems.
2) it costs less than the asset it protects.
3) it is recommended by at least one security consultant.
4) the result of a cost-benefit analysis is positive.
Answer:
4, definitely but also maybe 3