Answer:
Present value of the firm = $ 524,467.50
Explanation:
Using the free cash flow, the value of a firm is the the present value of the free cash discounted at the appropriate cost of capital.
Year PV
1 62,000× (1.145)^(-1) = 54,148.47162
2 65,400 × (1.145)^(-2) = 49,884.63225
3 68,900 × (1,145)^(-3) = 45, 898.95119
4 to infinity ( see working below) $374,535.44
Workings
Present value from Year 4 to infinity (this will be done in two steps)
Step 1
PV in year 3 = FCF × (1+g)/(WACC- g)
FCF -68,900, g =2%, WACC - 14.5%
= ( 68,900 × 1.02(/0.145-0.02)
= $562,224.00
Step 2
PV in year 0 = PV in year 3 × (1+r)^(-3)
= $562,224.00 × (1.145^(-3)
= $374,535.44
The present value of Allison =
54,148.47 + 49,884.63 +45,898.95 +374,535.44
= $ 524,467.50
Present value of the firm = $ 524,467.50
William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D 19 comma 900 units/year Ordering cost S $27/order Holding cost H $3/unit/year a) The EOQ for the workbooks is nothing (round your response to the nearest whole number). b) What are the annual holding costs for the workbooks? $ nothing (round your response to the nearest whole number). c) What are the annual ordering costs? $ nothing (round your response to the nearest whole number).
Answer:
a. 598 units
b. $897
c. $898
Explanation:
a. The computation of the economic order quantity is shown below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
[tex]= \sqrt{\frac{2\times \text{19,900}\times \text{\$27}}{\text{\$3}}}[/tex]
= 598 units
b. The average inventory would equal to
= Economic order quantity ÷ 2
= 598 units ÷ 2
= 299 units
Carrying cost = average inventory × carrying cost per unit
= 299 units × $3
= $897
c. The number of orders would be equal to
= Annual demand ÷ economic order quantity
= $19,900 ÷ 598 units
= 33.28 orders
Ordering cost = Number of orders × ordering cost per order
= 33.28 orders × $27
= $898
Evaluate how organizations can use one-sample hypothesis testing to determine if there are performance issues in the organization. Support your response with a specific example. In replies to peers, provide an additional example that supports the ideas presented.
Answer:
Explanation:
For example: Suppose you want to check the average working hour of employees. You may think that the average duration of an employees is 7.6 hours. You want to check this claim so you collect a sample of 20 employees and note their duration of work. (please check attached file for this, and continue)
NULL HYPOTHESIS H0:u= 7.6 HOURS
ALTERNATIVE HYPOTHESIS Ha: ≠7.6 HOURS
alpha=0.05
t= 7.765-7.6/1.25/sqrt(20)
t= 0.165/1.25/4.47
t= 0.165/0.28
t= 0.589
degrees of freedom= n-1=20-1=19
t critical = 2.09
Since t critical is GREATER than t calculated therefore we fail to reject null hypothesis H0.
From this we can conclude that We don't have enough or sufficient evidence to say that the mean working duration is different than 7.6 hours.
Presented below is information for Oakley Company for the month of March 2020.
Cost of goods sold $254,000
Rent expense $36,000
Freight-out 7,500
Sales discounts 8,800
Insurance expense 5,000
Sales returns and allowances 11,000
Salaries and wages expense 75,000
Sales revenue 425,000
Prepare a multiple -step income statement.
Answer:
Oakley Company multiple -step income statement for the month of March 2020.
Sales revenue 425,000
Less Sales returns and allowances (11,000)
Net Revenue 414,000
Less Cost of goods sold (254,000 )
Gross Profit 160,000
Less Operating Expenses
Selling And Distribution Expenses :
Sales discounts 8,800
Freight-out 7,500
Administrative Expenses :
Rent expense 36,000
Insurance expense 5,000
Salaries and wages expense 75,000 (132,300)
Operating Income 27,700
Explanation:
A multiple -step income statement shows income derived from Primary Activities of the Company (Operating Activities) separately from the Income that is derived from Secondary Activities of the Company (Non-Operating).
Answer:
Operating Income = $27,700
Explanation:
Kindly check the attached picture for the Full and detailed Oakley Company Income statement for March, 2020.
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:
Standard Quantity Standard Price
or Rate Standard Cost
Direct materials 2.00 ounces $ 30.00 per ounce $ 60.00
Direct labor 0.50 hours $ 14.00 per hour 7.00
Variable manufacturing overhead 0.50 hours $ 3.40 per hour 1.70
$ 68.70
During November, the following activity was recorded relative to production of Fludex:
a. Materials purchased, 10,000 ounces at a cost of $287,000.
b.
There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending inventory.
c.
The company employs 20 lab technicians to work on the production of Fludex. During November, they worked an average of 130 hours at an average rate of $12.00 per hour.
d.
Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,700.
e. During November, 3,400 good units of Fludex were produced .
Required:
1. For direct materials:
a.
Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?
Yes
No
2. For direct labor:
a.
Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b.
In the past, the 20 technicians employed in the production of Fludex consisted of 4 senior technicians and 16 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued?
Yes
No
3.
Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
Becton Labs' direct materials had a favorable price variance and an unfavorable quantity variance. Direct labor showed a favorable rate variance but an unfavorable efficiency variance. Variable manufacturing overhead revealed a favorable rate variance and an unfavorable efficiency variance.
Direct Materials Variances
The price variance for direct materials is calculated by comparing the standard cost to the actual cost paid for the materials. The standard cost for materials would be 2 ounces per unit of Fludex at $30 per ounce, totaling $60. With the company purchasing 10,000 ounces for $287,000, the actual price per ounce is $28.70. The price variance is thus (30 - 28.70) * 10,000 ounces, which equals a $13,000 favorable variance.
The quantity variance is found by taking the standard quantity for the actual production and comparing it to the actual quantity used. To produce 3,400 units, the standard quantity would be 3,400 units * 2 ounces/unit = 6,800 ounces. The actual quantity used is 10,000 ounces purchased minus 3,000 ounces ending inventory, equaling 7,000 ounces. The variance is then (6,800 - 7,000) * $30 per ounce, resulting in a $6,000 unfavorable variance.
To answer whether Becton Labs should enter into a long-term contract with the new supplier, we should consider both the favorable price variance and the potential reasons for the unfavorable quantity variance.
Direct Labor Variances
The rate variance for direct labor is calculated by comparing the standard rate per hour to the actual rate paid. With a standard rate of $14 per hour and an actual rate of $12 per hour, multiplied by the total hours worked (20 technicians * 130 hours), we have an $11,200 favorable rate variance.
The efficiency variance compares the standard hours for actual production to the actual hours worked. Standard hours are 0.5 hours per unit * 3,400 units, totaling 1,700 hours. Actual hours were 2,600 (20 * 130), resulting in a 900-hour difference. Multiplying by the standard rate, we get a $12,600 unfavorable efficiency variance.
Deciding on whether to continue with the new labor mix requires further investigation of the causes and effects of the unfavorable efficiency variance.
Variable Manufacturing Overhead Variances
The variable overhead rate variance is the difference between the standard rate and the actual rate. The standard rate is $3.40 per hour. With $4,700 spent for 2,600 hours, the actual rate is approximately $1.81. Therefore, the variance is a favorable variance.
The variable overhead efficiency variance is computed by comparing the standard hours to the actual hours, similar to direct labor. With 1,700 standard hours and 2,600 actual hours, the difference applied to the standard overhead rate results in an unfavorable efficiency variance.
Write a Risk Management Plan (RMP) using the content found in the PMBOK 6e (Section 11.1.3.1). At a minimum, the plan should address all elements of a RMP found in the PMBOK. The plan should include the following figures and tables:
Answer:
The risk management plan describes how risk management activities will be structured and performed. There are 6 elements to be included in the risk management plan
Explanation:
According to the Project Management Institute (PMI, 2017), a risk management plan should consist of the following elements:
•Risk strategy – a risk strategy describes the approach to managing risk. It consists of looking at the project from all perspectives, identifying risks and choosing the best possible solution to the risk.
•Methodology – this defines the specific tools, ideas, and sources of data that will be used to undertake the risk management task
•Roles and Responsibilities – everyone on the team should have a clear understanding of what is expected of them and how they should react should a certain problem arise. Leaders, supporters and the entire team should have a specific task assigned to them.
•Funding – possible sources of financial assistance and calculated estimates of how much would be needed for each specific risk identified, should be established in the plan and potential funders should be contacted
•Timing – defines when and how often the processes will be performed and defines risky activities and how much time would be needed to deal with each risk
•Risk categories – risks should be categorized in terms of their severity and/ or likeliness to occur. A scale of 1 – 5 can be used, where 1 is lease likely to occur and 5 is most likely, or, 1 being least severe and 5 being very severe
It is important to monitor, evaluate and review the plan once it is implemented.
5. Immediately after a used truck is acquired, a new motor is installed and the tires are replaced at a total cost of $5,750. Is this a capital expenditure or a revenue expenditure
Answer: Capital Expenditure
Explanation:
Capital Expenditure occurs if the expense made was to enhance the capability of an asset to perform the role for which it was acquired over an extended period of time.
The new motor and tires will go a long way in making sure that the Truck benefits the company over a long period of time and so should be considered CAPITAL EXPENDITURE.
Do comment if you need any further clarification.
Answer:
CAPITAL EXPENDITURE
Explanation:
In accounting, an expense carried out is considered to be capital expenditure when the asset is an investment with a life of more than one year or a newly purchased capital asset or an expense which improves the useful life of an existing capital asset.
Capital Expenditure is the money an organization or firm uses to purchase, maintain, upgrade or improve its fixed assets such as vehicles, production equipment, buildings or land.
Capital expenditures on fixed assets may include everything ranging from repairing a roof to building, to purchasing a new vehicle or upgrading a newly purchased used vehicle.
Therefore, the total costs of $5,750 used in the installation of a new motor and replacement of the tires are the CAPITAL EXPENDITURE.
Other examples of CAPITAL EXPENDITURE are costs of:
- Buildings (with costs to extend useful life)
- Land (with the cost of upgrading land e.g irrigation system setup, land clearing, etc)
- Machinery (with costs of transporting equipment to factory)
etc.
A company has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during Year 1, its first year of operations: January 2 Issues 100,000 shares of common stock for $26 per share. February 6 Issues 2,100 shares of 9% preferred stock for $11 per share. September 10 Purchases 11,000 shares of its own common stock for $31 per share. December 15 Resells 5,500 shares of treasury stock at $36 per share. Required: Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer and Explanation:
The journal entries are shown below:
On Jan 2
Cash (100,000 shares × $26) $2,600,000
To Common Stock (100,000 shares × $1) $100,000
To Paid in capital in excess of par value - Common Stock $2,500,000
On Feb 6
Cash (2,100 shares × $11) $23,100
To Preferred stock (2,100 shares × $10) $21,000
To Paid in capital in excess of par value-preferred stock $2,100
On Sep 10
Treasury Stock (11,000 × $31) $341,000
To Cash $341,000
(Being the purchase of own common stock is recorded)
On Dec 15
Cash (5,500 shares × $36) $198,000
To Treasury Stock (5,500 shares × $31) $170,500
To Paid in capital from sale of treasury stock $27,500
(Being the resells of treasury stock is recorded)
If the European subsidiary of a U.S. firm has net exposed assets of euro200,000, and the euro increases in value from $1.22/euro to $1.26/euro the U.S. firm has a translation: A. loss of $8,000. B. gain of $8,000. C. loss of euro252,000. D. gain of $252,000.
Answer:
B. Gain $8,000
Explanation:
The calculation of exchange translation is shown below:-
Old exchange rate = Net exposed assets × Value of Euro
= 200,000 × $1.22
= $244,000
New value in euro = Net exposed assets × Increased exchange rate
= 200,000 × $1.26
= $252,000
Translation Profit = New value in euro - Old exchange rate
= $252,000 - $244,000
= $8,000
During January, Luxury Cruise Lines incurs employee salaries of $1.1 million. Withholdings in January are $84,150 for the employee portion of FICA, $165,000 for federal income tax, $68,750 for state income tax, and $11,000 for the employee portion of health insurance (payable to Blue Cross/Blue Shield). The company incurs an additional $68,200 for federal and state unemployment tax and $33,000 for the employer portion of health insurance. Required: 1., 2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.)
Answer:
See the explanation below.
Explanation:
Details Dr ($) Cr ($)
Salary expenses 1,100,000
Employee portion of FICA payable 84,150
Federal income tax payable 165,000
Employee's State income tax payable 68,750
Employee portion of health ins. payable 11,000
Net salaries payable 771,100
To record gross salaries, withholding taxes and net salaries
Employer portion of FICA expenses 84.150
Federal and state unemployment tax 68,200
Employer portion of health insurance 33,000
Employer portion of FICA payable 84,150
Fed. and state unemploymt tax payable 68,200
Employer portion of health ins. payable 33,000
To record employer's payroll taxes and other expenses
Employee portion of FICA payable 84,150
Federal income tax payable 165,000
State income tax payable 68,750
Employee portion of health ins. payable 11,000
Net salaries payable 771,100
Employer portion of FICA payable 84,150
Fed. and state unemploymt tax payable 68,200
Employer portion of health ins. payable 33,000
Cash 1,285,350
To record payment of payroll liabilities and other expenses
Free Spirit Industries Inc.’s marketing sales director doesn’t think that the market for the firm’s goods is big enough to sell enough units to make the company’s target operating profit of $15,000,000. In fact, she believes that the firm will be able to sell only about 175,000 units. However, she also thinks the demand for Free Spirit Industries Inc.’s product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 175,000 units, what price must it set to meet the CFO’s EBIT goal of $15,000,000?
Answer:
In the attached the fixed costs is $12,000,000
selling price is $41.50
variable cost is $12.80
The price for the target EBIT of $15 million is $167.09
Explanation:
target units=fixed costs+target EBIT/selling price-variable cost
target units is 175,000
fixed costs of $12,000,000
target EBIT of $15,000,000
variable cost is $12.80
selling price is unknown,let assume is X
175,000=($12,000,000+$15,000,000)/X-12.80
175,000=27,000,000/X-12.80
175,000*(X-12.80)=27,000,000
X-12.80=27,000,000/175,000
X-12.80=154.29
X=154.29+12.80
X=$167.09
EBIT=Sales units*(selling price-variable cost)-fixed costs
The only capital investment required for a small project is investment in inventory. The operating cash flow this year was $10,000, and inventory increased from $4,000 to $5,000. What was the cash flow from the project?
Answer:
$9,000
Explanation:
Cash flow can be defined as the amount of cash that is being transferred or that flows into and out of a business which may either leads to increase or decrease in the amount of money a business or individual has.
Cash flow = profit − increase in inventory =
$4,000 - $5,000 = $1000
Therefore
$10,000 − $1,000 = $9,000
Therefore the Cash flow from the project is $9,000
The cash flow from the project will be $9000.
Cash flow from the project simply means the cash flow that's generated. It can be gotten by using the formula:
Cash flow = Profit - Increased working capital.
Therefore, cash flow will be:
Cash flow = Profit - Increased working capital.
Cash flow = $10000 - ($5000 - $4000)
Cash flow = $10000 - $1000
Cash flow = $9000
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The petty cash fund had an initial imprest balance of $ 220. It currently has $ 18 in cash, $ 3 in miscellaneous petty cash tickets, and an additional $ 191 in specific petty cash tickets. The debit to Cash Short & Over would be:
Answer:
The debit to Cash Short & Over would be: $ 8
Explanation:
Particulars Debit Credit
Cash $ 18
Miscellaneous $ 3
Additional Tickets $ 191
Cash Over and Short $ 8
Petty Cash Fund $ 220
Sometimes a petty cashier fails to get a receipt for a payment or over pays for the amount due. When this occurs and the fund is later reimbursed the petty cash payments report plus the cash remaining will not total to the fund balance . This mistake causes the fund to be short. This shortage is recorded as an expense in the reimbursing entry with a debit to Cash Short & Over .
Final answer:
The debit to Cash Short & Over would be $8. This is calculated by subtracting the sum of the current cash on hand and petty cash tickets ($212) from the initial imprest balance ($220).
Explanation:
The petty cash fund had an initial imprest balance of $220. The question involves reconciling the petty cash, which includes counting the remaining cash and accounting for the petty cash tickets. The current cash on hand is $18 and there are petty cash tickets totaling $194 ($3 in miscellaneous tickets plus $191 in specific petty cash tickets). The total of cash and tickets should equal the initial imprest balance. To find the debit to Cash Short & Over, we need to calculate the difference between the initial balance and the sum of current cash and tickets.
Calculation:
Initial imprest balance: $220
Current cash on hand: $18
Petty cash tickets: $194 ($3 + $191)
Total cash and tickets: $18 + $194 = $212
Debit to Cash Short and Over = Initial imprest balance - Total cash and tickets
Debit to Cash Short and Over = $220 - $212 = $8
Therefore, the debit to Cash Short & Over would be $8.
Harrington makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for June, July, and August were $80,000, $130,000, and $120,000, respectively, what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31
Answer:
Cash Collection is $122,000
Receivable as on August 31, is $97,000
Explanation:
Total budgeted cash collection in the month of August is $122,000 and total receivables as on August 31 is $97,000.
A schedule for the cash collection is made in MS Excel file, which is attached with this answer, please find it.
In August, the budgeted collections for Harrington were $122,000 and the total budgeted receivables on August 31st were $136,000.
Explanation:To calculate the firm's budgeted collections for August, we need to apply Harrington's collection pattern to the sales made in June, July, and August. 30% of August's sales are collected in the same month which equals $36,000 (0.3 * $120,000). The first month after July sales, 60% is to be collected amounting to $78,000 (0.6 * $130,000). The second month after June 10%, results in $8,000 (0.1 * $80,000). Thus, the total collection for August is $36,000 + $78,000 + $8,000 = $122,000.
For the budgeted receivables on August 31, the remaining amounts to be collected from July and August should be considered. This comprises of 40% from July's sale amounting to $52,000 (0.4 * $130,000), and 70% from August's sales which equals $84,000 (0.7 * $120,000). So, the total budgeted receivables on August 31 is $52,000 + $84,000 = $136,000.
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FASB No. 52 is a statement issued by the Financial Accounting Standards Board requiring American MNCs to first convert the financial statement accounts of foreign subsidiaries into the country's functional currency and then translate the accounts into the parent firm's currency using the ________ method.
Answer:
all-current-rate method
Explanation:
The all-current-rate method is the method by which most items in the financial statements are translated at the current exchange rate
In current-rate-method,
the income statement is translated at the weighted average exchange rate,
assets and liabilities are translated at the current rate, issued capital stock is translated at the exchange rate.
The balance sheet must be balanced. Cumulative Translation Adjustment (CTA) balances the asset side of the balance sheet with the liabilities and owner’s equity side of the balance sheet.
Access Organics, Inc., hired Andy Hernandez to sell organic produce. Later, Hernandez signed an agreement not to compete with Access for two years following the termination of his employment. He did not receive a pay increase or any other new benefits in return for signing the agreement. When Access encountered financial trouble, Hernandez left and began to compete with his former employer. Access filed a lawsuit against Hernandez. Is the noncompete agreement enforceable?
Answer: The Non Compete is NOT Enforceable.
Explanation:
An Agreement not to compete with your previous company is a RESTRICTIVE covenant that was generally introduced to ensure that Upper and Middle Management who were generally privy to Trade Secrets in an Organization do not take that information somewhere else and use it against that old company usually in exchange for better compensation packages.
Hernandez joined Access Organics and regrettably was not given a pay increase or any other special considerations. This is very relevant.
For a Non-compete to hold relevance especially if it is signed AFTER an employee has already being working in an organization, there needs to be SUFFICIENT Considerations that gave the employee better terms such as more job security or better benefits as a result of signing said agreement.
Andy Hernandez received no such benefits in return for signing the agreement and so the Non-compete Agreement lacks said Sufficient Considerations.
The Non-compete is therefore NOT ENFORCEABLE.
It is worthy of note that in the actual case, the Judge ruled in favor of of Andy Hernandez.
If you require further clarification do react or comment.
Answer:
Yes, a valid non-compete is enforceable as a state law once one party violates is provision.
Explanation:
If the non compete did not categorically state that Hernandez will receive a pay increase or any other new benefits in return for signing the agreement and yet he endorsed it, going against the agreement not to compete with Access for two years following the termination of his employment is a clear case of violation.
Penalty for violating a non compete include payment for damages. In this case, Access Organics Inc. could also file lawsuit against Hernandez for both money damages and an injunction.
Sleepgood Company produces and sells pillows. It expects to sell 15,000 pillows in the next year and will have 1,500 pillows in finished goods inventory at the end of the current year. Sleepgood would like to complete operations next year with at least 1,350 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for $6 each. How many pillows would be produced in the next year?
Answer:
Pillows to be produced next year =14,850 units
Explanation:
The expected units of a product that a business estimates to manufacture gives its sales budget and inventory is known as the production budget.
The production budget can bed determined by adjusting the sales budget for closing and opening inventories.
Production budget = Sales budget +closing inventory - opening inventory
No that the opening inventory for next year would be the closing inventory for the current year. Therefore, the opening inventory for next year is 1,500 units.
Sales budget for next year - 15,000, closing inventory -1,350
Production budget = 15,000 + 1,350 - 1,500
= 14,850 units
Pillows to be produced next year =14,850 units
Mays Corp. reported free cash flows for 2018 of $491 million and investment in operating capital of $321 million. Mays Corp. incurred $146 million in depreciation expense and paid $309 million in taxes on EBIT in 2018. What is Mays Corp.’s 2018 EBIT?
Answer: $975 million
Explanation:
Given the above details, we can solve for Earnings Before Tax and Interest with the following formula,
Operating Cash Flow = EBIT – Taxes on EBIT + Depreciation
Making EBIT the subject would turn it to be,
EBIT = Operating Cash Flow + Taxes on EBIT - Depreciation
We have all of the above except the EBIT and Operating Cash Flow.
Luckily we can solve for the Operating Cash Flow with the details given using,
Operating cash flow = Free Cash Flow + Investment in operating capital
Therefore,
= $491 million + $321 million
= $812 million
Operating cash flow is $812 million
Plugging it into the original formula we have,
EBIT = Operating Cash Flow + Taxes on EBIT - Depreciation
EBIT = $812 million + $309 million - $146 million
EBIT = $975 million
Earnings before Taxes and Interest is $975 million.
If you need any clarification do react or comment.
The following operating information reports the results of Bramble Company’s production and sale of 12,500 air-conditioned motorcycle helmets last year. Based on early market forecasts, Bramble expects the same results this year. Sales $2,022,000 Variable manufacturing expenses 885,000 Fixed manufacturing expenses 273,000 Variable selling and administrative expenses 120,000 Fixed selling and administrative expenses 226,000 The American Motorcycle Club has offered to purchase 1,900 helmets at a price of $100 each. Bramble has sufficient idle capacity to fill the order, which would not affect the company’s cost structure or regular sales. If Bramble accepts this order, by how much will its income increase or decrease?
Answer:
Effect on income= $37,240 increase
Explanation:
Giving the following information:
Production= 12,500 units
Variable manufacturing expenses 885,000
Variable selling and administrative expenses 120,000
The American Motorcycle Club has offered to purchase 1,900 helmets for $100 each.
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs.
First, we need to calculate the unitary variable costs:
Unitary variable manufacturing expense= 885,000/12,500= $70.8
Unitary selling and administrative expenses= 120,000/12,500= $9.6
Total variable cost= $80.4
Effect on income= 1,900*(100 - 80.4)= $37,240 increase
Staples, the office supply store, owns Quill, which specializes in selling to more than 1 million small and mid-sized U.S. businesses. For example, Quill offers medical supplies to doctors’ offices. Staples has found it pays to departmentalize by _______.
A. Product
B. Function
C. Customer
Final answer:
Staples has found it pays to departmentalize by customer, as exemplified by its subsidiary Quill, which targets small and mid-sized U.S. businesses with specific product offerings like medical supplies for doctors' offices. This approach takes advantage of specialization and addresses the unique needs of different customer segments.
Explanation:
Staples, the office supply store, owns Quill, which specializes in selling to small and mid-sized U.S. businesses, such as providing medical supplies to doctors' offices. When we consider the organization of departments in major grocery stores in the United States, which are sorted into departments like dairy, meats, produce, etc., this is an example of a business that is departmentalized by product. Each product category is specialized to cater to the needs of different consumers and to manage the vast array of items effectively.
In the context of business operations, companies like Staples departmentalize to take advantage of specialization, which allows employees to focus on a part of the production process where they have an advantage, similar to how people have different skills and interests. Whether it be educational choices, regional advantages, or the scale of operation, specialization can lead to greater productivity and effectiveness. In Staples' case, through Quill, it has chosen to departmentalize by customer type, which allows the organization to cater specifically to the needs of small and mid-sized businesses, providing them with tailored products and services.
A zero-investment portfolio with a positive alpha could arise if: a. The expected return of the portfolio equals zero. b. The capital market line is tangent to the opportunity set. c. The Law of One Price remains unviolated. d. A risk-free arbitrage opportunity exists.
Answer:
d. A risk-free arbitrage opportunity exists.
Explanation:
A zero-investment portfolio refers to a portfolio of assets which all the investments its contains has a collective net value that is zero which is obtained when there is a simultaneously purchasing securities and selling equivalent securities.
Alpha refers to the active return on an investment. This implies that when a zero-investment portfolio has a positive alpha, its active return is positive. This can only occur when there is a risk-free arbitrage opportunity.
A risk-free arbitrage refers to the opportunity to make some profit with no capital investment.
Therefore, the correct option is d. A risk-free arbitrage opportunity exists.
Final answer:
A zero-investment portfolio with a positive alpha typically results from a risk-free arbitrage opportunity, which aligns with the concept of generating excess returns without additional risk. An analysis of three investments' risks and expected returns indicates the third investment as the safest, the first as the riskiest, and the second as having the highest expected return on average.
Explanation:
A zero-investment portfolio with a positive alpha suggests the existence of an arbitrage opportunity where an investor can generate excess returns without any additional investment or risk. The statement in the question "A risk-free arbitrage opportunity exists" aligns with the concept of generating a positive alpha without additional investment, thereby leading to the creation of a zero-investment portfolio with positive returns. Other statements do not logically support the creation of such a portfolio. Option d is correct .
Investment analysis involves evaluating risk and return to determine the safest and riskiest investments, along with the highest expected average returns. Considering the probabilities and potential returns for three different investments, we find:
The first investment (software company) has an expected return of $200,000The second investment (hardware company) has an expected return of $600,000The third investment (biotech firm) has an expected return of $400,000The biotech firm represents the lowest risk due to its minimal chance of loss. Conversely, the software company carries the highest risk, stemming from its elevated probability of incurring a loss. The hardware company offers the highest expected return on average, considering the balance of probabilities and potential profits.
Throughout history, high-risk investment approaches have sometimes been detrimental to investment portfolios, particularly during times of economic downturn or market volatility, such as the 2008 financial crisis or the dot-com bubble burst.
Yvonne and Larry plan to begin a business that will grow plants for sale to retail nurseries. They expect to have substantial losses for the first three years of operations while they develop their plants and their sales operations. Both Yvonne and Larry have substantial interest income, and both expect to work full-time in this new business. List three advantages for operating this business as a partnership instead of a C corporation.
Answer:
Partnership refers to a mutual agreement between two or more individuals to carry on a business and share it's profits and losses in a specified ratio as per the clauses in the partnership deed.
A corporation form of business refers to a business characterized by separate legal existence, perpetual existence and common ownership.
Following are the benefits of conducting business via mode of partnership instead of a corporation:
Better freedom and independence in decision making process: Unlike in a corporation, the partners can mutually decide and arrive at a business decision quickly since under a corporation, a business decision requires approval of majority of the members and has to be put at vote.Collective vs Individual taxation. Partnership profits are taxable in the hands of the partners as individual share of profits each partner earns unlike a corporation wherein the corporate body is taxed first and then it's owners and shareholders personally for the income they earn.Partnership losses can be claimed by individuals against their personal income unlike corporate losses which are allowable to a corporation as a whole. Partners can share profits as per their mutually agreed upon profit sharing ratio unlike in case of corporates which take into consideration proportionate capital interests.For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included warranty expense of $6 and $20 in depreciation expense. Two million of warranty costs were incurred, and depreciation deductions in the tax return amounted to $35. In the absence of other temporary or permanent differences, what was Centipede's taxable income currently, assuming a tax rate of 40%?
a. 19.6 million.
b. 27.6 million.
c. 29.2 million.
d. 25.2 million
Answer:
The correct option is B,$27.6 million
Explanation:
In order to compute Centipede Corp's taxable income for the current year,we need to adjust the pre-tax accounting income by adding back estimates of warranty and depreciation expenses,whereas the actual warranty and depreciation deductions allowed by the tax authority are deducted.
Million($)
Pre-tax accounting income 80
add:
estimated warranty expense 6
estimated depreciation expense 20
Total 106
less:
actual warranty cost (2)
actual depreciation deductions (35)
Taxable income 69
Since $69 million is not one of the options,hence the income tax payable is computed thus:
40%*$69 million=$27.6
Two goods, wool socks and shaved ice, have a cross price elasticity of demand equal to 0.4. Given this information, what can you tell about the nature of the relationship between these two goods?
0.4 cross price elasticity of demand means that there is direct effect of change of price of wool socks on the demand of shaved ice but they are not very closely related to each other.
Explanation:
Cross Price elasticity of demand is the concept in Economics which focuses on the effect of change of price of one good leading to the change of the demand of the other good, but in this matter, the other things have to kept the same which is also known as ceteris paribus.
For example when the price of coffee increases, the demand of tea will increase because the people will start preferring to have tea because of the increase in the price of coffee.
As the contestant with the longest winning streak in the history of Jeopardy, Ken Jennings won more than $2.5 million. Suppose he invested $1.6 million in an ordinary annuity that earned 9.6%, compounded monthly. How much would he receive at the end of each month for the next 20 years
Answer:
Total amount = $10906400
He would receive = $ 45443.33 every month
Explanation:
Ken invested $1.6 million at 9.6% for 20 yes compounded monthly.
n = 20*12= 140
t = 20
P= 1600000
R= 9.6% = 0.096
Amount A is equal to
A = p(1+r/n)^(nt)
A =
1600000(1+(0.096/140))^ (140*20)
A =
1600000(1 + (6.857*10^-4))^(2800)
A= 1600000(1.0006857)^2800
A = 1600000*6.8165
A = 10906400
Every month, he will get
10906400/(12*20)
= 10906400/240
=$ 45443.333
Answer: Therefore, he would recieve $15,018.74 at the end of each month.
Explanation:
$1.6 million investment is the present value (PV)
PV = $1,600,000
INTEREST RATE(r) = 9.6% or 0.096 compounded monthly = (0.096÷12) = 0.008
PERIOD(n) = 20 years = (20×12) = 240 months
Ordinary value of annuity:
Annuity = (rate × PV) ÷ (1 - (1 + r)^-240)
Annuity = (0.008 × $1,600,000) ÷ (1 - (1 + 0.008)^-240)
Annuity = ($12,800) ÷ (1 - (1.008)^-240)
Annuity = $12,800 ÷ 0.8522687768
Annuity = $15,018.74
Therefore, he would recieve $15,018.74 at the end of each month.
. Currency options sold through an options exchange contain which of the following? a) a commitment to the owner and are standardized. b) a commitment to the owner and can be tailored to the owner’s desire. c) a right but not a commitment to the owner and can be tailored to the owner’s desire. d) a right but not a commitment to the owner and are standardized.
Answer: a) a commitment to the owner and are standardized.
Explanation:
Futures are generally traded through Exchanges as opposed to Forwards which are not.
Futures are a commitment to the owner to buy or sell an underlying asset and as they are sold at Exchanges, they are standardized to allow for easier trading. The prices that the sellers are to get are certain as the Exchange protects the transaction.
Unlike Forwards that can be tailor made to the specifications of the owner, Futures come as already made and standardized and so are not tailor made. This is to enable as many participants as possible.
This is why option A is correct because Futures contain a commitment to the owner and are standadized as well.
In Business Brilliant, Louis Schiff writes that most millionaires are ____ ; for example, they believe that "it's important in negotiations to exploit the weaknesses in others" to come out on top.
A.EXTROVETED
B. MACHIAVELLIAN
C. CONSCIENTIOUS
D. AUTHORITARIAN
Answer: Machiavellian
Explanation:
In Business Brilliant, Louis Schiff writes that most millionaires are MACHIAVELLIAN; for example, they believe that "it's important in negotiations to exploit the weaknesses in others" to come out on top. Thus, option B is the correct option.
What are Machiavellian beliefs?According to Machiavelli, it is preferable for a ruler to be universally feared rather than deeply loved since the former maintains power via duty and the latter through dread of retribution. In his role as a political theorist, Machiavelli stressed the "necessity" of using brutal force or deception methodically, even the eradication of whole noble families, to prevent any possibility of a challenge to the prince's rule.
Historians frequently point out that Machiavelli exalts instrumentality in the establishment of states, an attitude exemplified by the proverb "The aims justify the means," which is frequently linked to readings of The Prince. According to Machiavelli, a ruler must utilize fraud and deception. For the effective stability of power and the installation of new regimes, violence may be required.
Learn more about Machiavellian beliefs here:
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Devon and Edmond enter into a contract for the closing of a sale of Devon's recording studio. When Edmond's schedule conflicts, he asks Ferdie to perform his duties at the closing. This transfer of dutiesa. a delegation.b. an assignment.c. prohibited.d. a negotiation.
Answer:
Option A; DELEGATION.
Explanation:
Delegation is an administrative process of getting things done by others by giving them responsibility.
Example is a manager asking a subordinate to take over his duties at a meeting. However, the person who delegated the work remains accountable for the outcome of the delegated work.
Delegation simply means empowering a subordinate to get a work done (i.e. a transfer of authority from a superior to a subordinate).
Since Edmond asks Ferdie to perform his duties at closing because of his own conflicting schedule, therefore, this transfer of duties is called DELEGATION.
Answer:
A
Explanation:
Delegation
Delegation is the act of transfering of authority or responsibility from a superior to a subordinate Indeed, delegation is the downward transfer of authority from a superior to a subordinate. Edmond for some reason was unavoidable absent due to schedule conflicts and delegates the work to Ferdie, to perform his duties at the closing
Casey Electronics has a piece of machinery that costs $300,000 and is expected to have a useful life of 6 years or 40,000 hours. Residual value is expected to be $50,000. Using the units-of-production method, what is depreciation expense for the first year assuming it was used 6,000 hours
Solution:
The unit-of-production approach allocates depreciation on the basis of the usage of the commodity.
The first step is to measure depreciation per unit by calculating the sum of less residual value by usable life in units.
For this scenario, we measure ($300,000-$50,000)/40,000 hours
= $6.25 per computer hour as the deprecation cost per device.
That number is compounded by the real use for the year.
In this scenario, 6,000 hours * $6.25 depreciation cost
= $37,500 depreciation bill.
Assuming the staffers' personnel files have data on the Big Five, how could that data be used to inform the decisions about combining areas? What would be the profile of someone who could take on a lot more, versus someone who can only take on a little more?
Answer:
The big five characteristics include agreeableness, conscientiousness, extraversion, neuroticism and open to new experience.
Explanation:
The data captured within the big five characteristics can be used to inform the decisions about combining areas of expertise in job specifications.
The profile of someone who could take on a lot more will include all the characteristics in the big five except neuroticism.
Someone that is neurotic expresses anger easily and is prone to depression. This is a self conscious individual that is easily irritated.
A customer charges a treadmill at Greg’s Sport Shop using a Greg’s Sport Shop credit card. The price is $2,000 and the financing charge is 1.5% per month if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer’s account. The entry to record the finance charge on Greg’s Sport Shop’s books would: Select one: a. Credit Interest Revenue $30 b. Credit Sales $30 c. Debit Accounts Receivable $2,000 d. Debit Accounts Receivable $1.50 e. None of the above
Answer:
c) Credit interest revenue
Explanation:
Financing Charge = Price X Rate
Financing Charge = $2,000 X 1.5% = $30
The accounts receivable will increase by way of debit of an amount of $30.
Interest revenue will increase by way of credit of an amount of $30.
The correct answer is: a. Credit Interest Revenue $30. The correct entry to record the finance charge on Greg’s Sport Shop’s books involves debiting Accounts Receivable and crediting Interest Revenue for $30.
To determine the correct entry to record the finance charge on Greg’s Sport Shop’s books, we need to calculate the finance charge and then identify the correct accounting entries. The treadmill cost $2,000, and the finance charge is 1.5% per month. Therefore, the finance charge is:
Finance Charge = $2,000 x 0.015 = $30
The correct journal entries involve debiting Accounts Receivable and crediting Interest Revenue to record the finance charge added to the customer's account:
Debit Accounts Receivable $30Credit Interest Revenue $30Thus, the correct choice is: a. Credit Interest Revenue $30