Answer:
machine's cost = $200,000 + $10,000 + $30,000 = $240,000
useful life of 4 years
salvage value of $25,000, depreciable value = $215,000
MACRS 3-year asset:
0.333 x $215,000 = $71,5950.445 x $215,000 = $95,6750.148 x $215,000 = $31,8200.074 x $215,000 = $15,910incremental sales of 1,250 units per year, during 4 years:
1,250 x $200 = $250,0001,250 x $206 = $257,5001,250 x $212.18 = $265,2251,250 x $218.55 = $273,188incremental COGS of 1,250 units per year, during 4 years:
1,250 x $100 = $125,0001,250 x $103 = $128,7501,250 x $106.09 = $132,6131,250 x $109.27 = $136,588net working capital increases by 12% of sales revenue = $250,000 x 12% = $30,000
WACC = 10%
tax rate = 40%
initial investment = $240,000 (machine cost) + $30,000 (working capital) = $270,000
net cash year 1 = [($250,000 - $125,000 - $71,595) x (1 - 40%)] + $71,595 = $103,638net cash year 2 = [($257,500 - $128,750 - $95,675) x (1 - 40%)] + $95,675 = $115,520net cash year 3 = [($265,225 - $136,588 - $31,820) x (1 - 40%)] + $31,820 = $92,295net cash year 4 = [($273,188 - $136,588 - $15,910) x (1 - 40%)] + $15,910 = $88,324 + $25,000 (salvage value) + $30,000 (net working capital) = $143,324to calculate the present value:
PV = $103,638/1.1 + $115,520/1.1² + $92,295/1.1³ + $143,324/1.1⁴ = $94,216 + $95,471 + $69,343 + $97,892 = $356,922
NPV = $356,922 - $270,000 = $86,922
Final answer:
To analyze the viability of Adams, Incorporated's new business venture, construct annual incremental operating cash flow statements factoring in the initial equipment investment, sales, costs, and inflation. Calculate depreciation using MACRS and adjust net working capital to reflect the 12% of sales revenues. This process is critical to projecting the potential profitability of the investment.
Explanation:
The analysis of the viability of a new line of business for Adams, Incorporated involves constructing annual incremental operating cash flow statements. The initial investment consists of $200,000 for machinery, $10,000 for shipping, and $30,000 for installation. The machinery, which falls under MACRS 3-year property, has a projected useful life of 4 years and an estimated salvage value of $25,000. Sales are expected to be 1,250 units annually at $200 per unit initially, with both cost and sales price inflating by 3% per year. The net working capital will increase proportionately to 12% of sales revenues. The tax rate is 40%, and the weighted average cost of capital is 10%.
Example Operating Cash Flow Calculation (Year 1)
Initial Sales Revenue: 1,250 units × $200 = $250,000
Incremental Cost (excluding depreciation): 1,250 units × $100 = $125,000
Depreciation: Based on MACRS 3-year schedule for Year 1
Taxable Income: Sales Revenue - Incremental Costs - Depreciation
Taxes: Taxable Income × 40%
Net Operating Cash Flow: Taxable Income - Taxes + Depreciation
Net Working Capital Increase: 12% of Sales Revenue
For subsequent years, index the sales and costs by the inflation rate to calculate the new values. This example illustrates how to start the cash flow analysis by estimating the first year's operating cash flow. The exercise would be repeated for years 2 to 4, factoring in inflation-adjusted revenues, costs, and the annual depreciation, in accordance with MACRS.
Contribution Margin Molly Company sells 37,000 units at $19 per unit. Variable costs are $11.59 per unit, and fixed costs are $109,700. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio (Enter as a whole number.) % b. Unit contribution margin (Round to the nearest cent.) $ per unit c. Income from operations $
Answer:
(a) Contribution margin ratio = 0.39, or 39%
(b) the unit contribution margin = $7.4 per unit
(c) income from operations = $164,470
Explanation:
Total revenue = 37,000 × $19 = $703,000
Total variable cost = 37,000 × $11.59 = $428,830
Margin = $703,000 - $428,830 = $274,170
(a) the contribution margin ratio
Contribution margin ratio = $274,170/$703,000 = 0.39, or 39%
(b) the unit contribution margin
Unit contribution margin = $19 - $11.59 = $7.4 per unit
(c) income from operations
Income from operations = $274,170 - $109,700 = $164,470
On December 31, 2020, Oriole Company granted some of its executives options to purchase 153000 shares of the company's $50 par common stock at an option price of $60 per share. The Black-Scholes option pricing model determines total compensation expense to be $2940000. The options become exercisable on January 1, 2021, and represent compensation for executives' past and future services over a three-year period beginning January 1, 2021. What is the impact on Oriole's total stockholders' equity for the year ended December 31, 2020, as a result of this transaction under the fair value method?
Answer:
$2,940,000/3 = $980,000
Explanation:
First, the question is to calculate the impct of the transactions on Oriole's total stockholders' equity for the year ended December 31st 2020.
Since the fair value method is mentioned, we answer as follows
What is the fair value of the Option = $2,940,000
It is important to note that under this fair value method, over the life of an option, the total compensation for that option is to be recognized as an expense.
Based on this criteria, the amount recognized for the December 31, 2020
= Fair value of option /3
= $2,940,000/3 = $980,000
Huffington Company uses a plantwide overhead rate to apply overhead. The predetermined overhead rate is based on machine hours. At the beginning of the year, the company made the following estimates: direct labor hours of 16,000, direct labor cost of $200,000, machine hours of 5,000, and total overhead costs of $25,000. On a per machine hour basis, the company's plantwide overhead rate is:__________
Answer:
The company's plantwide overhead rate on a per machine hour basis is $5 per hour.
Explanation:
Acording to the data, we have the following:
Direct Labour Cost=$200,000
Direct Labour Hours= 16,000
Total Overhead Cost= $25,000
Machine Hours= 5,000
Therefore, to calcuate the company's plantwide overhead rate on a per machine hour basis, we use the following formula:
Company's plantwide overhead rate= Total Overhead/ Machine hours
= $ 25,000 / 5000 hours
=$5 per hour
Final answer:
The company's plantwide overhead rate is calculated as $25,000 divided by 5,000 machine hours, resulting in $5 per machine hour.
Explanation:
To calculate the plantwide overhead rate based on machine hours, we use the formula:
Plantwide Overhead Rate = Total Overhead Costs / Total Machine HoursGiven that the total overhead costs are $25,000 and the total machine hours are 5,000, we can calculate the rate as follows:
Plantwide Overhead Rate = $25,000 / 5,000 = $5 per machine hour.Example Calculation:
If a job requires 100 machine hours, the overhead applied to the job would be 100 hours * $5/machine hour = $500.7. Fast Pizza hires college students who drive their own cars to deliver pizzas to customers. Fast Pizza is concerned that the company may be liable for damages caused by company employees while they are driving their cars on company business. Identify a liability coverage form that Fast Pizza could purchase to deal with this exposure.
Answer:
Business auto insurance
Explanation:
Liability coverage is a type of insurance cover that protects the purchaser from liabilities from lawsuits and other similar claims.
The purchaser is protected when the claim comes under what the liability insurance covers.
In this case FasbPizza can use vicarious liability.
Business auto insurance cover is used to cover a company for use of cars, trucks, and other vehicles in the course of carrying out its business. It covers both liability and damage incurred.
Coverage is for cars owned by business, leased, and owned by employees but used for company business
Randall Company manufactures chocolate bars. The following were among Randall's manufacturing costs during the current year: Wages Machine operators $ 300,000 Selling and Administrative personnel $ 75,000 Materials used Lubricant for oiling machinery $ 25,000 Cocoa, sugar, and other raw materials $ 225,000 Packaging materials $ 190,000 Randall's direct materials amounted to:
Answer:
$225,000
Explanation:
Direct materials:
Cocoa, sugar, and other raw materials $225,000
Therefore Randall's direct materials amounted to: $225,000 because the Direct materials costs include the costs of materials that can be easily and conveniently traced to products, such as the $225,000 of cocoa, sugar, and other raw materials.
While The lubricant for oiling machinery in the amount of $25,000 and the packaging materials in the amount of $190,000 would be classified as indirect materials because they are not easily and conveniently traced to products.
Answer:
$225,000 is the direct material cost
Explanation:
Direct cost is the cost of materials used in the production that is traceable to finished product such the flour used in making a loaf of bread,the cost of the flour is a direct material cost as the flour is traceable to the finished product-bread.
In this instance, the cocoa ,sugar and other raw materials are easily traced to the finished product- chocolate bar,hence the cost of cocoa,sugar and other materials,$225,000 is the direct material cost
Kieu Corporation constructs a new warehouse. It pays $100,000 for materials and $70,000 to the general contractor. Architectural fees total $18,000. The corporation pays $13,000 in interest on its loan to finance construction. The land costs $15,000, and the real estate taxes paid on the land during construction amount to $1,000. What is Kieu's initial basis in the warehouse?
Answer:
$204,000
Explanation:
Initial cost basis is the amount of cost capitalized in the purchase of an asset for tax and other purposes.It consists of purchase price , development fees , professional fees estate taxes and others.
Please note that finance cost is not included as it is recorded as expenses over the life of the loan.
Workings
Materials - $100,000
Contractor fees - $70,000
Architectural fees - $ 18,000
Cost of land $ 15,000
Estate taxes - $1000
Total cost =$204,000
Willkom Corporation buys 100% of Szabo Inc. on January 1, 2018, at a price in excess of the subsidiary’s fair market value. On that date, Willkom’s equipment (10 year life) has a book value of $600,000 but a fair market value of $800,000. Szabo has equipment (10 year life) with a book value of $400,000 but a fair market value of $600,000. Willkom uses the partial equity method to record its investment in Szabo. On December 31, 2020, Willkom has equipment with a book value of $420,000 but a fair market value of $660,000. Szabo has equipment with a book value of $280,000 buy a fair market value of $540,000. What is the consolidated balance for the equipment account as of December 31, 2020?
Answer:
The consolidated balance for the equipment account as of December 31, 2020 is $652,000.
Explanation:
the original price allocation = $660,000 - $420,000
= $24000
(240000/10years)*3 years = $72,000
consolidated equipment
= book value + other company book value + original purchase price allocation - amortization of allocation
= $420,000 + $280,000 + $24000 - $72,000
= $652,000
Therefore, The consolidated balance for the equipment account as of December 31, 2020 is $652,000.
Structural unemployment Multiple Choice is also known as frictional unemployment. is the main component of cyclical unemployment. is said to occur when people are waiting to be called back to previous jobs. may involve a locational mismatch between unemployed workers and job openings.
Answer:
may involve a locational mismatch between unemployed workers and job openings
Explanation:
Structural unemployemt refers to unemployment resulting out of structural changes of the economy such as technological changes which change the dynamics of how work is performed.
This represents a mismatch between the kind of skills workers possess and the skills the economy demands and requires.
Such unemployment is also attributable to a situation wherein, in a particular region, jobs are available but the unemployed workers live too far away from such regions. This is referred to as locational mismatch, one of the causes behind structural unemployment.
Baker Mfg. Inc. (see Table 11.9) wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory.
a) What is Baker’s inventory turnover?
b) What is Baker’s percent of assets committed to inventory?
c) How does Baker’s performance compare to the industry leaders?
Table 11.9
ARROW DISTRIBUTING CORP.
Net revenue- $16,500
Cost of sales- $13,500
Inventory- $ 1,000
Total assets - $ 8,600
Baker MFg. Inc.
Net revenue- $27,500
Cost of sales- $21,500
Inventory- $ 1,250
Total assets- $16,600
Answer:
The answer is:
a. 17.2
b. 7.53%
c. Baker's performance is 0.47% lower than the industry performance
Explanation:
a. Baker's Inventory turnover = cost of sales/inventory
$21,500/$ 1,250
=17.2
b. Baker's Percentage of assets committed to inventory = (inventory/assets) x 100
($1,250/$16,600) x 100
7.53%
c. The industry's Percentage of assets committed to inventory is 8% whereas Baker's own 7.53%, meaning Baker's performance is 0.47% lower than the industry performance
Baker Mfg. Inc. has an inventory turnover of 17.2 times and 7.53% of its assets committed to inventory. Compared to the industry leaders with a turnover of 13 times and 8% of assets in inventory, Baker has a higher turnover and a slightly lower percentage of assets in inventory.
Explanation:The student is asking for help with calculating and analyzing inventory turnover and the percentage of assets committed to inventory for Baker Mfg. Inc., in order to compare it with industry leaders.
Inventory turnover is calculated by dividing the cost of sales by the average inventory. For Baker Mfg. Inc., the calculation is as follows:
Inventory Turnover = Cost of Sales / Inventory
= $21,500 / $1,250
= 17.2 times
To find the percentage of assets committed to inventory, we divide the inventory by the total assets and then multiply by 100 to get the percentage.
Percentage of Assets = (Inventory / Total Assets) × 100
= ($1,250 / $16,600) × 100
= 7.53%
In comparison to industry leaders with an inventory turnover of about 13 times per year and 8% of their assets invested in inventory, Baker Mfg. Inc. has a higher inventory turnover at 17.2 times, and a slightly lower percentage of assets committed to inventory at 7.53%.
In July, one of the processing departments at Okamura Corporation had beginning work in process inventory of $23,000 and ending work in process inventory of $28,000. During the month, the cost of units transferred out from the department was $158,000. In the department's cost reconciliation report for July, the total cost to be accounted for under the weighted-average method would be:
Answer:
$186,000
Explanation:
Costs to be accounted for as follows:
Cost of ending work in process inventory $ 28,000
Add Cost of units transferred out $158,000
Total cost accounted for $186,000
Therefore the total cost to be accounted for under the weighted-average method would be: $186,000
Which of the following intrinsic or extrinsic changes would result in an increase in stroke volume? Group of answer choices An increase in diastolic blood pressure A decrease in preload A decrease in ventricular compliance An increase in venous return Arterial constriction
Answer: An increase in diastolic blood pressure.
Explanation: Stroke volume is defined in cardiovascular physiology as the volume of blood that is pumped from the left ventricle per heart beat.
An increased diastolic blood pressure, which can also be called diastolic hypertension, is when the they extra strain on the heart and blood vessels.
An increased diastolic blood pressure increases the stroke volume, because when the diastolic blood pressure increases, it create an extra strain in the heart and blood vessels, which will cause the left ventricle to pump in more blood per beat.
Answer:
An increase in diastolic blood pressure
Explanation:
Stroke volume is defined as the volume of blood let out from the left ventricle in a single heartbeat.
Diastolic pressure is the pressure on the arterial wall between heartbeats.
As Stroke volume increases, end diastolic volume increase slightly. This increased disatolic volume leads to the Frank-Starling mechanism which contributes to the increased stroke volume (stroke volume increases when end-diastolic volume increases). Since pressure and volume are directly proportional, an increase in stroke pressure also leads to an increase in the diastolic pressure.
Bill operates a proprietorship using the cash method of accounting, and this year he received the following: $170 in cash from a customer for services rendered this year a promise from a customer to pay $186 for services rendered this year tickets to a football game worth $215 as payment for services performed last year a check for $184 for services rendered this year that Bill forgot to cash How much income should Bill realize on Schedule C
Answer:
$569
Explanation:
Cash from a customer for services rendered $170
Tickets to a football game worth $215
Check for services rendered $184
Total $569
Therefore Bill should realized income of $569 on Schedule C because Income is realized as property is received but the promise to pay is not property (unless accompanied by a note receivable).
Analysts predicted earnings per share (EPS) for your company to be $0.XX at the close of 20XX. How does this compare to actual EPS for 20XX? If actual EPS is higher than the analysts’ prediction, what factors contributed to the success? If actual EPS is lower than the prediction, how will you explain the shortfall to your investors? Is there anything you did or could have done to meet/exceed the prediction?
Answer and Explanation:
Earnings per Share, EPS = Net Income dividend of preferred stock
Number of stock outstanding
EPS depends on the earnings and its dilution due to increase in preferred stock also it depends on the net income earned
When EPS is higher than analyst prediction,
this may be due to increase in the net income
or
payback of common stock or preferred stock
thereby leading to reduction in the number of stock outstanding
When EPS is lower than analyst prediction
this would be due to reduction in the net income
or
increase of stock or preferred stock due to fresh issue
Insurance against issues that could lead to reduction on income and inrease in the activities that will lead to net income increase can help meet or surpass analyst prediction
Initiating structure describes the following leadership behavior:
A. A leader who is task-oriented and directs subordinates' work
B. A leader who is sensitive to subordinates and respects their ideas, and feelings
C. A leader who seeks input from subordinates regarding important decisions
D. A leader who listens carefully to problems.
Answer:
The correct answer is A. A leader who is task-oriented and directs subordinates' work .
Explanation:
The starting structure: Refers to the measure by which the leader can define and structure his role and those of his subordinates, in the pursuit of goal achievement. It includes behavior that tries to organize work, work relationships, and goals.
Extensive research, based on these definitions, shows that leaders with high rates of starting structure and consideration (a "high - high" leader) tend to achieve high performance and subordinate satisfaction, more often than those who rate low either in consideration, starting structure or in both dimensions. It does not always result in positive consequences to high rates of truancy and turnover, as well as low levels of job satisfaction for workers performing routine tasks. In conclusion, the Ohio State studies emerged that "high - high style" generally produced positive results.
Initiating structure is a type of leadership behavior characterized by a leader who is task-oriented and directs the work of their subordinates. This approach can lead to high productivity levels.
Explanation:Initiating structure is a type of leadership behavior characterized by a leader who is task-oriented and directs the work of their subordinates. It is related to how a leader organizes and defines relationships within the group, and how they establish clear patterns of organization, channels of communication, and procedures. In this case, Option A is correct: 'A leader who is task-oriented and directs subordinates' work'. This approach can lead to high productivity levels and shows that the leader is actively involved in the work process.
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Calculating costs Kate is working for a consulting firm making $50,000 per year but considers starting her own consulting company. Kate has determined that to launch the business, she needs to invest $80,000 of her own funds. The annual cost of running the business will include $50,000 for the rent of the office space, $180,000 for employee wages, and $8,000 for materials and utilities. Kate plans to manage the business, which means that she will have to quit her current job. Suppose that the interest rate (or rate of return) on investments in the economy is 5%.
Kate's total implicit cost per year is_____ . Kate's total cost per year is______
Answer:
Implicit cost =$54,000
Total cost = $292,000.
Explanation:
The implicit cost is the sum of value of the next best alternative sacrificed in favour of a decision.
The implicit cost for Kate includes
The job salary to be lost = $50,000
Interests lost by not depositing the sum = (5%× 80,000)= $4,000
Implicit cost
= $50,000 +$4,000
=$54,000
Implicit cost =$54,000
Total cost
Total cost i the sum of implicit cost and accounting cost
Total cost = 50,000 + 180,000 +8000 + 54,000
Total cost = $292,000.
2. John likes coffee and cookies. The price for one cup of coffee is $1; the price for one cookie is $1. His marginal utility for coffee is 10 – x, where x is the amount of coffee. His marginal utility for cookies is 21 – 2 y, where y is the number of cookies. How many cups of coffee and units of cookies will John buy if he has only $10
Answer:
3 cups of Coffee and 7 units of cookies
Explanation:
In order to maximize his utility John will satisfy the following relationship
The Rational Spending Rule for two goods, X and Y:
MUX/PX = MUY/PY
10 - x = 21 - 2y
10 - 21 + 2y = x
x = 2y - 11. ..........equation (1)
A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint. Here John's constraint is $10,
we have, cups of coffee (x) + units of cookies (y) = $10
x + y = 10
We substitute X with the value of x in equation (1)
(2y - 11) + y = 10
2y +y = 10 + 11
3y = 21
y = 7.
y is the number of cookies, therefore y = 7 units
x = 2y - 11 = 2 × 7 - 11 = 14 - 11 = 3
x is the amount of coffee, therefore x = 3 cups.
If John has $10 he will 3 cups of Coffee and 7 units of cookies
g A. Cutting the firm's dividend to increase investment will raise the stock price if, and only if, the return of new investments is higher than the cost of capital. B. We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth. C. Total return equals earnings multiplied by the dividend payout rate. D. As firms mature, their earnings exceed their investment needs and they begin to pay dividends.
Answer:
C. Total return equals earnings multiplied by the dividend payout rate.
A local farm market buys fresh fruits and vegetables from local farmers. It buys peaches from one farmer at a cost of $1.00 per pound and sells them for $2.00 per pound. The demand for peaches during the season is normally distributed with a mean of 40 pounds per day and a daily standard deviation of 6 pounds. At the end of each business day, any unsold peaches are purchased by local restaurants for $0.40 per pound (in U.S. dollars): Enter your answers to one decimal place. Determine the service level. The service level is Number %. What is the optimal stocking level for the service level deterimined in (a)
Answer:
1. The service level is 63%
2. 42 pounds
Explanation:
1. Cost Price of Peaches = $1.00 per pound
Selling Price of Peaches = $2.00 per pound
Cost of shortage = Selling Price of Peaches - Cost Price of Peaches = $2 - $1 = $1
Cost of overage = Cost Price of Peaches - salvage value = $1 - $0.4 = $0.6
Service level = Cost of shortage /(Cost of shortage + Cost of overage)
= $1/($1 + $0.6) = $1/$1.6 =0.625 = 62.5% ≈ 63%
The service level is 63%
2. The z value for this service level = 0.332
Mean = 40 pounds
Standard deviation = 6 pounds
Optimum stocking level = (Mean + z value x Standard deviation)
= 40 + 6 × 0.332 = 41.992 ≈ 42 pounds
The optimal stocking level for the service level deterimined in (a) is 42 pounds
Your aunt is thinking about opening a hardware store. She estimates that it would cost $300,000 per year to rent the location and buy the stock. In addition, she would have to quit her $45,000 per year job as an accountant. What is the opportunity cost of something
Answer:
Opportunity cost = $345,000
Explanation:
Given:
Total investment = $300,000
Give up job revenue = $45,000
Opportunity cost = ?
Computation of opportunity cost:
Opportunity cost refers to the price we are willing to lose to get something.
Opportunity cost = Total investment + Give up job revenue
Opportunity cost = $300,000 + $45,000
Opportunity cost = $345,000
The opportunity cost in this case is $45,000 per year.
The opportunity cost in this scenario is the value of the next best alternative that your aunt gives up by choosing to open the hardware store instead of continuing her job as an accountant.
Here's how we calculate it:
1. Annual Cost of Opening the Hardware Store:
- Rent and stock: $300,000 per year
2. Annual Income from Current Job:
- Salary as an accountant: $45,000 per year
Since your aunt would have to quit her job as an accountant to open the hardware store, the opportunity cost is the salary she gives up by not working as an accountant.
Therefore, the opportunity cost in this case is $45,000 per year. This represents the income she would have earned annually if she had continued working as an accountant instead of pursuing the hardware store venture.
Berry Co. produces a variety of scissors and other cutting instruments at its Rome manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The company expects to produce 24,000 total units during the current period. The costs and cost drivers associated with four activity cost pools are given below:
ACTIVITIES: UNIT BATCH PRODUCT FACILITY
LEVEL LEVEL LEVEL LEVEL
Cost $70,000 ? $23,000 $240,000
Cost Driver 5,000 labor hrs 120 set ups % of use 30,000 units
Production of 2,000 units of a pipe-cutting tool required 600 labor hours, 16 setups, and consumed 35 % of the product sustaining activities and resulted in an overhead allocation of $34,850. What amount of batch-level overhead costs was expected during the period? (Do not round intermediate calculations.)
a. $2,400
b. $18,000
c. $32,450
d. None of these answers is correct.
Answer:
Explanation:
the solution to the problem is shown in the file attached below
The amount of batch-level overhead costs expected by Berry Co is $138,000.
Data and Calculations:
Expected production output = 24,000 units
ACTIVITIES: UNIT BATCH PRODUCT FACILITY
LEVEL LEVEL LEVEL LEVEL
Cost $70,000 ? $23,000 $240,000
Cost Driver 5,000 labor hrs 120 set ups % of use 30,000 units
Usage for 2,000 units
Actual use 600 labor hrs 16 setups 35% 2,000 units
Total overhead allocated for 2,000 units = $34,850
Overhead for 2,000 units:
Unit level overhead = $8,400 ($70,000/5,000 x 600)
Product-level overhead = $8,050 ($23,000 x 35%)
Total overhead allocated = $34,850
Batch-level overhead for 2,000 units = $18,400 ($34,850 - $8,400 - $8,050)
Thus, the amount of batch-level overhead costs expected by Berry Co is $138,000 ($18,400/16 x 120).
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A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering there alternatives, N (new location), S (subcontract), E (expand existing facilities). Alternative N would involve substantial fixed costs but relatively low variable costs: fixed costs would be $250,000 per year (for the new facility), and variable costs would be $500 per boat.a. Find the range of output for each alternative that would yield the lowest total cost.
A or more
B to
C to
b. Which alternative would yield the lowest total cost for an expected annual volume of 150 boats?
A
B
C
Answer:
(a) Alternative A = 401 or more
Alternative B = 0 to 33
Alternative C = 34 to 399
(b) Alternative C will yield the lowest total cost
Explanation:
Alternative A:
Fixed costs = FCa = $250,000
Variable costs per boat = VCa = $500
Alternative B:
Variable costs per boat = VCb = $2500
Alternative C:
Fixed costs = FCc = $50,000
Variable costs per boat = VCc = $1000
We have to find crossover point with the alternative which have nearest variable cost
Hence, we find crossover point between pair of Alternative A and C and pair of Alternative B & C
For A & C
Let the crossover point be x
FCa + VCa * x = FCc + VCc * x
250,000 + 500x = 50000 + 1000x
x = 400
Higher number is preferred for Alternative with higher fixed cost.
Hence, for alternative A, the range should be 400 or more
For alternative C, the range should be less than 400
For B & C
Let the crossover point be y
FCb + VCb * y = FCc + VCc * y
0 + 2500x = 50000 + 1000y
y = 33.33
Higher number is preferred for Alternative with higher fixed cost.
Hence, for alternative C, the range should be 34 or more
For alternative B, the range should be less than 33
As seen from above,
Alternative A = 401 or more
Alternative B = 0 to 33
Alternative C = 34 to 399
Indifference points of 33.33 and 400 are not included in the above answer.
b.
For an annual volume of 150 boats, this fall in the range of 34 to 399
Hence, Alternative C will yield the lowest total cost for an expected annual volume of 150 boats
Final answer:
Without the costs for alternatives S (subcontract) and E (expand existing facilities), we cannot calculate their output ranges or compare them to alternative N (new location). Only the costs for alternative N are given, where the fixed cost is $250,000 per year and the variable cost is $500 per boat. To determine which alternative would have the lowest total cost for 150 boats, information on all alternatives is necessary.
Explanation:
To find the range of output for each alternative that would yield the lowest total cost, we need to compare the three alternatives, N (new location), S (subcontract), and E (expand existing facilities), based on their cost structures. Unfortunately, the costs for alternatives S and E are not provided; thus, we cannot calculate the ranges of output for these alternatives. However, with the information given, we can analyze alternative N only.
For alternative N, the fixed costs are $250,000 per year, and the variable costs are $500 per boat. The total cost (TC) for producing x boats at this new location would be TC = $250,000 (fixed costs) + $500x (variable costs). Without information on the variable and fixed costs of the other two alternatives (S and E), it's not possible to determine the cost-minimizing range of output for those options or to identify which would yield the lowest total cost for an expected annual volume of 150 boats.
Analysis of Alternative N:
Total cost at 150 boats for alternative N: TC = $250,000 + ($500 × 150) = $250,000 + $75,000 = $325,000.
Without information on alternatives S and E, we cannot provide an answer for part b of the question, i.e., which alternative would yield the lowest total cost for an expected annual volume of 150 boats. Additional data would be required to conduct a full analysis and determine the most cost-effective alternative.
Corporation sold laser pointers for $ 14 each in 2017. Its budgeted selling price was $ 13 per unit. Other information related to its performance is given below: Actual Budgeted Units made and sold 27,300 27,600 Variable costs $100,000 $5 per unit Fixed costs $52,000 $48,000 Calculate Zoar's static budget variance for (a) revenues, (b) variable costs, (c) fixed costs, and (d) operating income. Begin by determining all of the actual amounts, then the static budget amounts, and finally the static-budget variances. Label each variance as favorable (F) or unfavorable (U)
Answer:
Static budget variance
a. revenue variance = budgeted revenue - actual revenue
= ( $13*27,600 ) - ( $14*27,300)
= $358,800 - $382,200
= $23,400 F
b Variable cost variance = ($5* 27,600) - $100,000
= $138,000 - $100,000
= $38,000 F
c. fixed cost variance = $48,000 - $52,000
= $4,000 U
d. operating income = $23,400 F + $38,000 F + $4,000 U
= $57,400 F
Explanation:
On January 1, 2021, David Mest Communications granted restricted stock units (RSUS) representing 30 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUS satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $18 per share on the grant date. At the date of grant, Mest anticipated that 6% of the recipients would leave the firm prior to vesting. On January 1, 2022, 5% of the RSUs are forfeited due to executive turnover. Mest chooses the option to account for forfeitures when they actually occur. Required: 1. to 3. Prepare the appropriate journal entries to record compensation expense on December 31, 2021, December 31, 2022, and December 31, 2023.
Answer:
Compensation expense for 2021 = $120 million
Compensation expense for 2022 = $108 million
Compensation expense for 2023 = $114 million
Explanation:
Check the picture attached for the calculation
Answer:
Explanation:
Explanation
1.
At January 1, 2021, the estimated value of the award is:
$ 12 estimated fair value per share
× 30 million RSUs granted
= $ 360 million total compensation
Compensation expense ($360 million ÷ 3 years) = $120 million
2.
We adjust the cumulative amount of compensation expense recorded to date in the year a forfeiture occurs.
2022
Compensation expense ([$360 − (5% × $360) × 2/3] − $120) = $108 million
3.
2023
Compensation expense ([$360 − (5% × $360) × 3/3] − $120 − $108) = $114 million
Baron Corporation has a target capital structure of 65 percent common stock, 10 percent preferred stock, and 25 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax rate is 21 percent.
a. What is the company’s WACC?
b. What is the aftertax cost of debt?
Answer:
WACC is 7.24%
After tax cost of debt is 3.95%
Explanation:
WACC=Ke*E/V+Kd*D/V*(1-t)+Kp*P/V
Ke is the cost of equity of 9% or 0.09
Kd is the cost of debt at 5% or 0.05
Kp is the of preferred stock of 4% or 0.04
E is the weight of equity of 65% 0r 0.65
D is the weight of debt of 25% 0.25
K is the weight of preferred stock of 10% or 0.10
t is the tax rate of 21% or 0.21
WACC=(0.09*0.65)+(0.05*0.25*1-0.21)+(0.04*0.10)
WACC=(0.09*0.65)+(0.05*0.25*0.79)+(0.04*0.10)
WACC=7.24%
after tax cost of debt=pretax cost of debt*(1-t)
=0.05*(1-0.21)
=0.0395=3.95%
Borel Inc., a calendar year company, purchased on June 29, 2019 a tractor trailer for transporting racehorses. The cost of the trailer was $200,000 and is estimated to have a useful life of five years and salvage value is to be ignored. What would be the depreciation expense during the entire useful life of the asset
Answer:
In the first year 2019, the depreciation expense would be $20,000.
From 2020 to 2023, the depreciation expense would be $40,000 and then $20,000 in 2024.
Explanation:
Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.
It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset
Mathematically,
Depreciation = (Cost - Salvage value)/Estimated useful life
Annual depreciation
= $200,000/5
= $40,000
In the first year 2019, the depreciation expense would be
= 1/2 * $40,000
= $20,000
From 2020 to 2023, the depreciation expense would be $40,000 and then $20,000 in 2024
Answer:
The depreciation expense during the entire useful life of the asset is simply the same as the cost of the asset, which is $200,000. This is because there was no salvage value. The following journals apply:
Debit Depreciation expense $200,000
Credit Accumulated depreciation $200,000
(To record accumulated depreciation for the entire life of the asset)
Explanation:
There are varying methods of calculating depreciation expense like straight-line, double-declining or the unit-of-production method. The most commonly used is the straight-line method. Under this method, depreciation is an allocation of the cost of an asset over its estimated useful life and it is expressed with this formula: (cost - residual value) / No of years = ($200,000 - 0) / 5 years = $40,000 yearly depreciation expense.
Accumulated depreciation for 5 years is $40,000 x 5 years $200,000.
So, the net book value (NBV) of the asset (expressed as Cost - Accumulated depreciation) is $200,000 - $200,000 = $0.
John owns a corporate bond with a coupon rate of 8% that matures in 10 years. Bill owns a corporate bond with a coupon rate of 12% that matures in 25 years. If interest rates go down, then:
A.the value of John's bond will decrease and the value of Bill's bond will increase.
B.the value of both bonds will increase.
C.the value of Bill's bond will decrease more than the value of John's bond due to the longer time to maturity.
D.the value of both bonds will remain the same because they were both purchased in an earlier time period before the interest rate changed.
Answer:
B.the value of both bonds will increase.
Explanation:
Bonds are known to be a financial security that shows or holds a promise to repay a fixed amount of funds.
There is an oppose relationship in terms of bond and an increase in thet interest rates, will lead to drop in the value of bonds and whenor if interest rates drops, there will be a corresponding increase in the bonds value. since both the bonds owned by John, he would still receive fixed interest payments which will be higher than the interest amount available on new bonds which are issued at lower interest rates and the value of both of these bonds would increase automatically
Final answer:
Option B. The value of both John's and Bill's bonds will increase when interest rates fall, with Bill's bond increasing more due to its longer time to maturity and higher coupon rate.
Explanation:
When interest rates go down, the value of existing bonds with fixed coupon rates quite often increase. This is because the fixed interest payments of the bond become more attractive compared to the new bonds being issued at the now lower interest rates. Thus, the correct answer is B: the value of both bonds will increase.
The bond that Bill owns, with a higher coupon rate and longer time to maturity, will be affected even more due to its longer duration. This longer duration means the bond's payments are locked in for a greater period of time at a higher rate than what's currently available, making it even more valuable if interest rates drop.
It should be noted that the value of a bond is inversely related to interest rates. However, once the bond is in the investor's hands, the actual dollar amounts paid by these bonds do not change. Therefore, the change in market value does not affect existing bondholders unless they intend to sell the bond before maturity.
American Products is concerned about managing cash efficiently. On average, inventories have an age of 80 days, and accounts receivable are collected in 40 days. Accounts payable are paid approximately 30 days after they arise. The firm has annual sales of about $30 million. Goods sold total $20 million, and purchases are $15 million.
a. Calculate the firm’s operating cycle.
b. Calculate the firm’s cash conversion cycle.
c. Calculate the amount of resources needed to support the firm’s cash conversion cycle.
d. Discuss how management might be able to reduce the cash conversion cycle.
a. The firm's operating cycle is 120 days. b. The firm's cash conversion cycle is 90 days. c. The amount of resources needed to support the firm's cash conversion cycle is $4.93 million. d. Management can reduce the cash conversion cycle by improving inventory management, accounts receivable management, and negotiating payment terms with suppliers.
Explanation:a. The operating cycle of a firm is the average time it takes for a company to convert its inventory into cash. In this case, the average age of inventory is given as 80 days and the average collection period for accounts receivable is 40 days. Adding these two together gives us the operating cycle: 80 + 40 = 120 days.
b. The cash conversion cycle is a measure of the time it takes for a company to convert its investments in inventory and accounts receivable into cash. To calculate it, we subtract the average payment period for accounts payable from the operating cycle. In this case, the average payment period for accounts payable is 30 days. So the cash conversion cycle would be 120 - 30 = 90 days.
c. The amount of resources needed to support the cash conversion cycle can be calculated by multiplying the average daily cost of goods sold by the cash conversion cycle. Here, the cost of goods sold is $20 million and the cash conversion cycle is 90 days. So the resources needed would be: $20 million * (90/365) = $4.93 million.
d. Management can reduce the cash conversion cycle by adopting strategies such as improving inventory management to reduce the average age of inventory, implementing efficient accounts receivable management to collect payments more quickly, and negotiating longer payment terms with suppliers to increase the average payment period for accounts payable.
Preferred stock: 8 percent, par $10, authorized 20,000 shares. Common stock: par $1, authorized 50,000 shares. The following transactions occurred during the first year of operations in the order given: a. Issued a total of 45,000 shares of the common stock for $20 per share. b. Issued 12,000 shares of the preferred stock at $21 per share. c. Issued 3,500 shares of the common stock at $25 per share and 1,200 shares of the preferred stock at $21. d. Net income for the first year was $53,000.
Final answer:
Preferred stock: 8 percent, par $10, authorized 20,000 shares. Common stock: par $1, authorized 50,000 shares. Various transactions occurred involving the issuance of common and preferred stock, resulting in total cash inflows. Net income for the first year was $53,000.
Explanation:
The total number of authorized shares for preferred stock is 20,000 shares, with a par value of $10. Each share has a dividend rate of 8%. The total number of authorized shares for common stock is 50,000 shares, with a par value of $1.
The first transaction involved issuing 45,000 shares of common stock at $20 per share, resulting in a total cash inflow of $900,000.
In the second transaction, 12,000 shares of preferred stock were issued at $21 per share, resulting in a total cash inflow of $252,000.
The third transaction involved issuing 3,500 shares of common stock at $25 per share and 1,200 shares of preferred stock at $21 per share. This resulted in a total cash inflow of $109,500 for the common stock and $25,200 for the preferred stock.
Net income for the first year was $53,000 for both common and preferred stockholders.
In "traditional channel systems," the channel members: A. consider traditional values-like cooperation and respect-as central to their relationship. B. have franchise contracts. C. usually have a common product-market commitment. D. make little or no effort to cooperate with each other. E. are integrated.
Answer:
D. make little or no effort to cooperate with each other.
Explanation:
When companies are promoting and transmitting their product from the point of production to the customer they use different channels.
The traditional channel is the normal brick and mortar stores that sell products to customers. However with the introduction of the internet a lot of stores have gone online.
Traditional stores make little effort to cooperates with one another, unlike online stores that collaborate to promote products.
Answer: D. make little or no effort to cooperate with each other.
Explanation: Channels of distribution are any series of firms or individuals who are involved in the flow of products from the producer to the end user or consumer. In "traditional channel systems," the channel members make little or no effort to cooperate with each other. Though traditional channel systems may exhibit little cooperation between channel members, they also buy and sell from each other with the producer setting the objectives for all channel members.
In 2007, the economy slipped in a recession that many called the worst since the Great Depression. This caused people to experience a general decrease in their income levels. At the same time, there was an increase in the price of wheat used to make Ramen Noodles (an inferior good). Given these two effects, what would happen to the equilibrium price and quantity of Ramen Noodles
Answer:
an increase in equilibrium price and an indeterminate effect on equilibrium quantity.
Explanation:
An inferior good is a good whose demand increases when income falls and reduces when income rises.
If ramen is an inferior good, when income falls its demand would increase. This would lead to a rise in quantity and price.
An increase in the price of wheat would increase the cost of production of ramen. As a result, the supply of ramen would fall. Price would increase and supply would fall.
The combined effect would be an increase in equilibrium price but an indeterminate effect on equilibrium quantity.
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