A company estimates the following manufacturing costs for the next period: direct labor, $500,000; direct materials, $181,000; and factory overhead, $122,000. Required: 1. Compute its predetermined overhead rate as a percent of direct labor. 2. Compute its overhead cost as a percent of direct materials.
Answer:
1) 24.4%
2) 67.4%
Explanation:
The basis on which overheads are to be applied is considered under 'denominator' value.
1)
Numerator = Estimated factory $122,000
Denominator = Direct Labor $500,000
Overhead Rate = 122,000 / 500,000 = 0.244 ==> 24.4%
2)
Numerator = Estimated factory overhead $122,000
Denominator = Direct Material $181,000
Overhead Rate = 122,000 / 181,000 = 0.674 ==> 67.4%
Aikmen Lab plans to purchase a new centrifuge machine for its Georgia facility. The machine costs $279,000 and is expected to have a useful life of 7 years, with a terminal disposal value of $50,000. Savings in cash operating costs are expected to be $63,000 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $30,000 needs to be maintained at all times, but this investment is fully recoverable (will be "cashed in") at the end of the useful life. Aikmen Lab's required rate of return is 10%. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Aikmen Lab uses straight-line depreciation for its machines.
Required:
1. Calculate net present value.
2. Calculate internal rate of return.
3. Calculate accrual accounting rate of return based on net initial investment.
4. Calculate accrual accounting rate of return based on average investment.
5. You have the authority to make the purchase decision. Why might you be reluctant to base your decision on the DCF methods?
Answer:
initial outlay costs of the project = $279,000 (machine) + $30,000 (additional working capital) = $309,000
CF1 = $63,000CF2 = $63,000CF3 = $63,000CF4 = $63,000CF5 = $63,000CF6 = $63,000CF7 = $63,000 + $50,000 (salvage value) + $30,000 (working capital) = $143,000discount rate = 10%
using an excel spreadsheet:
1) =NPV(10%,63000,63000,63000,63000,63000,63000,143000) = $347,763 - $309,000 = $38,763
2) =IRR(-309000,63000,63000,63000,63000,63000,63000,143000) = 13.34%
3) accounting rate of return based on net initial investment = average net profit / net initial investment
average net profit = $63,000 - $32,714 (depreciation cost) = $30,286net initial investment = $309,000accounting rate of return based on net initial investment = $30,286 / $309,000 = 9.8%
4) accounting rate of return based on average investment = average net profit / average investment
average net profit = $63,000 - $32,714 (depreciation cost) = $30,286average investment = ($309,000 + $80,000) / 2 = $194,500accounting rate of return based on average investment = $30,286 / $194,500 = 15.57%
5) Generally the discounted cash flow method is the most widely accepted way to determine whether a project should be accepted or not, and to be honest the NPV is positive and the IRR is higher than the required rate of return. The only rate that was lower was the accounting rate of return on net investment (9.8%) but it was really close.
If I was the manager that decided whether or not to carry out the project I would go for it.
The Pecking Order view on capital structure:
a. Argues that firm's first choice for capital is new equity due to the fact that dividends are not contractually required.
b. Argues that the firm's first choice for capital is new debt as interest payments are tax-deductible.
c. Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
d. Argues that firms are indifferent between new equity, debt and retained earnings as sources of capital.
Answer:
c. Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
Explanation:
The Pecking order theory states that a business should first of all seek for internal funds (retained earnings) as a first choice of capital.
When internal funds are depleted, it can now look to debt as a source of finance.
In turn when debt options have been exhausted the last resort is to look for funding from equity.
So the Pecking order argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
Suppose there are two firms (1 and 2) located along a surface water resource and that the profit functions of each firm are provided below, where 7iNSYsLDJFEN13ZU0zrrDQ8e1tBLr7r8AAAAAElF is the quantity of water used by firm i.
Firm a:wPHcbYArNlLhwAAAABJRU5ErkJggg==
Firm b: O4fW7gxNIFgAAAABJRU5ErkJggg==
If each firm uses the amount of water that maximizes its own profits, what is the total quantity of water that will be used?
Suppose that there are only 20 total units of water available. What is the allocation of the 20 units of water across the two firms that maximizes total profits?
Relative to the allocation of water that you found in part (b), by how much do total profits decrease if the 20 units are instead evenly distributed to the two firms (in other words, each firm is allocated 10 units of water)?
Answer:
See attached files
Explanation:
Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the slots and $1.200 at poker. Also this year, Rhett made several trips to the racetrack, but he lost $700 on his various wagers. What amount must Rhett include in his gross income? Multiple Choice
a. 08 Zero - gambling winnings are not included in gross income
b. $1,450
c. $250
d. $750
d. $1,200
Answer:
b. $1,450
Explanation:
Data provided as per the question
Winnings in slot = $250
Winnings in poker = $1,200
The computation of gross income is shown below:-
Total amount in Gross Income = Winnings in slot + Winnings in poker
= $250 + $1,200
= $1,450
Therefore for computing the total amount in gross income we simply add winning in slot with winning in poker.
The following data for Romero Products Inc. are available:
For the Year Ended December 31 Actual Planned Difference
Sales $8,360,000 $8,200,000 $160,000
Variable costs:
Variable cost of goods sold $3,496,000 $3,280,000 $216,000
Variable selling and administrative expenses 760,000 902,000 (142,000)
Total variable costs $4,256,000 $4,182,000 $74,000
Contribution margin $4,104,000 $4,018,000 $86,000
Number of units sold 38,000 41,000
Per unit:
Sales price $220 $200
Variable cost of goods sold 92 80
Variable selling and administrative expenses 20 22
Prepare an analysis of the sales quantity and unit price factors.
Answer:
Sales quantity factor = - $600,000
Unit price factor = $760,000
Explanation:
sales quantity factor is the effect of change in number of units sold with respect to the budgeted price or planned price.
Unit price factor is the change in price per unit with respect to the actual number of units sold.
Unit price factor $(220-200)×38,000 = $760,000
Sales quantity factor (38,000 - 41,000) × $200 = -$600,000
Kindly see attached picture
An analysis of Romero Products Inc.'s performance reveals a shortfall in the sales quantity factor given fewer units were sold than planned. However, the unit price factor was positive as higher prices were achieved than planned. Additionally, despite an increase in variable cost of goods, a favourable variances in variable selling and administrative expenses led to a higher contribution margin than planned.
Explanation:The sales quantity factor can be analyzed by looking at the difference in the number of units sold. While Romero Products Inc. planned to sell 41,000 units, they only sold 38,000 units. This difference of 3,000 units is a negative factor for the company since it represents lost potential revenue.
The unit price factor can be analyzed by comparing the actual and planned sales price per unit. Romero Products Inc. was able to sell their product at a higher price than planned - $220 per unit instead of the projected $200 per unit. This $20 advantage per unit is a positive factor for the company as it increases revenue.
It's essential to recognize that the variable costs also increased, with the cost of goods sold being higher than planned ($92 against the planned $80). However, variable selling and administrative expenses were lower than planned ($20 compared to $22). Therefore, the company's contribution margin - the sales revenue minus the variable costs - was higher than planned.
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The United States taxes the domestic and remitted foreign earnings of U.S. based MNEs no matter where the earnings occurred. This is an example of a/an ________ approach to levying taxes.
Answer:
The correct answer is A) worldwide.
Explanation:
The concept of a global approach to tax collection is the determination of the tax burden without considering the origin of the profits reported in the tax declaration, which implies the homogenization of the tax burden that becomes effective taking into account double treaties. taxation, where information is received from other countries on the behavior of foreign branches in this regard.
Cullumber, Inc. acquired 30% of Marigold Corporation's voting stock on January 1, 2021 for $890000. During 2021, Marigold earned $367000 and paid dividends of $228000. Cullumber's 30% interest in Marigold gives Cullumber the ability to exercise significant influence over Marigold's operating and financial policies. During 2022, Marigold earned $467000 and paid cash dividends of $128000 on April 1 and $128000 on October 1. On July 1, 2022, Cullumber sold half of its stock in Marigold for $627000 cash.
Required:
1. What should the gain be on sale of this investment in Cullumber's 2022 income statement?
Answer:
The gain on the sale of investment is $145,325
Explanation:
In determining the gain on the sale of half of the stock,the first thing to do would be determine the cost of the stock sold such that the cost can then be compared with the proceeds from the sale of the investment so as to determine the gain therein.
The total investment should be valued in such a way that the share of profits should be added to the investment while the dividends received would be deducted.
Jan,1 2021 $890,000
Share of profit($367,000*30%) $110,100
less dividends(since it already received in cash
($228,000*30%) ($68,400 )
Value of investment at 31 Dec,2021 $931,700
Share of profit(30%*$467000)*6/12 $70,050
Dividends(30%$128,000) ($38,400 )
Value of investment as at 1 july 2022 $963,350
Note that as at I july 2022 Marigold Corporation is only entitled to half year profits on the investment as well as half year dividends
Cost of half of investment=$963,350*1/2=$ 481,675.00
Gain= proceeds-cost=$627,000- 481,675 =$145,325
Suppose the S&R index is 800, the continuously compounded risk-free rate is 5%, and the dividend yield is 0%. A 1-year 815-strike European call costs $75 and a 1- year 815-strike European put costs $45. Consider the strategy of buying the stock, selling the 815-strike call, and buying the 815-strike put. a. What is the rate of return on this position held until the expiration of the options? b. What is the arbitrage implied by your answer to (a)? c. What difference between the call and put prices would eliminate arbitrage? d. What difference between the call and put prices eliminates arbitrage for strike prices of $780, $800, $820, and $840?
Answer:
a) the rate of return on this position held until the expiration of the options is r = 0.05638
b) $5.52
c) C - P = $24.748
d)
C - P = $4.748 C - P = $24.748 C - P = $44.748 C - P = $64.748Explanation:
a) Assume that, we are buying the stock, selling the 815-strike call , and buying the 815 strike put, the rate of return on this position held until the expiration of the options can be determined as follows:
solving for the cost first; we have:
(- $800 + $75 - $45) = $770
After 1-year ; the compounded rate of return (r) can be expressed as:
[tex]770e^r = 815[/tex]
[tex]e^r = \frac{815}{770} \\ \\ e^r = 1.058 \\ \\ e = In(1.058) \\ \\ r = 0.05638[/tex]
Thus, the rate of return on this position held until the expiration of the options is r = 0.0564
b)
What is the arbitrage implied by your answer to (a)?
The return rate on this position shows more interest than the risk-free interest rate. However, there is need to borrow money at 5% (0.05) in order to purchase a large amount of the rate of return position of (a), resulting into a sure return of 0.64%. In essence, $770 is being borrowed from the bank to buy and secure one position; Therefore , after 1-year; the bank is being owed:
$[tex]770e^{0.05}[/tex] = $809.48
Thus, the arbitrage implied by the answer to (a) is:
$815 - $809.48 = $5.52
c) . What difference between the call and put prices would eliminate arbitrage? To eliminate arbitrage; it is crucial that the call and put prices should be on hold. This implies that:
C - P = [tex]S_o - Ke^{-rT}[/tex]
C - P = [tex]800 - 815 e^{-rT}[/tex]
C - P = [tex]800 - 815 e^{-0.05*1}[/tex]
C - P = $24.748
d). What difference between the call and put prices eliminates arbitrage for strike prices of $780, $800, $820, and $840?
C - P = [tex]S_p - Ke^{-rT}[/tex]
where [tex]S_p[/tex] is the spike prices
when [tex]S_p[/tex] = $780
C - P = [tex]780 - 815 e ^{-0.05*1[/tex]
C - P = $4.748
when [tex]S_p[/tex] = $800
C - P = [tex]800 - 815 e^{-0.05*1}[/tex]
C - P = $24.748
when [tex]S_p[/tex] = $820
C - P = [tex]820 - 815 e^{-0.05*1}[/tex]
C - P = $44.748
when [tex]S_p[/tex] = $840
C - P = [tex]840 - 815 e^{-0.05*1}[/tex]
C - P = $64.748
Enya Corp. adopted the dollar-value LIFO method on January 1, 2008. Its inventory on that date was $160,000. On December 31, 2008, the inventory at prices existing on that date amounted to $140,000. The price level at January 1, 2008, was 100, and the price level at December 31, 2008, was 112.
Instructions
(a) Compute the amount of the inventory at December 31, 2008, under the dollar-value LIFO method.
(b) On December 31, 2009, the inventory at prices existing on that date was $172,500, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.
Answer:
Option (a) =$28750 option (b) = $28750
The value of the inventory is= $153750
Explanation:
From the given question we solve for the options (a) and (b) below.
Date 1 January 2008
Inventory at the end of year prices = $160,000
Price Index = 100
Inventory at Base year prices =$160,000
Change from previous year = 0
December 31st 2008
Inventory at the end of year prices =$140,000
Price Index = 112
Inventory at Base year prices =$125000
Change from previous year = (35000)
31 December 2018
Inventory at the end of year prices = $172500
Price Index = 115
Inventory at Base year prices= $150000
Change from previous year = 25000
Now we solve for,
(a) Inventory at 31 December 2008
In the year 2008 there is LIFO liquidation (35000), so the inventory value under dollar value LIFO method;
$125000 x 1 = $125000
(b)Inventory at 31 December 2009:
$125000 x 1 = $125000
$25000 x 1.15 = $28750
Thus value of inventory ($125000 + $28750) = $153750
Suppose in the year 2018, people spent $200 on durable goods, $200 on non-durable goods, and $100 on services. During the same year, the government paid $200 to soldiers and police officers, spent $100 building missiles and highways, spent $200 on welfare and unemployment benefits and $300 on social security payments. During this year the United States had imports totaling up to $500 while exporting $400 worth of goods and services. Finally, firms spent $200 on machines that will increase their productive capacity and they raised the amount of goods in their inventories from $400 at the beginning of the year to $500 at the end of the year.
Required:
1. Please use this information to calculate total GDP for 2018.
a. $1,500
b. $1,300
c. $1,200
d. $1,000
Answer:
d. $1,000
Explanation:
Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP = Consumption spending by households on durable and non durable goods and services + Investment spending by businesses + Government Spending + Net Export
Consumption spending = $200 + $200 + $100 = $500
Investment spending = $200 + $(500 - 400) = $300
Government spending = $200 + $100 = $300
Transfer payments aren't included in the calculation of GDP. So, the $200 spent on welfare and unemployment benefits and $300 on social security payments isn't included in the calculation of GDP.
Net export = Export- Import = $400 - $500 = $-100
GDP = $500 + $300 + $300 - $100 = $1000
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At December 31, 2020, Pharoah Company has outstanding three long-term debt issues. The first is a $2,370,000 note payable which matures June 30, 2023. The second is a $5,580,000 bond issue which matures September 30, 2024. The third is a $12,850,000 sinking fund debenture with annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.Prepare the required note disclosure for the long-term debt at December 31, 2020.
Answer:
The first is a $2,370,000 note payable which matures June 30, 2023.
The second is a $5,580,000 bond issue which matures September 30, 2024.
annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.
Year Amount of long term debt Working
2021 $0
2022 $2,570,000
2023 $4,940,000 = $2,570,000 + $2,370,000
2024 $8,150,000 = $,2,570,000 + $5,580,000
2025 $2,570,000
2026 $2,570,000
Long term debt is debt that must be paid in a period of time longer than one year. Debts that are due in less than one year are classified as current debts or liabilities. That is why there is no long term debt for 2021 (current year).
Vibrant Company had $850,000 of sales in each of Year 1, Year 2, and Year 3, and it purchased merchandise costing $500,000 in each of those years. It also maintained a $250,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of Year 1 that caused its Year 1 ending inventory to appear on its statements as $230,000 rather than the correct $250,000. Required: 1. Determine the correct amount of the company's gross profit in each of Year 1, Year 2, and Year 3.
Answer:
The correct amount of the company's gross profit in each of Year 1, Year 2, and Year 3 is $350,000.
Explanation:
Gross profit is the earning of the company from the direct sales of the products or services. It is calculated by deducting the cost of goods sold from sales.
Cost of Goods sols is the production or purchase cost of an item or service sold during the period. Cost of Goods sold can be calculated by adding purchases for the period in beginning inventory and deducting the closing inventory.
Correct Gross Profit
Sales $850,000
less: Cost of Goods Sold
Beginning Inventory $250,000
+ Purchases $500,000
- Ending Inventory $250,000
$500,000
Gross Profit $350,000
As each years values of sales, purchases and beginning and Ending Inventory are same the gross profit will also be the same.
Statutory employees :a. Include common law employees.b. Report their expenses as miscellaneous itemized deductions.c. Claim their expenses as deductions for AGI.d. Are subject to income tax withholdings.e. None of these choices are correct.
Answer:
c Claim their expenses as deductions for AGI.
Explanation:
Their costs are specified in Schedule C, not Form 2106 (Option). Although subject to Social Security tax, they are not subject to income tax withholding (option). Legitimate employees are not common law employees (selected). Costs for AGI will be reduced
"A production line is to be designed to make 375 El-More dolls per day. Each doll requires 11 activities totaling 16 minutes of work. The factory operates 750 minutes per day. What is the required cycle time for this assembly line?"
Answer: 2minutes
Explanation:
Cycle time is the time between the starting and completion of a process. The average time taken to complete in between the process is the cycle time.
Given
No of units produced = 375 El
No of operational hours = 750 minutes
Calculation of cycle time for this assembly line
The formula for cycle time = 1/Throughput rate.
Throughput rate = (Units Produced or Tasks completed)/ Time
=375/750
=0.5
Throughput rate =0.5
cycle time = 1/Throughput rate
=1/0.5
=2 minutes
The required cycle time for the assembly line is 2 minutes.
The cycle time is the time taken or the time difference between the starting time and the time taken to complete the process. it can be used to take future decisions for processing the similar task.
Computation:
Given,
Units produced =375 El
Operational hours =750 minutes
First, the throughout rate is computed:
The formula used is:
[tex]\begin{aligned}\text{Throughout Rate}&=\dfrac{\text{Units Produced }}{\text{Operational Hours}}\end{aligned}[/tex]
Substituting the values in the formula:
[tex]\begin{aligned}\text{Throughout Rate}&=\dfrac{375}{750}\\&=0.5\end{aligned}[/tex]
Now using the value of throughout rate for computing the cycle time:
[tex]\begin{aligned}\text{Cycle Time}&=\dfrac{1}{\text{Throughout Rate}}\\&=\dfrac{1}{0.5}\\&=2\;\text{minutes}\end{aligned}[/tex]
Thus, the cycle time is 2 minutes.
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Dennis and Rhonda are married with two boys, Blake and Chase. They have the following accounts with the following balances at their local bank: Dennis (single account) $300,000 Rhonda (single account) $100,000 Dennis & Rhonda (joint account) $400,000 Rhonda & Blake (joint account) $100,000 How much of all of their accounts will be insured by the FDIC?
Answer:
$850000
Explanation:
Dennis ( SINGLE ACCOUNT ) = $300000
Rhonda (single account ) = $100000
Dennis and Rhonda ( joint account ) = $400000
Rhonda and Blake (joint account ) = $100000
The FDIC will insure individual accounts up to the tune of $250000 and also shares of each individual in every joint account will also be insured as well
From Dennis single account : $250000 is insured
From Rhonda single account : $100000 is insured
from Dennis share in the joint account with Rhonda : $200000 is insured
likewise Rhonda's share which is also : $200000
Rhonda and Blake shares from their joint account will be insured as well : $10000
Total insured amount by FDIC = 250000 + 100000 + 200000 +200000 +100000 = $850000
Required initormation Potential Misstatements in the Revenue Cycle Read the overview below and complete the activities that follow. The revenue cycle is a major cycle for most companies. Accounts receivable, revenue, and other accounts are tested through this cycle. Often there are misstatements found, including errors and/or fraud by the client.
CONCEPT REVIEW: It is important in testing any cycle, especially revenue, to realize that misstatements will occur and to try to distinguish between errors and fraud
1. Many instances of misstatement are based on the inappropriate recognition of __________
2. One way to avoid misstatement of revenue is to ensure the client has proper ________
3. Revenues are deemed to be earned when the company has ____________what it must do to fulfill its obligation
4.Side ___________ can substantially alter the terms of a sale.
5. __________ needs to be assured in order to recognize revenue.
1.controls,errorsmisstatementrevenuerisk2. cutoff policiesinsurance policiesliability policiesrisk policiessecurity policies3. accomplishedanticipatedauditedconsidereddiscovered4. agreementsauditscompaniesinventoriespolicies5. collectabilitycompletionconfirmationinventoryshipping
Answer:
Many instances of misstatement are based on the inappropriate recognition of controls, errors,misstatement,revenue and risk.One way to avoid misstatement of revenue is to ensure the client has proper cutoff policies,insurance policies,liability policies,risk policies and security policies.Revenues are deemed to be earned when the company has accomplished,anticipated,audited,considered and discovered what it must do to fulfil its obligation. Side agreements,audits,companies,inventories and policies can substantially alter the terms of a sale.Collectability,completion,confirmation,inventory and shipping needs to be assured in order to recognize revenue.
Selling, general, and administrative expenses were $69,000; net sales were $313,500; interest expense was $7,400; research and development expenses were $32,700; net cash provided by operating activities was $82,200; income tax expense was $7,900; cost of goods sold was $171,600. Required: a. Calculate operating income for the period. b. Calculate net income for the period.
Answer:
Operating income is $40,200
Net income is $24,900
Explanation:
The operating income is the net sales minus the costs of goods sold, the selling,general and administrative expenses,research and development expenses.This is known as earnings before interest and tax(EBIT).
The net income is the operating income minus the interest expense as well as the tax expense for the year,which is known as earnings after tax.
Net sales $313,500
Costs of goods sold ($171,600)
Gross profit $141,900
Selling,general and administrative expenses ($69,000)
Research and development expenses ($32,700)
Operating income $40,200
Interest expense ($7,400)
income tax expense ($7,900)
net income $24,900
The operating income for the period is calculated as $40,200, and net income for the period comes out to be $24,900.
Explanation:To begin with, the operating income can be calculated using the following formula: Net sales - Cost of goods sold - Selling, General and Administrative expenses - Research and Development expenses. So, using the given numbers, operating income will be $313,500(net sales) - $171,600 (cost of goods sold) - $69,000 (selling, general and administrative expenses) - $32,700 (research and development expenses) = $40,200.
Moving on to net income, it can be calculated by subtracting the interest expense and the income tax expense from the operating income. So, the net income will be $40,200 (operating income) - $7,400 (interest expense) - $7,900 (income tax expense) = $24,900.
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Canine Supply Company’s budgeted sales for January, February, and March are $120,000, $160,000, and $140,000, respectively. Based on past experience, ABC expects that 25% of a month’s sales will be collected in the month of sale, 65% in the following month, and 9% in the second month following the sale. Budgeted cash receipts for the month of March would be
Answer:
$149,800
Explanation:
- 25% will be received the same month = 140000*0.25 = 35000.
- 65% will be received the following month = 160000*0.65 = 104000.
- 9% will be received the second month after = 120000*0.09 = 10800.
Hence total receipt will be = 35000+104000+10800 = 149800.
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ABC opened for business on January 1, 2018, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What was the balance in ABC's Prepaid Insurance account as of December 31, 2018
Answer:
$18,000
Explanation:
Data provided in the question
Liability policy for 18 months = $36,000
And, the crop damage policy = $12,000 for two years
So by considering the above information, the balance in the ending prepaid insurance account is
= Liability policy ÷ number of years
= $36,000 ÷ 2 years
= $18,000
By dividing the liability policy with the number of years we can get the ending balance and the same is shown above
True or false?
The foreign exchange market serves two main functions. The first is to convert the currency of one country into the currency of another, and the second is to provide some insurance against foreign exchange risk. When two companies are trying to provide some insurance against foreign exchange risk, they can either exchange the currency immediately, which is called spot exchange, or at a specific date in the future, which is called a forward exchange rate.
Answer:
true.
Explanation:
called sopt exchange, or at a specific date in the future, which is called a forward exchange rate.
Final answer:
True. The foreign exchange market serves two main functions: currency conversion and providing insurance against foreign exchange risk. Companies can choose to exchange currency immediately or at a specified future date.
Explanation:
True. The foreign exchange market serves two main functions. The first function is to convert the currency of one country into the currency of another. This is done through trading in the market, where one currency is bought using another currency. The second function is to provide insurance against foreign exchange risk. When two companies want to protect themselves from potential changes in exchange rates, they can either exchange the currency immediately in the spot exchange or agree to exchange at a specified future date using a forward exchange rate.
The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 40 cars per month. The cars cost $60 each, and ordering costs are approximately $15 per order, regardless of the order size. The annual holding cost rate is 20%.
(a) Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
If required, round your answers to two decimal places.
Q* =
Total Cost = $
(b) Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars.
If required, round your answers to two decimal places.
S* =
Total Cost = $
(c) What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year.
If required, round your answer to two decimal places.
Length of backorder period = days
(d) Would you recommend a no-backorder or a backorder inventory policy for this product? Explain.
If required, round your answers to two decimal places.
Recommendation would be - Select your answer -backorderno-backorderItem 6 inventory policy, since the maximum wait is only days and the cost savings is $ .
(e) If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies?
If required, round your answers to two decimal places.
Reorder point for no-backorder inventory policy is .
Reorder point for backorder inventory policy is .
Answer:
Task a:Task a.1EOQ = 34.64 orders
Task a.2Total annual cost = $29,215.69
Task b:Task b.1Total Cost Minimum inventory policy=( bS2/ 2Qbo) + P (Qbo- S)2/2Qbo + K(D/Qbo)
Task b.2Total annual cost = $207.91
Task cThe maximum number of days = 6.09 days
Task dThe saving in using backorder is $207.79
Task eTask e.1:Reorder point = 9.6
Task e.2:Reorder point = 3.51
Explanation:
Demand per month= 40 cars
Annual Demand (D)= 12*40 = 480
Ordering cost per order (K)= $15
Holding Cost= 20% of cost= $60 *0.2 = 12
Task aDetermine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
If required, round your answers to two decimal places.
Task a.1Calculate EOQEOQ = [tex]\sqrt\frac{2CoD}{Ch}[/tex]
EOQ = [tex]\sqrt\frac{2*15*480}{12}[/tex]
EOQ = 34.64 ordersTask a.2Total annual cost:
Total annual cost = P×D + Co × ([tex]\frac{D}{EOQ}[/tex]) + Ch × ([tex]\frac{EOQ}{2}[/tex])
Total annual cost = 60 × 480 + (15 × [tex]\frac{480}{34.64}[/tex]) + (12 × [tex]\frac{34.64}{2}[/tex])
Total annual cost = $28,800 + $207.85 + $207.84
Total annual cost = $29,215.69
Task b:Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars.
If required, round your answers to two decimal places.
S* =
Total Cost = $
Solution:
Task b.1Minimum cost inventory policy:Backorder Cost (b)= $45
Qbo= Q* × √( b+h/ h)
= 35*√(12+45/ 45)
= 35* 1.12
=39.28
Shortage (S)= Qbo * (K/K+b)
= 39* (15/15+45)
= 39* 0.25
= 9.75
Total Cost Minimum inventory policy=( bS2/ 2Qbo) + P (Qbo- S)2/2Qbo + K(D/Qbo)
Task b.2Total annual cost = 45* 9.752 / 2* 392 + 60 (39-9.75)2/ 2* 392 + 15 ( 480/39)
= 1.40+ 21.9.+ 184.61
=$207.91
Task c:What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year.
If required, round your answer to two decimal places.
Solution:Length of backorder days (d) = Demand ÷ amount of working days
d = 480 ÷ 300
d = 1.6
Calculate the backorders as the maximum number of backorders divided by the demand per day
s/d = 9.75/1.6 = 6.09 days (answer)
Task dWould you recommend a no-backorder or a backorder inventory policy for this product? Explain. If required, round your answers to two decimal places.
Recommendation would be inventory policy, since the maximum wait is only days and the cost savings is $._____
Solution:
Calculate the difference in total between not using backorder:
$207.85 + $207.85 - 207.91 = $207.79
The saving in using backorder is $207.79.
Task eIf the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies? If required, round your answers to two decimal places.
Task e.1Reorder point for no-backorder inventory policy is .
Task e.2Reorder point for backorder inventory policy is .
Solution:Task e.1Reorder point for no-backorder inventory policy is .
Reorder point = d*lead timeReorder point = 1.6*6
Reorder point = 9.6
Task e.2Reorder point for backorder inventory policy is .
Reorder point = d*lead time - S
Reorder point = 1.6*6 - 6.09
Reorder point = 3.51
To determine the Economic Order Quantity (EOQ) and total annual cost:
EOQ Calculation: EOQ formula is:Total Cost without backorders: $29520.55
Backorder Cost Calculation: Minimum cost policy with backorders involves EOQ with backorder cost (C) taken into account:Maximum number of backorder days:
Given: Hobby Shop open for 300 days per year
Length of backorder period = (Q*/D) * (P/P+S), where P is the number of backorders filled during the cycle and S = remaining time backorder is held.
Therefore, maximum waiting time = (20.55/480) * 300 = 0.12 * 300 = 36 days.
Recommendation
It would be prudent to recommend a backorder policy because the cost savings of $21,122.18 annually outweigh the inconvenience of 36 days of potential backorders.Reorder PointWithout backorders:Anthonia is a senior manager at Buxley Corp., a motorcycle manufacturer. Buxley has entered an equity alliance with Supremo, a moped manufacturer. "Don't worry, Anthonia," her counterpart at Supremo tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set." What else should Anthonia request from Supremo?
A) personnel exchanges to share tacit knowledge
B) a gradual change from an equity alliance to a non-equity alliance to show greater commitment
C) nothing, because the information transfer described is complete and appropriate
D) a licensing agreement so that Buxley can exchange codified knowledge with Supremo
Answer: A) personnel exchanges to share tacit knowledge
Explanation:
Buxley has entered an EQUITY ALLIANCE with Supremo, meaning that they are now both shareholders in each other's Companies as they both acquired minority stakes in the other company.
Anthonia should definitely request personnel exchanges to share tacit knowledge. Tacit knowledge refers to knowledge that is better passed in person as it can be quite difficult to transfer by writing or otherwise. Buxley and Supremo could stand to gain from knowing the strategies that they both employ if they have personnel on ground to actually show them how they do certain things.
Doyle Company issued $381,000 of 10-year, 7 percent bonds on January 1, Year 1. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Doyle immediately invested the proceeds from the bond issue in land. The land was leased for an annual $73,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 1. Required a. Prepare the journal entries for these events, and post them to T-accounts for Year 1 and Year 2.
Answer:
Year 1:
Issue of bonds:
Dr Cash $381,000
Cr Bonds payable $381,000
Purchase of land:
Dr Land $381,000
Cr Cash $381,000
Receipt of lease rental:
Dr Cash $73,500
Cr Lease revenue $73,500
Payment of coupon interest:
Dr interest expense $26,670
Cr Cash $26,670
Year 2
Receipt of lease rental:
Dr Cash $73,500
Cr Lease revenue $73,500
Payment of coupon interest:
Dr interest expense $26,670
Cr Cash $26,670
Find attached t accounts.
Explanation:
Upon the issue of bonds for $381,000 the cash account would be debited with $381,000 while bonds payable account is credited with $381,000.
However,when the cash proceeds is invested in land,the land account would be debited with $381,000,while the cash account is credited with $381,000.
Besides,on receipt of annual lease rental the cash account is debited with $73,500 while the lease revenue is credited with $73,500.
The coupon interest is $381,000*7%=$26670
This would necessitate debiting interest expense with $26,670 while cash is credited with same amount.
Green Planet Corp. has (a) 5,800 shares of cumulative 11% preferred stock with a $2 par value and (b) 22,000 shares of common stock with a $0.01 par value. During its first two years of operation, Green Planet declared and paid the following total cash dividends. Compute the dividends paid each year to each of the two classes of stockholders: preferred and common.
Answer:
Find attached complete question:
Year 1:
Preferred stock dividends is $760
common stock is $0
Year 2:
Preferred stock dividends is $1,792
Common stock dividends is $408
Explanation:
The dividends paid as found in the attached were:
Year 1 $760
Year 2 $2,200
Preferred stock dividends =$2*5800*11%=$1276
Hence in the year the $760 would be paid preferred stockholders leaving a balance of $516 ($1,276-$760) to be paid next year.
preferred stock dividends in the second year=$516+$1276=$1,792
Common stock dividends in year 2=$2,200-$1,792=$408
The Computation of the Dividends Paid to Preferred and Common Stockholders is as follows:
Preferred Common
Stockholders Stockholders
Year 1 $760 $0
Year 2 $1,792 $408
Data and Calculations:
5,800 shares, 11% Cumulative Preferred Stock at $2 par value = $11,600
22,000 shares, Common Stock at $0.01 par value = $220
Year 1 Cash Dividends = $760
Year 2 Cash Dividends = $2,200
The Computation of the Dividends Paid to Preferred and Common Stockholders is as follows:
Preferred Stockholders Common Stockholders
Arrears Amount Paid
Year 1 $1,276 ($11,600 x 11%) $516 $760 $0 ($760 - $760)
Year 2 $1,276 ($11,600 x 11%) $1,792 $1,792 $408 ($2,200 - $1,792)
Thus, only cumulative preferred stockholders received dividends in Year 1 with their Year 1 balance cumulating in Year 2.
Learn more: cumulative preferred stock at brainly.com
Marigold Corp. had 1,000,000 shares of common stock issued and outstanding at December 31, 2017. On July 1, 2018 an additional 1,000,000 shares were issued for cash. Marigold also had stock options outstanding at the beginning and end of 2018 which allow the holders to purchase 292000 shares of common stock at $21 per share. The average market price of Marigold’s common stock was $28 during 2018. The number of shares to be used in computing diluted earnings per share for 2018 is
Answer:
1,573,000 shares
Explanation:
The computation of the shares computing diluted earnings per share for 2018 is shown below:
= 1,000,000 shares × 6 months ÷ 12 months + 2,000,000 shares × 6 months ÷ 12 months + [($28 - $21) ÷ 28 ] × 292,000 shares
= 500,000 shares + 1,000,000 shares + 73,000 shares
= 1,573,000 shares
The 2,000,000 shares is come from
= 1,000,000 shares + 1,000,000 shares
= 2,000,000 shares
Radisson Enterprises sells a product for $69 per unit. The variable cost is $40 per unit, while fixed costs are $206,045. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $75 per unit.
Answer:
1. 7,105 units
2. 5,887 units
Explanation:
The computation of given question is shown below:-
a. Contribution margin per unit = Sale price - Variable cost
= $69 - $40
= $29
Break-even point in sales units = Fixed costs ÷ Contribution margin per unit
= $206,045 ÷ 29
= 7,105 units
b. Contribution margin per unit
= $75 - $40 = $35
Break-even point = Fixed cost ÷ Contribution margin per unit
$206,045 ÷ $35
= 5,887 units
Preparing a Direct Labor Budget Tulum Inc. makes a Mexican chocolate mix. Planned production in units for the first 3 months of the coming year is: January 24,700 February 22,000 March 30,200 Each box of chocolate mix takes 0.4 direct labor hour. The average wage is $17 per hour. Prepare a direct labor budget for the months of January, February, and March, as well as the total for the first quarter.
Answer:
Jan = $306 in direct labour costs
Feb = $272 in direct labour costs
March = $357 in direct labour costs
Total for the quarter = $935 in direct labour costs
Explanation:
0.4 hours is 24 minutes
January
= 24 700 units / 24 minutes = 1029
1029 minutes would be required for 24 700 units
1029 minutes / 60 = 17.15 hours. We round up to 18 hours
18 hours* $17 per hour = $306
Therefore, $306 in direct labour costs in January
February
= 22 000 units / 24 minutes = 917
917 minutes would be required to produce 22 000 units
917 minutes / 60 = 15.3 hours. We round up to 16 hours
16 hours * $17 per hour = $272
Therefore, $272 in direct labour costs in February
March
= 30 200 units / 24 minutes = 1258
1258 minutes would be required to produce 30 200 units
1258 minutes / 60 = 20.97 hours. We round up to 21 hours
21 hours * $17 per hour = $357
Therefore, $357 in direct labour costs in March
Total for the quarter = 306 + 272 + 357 = 935
$935 in direct labour costs for the first quarter
Answer:
The direct labor costs for January ,February and March are $ 167960
$ 149600 and $ 205360 and total is $ 522,920
The direct labor hours for January ,February and March are 9880 8800 and 12080 . Total Direct Labor hours are 30760
Explanation:
Tulum Inc.
Direct Labor Budget
January February March Total
Units 24,700 22,000 30,200 76,900
DLH per unit 0.4 0.4 0.4
DLHs 9880 8800 12080 30760
Wage/hr $ 17 $ 17 $ 17
Wages $ 167960 $ 149600 205360 $ 522,920
The direct labor costs for January ,February and March are $ 167960
$ 149600 and $ 205360 and total is $ 522,920
The direct labor hours for January ,February and March are 9880 8800 and 12080 . Total Direct Labor hours are 30760
Wolf Den Craft Beers projects that it will need $50 million in total assets to meet the sales projection of $65 million. The pro forma balance sheet shows accounts payable, $8 million, accrued expenses, $2 million, longminusterm debt, $10 million and equity, $25 million. If Wolf Den decides to meet discretionary financing needs with 5 year notes payable, how much will it need to borrow?
Answer:
$5 million
Explanation:
As we know the asset is financed from two capital sources equity and liability.
Using Accounting equations as follow
Assets = Equity + Liabilities
Total Assets Value = Equity Value + ( Account Payable + Accrued expenses + Long-Term Debt )
As we both sides are not equal, asset are more that the sum of equity and liabilities so we need more borrowing to finance the assets.
$50 million = $25 millions + ( $8 million + $2 million + $10 million ) + Additional Borrowing
$50 million = $25 millions + $20 million + Additional Borrowing
$50 million = $45 millions + Additional Borrowing
Additional Borrowing = $50 million - $45 millions
Additional Borrowing = $5 million
Wolf Den Craft Beers needs to borrow $5 million to meet its assets requirement of $50 million after accounting for its existing liabilities and equity.
Wolf Den Craft Beers needs to calculate the amount that it will need to borrow in order to meet its discretionary financing needs based on the projected total assets and liabilities. The company projects it will need $50 million in total assets to meet a sales projection of $65 million. The pro forma balance sheet indicates current liabilities: accounts payable of $8 million, accrued expenses of $2 million, long-term debt of $10 million, and equity of $25 million. To calculate the discretionary financing needed, we start by adding up the liabilities and equity, which totals to $45 million ($8 million + $2 million + $10 million + $25 million). Since the total assets needed are $50 million, Wolf Den will need to borrow the difference, which is $5 million ($50 million - $45 million) using 5-year notes payable.
Production Budget
Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7 sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five quarters are as follows:
S12L7 S12L5
First quarter, 20X1 1,120 1,820
Second quarter, 20X1 3,080 1,960
Third quarter, 20X1 7,840 7,420
Fourth quarter, 20X1 6,440 5,460
First quarter, 20X2 1,260 1,680
The vice president of sales believes that the projected sales are realistic and can be achieved by the company.
Stillwater Designs needs a production budget for each product (representing the amount that must be outsourced to manufacturers located in Asia). Beginning inventory of S12L7 for the first quarter of 20X1 was 340 boxes. The company's policy is to have 20% of the next quarter's sales of S12L7 in ending inventory. Beginning inventory of S12L5 was 170 boxes. The company's policy is to have 30% of the next quarter's sales of S12L5 in ending inventory.
Required:
a.Prepare a production budget for each quarter for 20X1 and for the year in total.
Stillwater Designs
Production Budget for S12L7
For the Year Ended December 31, 20X1
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
b. Prepare a production budget for each quarter for 20X1 and for the year in total. If required, round your answers to nearest whole value.
Stillwater Designs
Production Budget for S12L5
For the Year Ended December 31, 20X1
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
Answer:
Stillwater Designs
Production Budget for S12L7
For the Year Ended December 31, 20X1
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
Sales 1,120 3,080 7,840 6,440
Desired ending inventory 616 1,568 1,228 252
Total needs 1,736 4,648 9,068 6,692
Less: Beginning inventory (340) (616) (1,568) (1,228)
Units produced 1,396 4,032 7,500 5,464
Stillwater Designs
Production Budget for S12L5
For the Year Ended December 31, 20X1
1,680
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
Sales 1,820 1,960 7,420 5,460
Desired ending inventory 588 2,220 1,638 504
Total needs 2,408 4,180 9,058 5,964
Less: Beginning inventory (170) (588) (2,220) (1,638)
Units produced 2,238 3,592 6,838 4,326
Explanation:
Production Budget shows the quantities of finished goods that must be produced to meet expected sells plus any increase of inventory levels that might be required.
Final answer:
The production budget for Stillwater Designs is calculated by considering the projected sales, desired ending inventory, and beginning inventory for both S12L7 and S12L5 subwoofers. Production budgets determine units to be produced each quarter. Additionally, economies of scale imply that producing larger quantities can lead to lower average costs until a limit is reached.
Explanation:
The production budget for Stillwater Designs' automotive subwoofers, the S12L7 and S12L5, must take into account projected sales, desired ending inventory, and beginning inventory to determine the units produced each quarter. For the S12L7, with beginning inventory of 340 units and a 20% ending inventory policy, we calculate units produced by first determining the necessary ending inventory and total needs for each quarter, then subtracting current inventory. The S12L5 follows a similar process but begins with 170 units and maintains a 30% ending inventory policy.
On the topic of economies of scale, the decision by a manager of an automobile assembly plant on whether to produce cars or SUVs, given equal input quantities, should also consider potential cost reductions at higher production levels. As production quantity increases, average costs may decrease due to economies of scale, up to a certain point where these cost benefits plateau or diminish.