Answer:
The correct answer is letter "C": Positive confirmations.
Explanation:
Positive confirmations are audit procedures by which ambiguous information is clarified. It also implies the confirmation of the accuracy of the data provided in the company's books and Financial Statements. By doing so, liabilities, bank accounts, accounts receivables and payables amounts are verified.
Pargo Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 18%, 23%, 23%, and 36%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $43 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 10% higher than the budgeted sales for the first quarter of 2020. Production. Management desires to maintain the ending finished goods inventories at 20% of the next quarter’s budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2021 are 490,000 pounds. Prepare the sales, production, and direct materials budgets by quarters for 2020.
Answer:
Sales Budget = 6840,000 + 8740,000 + 8740,000 + 15480,00 = $ 39800,000
Production Budget, = 490,000+ 230,000 + 256,000 +327,600= 1303600
Purchases Cost Budget = $ 475,0000 + 462, 6000 + 519,1000 + 649,5000 = $2106,2000
Explanation:
Pargo Company
Sales Budget
For the year 2020
QUARTERS
1 2 3 4 TOTAL
18%, 23%, 23%, 36%,
Sales, 180,000 230,000 230,000 360,000
Sale Price $38 $ 38 $ 38 $ 43
Sales Budget 6840,000 8740,000 8740,000 15480,00 $ 39800,000
Pargo Company
Production Budget
For the year 2020
QUARTERS
1 2 3 4 TOTAL
Sales 180,000 230,000 230,000 360,000
+Ending Inventory 46,000 46000 72000 39,600*
-Opening Inventory 264,000* 46000 46000 72000
Production, 490,000 230,000 256,000 327,600 1303600
Working:
The opening inventory is calculated as the production ius already given. 264,000
Sales of 1st quarter 2020 = 180,000
Sales of 1st quarter 2021 = 180,000 + 18,000= 198,000
Ending inventory of 4th quarter of 2020 = 198,000* 20%= 39,600
Pargo Company
Direct Materials Budget
For the year 2020
QUARTERS
1 2 3 4
Units Produced 490,000 230,000 256,000 327,600
Direct materials
Per Unit 2 pounds 2 pounds 2 pounds 2 Pounds
D. Mat Used 980,000 460,000 512,000 655,200
Add Desired
Ending Inv 23,000 25,600 32,700 27,000
Less Beginning
Inventory 528,000* 23,000 25,600 32,700
D. Materials
Purchases 475,000 462, 600 519,100 649,500
Cost per pounds $ 10 $ 10 $ 10 $ 10
Purchases Cost $ 475,0000 462, 6000 519,1000 649,5000 TOTAL $2106,2000
The beginning inventory is calculated from the production budget opening inventory.
Let S represent the amount of steel produced (in tons). Steel production is related to the amount of labor used (L) and the amount of capital used (C) by the following function: S = 15 L0.2 C 0.8 In this formula L represents the units of labor input and C the units of capital input. Each unit of labor costs $50, and each unit of capital costs $100. (a) Formulate an optimization problem that will determine how much labor and capital are needed in order to produce 50,000 tons of steel at minimum cost. Min L + C L0.2 C 0.8 L, C (b) Solve the optimization problem you formulated in part a. Hint: When using Excel Solver, start with an initial L > 0 and C > 0. If required, round your answers to two decimal places. L = $ C = $ Cost = $
Solution
S = 15 x [tex]L^{0.2}[/tex] x [tex]C^{0.8}[/tex]
Total cost, T = wL + rC = 50L + 100C
Total revenue, R = Output price (P) x Quantity = P x 15 x [tex]L^{0.2}[/tex]x [tex]C^{0.8}[/tex]
(a)
Optimization problem will be:
Max R = P x 15 x [tex]L^{0.2}[/tex] x [tex]C^{0.8}[/tex]
Subject to T = 50L + 100C
(b) When S = 50,000
Cost is minimized when (MPL / MPC) = w / r
MPL = [tex]\partial[/tex]R / [tex]\partial[/tex]L = P x 15 x 0.2 x [tex](C / L)^{0.8}[/tex] = P x 3 x [tex](C / L)^{0.8}[/tex]
MPC = [tex]\partial[/tex]R / [tex]\partial[/tex]C = P x 15 x 0.8 x [tex](L / C)^{0.2}[/tex] = P x 12 x [tex](L / C)^{0.2}[/tex]
MPL / MPC = (3/12) x (C / L) = 50/100
C / 4L = 1/2
4L = 2C
2L = C
Substituting in production function,
15 x [tex]L^{0.2}[/tex] x [tex]C^{0.8}[/tex] = S
15 x[tex]L^{0.2}[/tex] x [tex](2L)^{0.8}[/tex] = 50,000
15 x [tex]2^{0.8}[/tex] x [tex]L^{0.2}[/tex] x [tex]L^{0.8}[/tex] = 50,000
L = 50,000 / (15 x 20.8)
L = 1,914.50
C = 2L = 3,829.00
Total cost ($) = 50 x 1,914.50 + 100 x 3,829.00 = 95,725.00 + 382,900 = 478,625.00
Note: This optimization problem can be solved without using Solver too, as shown here.
Final answer:
To minimize production costs while producing 50,000 tons of steel, formulate an optimization problem with the cost function 50L + 100C and production function S = 15L^0.2C^0.8 as the constraint. Solve using Excel Solver with initial positive values for L and C.
Explanation:
To determine how much labor (L) and capital (C) are needed to produce 50,000 tons of steel at the minimum cost, we need to formulate and solve an optimization problem. Given that each unit of labor costs $50 and each unit of capital costs $100, we aim to minimize the cost function subject to the production function constraint S = 15L0.2C0.8. The cost function is the sum of the costs of labor and capital, which is 50L + 100C. The constraint in this optimization problem is that the production function must equal 50,000 tons.
To solve the optimization problem, one might use Excel Solver starting with initial positive values of L and C. After setting up and solving the problem with Solver, we would get the optimal values of L and C that minimize the cost. However, since specifics such as Solver setup and actual calculations are not provided in the context, the answer to part b cannot be given here. Remember that in a real scenario, it would be crucial to ensure Excel Solver is set to respect the constraint that S equals 50,000.
Suppose an inventor is interested in the proportion of local consumers who would be interested in purchasing her new product. If she samples local residents at random and tests hypotheses regarding p, the population proportion, what should she do to reduce her risk of making a Type II error?
a. Increase the number of local consumers she will sample
b. Decrease the number of local consumers she will sample
c. Make sure her sample of local consumers is exactly 10
d. Decrease the significance level
Answer:
The answer is option A) To reduce her risk of making a Type II error, she should Increase the number of local consumers she will sample
Explanation:
A type II error is sometimes called a beta error because it confirms an idea that should have been rejected, claiming the two observances are the same, even though they are different. A type II error is essentially a false positive.
A type II error can be reduced by making more stringent criteria for rejecting a null hypothesis such as:
Increasing the the sample size used in the Test: this is a strategy used to increase the power of the test and reduce the error to a considerable amount.Increasing the significance level: choosing a higher level of significance is important for double checking and which increases accuracy.The correct option to reduce the risk of making a Type II error is a. Increase the number of local consumers she will sample.
To understand why increasing the sample size reduces the risk of a Type II error, one must consider the factors that influence the probability of committing a Type II error (denoted by β). These factors include:
1. The sample size (n): A larger sample size provides more information about the population, which reduces the variability of the sample statistic. This, in turn, increases the power of the test (1 - β), thereby reducing the probability of a Type II error.
2. The significance level (α): A lower significance level means that the test requires stronger evidence to reject the null hypothesis, which can increase the probability of a Type II error. Conversely, increasing the significance level decreases the probability of a Type II error but at the cost of increasing the probability of a Type I error.
3. The effect size (the difference between the null hypothesis and the alternative hypothesis): A larger effect size makes it easier to detect a difference, thus reducing the probability of a Type II error.
4. The variability in the population (Iƒ): Less variability in the population makes it easier to detect a difference, thus reducing the probability of a Type II error.
Given these factors, the inventor can control the sample size and the significance level. Decreasing the significance level (option d) would actually increase the risk of a Type II error, which is the opposite of what the inventor wants. Making sure her sample size is exactly 10 (option c) does not necessarily reduce the risk of a Type II error; it could be too small to detect a meaningful difference. Decreasing the number of local consumers she will sample (option b) would definitely increase the risk of a Type II error.
Therefore, the best course of action for the inventor to reduce the risk of making a Type II error is to increase the number of local consumers she samples (option a). This will increase the power of the test, making it more likely to detect a true effect if one exists.
Selected information from Peridot Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 31 Reacquired Peridot common stock 57 Proceeds from sale of land 92 Gain from the sale of land 51 Investment revenue received 74 Cash paid to acquire office equipment 87 In its statement of cash flows, Peridot should report net cash outflows from investing activities of:
Answer:
Peridot should report net cash outflows from investing activities of $26 million
Explanation:
Prepare a Cash flow from Investing Activity Section as follows :
Cash flow from Investing Activity
($ in millions)
Purchase of Machinery (31)
Proceeds from Sale of land 92
Purchase of Office Equipment (87)
Net Cash Flow from Investing Activities (26)
The Section only includes Activities relating to Capital Expenditure
Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,500, whereas the gas-powered truck will cost $17,960. The cost of capital that applies to both investments is 13%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,860 per year and those for the gas-powered truck will be $4,600 per year. Annual net cash flows include depreciation expenses.
Calculate the NPV andIRR for each type of truck, and decide which to recommend.
Answer:
The fact that electric-powered forklift truck has a higher NPV and IRR means that it is more profitable and more value-adding, hence, the electric-powered forklift truck is highly recommended
Explanation:
The net present value of a project is the present value of its future cash flows discounted at the required rate of return of 13%.
The present value of each future cash flow can be determined as the future value multiplied by the discount factor
PV=FV*1/(1+r)^N
which can be rewritten thus:
PV=FV/(1+r)^N
FV=future cash flow
r=discount rate=13%
N=the year of cash flow(1 for year 1 cash flow,2 for year 2 cash flow and so on)
gas-powered forklift truck:
NPV=$4,600/(1+13%)^1+$4,600/(1+13%)^2+$4,600/(1+13%)^3+$4,600/(1+13%)^4+$4,600/(1+13%)^5+$4,600/(1+13%)^6-$17,960
NPV=$428.73
electric-powered forklift truck:
NPV=$6,860/(1+13%)^1+$6,860/(1+13%)^2+$6,860/(1+13%)^3+$6,860/(1+13%)^4+$6,860/(1+13%)^5+$6,860/(1+13%)^6-$21,500
NPV=$5,923.19
The internal rate of return is the discount rate at which the the present value of future cash flows is the same as the initial investment outlay, in essence, at IRR,NPV is zero
The IRR can be determined using excel IRR as shown below:
=IRR(values)
the values are the cash flows beginning with initial investment(negative cash flow) followed by future cash flows in subsequent years
Find attached
The NPV for the electric-powered truck is $12,285.04 with an IRR of 23.55%. The NPV for the gas-powered truck is $3,692.33 with an IRR of 18.20%. Therefore, the electric-powered truck is recommended.
To solve this problem, we need to calculate both the Net Present Value (NPV) and the Internal Rate of Return (IRR) for the electric-powered and gas-powered trucks.
Electric-Powered Truck:
Initial Cost: $21,500Annual Net Cash Flow: $6,860Life: 6 yearsCost of Capital: 13%Using the NPV formula:
NPV = Sum of (Cash Flow / (1 + discount rate)^year) - Initial Investment
NPV (Electric) = [tex]6,860 / (1 + 0.13)^1 + 6,860 / (1 + 0.13)^2 + 6,860 / (1 + 0.13)^3 + 6,860 / (1 + 0.13)^4 + 6,860 / (1 + 0.13)^5 + 6,860 / (1 + 0.13)^6 - 21,500[/tex]
= $12,285.04
Using a financial calculator, the IRR can be found as:
IRR (Electric) = 23.55%
Gas-Powered Truck:
Initial Cost: $17,960Annual Net Cash Flow: $4,600Life: 6 yearsCost of Capital: 13%Using the NPV formula:
NPV (Gas) = [tex]4,600 / (1 + 0.13)^1 + 4,600 / (1 + 0.13)^2 + 4,600 / (1 + 0.13)^3 + 4,600 / (1 + 0.13)^4 + 4,600 / (1 + 0.13)^5 + 4,600 / (1 + 0.13)^6 - 17,960[/tex]
= $3,692.33
Using a financial calculator, the IRR can be found as:
IRR (Gas) = 18.20%
Based on the NPV and IRR calculations, the electric-powered truck is recommended because it has a higher NPV and IRR.
Sep. 1: Sold a building that cost $ 540 comma 000 (accumulated depreciation of $ 275 comma 000 through December 31 of the preceding year). Guilda Bell Associates received $ 340 comma 000 cash from the sale of the building. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $ 75 comma 000. Before we record the sale of the building, we must record depreciation on the building through September 1, 2018.
Answer:
$8,718.75
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
= (540,000 - 75,000)/40
= $11,625
Depreciation between 1 January and 1 September 2018 (9 months)
= 9/12 * $11,625
= $8718.75
Eaton Company issued $600,000 of eight percent, 20‑year bonds at 106 on January 1, 2013. Interest is payable semiannually on July 1 and January 1. Through January 1, 2019, Eaton amortized $5,000 of the bond premium. On January 1, 2019, Eaton retired the bonds at 103 (after making the interest payment on that date). Prepare the journal entry to record the bond retirement on January 1, 2019.
Answer:
Bonds payable $600,000
Premium on bonds payable $31,000
Gain on bonds retirement $13,000
To Cash $618,000
(Being the redemption of bonds is recorded)
Explanation:
The journal entry is shown below:
On Jan 1, 2019
Bonds payable $600,000
Premium on bonds payable $31,000
Gain on bonds retirement $13,000
To Cash $618,000
(Being the redemption of bonds is recorded)
The computation is shown below:
Issue price of bonds (600000 ÷ 100 × 106) $636,000
Less: Face value $600,000
Premium on bonds $36,000
Less: Premium amortized till 2019 $5,000
Amortized premium $31,000
Now
Redemption price ($600,000 ÷ 100 × 103) $618,000
For recording this we debited the bond payable , premium and gains on bonds retirement and credited the cash as it reduced the liabilities plus the issued amount exceeded than the face value after considering the amortized same so the same is transferred to premium and the remaining amount is debited to gains on bond retirement.
Eaton Company recorded the retirement of their bonds by debiting Bonds Payable for $600,000, debiting Bond Premium for $1,000, debiting Loss on Bond Retirement for $17,000, and crediting Cash for $618,000.
Explanation:To record the retirement of the bonds on January 1, 2019, you will first need to understand the bond's carrying amount. The carrying amount is the bond's face value plus the unamortized bond premium. In this case, the face value of the bonds is $600,000 and the unamortized premium is $6,000- $5,000 = $1,000, making the carrying amount $601,000. In retiring the bonds, Eaton paid 103% of the bond's face value, or $618,000. The loss on retirement is the difference between these amounts, or $17,000. So the company's journal entry to record this transaction would be to debit (increase) Bonds Payable for $600,000, debit Bond Premium for $1,000, debit Loss on Bond Retirement for $17,000, and credit (decrease) Cash for $618,000.
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Gall Manufacturing sells a product for $50 per unit. The fixed costs are $840,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $200,000 and variable costs will be 50% of the selling price. The new break-even point in units is:
Answer:
The new break even point in units is 41600 units.
Explanation:
The break even point in units is the number of units that provide enough revenue to meet total costs and there is no profit and no loss as the total revenue equals total cost. The break even point in units is calculated as follows,
Break even in units = Fixed costs / Contribution margin per unit
Where,
Contribution margin per unit = Selling price per unit - Variable cost per unit
The, new total fixed costs will be,
New fixed cost = 840000 + 200000 = $1040000
The new contribution margin per unit = 50 - (50 * 0.5) = $25 per unit
The new break even in units = 1040000 / 25 = 41600 units
Use the following information from separate companies a through d: Net Income (Loss) Interest Expense Income Taxes a. $ 136,000 $ 55,760 $ 34,000 b. 130,600 50,934 47,016 c. 115,600 45,084 48,552 d. 139,100 6,955 66,768 Compute times interest earned. Which company indicates the strongest ability to pay interest expense as it comes due?
Answer:
Company a. 4.05
Company b. 4.49
Company c. 4.64
Company d. 30.60
From the above, Company d. has the strongest ability to pay interest expense as it comes due with 30 times.
Explanation:
Times interest earned = Income before interest and tax ÷ Interest expenses
Company a. Times interest earned = ($136,000 + $55,760 + $34,000) ÷ $55,760 = 4.05 times
Company b. Times interest earned = ($130,600 + $50,934 + $47,016) ÷ $50,934 = 4.49 times
Company c. Times interest earned = ($115,600 + $45,084 + $48,552) ÷ $45,084 = 4.64 times
Company d. Times interest earned = ($139,100 + $6,955 + $66,768) ÷ $6,955 = 30.60 times
From the above, Company d. has the strongest ability to pay interest expense as it comes due with 30 times.
Alliance Company budgets production of 35,000 units in January and 39,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $3.50 per pound. Each month’s ending raw materials inventory should equal 30% of the following month’s budgeted materials. The January 1 inventory for this material is 42,000 pounds. What is the budgeted materials cost for January?
Answer:
$506,800
Explanation:
The calculation of budgeted materials cost is shown below:-
For computing the budgeted materials cost first we need to find out the total materials for production and materials to be purchased which is here below:-
Total materials for production = Budgeted production × Pounds of raw material per unit
= 35,000 × 4
= 140,000
Materials to be purchased = Total materials for production + Ending raw materials inventory - January 1 inventory
= 140,000 + (39,000 × 4 × 30%) - 42,000
= 140,000 + 46,800 - 42,000
= 186,800 - 42,000
= 144,800
Budgeted materials cost for January = Materials to be purchased × Cost per pound
= 144,800 × $3.50
= $506,800
Answer:
$506,800
Explanation:
Material cost is the cost of raw material used in the production for the period.
First we need to calculate the purchases in the January.
January
+Production (35,000 units x 4 pounds) 140,000 pounds
-Beginning Inventory 42,000 pound
+Ending Inventory 46,800 pounds
(39,000 x 30% x 4 pounds)
Material used 144,800 pounds
Cost of Material = Material used x Rate of material
Cost of Material = 144,800 x $3.50 per pound
Cost of Material = $506,800
Alfalfa Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories:
Product Cost Market
A $110,000 $120,000
B 80,000 76,000
C 155,000 162,000
If Alfalfa applies the LCM basis, the value of the inventory reported on the balance sheet would be:
a. $341,000.
b. $345,000.
c. $358,000.
d. $362,000.
Answer:
a. $341,000.
Explanation:
As we know that the inventory should be valued at cost or market value whichever is lower and the same is shown below:
Product Cost Market Lower value of cost or market
A $110,000 $120,000 $110,000
B $80,000 $76,000 $76,000
C $155,000 $162,000 $155,000
Value of the inventory $341,000
Which one of the following statements about the carbon, phosphorus, and nitrogen cycles is true? Soil bacteria drive the phosphorus cycle. The major source of nitrogen used by plants in photosynthesis is the atmosphere. The major source of carbon used by plants is the carbonate rocks and soil. Phosphorus has no atmospheric component.
Answer:
Phosphorus has no atmospheric component.
Explanation:
The phosphorus cycle is a biochemical cycle that states the movement if the phosphorus from the lithos and hydros and the biosphere. Unlike other cycles, the atmosphere does not play any role in the movement due to the phosphorus is a found in usually sold forms. Through the phosphoric gas occurs is specific locations only, phosphorus is found only in small quantities as limited nutrient from the aquatic system.Does enter the atmosphere when the dust is dissolved in the rainwater like the sea spray but mostly on land, soil and rocks.Final answer:
The true statement about the cycles is that phosphorus has no atmospheric component. Soil bacteria mineralize phosphorus for plant use. Plants obtain nitrogen as nitrates or ammonium ions from soil, fixed by bacteria, and use atmospheric carbon dioxide in photosynthesis.
Explanation:
The correct statement about the carbon, phosphorus, and nitrogen cycles is that phosphorus has no atmospheric component. Contrary to other biogeochemical cycles, the phosphorus cycle does not include a gas phase and operates mainly through lithosphere, hydrosphere, and biosphere.
Soil bacteria are indeed crucial for the phosphorus cycle, but primarily through their role in making phosphorus available to plants by breaking down organic matter and mineralizing inorganic phosphorus.
The major source of nitrogen for plants is not directly the atmosphere; instead, plants utilize nitrogen in the form of nitrates and ammonium ions that are available in soil and water.
These forms of nitrogen are the result of nitrogen fixation by bacteria, which convert atmospheric nitrogen (N₂) into a form that plants can use. The statement about plants using nitrogen from the atmosphere in photosynthesis is thus misleading—plants use nitrogen fixed by bacteria into nitrates or ammonium ions.
As for carbon, the major source used by plants is indeed carbon dioxide from the atmosphere, which they convert into organic compounds through the process of photosynthesis, not from carbonate rocks and soil. These rocks can act as carbon reservoirs, but are not the primary carbon source for plant intake.
Daniel believes that a chemical company is responsible for contaminating some land that he owns. He files suit against the chemical company. Rather than have the case go to court, the chemical company’s attorney suggests arbitration to resolve the legal dispute. Explain how arbitration would work in this case.
Answer:
Arbitration can work instead of the suit filed by Daniel against a chemical company is responsible for contaminating some land that he owns if they give him a worthy compensation.
Explanation:
Arbitration means to settle out of court.
This method is used in resolving disputes outside of court to avoid certain legal documents that might haunt the company in future.
During Arbitration, parties refer their disputes to an arbitrator who reviews the evidence, listens to the parties, and then makes a decision that is favorable to both parties. More like a win-win.
Arbitration clauses can be mandatory or voluntary, and the arbitrator's decision may be binding or nonbinding but for arbitration to work, the parties must arrive at a mutual compromise.
ncome Statements under Absorption Costing and Variable Costing Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: Sales (4,000 units) $2,600,000 Production costs (4,350 units): Direct materials $1,218,000 Direct labor 522,000 Variable factory overhead 87,000 Fixed factory overhead 130,500 1,957,500 Selling and administrative expenses: Variable selling and administrative expenses $60,000 Fixed selling and administrative expenses 25,000 85,000 a. Prepare an income statement according to the absorption costing conce
Answer:
Income statement according to the absorption costing
Sales 2,600,000
Less Cost of Goods Sold
Opening Stock 0
Add Cost of Goods Manufactured
Direct materials 1,218,000
Direct labor 522,000
Variable factory overhead 87,000
Fixed factory overhead 130,500
Less Closing Stock (1,957,500/4,350)×350 (157,500) 1,800,000
Gross Profit 800,000
Less Period Costs :
Selling and administrative expenses:
Variable selling and administrative expenses (60,000)
Fixed selling and administrative expenses (25,000)
Net Income 715,000
Explanation:
Product/Manufacturing Cost - Absorption Costing = Direct Materials + Direct Labor + Variable Overheads + Fixed Overheads
Period Cost - Absorption Costing = All Non - Manufacturing Costs
Final answer:
The student's question is about preparing an income statement using absorption costing for a company's operations over the month of July. The provided financial data allows for the calculation of sales, cost of goods sold, and selling and administrative expenses to derive the operating income.
Explanation:
The student is asking for an income statement prepared under the absorption costing method for Gallatin County Motors Inc. for the month of July. Absorption costing includes all manufacturing costs in the cost of a product, meaning both variable and fixed manufacturing overhead are absorbed by the produced units. The income statement should reflect the cost of goods sold based on the number of units sold and should also account for the inventory at the end of the period. The student provided the necessary financial data to calculate this.
Here is a simplified representation of the income statement:
Sales (4,000 units x selling price)
Less: Cost of Goods Sold (costs assigned to units sold)
Gross Margin (Sales - Cost of Goods Sold)
Less: Selling and Administrative Expenses (both variable and fixed)
Operating Income (Gross Margin - Selling and Administrative Expenses)
On March 1, 2019, Baltimore Company's beginning work in process inventory had 9,500 units. This is its only production department. Beginning WIP units were 50% complete as to conversion costs. Baltimore introduces direct materials at the beginning of the production process. During March, a total of 25,200 units were started and the ending WIP inventory had 8,600 units which were 40% complete as to conversion costs. Baltimore uses the weighted average method. Use this information to determine for March 2019 the equivalent units of production for conversion costs. (Round answer to the nearest whole number of units)
Answer:
Total Equivalent Units direct materials 25200
Total Equivalent Units conversion costs 20,000
Explanation:
Baltimore Company
Beginning work in process inventory 9,500 units
Units Started 25,200 units
Less Ending WIP inventory 8,600 units
Units Finished 16,600
Particulars Units % of Completion Equivalent Units
Mat. Conversion Costs Mat. Conversion Costs
Ending W. I.P, 8600 100 (40%) 8,600 3440
Completed 16,600 100 100 16,600 16,600
Total Equivalent Units 25200 20,000
First we find the Completed Units by subtracting the ending work in process from the units started. The Equivalents units can be calculated by either adding the beginning work in process and units started or by adding Ending Wip and completed units. By doing the both calculations we get the same number of equivalent units.
Light Me Up Lamps has variable expenses of 40% of sales and monthly fixed expenses of $240,000. The monthly target operating income is $60,000.
What is the monthly margin of safety as a percentage of target sales in dollars?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Light Me Up Lamps has variable expenses of 40% of sales and monthly fixed expenses of $240,000. The monthly target operating income is $60,000.
We weren't provided with the selling price and unitary variable cost. Neither with the actual sales. But, I will provide the formulas and a small example to guide an answer.
Using the percentage of variable cost per sale, we can calculate the contribution margin ratio. The contribution margin ratio is the percentage of sales available to cover for fixed costs.
Contribution margin ratio= (1 -0.4=/1= 0.6
Now, we can calculate the break-even point in dollars with the desired profit:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= (240,000 + 60,000) / 0.6
Break-even point (dollars)= $500,000
Let's suppose actual sales of $750,000.
Margin of safety= (current sales level - break-even point)
Margin of safety= (750,000 - 500,000)
Margin of safety= $250,000
Margin of safety ratio= (current sales level - break-even point)/current sales level
Margin of safety ratio= 250,000/750,000= 0.33= 33%
The monthly margin of safety as a percentage of target sales in dollars for Light Me Up Lamps is 20%. This calculation involves finding the contribution margin ratio, the break-even sales, the target sales and subsequently the margin of safety.
Explanation:To calculate the monthly margin of safety as a percentage of target sales in dollars, we must first find the contribution margin ratio and the break-even sales.
First, since it's given that the company's variable expenses are 40% of sales, its contribution margin ratio becomes 60% (because 100% - 40% = 60%).
Secondly, the company's break-even sales are calculated by dividing its fixed expenses by the contribution margin ratio. Hence, $240,000 / 0.6 = $400,000.
Thirdly, we need to determine the company's target sales which is given by the equation: Fixed costs + target operating income divided by contribution margin ratio. This results in $240,000 + $60,000) / 0.6 = $500,000.
Finally, the margin of safety is calculated by subtracting break-even sales from target sales, then dividing the result by target sales and multiplying by 100% to turn it into a percentage. Hence, ($500,000 - $400,000) / $500,000 * 100% = 20%.
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VelSad is contemplating the acquisition of Po, Inc. The values of the two companies as separate entities are $32 million and $16 million, respectively. VelSad estimates that by combining the two companies, it will reduce marketing and administrative costs by $560,000 per year in perpetuity. VelSad can either pay $20 million cash for Po or offer Po a 44% holding in VelSad. The opportunity cost of capital is 10%.What is the cost of the stock offer?
Answer:
7.58m
Explanation:
The VelSad is considering to acquire Po, Inc. by offer of 20 million cash or either 44% holding. The cost of acquisition refers to all cost incurred by a company to acquire another company. The benefit VelSad can get after acquiring Po, Inc is that it can save marketing and administrative cost by $560,000 every year. The cost of stock offer is 7.58 million. This is calculated by taking 44% of VelSad value and then discounting it at cost of capital which is 10%.
Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has ten separate, less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $50 million in net income. The probability of the FDA approving a drug is 50%. What is the expected payoff for Little Cure's ten drugs? (2 points)
A) $250 million
B) $50 million
C) $1 billion
D) $0
Answer:
Correct option is A.
$250 million
Explanation:
Probability of approval for each drug=50% and if approved, net income from each for Little Cure=$50 million.
So, expected payoff from ten drugs of Little Cure=50*0.5*10=$250 million
Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2013. The notes included:Note A: Dated 5/31/2013, principal of $ 132,000and interest due 3/31/2014.Note B: Dated 7/1/2013, principal of $220,000 and interest at 8% annually, due on 4/1/2014.Frankenstein had accrued interest receivable from these notes of $16,000 in its 12/31/2013 balance sheet. What is the annual interest rate on Note A?a) 8.00%b) 9.35%c) 9.95%d) 9.65%
Answer:
Option B ⇒ The annual interest rate on Note A is 9.35% .
Explanation:
Note B has an accrued interest for six months during 2013: $220,000 x .08 x 6/12 = $8,800.
The remainder of the accrued interest, $7,200 ($16,000 - $8,800) was from Note A, which was held for seven months in 2013.
Therefore, we have the following: $132,000 x annual interest rate x 7/12 = $7,200.
Thus, the annual interest rate on Note A would be ($7,200/132,000) x 12/7 = 9.35%.
Option B ⇒ 9.35% is the correct answer.
Time horizon and elasticity The time horizon of the demand curve is one determinant of the price elasticity of demand. If the price of gasoline is relatively high for a long time, consumers are more likely to buy fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is ____ elastic in the long run than in the short run.
a. more
b. no more nor less
c. less
Answer: a. More
Explanation:
The demand for gasoline is more elastic in the long run than in the short run.
Price Elasticity is defined as the degree by which demand changes as a result of a change in price. If gasoline prices were to change today, people would stll buy them because they still need gasoline in their every day lives showing that gasoline is less elastic in the short run.
However, if prices remain high even in the long run, people start buying more efficient cars and taking public transport which means they will demand less gasoline because they need less. This drop in demand in the long run because of a high price shows more elascticity in the long run.
Avril Company makes collections on sales according to the following schedule: 30% in the month of sale 66% in the month following sale 4% in the second month following sale The following sales have been are expected: Expected Sales January$130,000 February$150,000 March$140,000 Budgeted cash collections in March should be budgeted to be:
Answer:
Budgeted cash collections for March are $146200
Explanation:
Following the terms of the collection schedule, the budgeted cash collections for the month of March is expected to be as follows,
4% amount of January sales that is 0.04 * 130000 = $5200
66% amount of February's sales that is 0.66 * 150000 = $99000
30% amount of March's sales that is 0.3 * 140000 = $42000
Thus, the total budgeted cash collection for March will be,
Budgeted cash collection-March = 5200 + 99000 + 42000
Budgeted cash collections- March = 146200
Is Starbucks bucking the trend of other food-service stores, or is something else going on?
Answer:
its it's something else
Accrued Vacation Pay A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $106,800. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay.
Answer:
On Jan 31
Vacation pay expense Dr $8,900
To vacation payable $8,900
(Being the vacation expense is recorded)
Explanation:
The journal entry is as follows
On Jan 31
Vacation pay expense Dr $8,900
To vacation payable $8,900
(Being the vacation expense is recorded)
The computation is shown below:
= Estimated amount of the current year's vacation pay ÷ total number of months in a year
= $106,800 ÷ 12 months
= $8,900
For recording this transaction we debited the vacation expense as it increased the expenses while at the same time it also increased the liabilities so the vacation payable is credited
The high-low method calculates the total fixed cost as the: Group of answer choices
a. difference between the unit variable cost and the unit total cost
b. change in activity level divided by the change in cost for two points
c. difference between total variable costs and total costs at a particular activity level
d. change in cost divided by the change in activity level for two points
Answer:
c. difference between total variable costs and total costs at a particular activity level
Explanation:
The high low method consists of calculating costs on the basis of highest & lowest activity & comparing their corresponding total costs.
Variable cost per unit is found by : change in cost divided by the change in activity level for two points
Variable Cost per unit = Highest activity cost - Lowest activity cost
Highest activity units - lowest activity units
Fixed Cost is thereafter calculated by subtracting Total Variable Costs from Total Cost
Fixed Cost = Highest Activity Total Cost - [ (Variable cost per unit) x (highest activity units)
Fixed Cost = Lowest Activity Cost - [ (Variable cost per unit) x (lowest activity units)]
Final answer:
The high-low method calculates total fixed costs by finding the change in cost divided by the change in activity level for two points, helping in separating fixed and variable costs for better financial planning.
Explanation:
The high-low method calculates the total fixed cost as the d. change in cost divided by the change in activity level for two points. This method is used in cost accounting to separate the fixed and variable components of mixed costs. The high-low method involves taking the highest and lowest activity levels and comparing the total costs at each level to determine variable costs per unit. Once the variable cost per unit is found, it can be used to calculate the total fixed costs. Specifically, the total fixed cost is calculated by subtracting the total variable cost at a certain activity level from the total cost at that activity level.
Understanding how to calculate average fixed cost, average variable cost, and average total cost is crucial for businesses to effectively manage and predict costs. These calculations help businesses in pricing strategies, budgeting, and financial planning to ensure profitability.
Each business day, on average, a company writes checks totaling $12,900 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $23,900. The cash from the payments is available to the firm after two days.
Calculate the company’s disbursement float, collection float, and net float
Answer:
A.Disbursement float: $51,600
Collection float:–$47,800
Net float $27,700
B.New collection float -23,900
New net float $27,700
Explanation:
A. The disbursement float can be defined as the average monthly checks written times the average number of days for the checks to clear.
Disbursement float = 4($12,900)
Disbursement float = $51,600
The collection float can be seen as the average monthly checks received times the average number of days for the checks to clear.
Collection float = 2(–$23,900)
Collection float = –$47,800
The net float can be defined as the disbursement float plus the collection float, so:
Net float = $51,600 – $47,800
Net float = $3,800
B. New collection float will be:
Collection float = 1(–$23,900)
Collection float = –$23,900
And the new net float will be:
Net float = $51,600 – 23,900
Net float = $27,700
You are given the following probability distribution of returns for stock IN A probability of 2 that the return will be 12 a probability of 35 that the return will be 18 a probability of 3 that the return will be 10 and a probability of 15 that the return will be 10 What is the expected return of this stock
Correct Question
You are given the following probability distribution of returns for stock IN A probability of 0.2 that the return will be 12 a probability of 0.35 that the return will be 18 a probability of 0.3 that the return will be 10 and a probability of 0.15 that the return will be 10 What is the expected return of this stock
Answer:
expected return of this stock = 13.2%
Explanation:
The expected rate of return is the weighted average of all the possible returns associated with an investment decision. The returns are weighted using the probability associated with their outcomes.
Expected return = WaRa + Wb+Rb + Wn+Rn
W- weight of the outcome, R - return of the outcome
=(0.2× 12%) + (0.35× 18%) + (0.30×10%) + (0.15 × 10%)
= 13.2%
A partially completed schedule of the company’s total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given below. Complete the schedule of the company’s total and unit costs. (Round the per unit variable cost and fixed cost to 2 decimal places.)
Answer:
The below is missing from the question:
Units Produced & Sold
30,000 40,000 50,000
Total Costs
Variable Costs $153700 ? ?
Fixed Costs 370000 ? ?
Total Costs $523700 ? ?
Cost per Unit
Variable Cost ? ? ?
Fixed Cost ? ? ?
Total Unit per Cost ? ? ?
2.
Assume that the company produces and sells 43,000 units during the year at a selling price of $8.97 per unit. Prepare a contribution format income statement for the year.
Harris Company
Contribution Format Income Statement
Sales ?
Variable Expenses ?
Contribution Margin ?
Fixed Expense ?
Net Operating Income ?
This question is better answered using excel file.hence find attached.
Explanation:
Points to note:
Variable cost per unit $5.12
Hence total variable cost at each level of output, is that level of output multiplied by $5.12
Total fixed costs remain the same over the different level of output,however the higher the level of output the lower the fixed cost per unit as the same total fixed cost is absorbed by more output
Better Corp. (BC) began operations on January 1, Year 1. During Year 1, BC experienced the following accounting events: 1. Acquired $7,000 cash from the issue of common stock. 2. Borrowed $12,000 cash from the State Bank. 3. Collected $47000 cash as a result of providing services to customers. 4. Pald $30,000 for operating expenses 5. Paid an $8,000 cash dividend to the stockholders. 6. Paid $20,000 cash to purchase land. Required a. Record the events in an accounting equation like the one shown next. Record the ined Earnings column. Provide the appropriate titles for these accounts in the last column of the table. The first event is shown amounts of revenue, expense, and dividends in as an example. (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Accounts Titles for Retained Earnings") BETTER CORP. Accounting Equation for Year 1 Assets Stockholders Equity Event Cash Land Notes Payable + Common Stock : + : Retained Account Tities for = Earnings R Beg. Bai. O NA 1. Issued stock 2. Borrowed Loan 3. Provided Service 4. Paid operating expenses 5. Paid dividend 6. Land purchase < Prev 80f 8 Next
Answer:
Better corp
Cash balance is $8,000
+
Land balance is $20,000
=
Notes payable is $12,000
+
Common stocks is $7,000
+
Retained Earnings is $9,000
Explanation:
Refer to the attached file for proper presentation
Better Corp. (BC)
a. Accounting EquationAssets = Liabilities + Equity
1. Cash $7,000 Common stock $7,000
2. Cash $12,000 Bank loan payable $12,000
3. Cash $47,000 Service Revenue $47,000
4. Cash ($30,000) Op. expenses ($30,000)
5. Cash ($8,000) Cash dividend ($8,000)
6. Land $20,000 Cash ($20,000)
Assets $28,000 = Liabilities $12,000 + Equity $16,000
b. December 31, Year 1 Balances:Total assets = $28,000
Total liabilities = $12,000
Stockholders' equity = $16,000
Balance Sheet as of December 31, Year 1
Assets:
Cash $8,000
Land $20,000
Total assets $28,000
Liabilities:
Bank loan $12,000
Equity:
Common stock $7,000
R/Earnings 9,000
Total equity $16,000
Liabilities and
Equity $28,000
c. January 1, Year 2 Balances:Total assets = $28,000
Total liabilities = $12,000
Total equity = $16,000
d. When The Land will be shown on the December 31, Year balance sheet at $20,000. The reason is that this is the acquisition cost and the land is not held for trading (no information provided).
Explanation:
a) Data and Analysis based on the Accounting Equation:
1. Cash $7,000 Common stock $7,000
2. Cash $12,000 Bank loan payable $12,000
3. Cash $47,000 Service Revenue $47,000
4. Cash ($30,000) Operating expenses ($30,000)
5. Cash ($8,000) Cash dividend ($8,000)
6. Land $20,000 Cash ($20,000)
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The credit that is created when a supplier sells goods and services on an account with extended payment terms is called . Garcia Assemblers Corporation is a manufacturing company. Garcia’s financial managers use many sources of financing for the company’s annual borrowings, which exceed $100 million. Garcia’s credit rating is excellent. At the moment, the managers are looking to fund a $5 million payroll by issuing a note with a 30-day maturity. What type of financing is this? Trade credit Accrual Commercial paper Bank loans
Answer:
1. The credit that is created when a supplier sells goods and services on an account with extended payment terms is called Trade credit.
2. The type of financing practiced by Garcia Assemblers Corporation is called Commercial paper.
Explanation:
Trade credit is the type of credit wherein a supplier sells goods and services with extended payment term. There is no immediate exchange of money.
Commercial paper is a short-term debt instrument mostly used by large corporations to finance payrolls and other short-term liabilities. It is unsecured as it is mostly issued without collateral. This method of financing is used by firms with good debt ratings. The denominations of the commercial paper is also usually high. Garcia Assemblers Corporation fit the description of a firm with high debt ratings using commercial paper to finance a high payroll.
Answer:
The correct answers are :
1.Trade credit
2. Commercial paper
Explanation:
In a bid to grow business and entice customers ,suppliers sell merchandise their customers with an agreement to receive payment at a later date,this is effectively funding the customers' business since a financial institution would have charged interest on such finance.This is done most times in order to boost revenue and retain customers by offering a trade credit.
Commercial paper is a short term note issued by corporate bodies with good credit rating in order to fund short term expenditure like payment of staff cost.
Its maturity can be 270 days or less.The practice is that it is issued at a discount ,that is the issuer receives a discounted value in return for full face value at maturity.
A company is analyzing the replacement of a color copier. The old machine was purchased 3 years ago for $30,000; it falls into the MACRS 5-year class; and it has 2 years of remaining life and an $8,000 salvage value 2 years from now. The current market value of the old machine is $17,000. The new machine has a price of $40,000, plus an additional $2,000 for installation and modification and an additional $2,000 for transportation. The new machine falls into the MACRS 5-year class, has a 2-year economic life, and can be salvaged for $23,000. The new machine will require a $7,000 increase in inventory, and accounts payable is expected to increase by $4,000. The new machine is expected to increase revenue by $8,000 per year and decrease costs by $3,000 per year. The firm has an 11 percent cost of capital and a marginal tax rate of 25 percent. The MACRS 5-year class uses the following percentages: 20%, 32%, 19%, 12%, 11%, and 6% (in that order). (Round all CFs to the nearest dollar.) What is the total net cash outflow at Year 0
Answer:
E. Outflow of $32,075
Explanation:
At Year 0, the cash outflow is calculated as under:Year 1 Outflow = Investment in the New asset (Step1) + Net working capital required (Step2) - Sale Proceeds from the old machine (Step3) - Tax On the sale of old Machinery (Step4)
Year 1 Outflow = $44,000 + $3,000 - $17,000 + $2,075 = $32,075
Step 1: Investment in the New assetNow here:
Investment in the New Asset = New machine cost + Transportation of asset + Installation of asset
By putting values, we have:
Investment in the New Asset = 40000 + 2000 + 2000 = $44,000
Step 2: Net working capital requiredNow
Net working capital required = $7,000 Investment in Inventory - $4,000 Increase in payables = $3,000
Step 3: Sale Proceeds from the old machineFair Value of the Old Machine is $17000 which means this would be the sales proceeds on the old machinery's sales.
Step 4: Tax On the sale of old MachineryOld machine purchased 3 year ago at = $30,000
Depreciation schedule and book value of old machine are as follows:
Year 1 2 3 4 5 6
MACRS Rate 20% 32% 19% 12% 11% 6%
Depreciation 6000 9600 5700 3600 3300 1800
Acc. depre. 6000 15600 21300 24900 28200 30000
Book value 24000 14400 8700 5100 1800 0
Now
From the table we can see that the Book value of the asset at the end of the year 3 is $8,700.
Tax on the gain of the asset = ($17,000 - 8,700) * 25% = $2,075