Answer: 5
Explanation:
The measure used to evaluate a change in company 's operating income as a result of relative change in sales is called degree of operating leverage of the company. The operating leverage has two components that is fixed cost and variable cost.
.
Operating income of a company is denoted as EBIT, that is, earnings before interest and tax.
.
FORMULA = [tex]\frac{percentage\ change\ in\ EBIT}{percentage\ change\ in\ sales}[/tex]
= [tex]\frac{50}{10}[/tex] = 5
note :-
percentage change in EBIT = [tex]\frac{1.5-1}{1}[/tex]= 50%
Which of the following statements about annuities are true? Check all that apply. An annuity due earns more interest than an ordinary annuity of equal time. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period.
The statements that an annuity due earns more interests than an ordinary annuity, an annuity involves a series of equal payments at fixed intervals, and an annuity due makes payments at the beginning of each period are correct. The statement that ordinary annuities make payments at the beginning of each period is incorrect as they actually make payments at the end of each period.
Explanation:Among the statements provided about annuities, the first and second one are correct. An annuity due, indeed, earns more interest than an ordinary annuity of equal time because payments are made at the beginning of each period, allowing more time for interest accumulation. Also, it is correct to say that an annuity is a series of equal payments made at fixed intervals for a specified number of periods, which is the basic definition of any annuity. However, the third statement which suggests that ordinary annuities make fixed payments at the beginning of each period is incorrect. Ordinary annuities make their payments at the end of each period, unlike annuity due.
The fourth statement is also correct, as it correctly described an annuity due, which as per definition, is an annuity that makes a payment at the beginning of each period.
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Job 397 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $ 46,000 Direct labor-hours 630 DLHs Direct labor wage rate $ 12 per DLH Number of units completed 4,000 units The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $11 per direct labor-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. (Round your answer to 2 decimal places.)
Answer:
Cost per unit for Job 397 = $15.12
Explanation:
Provided overhead predetermined rate = $11 based on Direct Labor Hours,
Therefore overheads will be charged on such predetermined rate.
Cost of direct material = $46,000
Cost of Direct Labor = $12 X 630 = $7,560
Cost of Overhead = $11 X 630 = $6,930
Total cost of units produced = $60,490
Total number of units produced of the Job 397 = 4,000 units
Cost per unit for Job 397 = $60,490/4,000 = $15.12
A term describing a firm's normal range of operating activities is: (a) Relevant range of operations. (b) Break-even level of operations. (c) Margin of safety of operations.
Answer:
A firm's normal range of operating activities is relevant range of operations.
Explanation:
Relevant range of operations can be described simply as a firm or company's expected range of activities without any extreme economic conditions. It is the range where the firm operates in normal conditions. Within this range the firm's operations run smoothly. Outside this range revenue and expenditure may fluctuate from what was expected.
Poodle Corporation was organized on January 3, 2018. The firm was authorized to issue 98,000 shares of $5 par common stock. During 2018, Poodle had the following transactions relating to shareholders' equity: Issued 24,000 shares of common stock at $5.20 per share. Issued 30,000 shares of common stock at $8.50 per share. Reported a net income of $100,000. Paid dividends of $45,000. What is total Paid-in capital at the end of 2018?
Answer:
The total Paid-in capital at the end of 2018 is $384,600
Explanation:
The computation of total paid in capital is shown below:
Par value of First issue common stock = 24,000 × $5.20 = $124,800
Par value of Second issue common stock = 30,000 × $5 = $150,000
Add: Excess of paid in capital
First issue of common stock = 24,000 × ($5.20 - $5) = $4,800
Second issue of common stock = 30,000 × ($8.50 - $5) = $105,000
So, the total paid in capital = $124,800 + $150,000 + $4,800 + $105,000
= $384,600
Thus, The total Paid-in capital at the end of 2018 is $384,600
J & B Corp. is investing in a major capital budgeting project that will require the expenditure of $20 million. The money will be raised by issuing $5 million of bonds, $3 million of preferred stock, and $12 million of new common stock. The company estimates is after-tax cost of debt to be 5%, its cost of preferred stock to be 9%, the cost of retained earnings to be 13%, and the cost of new common stock to be 16%. What is the weighted average cost of capital for this project?a)12.20%b)11.90%c)10.75%d)10.00%
Answer:
a) WACC = 12.20%
Explanation:
Weighted average cost of capital is computed by allocating weights to different capitals.
Cost of bonds = Cost of debt = 5%
Cost of preferred stock = 9%
Cost of equity = 16%
As it is new issued and not from retained earnings.
With weights cost will be as follows
Bonds = 5% X $5/$20 = 1.25%
Preference share = 9% X $3/$20 = 1.35%
Equity = 16% X $12/$20 = 9.6%
WACC = 1.25 + 1.35 + 9.6 = 12.20%
Answer:
a) 12.20%
Explanation:
For calculating the WACC which is termed as weighted average cost of capital, will be calculated here by taking out weighted proportion of each bonds, preferred stock and new common stock and multiplying these weighted proportion by the cost of debt, cost of preferred stock and cost of new common equity respectively. And at last we will add all three of them.
WACC = weightage of debt x cost of debt
+
weightage of preferred stock x cost of preferred stock
+
weightage of common stock x cost of common stock
= 25% ( 5/20 x 100) x 5% + 15% x 9% + 60% x 16%
= .25 x .05 + .15 x .09 + .6 x .16
= .0125 + .0135 + .096
= .122 ( multiplying by 100 to make it in percentage)
= 12.2%
Boxer Company owned 16,000 shares of King Company that were purchased in 2016 for $440,000. On May 1, 2018, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $22 per share on the date of declaration and $38 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?
Answer:
By 110,000 the retained earnings reduced by the property dividend.
Explanation:
Retained Earnings: The retained earnings is that earnings which is left after all payments relating to the business expenses, shareholder dividend. The earnings which is to be retained so that it can come in use in near future.
For retained earning calculation, the stock market value is recorded when the date is declared not on distribution date.
So, the calculation is computed below:
As the 50,000 shares is given for every 10 shares. So, first we have to compute for 1 share which comes by dividing shares to number of shares i.e. 50,000 shares ÷ 10 shares = 5,000 for 1 share.
Now, multiply by market value which comes = 5,000 × $22 = $110,000.
So, by 110,000 the retained earnings reduced by the property dividend.
San Ruiz Interiors provides design services to residential and commercial clients. The residential services produce a contribution margin of $450,000 and have traceable fixed operating costs of $480,000. Management is studying whether to drop the residential operation. If closed, the fixed operating costs will fall by $370,000 and San Ruiz’ income will:
Answer:
If closed the operating income will decrease by 50,000
Is a better scenario to continue with the residential sercives
Explanation:
current scenario:
contribution margin 450,000
Fixed Cost 480,000
net loss 30,000
drop scenario:
contribution margin = 0
fixed cost 450,000-370,000 = 80,000
net loss (80,000)
A college textbook is selling for (US) $140 in the United States. That same textbook sells in Canada for (CA) $150. The exchange rate is (CA) $1.10 = (US) $1.00. Shipping costs are (US) $5.00. Ignoring the shipping costs. What is the U.S. price of the textbook purchased in Canada? (US) $
Answer:
The U.S. price of the textbook purchased in Canada is of $135.
Explanation:
Assuming that the exchange rate is CA $1.10 = US $1.00, we can say that a Canadian Dollar is 10/11 or 0.90 of an American Dollar. As the textbook costs CA $150, we have to multiply 150 by the value of a Canadian Dollar with respect to an American Dollar: 150 x 0.90 = 135. Therefore, the U.S. price of the textbook purchased in Canada is of US $135.
Answer:
the reponse is answer 145$
Jill invests $1,000.00 to buy ten shares of Good Corporation. The corporation goes bankrupt having no assets and $1 million in liabilities. The most Jill can lose is the $1,000.00 she invested. This is an example of the corporate characteristic of: A. Limited liability. B. Free transferability of shares. C. Perpetual existence. D. Centralized management.
Answer:
A. Limited liability.
Explanation:
The limited Liabilities company's protects their members and managers.
It protects their personal assets from the business liabilities.
The laiblities of the business will be settle with the busieness assets. IF there are no more assets, then debts defaults and become uncollectible.
Columbus Company provides the following ABC costing information: Activities Total Costs Activity dash cost drivers Labor $ 480 comma 000 10 comma 000 hours Gas $ 32 comma 000 4 comma 000 gallons Invoices $ 110 comma 000 5 comma 500 invoices Total costs $ 622 comma 000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor 3 comma 000 hours 1 comma 200 hours 5 comma 800 hours Gas 1 comma 700 gallons 900 gallons 1 comma 400 gallons Invoices 1 comma 500 invoices 400 invoices 3 comma 600 invoices If labor hours are used to allocate the nonminuslabor, overhead costs, what is the overhead allocation rate
Answer:
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Explanation:
Provided
Activity Total costs Cost Driver
Labor $480,000 10,000 hours
Gas $32,000 4,000 gallons
Invoices $110,000 5,500 invoices
Total costs $622,000
Used as follows
Particulars Lawn Dept. Bush dept. Plowing Dept.
Labor 3,000 hours 1,200 hours 5,800 hours
Gas 1,700 gallons 900 gallons 1,400 gallons
Invoices 1,500 invoices 400 invoices 3,600 invoices
If labor hours are used even for non labor activities then
Overhead costs will be allocated in ratio of labor hours i.e. 3000:1200:5800
= 15:6:29 (Total = 50)
Total overheads = $622,000
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Lawn Department = $62.2 [tex]\times[/tex] 3,000 hours = $186,600
Bush Department = $62.2 [tex]\times[/tex] 1,200 hours = $74,640
Plowing Department = $62.2 [tex]\times[/tex] 5,800 hours = $360,760
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Suppose you know that a company’s stock currently sells for $65 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Final answer:
The current dividend per share is $6.50.
Explanation:
To find the current dividend per share, we need to determine the growth rate in dividends. Since the total return on the stock is evenly divided between the capital gains yield and the dividend yield, we can assume that the growth rate in dividends is the same as the growth rate in stock price. The capital gains yield is the difference between the required return and the dividend yield:
Capital gains yield = Required return - Dividend yield
In this case, the required return is 15% and the stock price is $65 per share. Let's assume the dividend yield is x:
Capital gains yield = 0.15 - x
We know that the dividend yield is equal to the dividend per share divided by the stock price:
Dividend yield = Dividend per share / Stock price
Substituting the values, we can solve for the dividend per share:
x = (Dividend per share) / 65
Capital gains yield = 0.15 - (Dividend per share) / 65
Since the total return is evenly divided between the capital gains yield and the dividend yield, the growth rate in dividends is equal to half of the total return:
Growth rate in dividends = (Capital gains yield) / 2
Growth rate in dividends = (0.15 - (Dividend per share) / 65) / 2
Now we can set up an equation to solve for the dividend per share:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Simplifying the equation:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Dividend per share = $9.75 - (Dividend per share) / 2
Dividend per share + (Dividend per share) / 2 = $9.75
3/2 * Dividend per share = $9.75
Dividend per share = ($9.75 * 2) / 3
Dividend per share = $6.50
Fess receives wages totaling $74,500 and has net earnings from self-employment amounting to $71,300. In determining her taxable self-employment income for the OASDI tax, how much of her net self-employment earnings must Fess count? a. $74,500 b. $71,300 c. $53,900 d. $127,200 e. None of the above.
Fess wages $74500
Net self employ $51300
Fess must count $39,200 of the taxable self employment income for the OASDI tax _______
125,800 First
First $113700
(125,800)
_________
12,100
-
Correct Answer: $39,200
($113,700 - $74,500)
Final answer:
Fess has to count her entire net self-employment earnings of $71,300 for the OASDI tax, as it is part of her income subject to self-employment taxes.
Explanation:
The question involves calculating the taxable self-employment income for Fess concerning the OASDI (Social Security) tax. Fess's total wages are $74,500, and she also has net earnings from self-employment of $71,300. Since both forms of income are subject to Social Security taxes up to a certain limit, and given that for 2023, the Social Security wage base limit is $147,000, Fess would have to consider her entire self-employment earnings along with her wage earnings for the OASDI tax calculation. The correct answer is $71,300, as that is the part of her income subject to self-employment taxes in addition to her wages, without exceeding the Social Security wage base limit.
Which of the following statements is CORRECT? a. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation. b. There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is very small. c. It is usually easier to transfer ownership in a corporation than in a partnership. d. Corporate shareholders are exposed to unlimited liability. e. Corporations generally face fewer regulations than proprietorships.
Answer:
c. It is usually easier to transfer ownership in a corporation than in a partnership
Explanation:
(A) (D) Shareholders has limited liability. It is the partnership members which has unlimited liability.
(E) Corporations, because manage large sum of capital are more regulated.
(B) Corporation can lobby to get tax exemption, also the income tax scales with income, not with business legal form. There is no tax disadvantage
(C) In a Corporation you can sale your shares (right of ownership) any time in open market. While in a partnership there are restrictions from you leaving right away.
Active Alarm is replacing its old device manufacturing machine with a new one. The old machine is being sold for $200,000 and it has a book value of $50,000. The tax rate for Active Alarm is 40%. How much cash will Active Alarm net from the sale of the old machine?
Answer:
The sale of the machine will generate an after-tax income of 90,000
Explanation:
The company will be paying a tax income for the diference between the sales price and the book value at a rate of 40%
200,000 - 50,000 = 150,000 x 40% = 60,000 tax income
150,000 gross profit - 60,000 tax income = 90,000 net gain from sale of machine
Salvage value refers to the estimated residual worth of an asset at the end of its useful life. It represents the amount that can be obtained by selling or disposing of the asset after it has been fully depreciated. Hence after-tax value Net Realized Cash is $ 140,000.
Salvage value of plant
book value on date of sale
Gain on disposal
tax on the gain on disposal
After-tax salvage value =
$200,000.00
$50,000.00
$150,000.00
$60,000.00
$140,000
[ 150000 x 0.4]
[ 200000-60000]
It is the residual value of an asset after it has been fully depreciated for tax purposes. The Net Realized Cash is used to calculate the taxable gain or loss when disposing of an asset. This value helps businesses recoup a portion of their investment and can impact their tax liability.
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Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $321,400 Number of purchase orders Scheduling $209,300 Number of production orders Materials handling $471,600 Number of moves Product development $797,200 Number of engineering changes Production $1,463,600 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 3,810 430 1,380 15 1,900 2,000 Tape drives 2,100 175 650 7 9,300 3,800 Wire drives 11,500 990 4,500 20 11,700 2,700 Determine the activity rate for procurement per purchase order.
Answer:
803.5 Activity rate
Explanation:
Determine the activity rate for procurement per purchase order.
321,400 Procurement cost
430 Number of purchase order
Any other data is irrelevant, we only need procurement cost and the number of purchase order.
[tex]cost\div driver = rate[/tex]
321,400 / 430 = 803.5
803.5 Activity rate
Mauro Products distributes a single product, a woven basket whose selling price is $12 per unit and whose variable expense is $10 per unit. The company’s monthly fixed expense is $2,400. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Answer:
1200 BEPunits$14,400 BEP dollarssecond scenario 1200 BEPunits$14,400 BEP dollarsExplanation:
[tex]\frac{Fixed Cost}{contribution margin} = BEPunits[/tex]
contribution margin = Sales - Variable Cost
12 - 10 = 2 contribution margin
fixed expenses = 2,400
BEP = 2,400/2 = 1,200 units
Resuming: each unit contributes with $2 dollars therefore it needs to sale 1,200 untis to pay the fixed cost.
units x sales price = sales revenue
1,200 x 12 = 14,400 BEP in Dollars
Also it is posible to get this by using contribution margin ratio
in the BEP formula:
[tex]\frac{Fixed Cost}{Contribution Margin Ratio} = BEPdollars[/tex]
contribution margin/sales price = 2/12 = 1/6
fixed cost /contribution margin ratio = 2,400/(1/6) = 14,400
Scenario were fixed cost increase:
increase in fixed/contribution margin + previous BEP = BEPunits
increase in fixed/contribution margin ratio + previous BEP = BEPdollars
600 fixed cost /contribution margin = 600/2 = 300 more units to our prevous 1,200 total of 1,500
600 fixed cost /contribution margin ratio = 600/(1/6) = $3,600 more sales revenue to our prevous 14,400 total of 18,000
The break-even point in units is 1,200 units, and in dollar sales, it's $14,400. If fixed expenses increase by $600, the new break-even points would be 1,500 units and $18,000 in dollar sales, respectively.
To calculate the break-even point in unit sales for Mauro Products, we use the formula: Break-Even Point (units) = Fixed Costs /(Selling Price per Unit - Variable Cost per Unit). Applying the provided figures: Break-Even Point = $2,400 /( $12 - $10) = 1,200 units. This means the company needs to sell 1,200 units to cover all its expenses and not incur a loss.
To calculate the break-even point in dollar sales, we multiply the break-even point in units by the selling price per unit. Hence, Break-Even Point (dollars) = 1,200 units * $12 = $14,400. Therefore, Mauro Products needs to have $14,400 in sales to break even.
If the company's fixed expenses were to increase by $600, making the total fixed expenses $3,000, the new break-even point in unit sales becomes $3,000 / ($12 - $10) = 1,500 units. The new break-even point in dollar sales would then be 1,500 units * $12 = $18,000.
Devon Company uses activity-based costing to determine the costs of its two products: A and B. The total estimated cost of the purchasing function activity pool is $14,000. The cost driver for that pool equals number of purchase orders. A total of 400 purchase orders are expected to be issued for the budgeted production of Product A and 300 purchase orders are expected to be issued for the budgeted production of Product B. The activity rate for the purchasing cost pool is:
Answer:
The activity rate will be 20 per order.
For product A it will be $8,000 applied
for Product B it will be $6,000 applied
Explanation:
estimated cost / activity pool = rate
14,000 / 700 = 20
Applied cost:
activity x rate
Product A 400 x 20 = 8,000
Product B 300 x 20 = 6,000
Answer:
$20 per purchase order
Explanation:
Resources in a company are allocated to companies at the beginning of a budgeting period based on consumption estimates. Activity-based costing (ABC) is a method used to identify the activities undertaken by an organisation, assigning the cost of each activity to the goods or services produced or offered by a company based on actual consumption of the related goods or services. The ABC method may support decisions associated with pricing, outsourcing and measurement of process improvements. The method allocates overhead costs of an activity based on cost drivers to determine the activity rate. This rate is then used to allocate costs based on actual consumption.
The overhead cost for the purchasing function of Devon Company is: $14,000
The cost driver is given as the number of purchase orders: 300(A) and 400(B)
The activity rate for the purchasing pool is therefore: $14,000/700 = $20 per order
Application:
If the actual purchase orders were below the estimated amount : say the orders for A were 250 and the actual purchase orders for B were 95, then the total cost of the purchasing function for the period would be (250 * $20) +(95*$20 = $6900 which would be below the $14,000 budget. That would signal that management would need to reassess and lower the resources allocated to the purchasing function during the next budgeting period.
If the actual orders were above the estimated amounts: say the orders for A were 450 and orders for B were 310 then the total cost incurred by the purchasing function would be (450 * $20) + (310 * $20) = $15200 which is above the budget. This would signal that there could be areas for process improvement to avoid redundancies arising from duplication of orders, loss of orders among other process inefficiencies.
"You purchased 350 shares of Organic Food Marketing stock for $3,350 one year ago. The company pays an annual dividend of $0.12 per share. Today, you sold all of your shares for $13.10 a share. What is your total percentage return on this investment?"
Answer:
38.1194% total return on investment
Explanation:
The return of the investment will be:
[tex]\frac{MarketValueSharesToday + Diviends}{PurchaseCost} - 1 = $total return on investment[/tex]
dividends = $0.12 per share x 350 shares = $42
share market value = $13.10 x 350 shares = $4,585
total return =$4,627
purchase cost = $3,350
$4,627/$3,350 - 1 = 0.381194 = 38.1194% total return on investment
A ratio between net income and investment is known as return on investment or return on costs. The return on the investment will be 38.1194%.
What is a return on investment?dividends = $0.12 per share x 350 shares = $42
Share market value = $13.10 x 350 shares = $4,585
total return =$4,627
purchase cost = $3,350
$4,627/$3,350 - 1 = 0.381194
= 38.1194% total return on investment
Your investments in the business are the time and money you devote to enhancing your enterprise. The profit you realize from your investments is the return. The ratio of net profit to the entire cost of the investment is how ROI is often defined.
The profit from an investment is divided by the investment's cost to determine the return on investment (ROI). When represented as a percentage, an investment with a profit of $100 and a cost of $100 would have an ROI of 1 or 100%.
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Victory Tire Company makes a special kind of racing tire. Variable costs are $ 220 per unit, and fixed costs are $ 20 comma 000 per month. Victory sells 500 units per month at a sales price of $ 310. If the quality of the tire is upgraded, the company believes it can increase the sales price to $ 360. If so, the variable cost will increase to $ 230 per unit, and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income
Answer:
If Victory decides to upgrade, the operating income increase by $20,000
Explanation:
For calculating the affect of operating income between two unit levels, the computation of operating income is important.
Steps given for calculating the operating income is given below:
Step 1 : First we have to compute contribution to arrive net operating income .
So, contribution = Sales revenue - variable cost.
Step 2 : Now, the computation of operating income is easy.
Because the operating income is an amount which is come from subtracting fixed cost from contribution.
So, Operating income = Contribution margin - Fixed cost
The computation of both levels is given in the attachment sheet.
Thus, If Victory decides to upgrade, the operating income increase by $20,000
Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $1.79 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of .85, a cost of equity of 11.9 percent, and an aftertax cost of debt of 4.7 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 2 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?
Answer:
Maximum initial cost would be $58,116,883.12
Explanation:
1,790,000 increased at 3%
[tex]WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})[/tex]
Ke 0.119 + 0.02 = 0.139
ER 0.15
Kd(after-tax) Kd(1-t) = 0.047
DR 0.85
[tex]WACC = 0.139(0.15) + 0.047(.85)[/tex]
WACC 0.06080
Now that we have the rate, we calculate the present value using the gordon method
1,790,000 / (0.06080-0.03) = 58,116,883.12
g How much do you need when you retire to provide a $2,500 monthly check that will last for 25 years? Assume that your savings can earn 0.5% a month. $402,766.67 $414,008.24 $388,017.16 $361,526.14
Answer:
The correct answer is $388,017.16
Explanation:
The assumption is that you have to save x money, that generates 0.5% a month, and that provide $2,500 monthly. The savings at second month will be (x-2500) * 1.005. At third month, the saving will be (((x - 2500) * 1.005)-2500)* 1.005. This continues until the twelfth month of the twenty fifth year. The short form of this calculations is [tex]C * (1-(1+i)x^{-t})/ i[/tex], where C is the monthly provision (2500), i is the interest (0.5%) and t is the time (12 months per year, 25 years, 300 months). The result is [tex]2,500 * (1-(1.005)x^{-300} )/0.005 = $388,017.16[/tex].
The amount you need at retirement to provide a $2,500 monthly check that will last for 25 years, with an interest rate of 0.5% per month, is approximately $388,017.16.
To calculate the amount you need at retirement to provide a $2,500 monthly check for 25 years with an interest rate of 0.5% per month, you can use the formula for the present value of an annuity. The formula is:
[tex]PV=\frac{(PMT)(1-(1+r)^{-n} }{r}[/tex]
Where:
PV is the present value of the annuity (the amount you need when you retire).
PMT is the monthly payment ($2,500).
r is the monthly interest rate (0.5%, or 0.005 as a decimal).
n is the total number of payments (25 years × 12 months/year = 300 months).
Let's calculate it:
[tex]PV=\frac{(2500)(1-(1+0.005)^{-300} }{0.005}[/tex]
[tex]PV=388,017.16[/tex]
The amount you need at retirement to provide a $2,500 monthly check for 25 years, assuming your savings can earn 0.5% a month, is approximately $388,017.16. This matches one of the provided options, confirming the calculation.
A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 5 percent. This firm is earning $5.50 on every $50 invested by its founders.a. What is its percentage rate of return?b. Is the firm earning an economic profit? If so, how largec. Will this industry see entry or exit?d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium?
Answer:
(A) the percentage RoR is 11%
(B) Yes, it is the earning are higher than average rate by 600 points,
(C)this industry will see in. The yield is higher than average
(D)Once it reached long run equilibrium it will be industry average of 5.5%
Explanation:
5.5/50 = .11 = 11%
11% - 5% = 6%
Answer:
a. 11%
b. Yes, economic profit is 6%
c. This industry will see more entries.
d. 5%
Explanation:
a.
The percentage rate of return is calculated as percentage of earnings over investment from founders or 5.5/50 = 11%
b.
As the firm return is 11% while normal rate of profit in the economy is only 5%, the economic earning is 6% which is calculated as 11%-5% = 6%.
c.
As there are opportunities in the industry to earn a profit level large than the normal level of the economy as a whole, investors will move more of their funds to the industry to enjoy higher return.
d.
As there are more entries, supply of the industries' products will be increased while demand remains the same. Price is lowered down and industry's profit will decrease subsequently. Once the industry's profit reaches 5% which is the normal profit level of the economy, the industry get in long-run equilibrium as there is no incentives for newcomers to enter the market.
Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,540 per month plus $45 per boat. For the month of April, the company planned for activity of 59 boats, but the actual level of activity was 11 boats. The actual cleaning equipment and supplies for the month was $3,260. The activity variance for cleaning equipment and supplies in April would be closest to:
The activity variance for Pratte Boat Wash's cleaning equipment and supplies in April is the difference between the budgeted cost for 11 boats ($3,035) and the actual cost ($3,260), calculating to be closest to $225.
Explanation:The activity variance for cleaning equipment and supplies in April refers to the difference between the budgeted cost for the actual number of boats cleaned and the actual cost incurred. The budgeted cost for 11 boats is calculated by taking the fixed monthly cost plus the variable cost per boat times the number of boats, which is $2,540 + ($45 × 11 boats) = $2,540 + $495 = $3,035. Comparing this to the actual cost of $3,260, the activity variance is $3,260 - $3,035 = $225. Therefore, the activity variance for cleaning equipment and supplies in April would be closest to $225.
Osborn Manufacturing uses a predetermined overhead rate of $20.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $279,390 of total manufacturing overhead for an estimated activity level of 13,900 direct labor-hours. The company actually incurred $277,000 of manufacturing overhead and 13,400 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin
Answer:
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Explanation:
Provided overhead predetermined rate = $20.10
Provided actual hours = 13,400
Therefore overhead cost based on predetermined rate = 13,400 X $20.10
= $269,340
Whereas actual incurred overheads = $277,000
Amount of overapplied manufacturing overhead = $277,000 - $269,340 = $7,660
Now since the cost is increased of goods sold, company's gross margin will decrease with the same amount = $7,660
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Underapplied overhead= $3,900 underapplied
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3. Joe Henry’s machine shop uses 10,000 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: (12 points) Annual demand 12,000 Holding cost per bracket per year $2.50 Order cost per order $60.00 Lead time 10 days Working days per year 250 a. Given the above information, what would be the economic order quantity (EOQ)? b. Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost? c. Given the EOQ, how many orders would be made each year? What would be the annual order cost? d. Given the EOQ, what is the total annual cost of managing the inventory? e. What is the time between orders? f. What is the reorder point (ROP)?
Answer:
a. 759 units
b. $948.75
c. 16 orders, $960
d. $1908.75
e. 16
f. 480
Explanation:
Economic order quantity (EOQ) is focus on the reducing the cost like - carrying cost, holding cost to produce additional number of a units in a company.
a. The economic order quantity (EOQ) is computed below.
= [tex]\sqrt{\frac{2\times \text{annual demand}\times \text{ordering cost}}{\text{carrying cost per order}}}[/tex]
= [tex]\sqrt{\frac{2\times \text{12,000}\times \text{\$ 60}}{\text{2.50}}}[/tex]
= 759 units
b. Average inventory = Economic order quantity ÷ 2
= 759 ÷ 2
= 379.5
Annual inventory holding cost = Average inventory × holding cost per order
= 379.5 × $2.50
= $948.75
c. Number of orders each year = Demand ÷ Economic order quantity
= 12,000 ÷ 759 units
= 16 orders
Annual order cost = Number of orders × ordering cost
= 16 orders × $60.00
= $960
d. Annual cost = Annual inventory holding cost + Annual order cost
= $948.75 + $960
= $1908.75
e. Time between orders = Number of working days per year ÷ number of orders
= 250 ÷ 16
= 16
f. Reorder Point (ROP) = Daily demand × lead time + safety stock
= (12,000 ÷ 250) × 10
= 480
Thus,
a. 759 units
b. $948.75
c. 16 orders, $960
d. $1908.75
e. 16
f. 480
The Economic Order Quantity for Joe Henry's machine shop is 759 brackets per order. The average inventory is 380 brackets, with an annual holding cost of $950, and 16 orders are placed annually, resulting in an annual order cost of $960. The total annual inventory management cost is $1,910, with 16 days between orders and a Reorder Point of 480 brackets.
Explanation:The Economic Order Quantity (EOQ) model is used to determine the most cost-effective quantity of inventory to order. The EOQ formula is √(2DS/H), where D is annual demand, S is the order cost per order, and H is the holding cost per unit per year. Using the given values:
Annual demand (D) is 12,000 brackets.Order cost (S) is $60 per order.Holding cost (H) is $2.50 per bracket per year.Using these to compute EOQ: √((2 × 12,000 × 60) / 2.50) = √(1,440,000 / 2.50) = √576,000 = 758.77, which can be rounded up to 759 brackets per order.
The average inventory is half of the EOQ, so it would be 759 / 2 = 379.5, rounded to 380 brackets. The annual inventory holding cost is the average inventory multiplied by the holding cost, which is 380 × $2.50 = $950.
The number of orders per year is the annual demand divided by EOQ, which is 12,000 / 759 ≈ 15.81, rounded up to 16 orders per year. The annual order cost is the number of orders multiplied by the order cost, which is 16 × $60 = $960.
The total annual cost of managing inventory includes both the annual order cost and the annual holding cost. It would be $960 (order cost) + $950 (holding cost) = $1,910.
The time between orders, or the order cycle time, is the number of working days per year divided by the number of orders per year. The calculation would be 250 / 16 ≈ 15.62 days, which can be rounded to 16 days between orders.
The Reorder Point (ROP) is calculated as daily demand multiplied by the lead time. Daily demand is annual demand divided by the number of working days, which is 12,000 / 250 = 48 brackets per day. With a lead time of 10 days, the ROP is 48 × 10 = 480 brackets.
An investment project provides cash inflows of $705 per year for eight years. a. What is the project payback period if the initial cost is $1,450? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $3,600? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $5,800? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Answer: A. 2.05 B. 5.10 C. 0
Explanation: Payback period can be defined as the period under which the profits or savings in an investment can recover the initial outlay invested in that investment. In simple words we can say that it is the time required by an investment to pay for itself.
Pay back period is computed as follows :-
[tex]=\:payback\:period=\frac{\:Initial\:cash\:outlay}{cash\:inflows}[/tex]
therefore,
A. [tex]=\:payback\:period=\frac{1450}{705}[/tex]=2.05years
B.[tex]=\:payback\:period=\frac{3600}{705}[/tex]=5.10years
C.[tex]=\:payback\:period=\frac{5800}{705}[/tex]=0
The payback period for an initial cost of $1,450 is approximately 2.06 years. For an initial cost of $3,600, it is about 5.11 years. For an initial cost of $5,800, the project never pays back within the 8-year period.
Explanation:The payback period is the time it takes for a project to recover its initial investment. To calculate it, you divide the initial investment by the annual cash inflows. For the first scenario with the initial cost of $1,450, the payback period is $1450/$705 = 2.06 years. For the second scenario with the initial cost of $3,600, the payback period is $3600/$705 = 5.11 years. Lastly, for the scenario with the initial cost of $5,800, since the project only provides cash inflows for eight years and the payback period is over 8 years, the project never pays back, so the answer is 0.
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Which of the following is a characteristic of a monopoly?A.a large number of sellersB.homogeneous productsC.larger barriers to entryD.price taking firms
Answer:
The correct option here is C) larger barriers to entry.
Explanation:
A monopoly is a form of market where the number of sellers won't be much, as much of the market share is with one company, a really good example of it is Microsoft owning windows operating system.
Here the firms are price makers not price takers , as in monopoly a firm can control both supply and price of goods and service, as if a firm decides to decrease the supply it can sell products at a high cost.
It is really difficult for a new firm to enter in to market if the monopoly has been established , since there would be large initial cost to be incurred for entering and also it will be difficult for the new firm top compete with old one in taking over market share, so that it can also achieve similar low costs as of old one ( monopolist one )
What journal entry is made in a job-order costing system when $8,000 of materials are requisitioned for general factory use instead of for use in a particular job? (a) Work in Process $8,000 Manufacturing Overhead $8,000 (b) Work in Process $8,000 Raw Materials $8,000 (c) Manufacturing Overhead $8,000 Work in Process $8,000 (d) Manufacturing Overhead $8,000 Raw Materials $8,000
Answer:
(d) Manufacturing Overhead $8,000 Raw Materials $8,000
Explanation:
This will be an spending associate with the actual overhead.
These materials are indirect, so it should go in the factory overhead account.
They are not associate with any job in particular, so it cannot be capitalize through work in process.
A company used straight-line depreciation for equipment that cost $12,000, had a salvage value of $2,000, and a 5-year useful life. At the beginning of year 4 of its useful life, the estimate of the salvage value was reduced to $1,200 and its total useful life was increased to 6 years. The amount of depreciation that will be recorded during each of the remaining years of its useful life is:
Final answer:
The amount of depreciation that will be recorded during each of the remaining years of its useful life is $2,000 for the first three years, and $1,800 for the remaining years.
Explanation:
To calculate the amount of depreciation that will be recorded during each of the remaining years of the equipment's useful life, we need to calculate the annual depreciation expense for each year.
The straight-line depreciation method allocates an equal amount of depreciation expense for each year over the useful life of the equipment. To calculate the annual depreciation expense, subtract the salvage value from the initial cost and divide it by the useful life in years.
For the first three years, the annual depreciation expense is ($12,000 - $2,000)/5 = $2,000. For the remaining years, after adjusting the salvage value to $1,200 and increasing the useful life to 6 years, the annual depreciation expense is ($12,000 - $1,200)/6 = $1,800.
If you deposit $6,100 at the end of each of the next 15 years into an account paying 11.3 percent interest, how much money will you have in the account in 15 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Answer:
$214.972,22
Explanation:
The future value of an annuity of $6100 for 15 years at an 11,3% rate.
[tex]\frac{(1+0.113)^{15}-1 }{0.113} * 6,100 = 214,972.22[/tex]
Let's remember that an annuity is when a person deposits the same amount of cash for several periods. When trying to calculate the money at the end of the annuity, we are doing future value. If you are trying to get the value fo the annuity today, it will be the present value.