Answer:
A. The amount of interest expense to record for 2018 is $320, calculated as follows: $12,000 x 8% x 4/12 = $320.
B. No amount of cash was paid for interest in 2018; i.e. = $0.00
C. Effect of each transaction on balance sheet, income statement, and statement of cash flows:
1. Cash Revenue of $16,200
Balance Sheet - Cash and Retained Earnings are increased by $16,200.
Income Statement - Revenue is increased by $16,200.
Statement of Cash Flows: Cash inflows are increased by $16,200. It is an operating activity (OA)
2. Bank Note Payable of $12,000 with accrued interest of $320 for 2018:
Balance Sheet - Cash and Notes Payable are increased with $12,000; Interest on Notes Payable is increased by $320 and Retained Earnings decreased by $320.
Income Statement: Net Income is decreased by $320.
Statement of Cash Flows: Cash inflows are increased by $12,000. It is a financing activity (FA).
Explanation:
1. Cash revenue increases net income and Cash Account balance, and reflects positively on the cash flows for operating activities.
2. Notes Payable increases Cash Account balance (an asset) and Notes Payable (a liability). It also increases the cash inflow for financing activities.
3. Accrued Interest on Notes Payable increases liability and decreases the net income, which reflects negatively on the Retained Earnings (Equity). It does not affect the statement of cash flows as no disposal had been made yet.
A corporate bond is quoted at a price of 103.16 ($1031.60) and carries a 5.20 percent coupon. The bond pays interest semiannually. What is the current yield on one of these bonds
Answer:
6.30 percent
Explanation:
Base on the scenario been described in the question. For we to calculate the current yield of one of the bond, we have to use the following procedure
Current yield = ( 0.065×$1,000)/(1.0316 × $ 1,000)
Current yield = 65 / 1,031.6
Current yield = 0.063008918185343× 100%
Current yield = 6.30percent approximately.
Answer:
5.04%
Explanation:
Current yield is the ratio of coupon payment of a bond to its current market price. It is calculated by using coupon payment and the current market value of the bond.
Coupon Payment = $1,000 x 5.2% = $52
Formula for Current yield is as follow
Current Yield = Annual Coupon Payment / Current Market Price
Current Yield = $52 / $1,031.60
Current Yield = 5.04%
Required information
Accounts receivable are amounts due from customers for credit sales. A subsidiary ledgerlists amounts owed by each customer. Credit sales arise from at least two sources:
(1) sales on credit and
(2) store credit card sales.
Sales on credit refers to a company's granting credit directly to customers. Store credit card sales involve customers' use of store credit cards.
Sellers allow customers to use credit cards for all of the following reasons: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ?
a. seller does not have to decide who gets credit
b. seller accepts the risk for extending credit to customers
c. seller receives cash sooner than if credit is granted directly to the customers
d. may allow seller to increase sales volume
e. seller determines which customers receive credit and how much
Answer:
a) c) d)
Explanation:
a) The seller does not have to decide who gets credit - this is done by the card issuer
c) seller receives cash sooner than if credit is granted directly to the customers - The cash is received from the card issuer
d) may allow seller to increase sales volume - As cash is available to those who otherwise might not have it for purchases
Why are wholly owned subsidiaries preferred by firms pursuing global or transnational strategies? A. They are more challenging B. They are less costly than other modes C. They allow the use of profits generated in one market and improve the competitive position in another D. They allow for easier management and transitions
Answer:
C. They allow the use of profits generated in one market and improve the competitive position in another.
Explanation:
A wholly owned subsidy is a company whose stocks are completely owned by the parent company which allows the spent company to diversify, manage and reduce or distribute the risk having a legal control over the operations and the processes. The transnational strategy is more of a personal approach towards the sales and marketing of the goods and the services. The Mcdonald's uses transnational strategy in fast-food chain as they rely on the brand name. Other large MNC also uses the global or the transnational strategies like the IBM, Citigroup having multiple levels of subsidies. It helps them to be more competitive and improve their position in another market.Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $284,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 7% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,600 before adjustment?
Answer:
Debit Bad debt expenses with 17,280; and Credit Allowance for Doubtful Accounts also with $17,280.
Explanation:
Bad expenses = ($284,000 × 7%) - $2,600 = $17,280
The adjusting will be as follows:
Details Dr ($) Cr ($)
Bad debt expenses 17,280
Allowance for Doubtful Accounts 17,280
To record the amount estimated to be uncollectible
Answer:
Debit Bad debt expense $17,280
Credit Allowance for doubtful debt $17,280
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Allowance required = 7% * $284,000
= $19,880
Amount to be adjusted = $19,880 - $2,600
= $17,280
Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line, how will operating income be affected?
Answer:
The missing part of the question is found below:
Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow:
Total Hiking Fashion
Sales revenue $480,000 $340,000 $140,000
Variable expenses 355,000 235,000 120,000
Contribution margin 125,000 105,000 20,000
Fixed expenses 76,000 38,000 38,000
Operating income (loss) $49,000 $67,000 $(18,000)
Answer
By discontinuing fashion line of business operating income would increase by $5,000
Explanation:
The impact of eliminating Fashion line is evident in the revised Income statement below:
Hiking
Sales revenue $340,000
Variable expenses ($235,000)
Contribution margin 105,000
Fixed expenses($76,000-$25,000) ($51,000)
Operating income $54,000
By discontinuing the fashion line of business,the operating income would increase by $5,000 ($54,000-$49,000) from $49,000 when operating the two lines of business to $54,000 when fashion is closed up.
The most appropriate action is to concentrate on the hiking line which might mean that Boots plus has a competitive edge in the Hiking business sector.
M Corporation uses the weighted-average method in its process costing. The following data pertain to its Assembly Department for September. Percent Complete Units Materials Conversion Work in process, September 1 1,900 55 % 10 % Units started into production during September 9,300 Units completed during September and transferred to the next department 8,400 Work in process, September 30 2,800 75 % 25 % Required: Compute the equivalent units of production for both materials and conversion costs for the Assembly Department for September using the weighted-average method.
Answer:
For material = 10,500 units
For conversion = 9,100 units
Explanation:
The computation of the equivalent units of production for both materials and conversion costs is shown below:-
For material = Units completed and transferred to the next department + (Work in process × Material work in progress percentage
= 8,400 + (2,800 × 75%)
= 8,400 + 2,100
= 10,500 units
For conversion = Units completed and transferred to the next department + (Work in process × Conversion work in progress percentage
= 8,400 + (2,800 × 25%)
= 8,400 + 700
= 9,100 units
Therefore we have computed the equivalent units of production for both materials and conversion costs by applying the above formula.
what is the best way to trade market volatility?
Answer:
Two ways: using VIX futures and traded notes or S&P 500 options and neutral investment strategies.
Explanation:
Volatility is a market's tendency to rise or fall sharply within short periods of time. It is usually measured using standard deviation or return on investment. There are several ways to handle market volatility. One is to use exchange-traded instruments, such as VIX future contracts and exchange traded notes. VIX provides real time estimations of greed and fear levels, as well as volatility expectations in the next 30 sessions. The other way is to use S&P 500 options and delta-neural strategies.
Suppose the marginal propensity to consume (MPC) is either 0.82, 0.75, or 0.55. a. For each value of the MPC, calculate the expenditure multiplier, or the impact of a one-dollar increase in government spending on GDP. Instructions: Enter a number rounded to one decimal place in each blank. MPC expenditure multiplier 0.82 4.6 0.75 4.0 0.55 1.2 b. For each value of the MPC, calculate the impact on GDP of a $250 million increase in government spending. Instructions: Enter a number rounded to one decimal place in each blank. MPC Impact on GDP 0.82 $ 0.75 $ 1000.0 0.55 $
Answer:
See the explanation below.
Explanation:
Multiplier = 1/(1-MPC)
a. For each value of the MPC, calculate the expenditure multiplier, or the impact of a one-dollar increase in government spending on GDP.
Multiplier for 0.82 = 1/(1-0.82) = 1/0.18 = 5.6
Multiplier for 0.75 = 1/(1-0.75) = 1/0.25 = 4.0
Multiplier for 0.55 = 1/(1-0.55) = 1/0.45 = 2.2
b. For each value of the MPC, calculate the impact on GDP of a $250 million increase in government spending.
For 0.82 MPC, Impact on GDP = 5.6 * 250,000,000 = $1,388,888,888.9
For 0.75 MPC, Impact on GDP = 4.0 *250,000,000 = $1,000,000,000.0
For 0.55 MPC, Impact on GDP = 2.2 *250,000,000 = $555,555,555.6
The Marginal Propensity to Consume (MPC) is used to calculate the expenditure multiplier and, in turn, the impact on GDP from a change in government spending. The higher the MPC, the larger the multiplier and the larger the impact on GDP.
Explanation:The Marginal Propensity to Consume (MPC) can be used to calculate the expenditure multiplier effect on the Gross Domestic Product (GDP) through an increase in government spending. For your listed values of MPC i.e., 0.82, 0.75, and 0.55, the expenditure multipliers are calculated as the inverse of 1-MPC, therefore, yielding 5.6, 4.0, and 2.2 respectively. As for the impact on the GDP of a $250 million increase in government spending, you multiply the change in spending by the expenditure multiplier. Hence, the impact on the GDP would respectively be $1400 million, $1000 million, and $550 million. These results illustrate how each dollar spent by the government can produce more than a dollar's worth of economic activity.
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When comparing levered versus unlevered capital structures, leverage works to increase EPS for high levels of EBIT because interest payments on the debt: A. vary with EBIT levels. B. stay fixed, leaving less income to be distributed over fewer shares. C. stay fixed, leaving more income to be distributed over fewer shares. D. stay fixed, leaving less income to be distributed over more shares.
Answer:
C. Stay fixed, leaving more income to be distributed over fewer shares.
Explanation:
Levered cash flow is of interest to investors because it indicates how much cash a business has to expand.
These capital structures are said to appear on balance sheet.
The difference between the levered and unlevered free cash flow is also an important indicator. The difference shows how many financial obligations the business has and if the business is overextended or operating with a healthy amount of debt. It is possible for a business to have a negative levered cash flow if its expenses exceed its earnings.
During January, LexPro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Unit Total Units
Units Cost Cost On hand
Balance on 1/1 1,000 $1 $1,000 1,000
Purchased on 1/7 600 3 1,800 1,600
Sold on 1/20 900 700
Purchased on 1/25 400 5 2,000 1,100
Under the moving-average method, what amount should LexPro report as inventory at January 31?
Answer:
$3,225
Explanation:
The computation of the amount reported as an ending inventory is shown below:
Date Particulars Units Cost Amount
1 -1 Op Balance 1,000 $1 $1,000
1 -7 Purchases 600 $3 $1,800
Total 1,600 $1.75 $2,800
($2,800 ÷ 1,600 units)
1 -20 COGS 900 $1.75 $1,575
Total 700 $1.75 $1,225
1 -25 Purchases 400 $5 $2,000
Ending inventory 1,100 $2.9318 $3,225
($3,225 ÷ 1,100 units)
We simply added the purchase units with the opening balance and deduct the cost of goods sold units from the opening balance so that the correct ending inventory amount could arrive
6. Explain how liabilities of an LLC (taxed as a partnership) or an S corporation affect the amount of tax losses from the entity that limited liability company members and S corporation shareholders may deduct. Do the tax rules favor LLCs or S corporations?
Answer:
LLC liabilities are included as part of member's tax basis while S corporation liabilities are not.
Tax rules favors LLCs.
Explanation:
LLC liabilities are included as part of a member's tax basis while S corporation liabilities are not included in an S corporation shareholder's tax basis other than loans from the shareholders.
This distinction is important because the amount of loss a member or shareholder may deduct is limited to his or her tax basis in either his or her LLC interest or shares. Thus in this particular regard Tax rules favors LLCs.
Stuart Manufacturing Company established the following standard price and cost data. Sales price $ 8.80 per unit Variable manufacturing cost $ 3.30 per unit Fixed manufacturing cost $ 2,300 total Fixed selling and administrative cost $ 900 total Stuart planned to produce and sell 2,200 units. Actual production and sales amounted to 2,400 units. Required Prepare the pro forma income statement in contribution format that would appear in a master budget. Prepare the pro forma income statement in contribution format that would appear in a flexible budget.
Answer:
Pro forma income statement - in a master budget
Sales ($ 8.80×2,200 units) $19,360
Less Cost of Goods sold
Cost of Goods Manufactured
Variable manufacturing cost ( $ 3.30 × 2,200 units) ($7,260)
Contribution $12,100
Less Expenses :
Fixed manufacturing cost ($ 2,300)
Fixed selling and administrative cost ($ 900)
Net Income $8,900
Pro forma income statement - in a flexible budget
Sales ($ 8.80×2,400 units) $21,120
Less Cost of Goods sold
Cost of Goods Manufactured
Variable manufacturing cost ( $ 3.30 × 2,400 units) ($7,920)
Contribution $13,800
Less Expenses :
Fixed manufacturing cost ($ 2,300)
Fixed selling and administrative cost ($ 900)
Net Income $10,600
Explanation:
The master budget is adjusted to match the actual level of output. This is known as flexing the budget.
To prepare the pro forma income statement in contribution format, calculate the total variable cost per unit, multiply it by the production and sales quantity, and add the fixed costs and revenue. Subtract the total cost from the total revenue to find the net income.
Explanation:To prepare the pro forma income statement in contribution format for the master budget, we need to calculate the total variable manufacturing cost per unit by subtracting the fixed cost from the sales price. Then we can multiply this variable cost by the actual production and sales quantity to get the total variable cost. The fixed manufacturing cost, fixed selling and administrative cost, and the total revenue can directly be added to the income statement. Finally, we subtract the total cost from the total revenue to calculate the net income.
For the flexible budget, we multiply the variable manufacturing cost per unit by the planned production and sales quantity instead of the actual quantity used in the master budget. The rest of the process is the same.
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A company's financial statements may contain errors even if debits and credit balance because:
A. wrong but equal amounts may have been posted to correct accounts
B. correct but equal amounts may have been posted to wrong accounts
C. wrong but equal amounts may have been posted to wrong accounts
D. of all these reasons.
Answer:
B. correct but equal amounts may have been posted to wrong accounts
Explanation:
It is possible that in the presence of the errors the debits and credits side remains balance.
Following errors may balance the debits and credits
Error of omission ( Transaction is totally omitted)Error of commission (posting in wrong accounts by same value)Error of Principle (Entry made against the principle of accounting)Error of Original Entry (Wrong amount posted on both debit and credit sides)Compensating error (Two errors compensate each others effect)All of the above errors may present in case of balanced debit and credit sides.
Organic Specialties sells organic mixes for soups. The company produces 5,000 packages per day. The total variable cost for making one bag of Organic split pea soup is $3. The average fixed cost per bag is $.90. The company charges $6.50 per bag and earns a 40 percent profit. Calculate the break-even point in units.
Answer:
Break even point in units is 12858 units.
Explanation:
The break even point in units is the number of units that are needed to be sold by the company to earn enough total revenue to cover its total costs. It is a point of no profit and no loss. The break even point is calculated as follows,
Break even point in units = Total fixed costs / Contribution per unit
Where,
Contribution per unit = Selling price per unit - Variable cost per unit
Total fixed costs per day = 0.9 * 5000 = $45000
Contribution per unit = 6.5 - 3 = $3.5
Break even in units = 45000 / 3.5 = 12857.14 units rounded off to 12858 units
Jazz Corporation owns 10 percent of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.
Jazz Corporation's dividends received deduction depends on the tax code's specific deduction rates, which vary based on the percentage of stock ownership. Without specific tax details, the exact deduction amount cannot be calculated, and the corporation's current loss might limit the ability to apply the deduction.
Explanation:The question relates to calculating the dividends received deduction for Jazz Corporation based on the dividend income received from Williams Corp. When a corporation like Jazz Corporation receives a dividend from another corporation in which it holds stock, it may be eligible for a deduction on its taxable income for a portion of the dividend received, which is referred to as the dividends received deduction (DRD).
In this case, Jazz Corporation received a $10,000 dividend. The deduction rate depends on the percentage of stock owned in the corporation paying the dividend. However, as the question does not provide specific tax code details or the relevant deduction percentage, we cannot calculate the exact deduction Jazz Corporation could claim. It's important to consult the Internal Revenue Code or a tax professional for the precise rate applicable for Jazz Corporation's ownership level.
It is also vital to note that the company's current taxable income before the dividend is at a loss of ($2,000). Depending on the tax code, the ability to apply the DRD might be limited if the corporation does not have taxable income.
The importance of managing cash in hand Cash is considered an idle asset because it does not earn interest. Good financial management requires a firm to hold a limited amount of cash, but it is important for the firm to hold sufficient cash so that it can pay its current obligations, maintain its credit rating, and meet its unexpected cash needs. The following statement refers to a type of cash balance. Select the best type of cash balance to complete the sentence: A cash balance is held to allow firms to take advantage of any bargain purchases that might arise. Consider the following case of Columbus Builders Inc.: Imagine that Columbus Builders Inc. is a manufacturing company. Columbus’s board is looking to expand through acquisition and would like to be able to react quickly if an opportunity presents itself. Columbus’s financial managers are making sure that cash is available to use as a down payment to commit to a purchase in the near future. What type of cash balance is this? Precautionary Speculative Compensating Transactions
Answer: 1. Speculative Motive/Balance
2. Speculative Balance
Explanation:
1. A cash balance is held to allow firms to take advantage of any bargain purchases that might arise.
SPECULATIVE MOTIVE.
This is a motive of holding money that enables the holder to take advantage of good deals be it in the stock market or as the scenario portrays, in the goods market.
2. The balance that Columbus has is a Speculative Balance. Like earlier mentioned, this money is kept to ensure that good deals are taken advantage of and seeing as Columbus wants to expand in future, keeping this money on hand ensures that they can react swiftly to secure a deal should an opportunity rear it's head.
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Flyaway Travel Company reported net income for 2021 in the amount of $101,000. During 2021, Flyaway declared and paid $3,225 in cash dividends on its nonconvertible preferred stock. Flyaway also paid $21,000 cash dividends on its common stock. Flyaway had 51,000 common shares outstanding from January 1 until 21,000 new shares were sold for cash on April 1, 2021. What is 2021 basic earnings per share
Answer:
The basic EPS for Flyaway in 2021 is $1.4648 per share
Explanation:
The basic earnings per share or basic EPS is the amount of earnings that are allocable to the common stockholders expressed in terms of per share earnings. The basic EPS is calculated by dividing the Net Income after adjusting for preferred stock dividends by the amount of weighted average number of common share outstanding during the Year. Thus, the formula for Basic EPS is,
Basic EPS = (Net Income - Preferred stock dividends) / Weighted average number of common shares outstanding
Weighted average number of common share outstanding during the year for Flyaway is = 51000 + 21000 * 9/12 = 66750 shares
Basic EPS = (101000 - 3225) / 66750
Basic EPS = $1.4647 per share
Church Corporation is a closely held C corporation. All of the stock is owned by Charles and Chanda Church. The corporation, in its second month of operation in its initial tax year, anticipates earning $150,000 of gross income in the current year. Gross income is expected to be approximately 40% dividends, 30% corporate bond interest, and 30% net real estate rentals (after interest, property taxes, and depreciation). Administrative expenses are expected to be $20,000. What special problems does the large amount of passive income that Church Corporation expects to earn present to you as their CPA
Answer:B.
$100
C.
$300
D.
$400
C.
$300
The exemption amount for a simple trust is $300. A simple trust is required to distribute all of its net income each year to the beneficiaries.
The exemption amount for a complex trust is $100. A complex trust is not required to distribute all of its net income each year to the beneficiaries.
2
What is the tax treatment for start-up expense incurred in May 2016?
A.
Not deductible
B.
Deduct up to $5,000; amortize the excess over 60 months
C.
Deduct up to $5,000; amortize the excess over 180 months
D.
Current deduction for all start-up expenses
C.
Deduct up to $5,000; amortize the excess over 180 months
For start-up expenses incurred after August 16, 2011, taxpayers may deduct up to $5,000 in the taxable year in which the business begins. The $5,000 amount is reduced by the amount by which the cumulative cost of start-up expenditures exceeds $50,000. Any remaining start-up expenditures not deducted are amortized over a 15-year period (180 months).
IRC Section 195
Explanation:
Final answer:
Closely held C corporations like Church Corporation with considerable passive income face challenges related to passive activity loss rules and Personal Holding Company (PHC) Tax, requiring careful tax planning and compliance to optimize tax liabilities.
Explanation:
Church Corporation, being a closely held C corporation with significant passive income (40% dividends, 30% corporate bond interest, and 30% net real estate rentals), faces a unique set of challenges as a CPA prepares for its tax planning and compliance. The mixture of income types, predominantly passive, may lead to complications under the Internal Revenue Code (IRC), specifically concerning the passive activity loss rules and the potential risk of being classified under the Personal Holding Company (PHC) Tax. The IRC subjects certain types of passive income to different tax treatment and limitations on the utilization of passive losses. Furthermore, the administrative expenses of $20,000 need careful consideration to ensure they are correctly allocated between the income-producing activities to optimize the corporation’s tax position.
Additionally, the substantial portion of income from dividends and interest may qualify for preferential tax rates or exemptions, but this benefit requires careful navigation of tax codes to avoid pitfalls. These factors necessitate strategic planning to both comply with tax regulations and to optimize the corporation's tax liabilities. Thus, the primary concern for a CPA advising the Church Corporation is to manage the tax implications of its passive income streams, ensuring that the corporation's tax strategy is both efficient and compliant with the IRS rules.
Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,800 rackets and sold 5,700. Each racket was sold at a price of $98. Fixed overhead costs are $93,840 and fixed year selling and administrative costs are $66,000. The company also reports the following per unit costs for the Variable production costs Variable selling and administrative expensesS 280 $25.80 Required: Prepare an income statement under variable costing ACES INC
Answer and Explanation:
The preparation of an income statement under variable costing is shown below:-
Income statement under variable costing
ACES INC
Sales $558,600
(5,700 × $98)
Less:
Cost of goods sold
Variable product cost $147,060
($25.80 × 5,700)
variable selling administrative
expenses ($2.80 × 5,700) $15,950
Less: Total variable cost $163,020
Contribution margin $395,580
Less: Fixed overhead cost $93,840
Less: Fixed and selling
administrative expenses $66,000
Net income $235,740
To prepare a variable costing income statement for ACES INC., calculate the sales revenue, subtract the sum of variable production and selling costs, and then subtract total fixed costs to get the net income, which is $61,300.
Variable Costing Income Statement for ACES INC.
To create an income statement under variable costing for ACES INC., we need to account for all variable costs and exclude fixed manufacturing overhead from the cost of goods sold. Here is how you can calculate it:
Sales Revenue: To calculate sales revenue, we multiply the number of rackets sold by the price per racket: 5,700 rackets × $98 = $558,600.
Variable Costs: The total variable production costs are the per unit cost ($28) times the number of units produced: 6,800 rackets × $28 = $190,400.
The variable selling and administrative expenses are the per unit cost ($25.80) times the number of units sold: 5,700 rackets × $25.80 = $147,060.
Contribution Margin: To calculate the contribution margin, subtract the total variable costs from the sales revenue: $558,600 - ($190,400 + $147,060) = $221,140.
Fixed Costs: The total fixed costs are the sum of fixed overhead costs and fixed selling and administrative costs: $93,840 + $66,000 = $159,840.
Net Income: To calculate the net income, subtract total fixed costs from the contribution margin: $221,140 - $159,840 = $61,300.
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school.
These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $17.00 each with a minimum order of 320 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50.
Since Hooper’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $34.00 each. Hooper would pay the students a commission of $8.00 for each shirt sold.
1. To make the project worthwhile, Hooper would require a $5,850 profit for the first three months of the venture. What level of unit sales and dollar sales would be required to reach this target net operating income? (Round your intermediate calculations to 2 decimal places.) Sales level in units sweatshirts Sales level in dollars
Answer:
$9 profit are made per unit sales.
650 unit sales should be made.
Explanation:
STEP1: What will be Hooper's profit in selling one sweatshirt.
Profit = selling price - cost price
Cost price includes all the expenses done.
Profit = $34 - ($8 + $17) = $9
Therefore Hooper will have $9 as profit if one student sales one sweatshirt.
STEP2: The Quantity of sweatshirt that Hooper needs to purchase in order to achieve his profit target.
Since he Target $5,850.
Therefore:
$5,850 ÷ $9 = 650 sweatshirt
Therefore;
If Hooper sales the sweatshirt at $34 per unit, he will achieve $9 as profit. And if he chooses to achieve $5,850 as profit, he has to place a one time order for 650 sweatshirt, that may arrive in batches.
To achieve the target profit of $5,850, Steve Hooper will need to sell approximately 650 sweatshirts, generating a sales level in dollars of $22,100.
Explanation:To calculate the required sales level, we need to first determine the profit per shirt. The selling price of the shirt is $34.00 and it costs Hooper $17.00 to produce plus an $8.00 commission fee. Therefore, the profit per shirt is $34.00 - $17.00 - $8.00 = $9.00.
To find out how many shirts need to be sold to generate a profit of $5,850, we use the equation: Profit = Quantity sold * Profit per unit. By repositioning the terms, we have Quantity sold = Profit / Profit per unit. Inserting the given values, we calculate: Quantity sold = $5,850 / $9.00 = approximately 650 sweatshirts.
Next, the sales level in dollars can be calculated by multiplying the unit sales level by the selling price per unit. Therefore, Sales level in dollars = 650 sweatshirts * $34.00 per sweatshirt = $22,100.
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Suppose real GDP in Puerto Rico is $48 billion and its annual growth rate is 8%. Real GDP for Puerto Rico will double in 6 years. 7.5 years. 8 years. 8.75 years. an indeterminate amount of years with the information given.
Answer: 8.75 years
Explanation:
To solve this we can use the brilliant rule of 70 which posits in it's simplest form that an amount will double if we decide 70 by it's required rate.
For example if you want to know how long your 20 billion will take to double given a 15% rate you say,
= 70/15
= 4.67 years.
In that same light therefore, we can calculate for this question thus,
= 70/8
= 8.75 years.
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Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) Interest Rate 1-year T-bill at beginning of year 1 4 % 1-year T-bill at beginning of year 2 5 % 1-year T-bill at beginning of year 3 9 % 1-year T-bill at beginning of year 4 11 %
Answer:
The expected return for securities with maturities of two, three, and four years is as follows:
Expected Return 2 year Security=4.50 %
Expected Return 3 year security= 6 %
Expected Return 4 year security=7.25 %
Explanation:
According to the expectations hypothesis theory, the expected return for the 2 year security is the average of the expected yields of two one-year T-bills, for the 3 year security is the average of the expected yields of three one-year T-bills and the 4 year security is the average of the expected yields of the four one-year T-bills.
Therefore, in order to calcuate the expected return for each year we have to use the following formula:
Expected Return 2 year Security=(4 + 5) / 2 = 4.50 %
Expected Return 3 year security=(4 + 5 + 9) / 3 = 6 %
Expected Return 4 year security=(4 + 5 +9 + 11) / 4 = 7.25 %
Final answer:
The expected returns for securities with maturities of two, three, and four years, based on the provided data, are 4.50%, 8.33%, and 8.33%, respectively.
Explanation:
The Expectations Hypothesis Theory for the term structure of interest rates states that the expected return for a security with a specific maturity is equal to the average of the interest rates of shorter-term securities leading up to that maturity.
Using the provided data, we can determine the expected returns for securities with maturities of two, three, and four years as follows:
For a two-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 1 (4%) and year 2 (5%), which is (4% + 5%) / 2 = 4.5%.For a three-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 2 (5%), year 3 (9%), and year 4 (11%), which is (5% + 9% + 11%) / 3 = 8.33% (rounded to 2 decimal places).For a four-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 2 (5%), year 3 (9%), and year 4 (11%), which is (5% + 9% + 11%) / 3 = 8.33% (rounded to 2 decimal places).Elite Couture, a high-end fashion goods store has to decide on the quantity of Luella Bartley handbags to sell during the Christmas season. The unit cost of the handbag is $28.50 and the handbag sells for $150. All handbags remaining unsold at the end of the season are purchased by a discounter for $20 each. Further, there is a significant 40% inventory holding cost incurred for each unsold bag. Demand for bags is distributed normally with mean 150 and standard deviation 20. How many bags should be purchased to maximize expected profit?
a)150
b)155
c)160
d)165
e)170
f)175
g)180
Answer:
170 bags should be purchased to maximum expected profi!
Final answer:
Elite Couture should purchase 165 Luella Bartley handbags to maximize expected profit during the Christmas season.
Explanation:
To maximize expected profit, Elite Couture should determine the optimal quantity of Luella Bartley handbags to purchase for the Christmas season. This can be done by considering the unit cost, selling price, unsold handbag purchase price, demand distribution, and inventory holding cost.
First, calculate the expected profit for different quantities of handbags by subtracting the unit cost from the selling price, multiplying it by the expected demand, and subtracting the inventory holding cost for any unsold handbags. Choose the quantity that yields the highest expected profit.
In this case, the highest expected profit is obtained when 165 bags are purchased, resulting in a profit of $6,304.40.
Assume the role of one noted Personality Theorist Carl Rogers. Carl (you) is going to write a letter to a client in response to this situation:Someone has come to you expressing a number of problems: the person's marriage is a mess, they hate their job, they cannot complete work on time, they feel overwhelmed and cranky much of the time, and even their dog doesn't like them much of the time. While working from the Humanistic (client centered) perspective, you will need to inform your fictional "client" what you believe the client can do about the problems the client is having. Using Rogerian theory, how might you tell them to set things to right again? After you have completed adequate research on Rogers, and how he envisioned both problems and solutions, write a letter your fictional client. Your letter should display clear evidence (such as textbook terms) that you understand what the theorist considers a healthy, well-adjusted personality, and how to help someone build one. No direct quotes of the textbook or other source is permitted.
Answer:
Dear XXX,
Much obliged to you for composing the letter and sharing your subtleties. I am happy that from the couple of proclamations that you have given about your issues, I can develop a few bits of knowledge on it. I am accepting that you may know me and my helpful methodology. I can see your issues and I can comprehend what you have been experiencing. The issues that are you confronting are veritable and it occurs with various individuals. I can see the issues are converging from inside you and your viewpoint towards them. You feel that your working isn't ideal. You have sentiments of disappointment, you can't see yourself opening up to new understanding and issues of trust with the family and even with the pooch.
Human character is considered weel balanced on different issues. there is a requirement for self-realization where people comprehend their significance of presence and an individual ought to be completely practical. Here I am suggesting that your character and your need are not going close by to hand. I can see there is a great deal of disturbance inside you and outside you. there are clear signs that your Real self ( what you are presently) and your optimal self ( what you need to be are not in line or offset with one another.
Your issues identifying with marriage, work, work are your genuine self what you are currently and your optimal self is by all accounts a circumstance where you are sans upbeat from every one of these issues. There is a need to take a shot at different issues of your self.
Your work, work, marriage would be hazardous in the event that you don't comprehend what you need and what you really need. It would be ideal if you give yourself here and there and for a second consider what you really need. Try not to be compelling or unforgiving on yourself. here you have to develop a solid self-idea. Do comprehend your value. Each human s deserving of busy thus do you. Develop your positive self-esteem. Train yourself in something or gain the expertise to neglect the different issues of your life. This will help in boosting your confidence.
Ultimately, I need to recommend that you can help and guide yourself.be open to new encounters, comprehend your reality, develop trust in yourself and your connections around, be imaginative and satisfy your existence with those things that you need to do.
Respects,
Carl Rogers.
From a Humanistic perspective, the client can address their problems by engaging in self-exploration, embracing authenticity, practicing unconditional positive regard, cultivating empathy, and focusing on personal growth and self-actualization.
Explanation:Dear Client,
I understand that you are currently facing multiple challenges in your life, including issues with your marriage, job dissatisfaction, difficulty completing work on time, feeling overwhelmed and cranky, and even your relationship with your dog. From a Humanistic (client-centered) perspective, I believe that you have the power to set things right again and create a healthy, well-adjusted personality.
In order to address these problems, I recommend the following:
Remember, the journey to personal transformation takes time and effort. It is essential to be patient and compassionate with yourself as you navigate through these challenges. Therapy or counseling sessions with a trained professional can also provide valuable support and guidance on your path to self-discovery and personal growth.
Wishing you strength and resilience on your journey towards a healthier and more fulfilling life.
Sincerely,
Carl Rogers
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Flounder Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $10 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:
Direct materials $3
Direct labor $4
Variable manufacturing overhead $1
The company’s fixed expenses would increase by $28,250 per year if managers decided to make the tire. Calculate total relevant cost to make or buy if the company needs 5,810 tires a year.
Answer:
Flounder should buy.
Relevant cost of making $ 74,730
Relevant of buying $58,100
Explanation:
Relevant cost are future incremental cash cost that arise as a direct consequence of a decision.
The relevant costs of making the tires internally are
$
Variable cost of making
(3+4+1)× 5,810 46,480
Incremental fixed cost = 28,250
Total relevant cost 74,730
Relevant cost of buying
External cost × units = 10× 5,810 = $58,100
Flounder Rides should buy as this will save it $16630 i. e (74,730 - 58100)
You are a dual income, no kids family. You and your spouse have the following debts (total): mortgage, $380,000; auto loan, $20,400; credit card balance, $5,800; and other debts of $10,700. Further, you estimate that your funeral will cost $11,600. Your spouse expects to continue to work after your death. Using the DINK method, what is your life insurance need?
Answer:
$220,050
Explanation:
DINK is a method of calculating life insurance coverage.
DINK , an acronym for double income no kid is calculated by adding to the funeral expenses half of all debts.
Mortgage - $380000
Auto loan - $20,400
Credit card balance - $5800
Other debts - $10700
Total $416,900
Insurance need = $11600 + ($416900/2)
$11600+$208450 = $220,050
Exercise 10-9 a As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. SORIA COMPANY Clothing Department Budget Report For the Month Ended October 31, 2020 Difference Budget Actual Favorable Unfavorable Neither Favorable nor Unfavorable Sales in units 8,100 11,000 2,900 Favorable Variable expenses Sales commissions $2,268 $2,860 $592 Unfavorable Advertising expense 1,134 990 144 Favorable Travel expense 3,888 3,850 38 Favorable Free samples given out 1,782 1,320 462 Favorable Total variable 9,072 9,020 52 Favorable Fixed expenses Rent 2,000 2,000 –0– Neither Favorable nor Unfavorable Sales salaries 1,100 1,100 –0– Neither Favorable nor Unfavorable Office salaries 700 700 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 500 500 –0– Neither Favorable nor Unfavorable Total fixed 4,300 4,300 –0– Neither Favorable nor Unfavorable Total expenses $13,372 $13,320 $52 Favorable As a result of this budget report, Joe was called into the president’s office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Joe knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice. Prepare a budget report based on flexible budget data to help Joe.
Answer:
A flexible budget unlike a static budget changes as volume or activity changes in the business.
A flexible budget provides a more accurate review of the financial performance of a Business than a static Budget
Management in reviewing the Actual position versus a static Budget didn't do much justice to the hardworking sales team that have almost delivered almost 4 times their sales target and even kept cost in control.
By using a flexible budget, we can tell that the respective budgets for each variable expense component ought have been:
Sales commission ought have been $8,603 ($0.78 per unit of sales) thereby showing a true savings of $5,743 and not unfavorability of $592
Advertising ought have been $4,301 ($0.39 per unit of sales) thereby showing a true savings of $3,311 and not $144
Free samples ought have been $6,759 ($0.61 per unit of sales) thereby showing a true savings of $5,439 and not $462
Travel expense ought have been $14,748 ($1.34 per unit of sales) thereby showing a true savings of $10,898 and not $38
By doing this simple analysis he would have shown management that he not only delivered on Sales Volume buy worked efficiently to cut cost per unit of sale and deliver a true savings on costs of $25,391 and not $52.
The attached document captures the full presentation of answers.
Which of the following are ways to develop a better social network:
A. Occupy structural holes
B. Invest in monastic endeavors
C. Maximize homophily
D. Invest in relationships that extend your expertise
E. Develop connections with powerful others
Answer:
The ways to develop a better social network is to:
C. Maximize homophily
D. Invest in relationships that extend your expertise
E. Develop connections with powerful others
Explanation:
Maximizing homophily refers to the tendency to have positive ties with individuals who are similar in socially significant ways. Engaging regularly or hanging out with your kind is a good way to develop better social network.
Investing in relationships that extends your expertise is a proactive way of breaking new grounds and connecting with people that are ahead of you in a cordial manner. More like a mentor-mentee approach.
Developing connections with powerful others opens up the gate to the elite social community which will deepen your social network.
You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certificates of deposit (CDs) worth $20,000, and (3) an investment portfolio consisting of 40% bonds, 40% equities, and 20% cash and cash equivalents. Your bonds are thirty-year U.S. government bonds, while your equities are made up solely of your employer’s stock. Your cash holdings consist of your savings account and CDs. Your employer’s stock paid a 1% dividend and its market value has increased 10% over the last year. The bonds have paid 3.0% interest. The rate of inflation is 2.5%. Your investment goals are mainly focused on retirement, and you have no large purchases planned in the short term.
The value of your current investment portfolio is (180,000 or 144,000 or 108,000 . This consists of 36,000 or 100,000 or 80,000 in cash and cash equivalents, 108,000 or 72,000 or 54,000 in bonds, and 90,000 or 72,000 or 54,000 in equities.
Given the existing composition of your investment portfolio, how would you characteristic your investment strategy? Is it conservative, moderate, or aggressive?
a. The investment strategy is aggressive.
b. The investment strategy is moderate.
c. The investment strategy is conservative.
The value of the current investment portfolio is $108,000 and b. the investment strategy is moderate.
Explanation:The value of the current investment portfolio can be calculated as follows:
Cash and cash equivalents: $16,000 + $20,000 = $36,000Bonds: 40% of $90,000 = $36,000Equities: 40% of $90,000 = $36,000The total value of the investment portfolio is $36,000 + $36,000 + $36,000 = $108,000. Given the composition of the investment portfolio, with a mix of bonds, equities, and cash, and the focus on retirement goals, the investment strategy can be characterized as moderate.
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Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows:
Direct materials $3.10
Direct labor 2.25
Variable overhead 1.15
Fixed overhead 1.80
Total $8.30
Suppose a customer wants to have its company logo affixed to each paperweight using a label. Smooth Move would have to purchase a special logo labeling machine that will cost $12,000. The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct materials of $0.20.
Required:
a. Should Smooth Move accept the special order?
b. By how much will profit increase or decrease if the order is accepted? If your answer is decrease, enter negative value.
Answer:
a. Smooth Move should REJECT the order
b) Net loss from accepting the order $ (7,500)
Explanation:
Relevant costs are future incremental cash costs that arise as a direct consequence of a decision.
The relevant cash flows of this decision include the following:
Variable cost of production -(3.10 +2.25 +1.15) + $0.20= $6.7 per unitCost of additional machine - $12,000. Sales revenue from the special offer$
Sales revenue from special offer (15,000×$7.00) = 105,000
Variable cost (15,000× $6.7) (100,500)
Cost of additional machine - (12,000)
Net loss from accepting the order (7,500)
Smooth Move should not accept the special order as the incremental costs exceed the incremental revenue. If the order was accepted, it would result in a profit decrease of $4,500.
Explanation:The subject of this question falls under Business, specifically managerial accounting. For a, whether Smooth Move should accept the special order depends on the incremental revenue and incremental costs of the order. Incremental revenue is straightforward: 15,000 units * $7/unit = $105,000. Incremental costs, however, are a bit more complex. They include variable production costs, additional material costs associated with the logo, and the cost of the special logo labeling machine. Variable production costs are $6.50/unit (direct materials + direct labor + variable overhead + additional logo material costs), so 15,000 units * $6.50/unit = $97,500. Adding the cost of the labeling machine gives total incremental costs of $109,500. Since the incremental costs are more than the incremental revenue, they should not accept the special order.
For b, the change in profit is simply the incremental revenue minus the incremental costs. In this case, $105,000 - $109,500 = -$4,500. Therefore, accepting the order would decrease profit by $4,500.
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