Answer and Explanation:
The variable manufacturing overhead costs are indirect manufacturing costs of an organization that change as the level of production or sales change such as factory power. Fixed manufacturing overhead costs differ from the former as they are indirect but do not change with change in production level or sales
Planning and control of variable manufacturing overhead costs encompasses both long-run and short-run focus. It involves solutions planning for overhead activities that add value which takes the long-run view while managing the cost drivers of those activities efficiently is the short run aspect of planning and control of variable manufacturing overhead costs. On the other hand planning and control of fixed manufacturing overhead costs have primarily a long-run focus.
Variable manufacturing overhead costs, which include variable factors like raw materials and energy costs, can be managed in both the short and long run, focusing on production levels and efficiency. Fixed manufacturing overhead costs, such as management salaries and lease payments, are static in the short run but become variable in the long run where all costs can be adjusted with strategic planning. The time horizon is crucial in determining the treatment and control of these costs.
The planning and control of variable manufacturing overhead costs take into account the costs directly tied to production levels, such as raw materials, salaries of production workers, and utility costs. These costs fluctuate with the number of units produced and can be managed in the short run by controlling cost drivers and focusing on efficiency in value-added activities.
Fixed manufacturing overhead costs, on the other hand, include expenses like management salaries and lease payments, which are contractually set for a period and are independent of the production volume. These costs are considered fixed in the short run but can become variable in the long run as contracts can be renegotiated, and operational changes can be implemented. In the long run, the firm can plan for these changes, turning fixed costs into variable as production factors and structure of costs can be altered.
The planning and control of variable and fixed manufacturing overhead costs involve different management practices due to the inherent nature of these costs over different time horizons. While variable costs can be managed both in the short and long run, fixed costs are often primarily a consideration for the long-term planning process as their variability comes into play over extended periods.
The income statement, balance sheet, and additional information for Video Phones, Inc., are provided.
VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2015
Net sales $3,136,000
Expenses:
Cost of goods sold $ 2,050,000
Operating expenses 878,000
Depreciation expense 29,000
Loss on sale of land 8,200
Interest expense 16,000
Income tax expense 50,000
Total expenses 3,031,200
Net income $104,800
VIDEO PHONES, INC.
Balance Sheet
December 31
2015 2014
Assets
Current assets:
Cash $ 179,720 $160,760
Accounts receivable 83,200 62,000
Inventory 105,000 137,000
Prepaid rent 12,480 6,240
Long-term assets:
Investments 107,000 0
Land 212,000 244,000
Equipment 274,000 212,000
Accumulated depreciation (71,400) (42,400)
Total assets $902,000 $779,600
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $67,800 $83,000
Interest payable 6,200 10,400
Income tax payable 15,200 14,200
Long-term liabilities:
Notes payable 289,000 227,000
Stockholders' equity:
Common stock 320,000 320,000
Retained earnings 203,800 125,000
Total liabilities and stockholders’ equity $902,000 $779,600
Additional Information for 2015:
1. Purchase investment in bonds for $107,000.
2. Sell land costing $32,000 for only $23,800, resulting in a $8,200 loss on sale of land.
3. Purchase $62,000 in equipment by borrowing $62,000 with a note payable due in three years. No cash is exchanged in the transaction.
4. Declare and pay a cash dividend of $26,000.
Required:
a. Prepare the statement of cash flows for Video Phones, Inc., using the direct method. Disclose any noncash transactions in an accompanying note.
Answer:
Net increase in cash position is $18,960
From operations $128,160
From investing activities -$83,200
From Finance activities -$26,000
Explanation:
The income statement has been uploaded for your benefit.
The schedules attached tagged "workings" explains how we arrived at each change in cash flow by line item.
The cash flow statement is one of the most important forms of the financial statement being prepared at the end of the financial period to record the inflow and outflow of the cash by various business activities. It can be prepared either by direct or indirect method.
It bifurcates the transactions into three activities: Operating activity, investing activity, and financing activity.
The cash flow statement by the direct method is attached below in the image.
To know more about cash flow statements, refer to the link:
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The term "benchmarking" as it relates to the hotel industry refers to a line-by-line analysis of an operating statement, comparing metrics for hotels of similar size or profile.
Answer:
This statement is True
Explanation:
Benchmarking by definition involves evaluating services, workflow and other best practices of an organizations so that other companies of similar profile and size can learn from them. This is used in analysis and comparison to that of a similar company for the purpose of organizational improvement. In hotel industry, it can be in form of continuously measuring operational performance in revenues & occupancy rates, customer service excellence and employee incentive programs.
Eastern Inc. purchases a machine for $15,000. This machine qualifies as a fiveminusyear recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. Eastern has a tax rate of 20%. If the machine is sold at the end of four years for $4,000, what is the cash flow from disposal?
Final answer:
To find the cash flow from disposal, calculate the tax savings resulting from the depreciation of the machine and subtract it from the selling price. The cash flow from disposal is $2,033.37.
Explanation:
To find the cash flow from disposal, we need to calculate the tax savings resulting from the depreciation of the machine.
Step 1: Calculate the depreciation expense for each year:
Year 1: $15,000 * 20.00% = $3,000Year 2: ($15,000 - $3,000) * 32.00% = $3,840Year 3: ($15,000 - $3,000 - $3,840) * 19.20% = $2,099.52Year 4: ($15,000 - $3,000 - $3,840 - $2,099.52) * 11.52% = $893.62Step 2: Calculate the total depreciation over the four years: $3,000 + $3,840 + $2,099.52 + $893.62 = $9,833.14
Step 3: Calculate the tax savings using the tax rate of 20%: $9,833.14 * 0.20 = $1,966.63
Step 4: Calculate the cash flow from disposal by subtracting the tax savings from the selling price: $4,000 - $1,966.63 = $2,033.37
Final answer:
The cash flow from disposal of the machine sold by Eastern Inc. at the end of four years for $4,000, after accounting for MACRS depreciation and a 20% tax rate, is $3,718.40.
Explanation:
To calculate the cash flow from disposal of a machine under MACRS, we need to establish the book value of the machine at the time of sale and the total gain or loss on the sale. Eastern Inc. bought the machine for $15,000 and is selling it at the end of four years for $4,000. Under the Modified Accelerated Cost Recovery System (MACRS), the fixed depreciation percentages for the first four years are 20%, 32%, 19.20%, and 11.52%, respectively.
First, let's calculate the cumulative depreciation over the four years:The book value of the machine at the end of four years is the original cost minus the accumulated depreciation: $15,000 - $12,408 = $2,592.
The sale of the machine for $4,000 results in a gain of $4,000 - $2,592 = $1,408. Because this is a sale of business property, the gain is taxable. Eastern's tax rate is 20%, so the tax on the gain is 0.20 x $1,408 = $281.60. The cash flow from disposal is the sale price minus the tax owed: $4,000 - $281.60 = $3,718.40.
Which of the following is a disadvantage of profit sharing plans? Group of answer choices Employees must trust that management will accurately disclose financial and profit information. Employees are taxed heavily on the income that they generate from profit sharing plans. Employers get little or no rebate on income tax for choosing profit sharing plans. Employees cannot access the funds that they receive from profit sharing plans for up to three years.
Final answer:
One noted disadvantage of profit-sharing plans is the necessity for employees to trust that management will accurately and transparently disclose the company's financial and profit information.
Explanation:
The disadvantage of profit sharing plans often noted is that employees must trust that management will accurately disclose financial and profit information. With profit and earnings distributed among employees, there's a direct correlation between the success of the business and benefits for employees—which can lead to improved productivity. However, the transparency necessary in financial disclosures does require trust in management's reporting.
As for the specific disadvantage choices provided, taxes on profit sharing plans are not necessarily heavier than on regular income, employers can receive tax benefits for contributing to retirement accounts of employees (though this depends on the jurisdiction and specific plan details), and employees can often access their profit sharing funds before three years in certain circumstances, such as financial hardship or plan rules.
A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for debt service in the amount of $12,000,000, including $7,000,000 for interest. It also reflected proceeds of bonds in the amount of $4,000,000. No interest accruals were involved. When moving from the changes in fund balances reported for the governmental funds to the change in Net Position for governmental activities, the net change would be
Answer:
= $1,000,000
Explanation:
Given that:
Expenditures for debt service: $12,000,000Interest: $7,000,000 Proceeds of bonds : $4,000,000Because interest and proceeds from the bonds have been included in the cost of debt service, so to find the exact change, we must minus two of this expenses. Because the cost of debt increases more than the total of other items, so it will increase in the net position
So the formula to find out the net change position as following:
= Expenditures for debt service - Interest - proceeds of bonds
= $12,000,000 - $7,000,000 - $4,000,000
= $1,000,000
Hope it will find you well.
Marin Inc. purchased a tractor trailer for $138000. Marin uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1000000 miles over its 10-year useful life. Salvage value is estimated to be $16000. If the truck is driven 80000 miles in its first year, how much depreciation expense should Marin record?
Answer:
$9,760
Explanation:
For computing the depreciation expense first we have to find out the depreciation rate which is shown below:
The computation of the depreciation per miles under the units-of-production method is shown below:
= (Original cost - residual value) ÷ (estimated miles)
= ($138,000 - $16,000) ÷ (1,000,000 miles)
= ($122,000) ÷ (1,000,000 miles)
= $0.122 per miles
Now for the first year, it would be
= Miles driven in first year × depreciation per miles
= 80,000 miles × $0.122 per miles
= $9,760
Suppose that a monopolistically competitive restaurant is currently serving 240 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $13 per meal. Instructions: Enter your answers as whole numbers. a. What is the size of this firm’s profit or loss? b. Will there be entry or exit? Will this restaurant’s demand curve shift left or right? c. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9. What is the size of the firm’s economic profit? d. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $9. Is the deadweight loss for this firm greater than or less than $40?
Answer:
The restaurant's profit per meal= consumers WTP for per meal - ATC per meal = $13 - $10 = $3
Given that restaurants sells 240 meals per day at this price the profit is
= $3 * 240 = $720
A) The size of the firms profit is $ 720.
B) As it can be seen that firm is making profit so there will be an entry into the industry since the other firms will try to capture some of the economic profit.
Also, the entry of other firms will reduce the demand for the restaurant which will lead the demand curve to shift to the left.
C) Now, the allocative efficient output level in long-run equilibrium is 200 meals. In the long-run, restaurant charges $11 per meal for 180 meal and the marginal cost of 180th meal is $9.
Thus, the size of the economic profits in the long run is always zero in monopolistic competitive market.
D) The dead-weight loss for the firm is exactly equal to $40 because the difference between the Marginal Benefit as given by the demand curve i.e., $11 and the Marginal Cost as given by the MC curve is $9, so the difference is equal to $2 ($11 - $9) for all the units between 180th and 200th.
Thus, the dead-weight loss is = $2 * (200-180)
= $2 * 20
= $40
Hence the dead-weight loss is $40.
The monopolistically competitive restaurant makes a profit of $720 which signals potential entry of more restaurants to the market. In the long-run equilibrium, if the restaurant charges $11 per meal and the marginal cost of the meal is $9, the company would make an economic profit of $360. The Deadweight loss to society if this firm is producing less than the allocatively efficient quantity will be exactly $40.
Explanation:a. In the case of the monopolistically competitive restaurant, the firm's total cost per meal is $10, while the price at which consumers are willing to pay is $13. Therefore, the profit per meal is the difference between the price and the cost, which is $3. Total profit is then $3 multiplied by the number of meals served, or $3 x 240 = $720, so this restaurant firm is making a profit of $720.
b. As the restaurant is making a profit, this is a signal for entry in the long run, implying that more restaurants will open up and start providing meals to customers. This competition will push prices down and move the restaurant's demand curve left, as it won't be able to command such high prices with more competition.
c. If in the long-run equilibrium this restaurant serves 180 meals at $11 and the marginal cost of the 180th meal is $9, then profit per meal is $2. The entire economic profit of the firm in this case will be $2 x 180 = $360.
d. Assuming the allocatively efficient output level in long-run equilibrium is 200 meals, but the company only produces 180 meals, the difference in production is 20 meals. If the price charged is $11 and the marginal cost is $9, then the total deadweight loss is $2 X 20 = $40. Therefore, the deadweight loss for this firm is exactly $40, not less or greater.
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if you’ve just recovered from prostate cancer within the last few years, an insurance company might require you to pay a 20% extra premium on your net premium for 3 years. Calculate the gross monthly premium during this 3 years, if the monthly gross premium after the 3 years is $100 and the monthly net premium among this $100 is $70
Final answer:
The gross monthly premium during the first 3 years after recovering from prostate cancer, with a 20% extra premium, is $114. This is calculated by adding the 20% extra charge of $14 to the stated gross premium of $100 that applies after the 3 years.
Explanation:
To calculate the gross monthly premium for the first 3 years after recovering from prostate cancer, where there is a 20% extra premium on the net premium, you can use the provided information about the net and gross premiums after those 3 years.
The given monthly net premium is $70, and an additional 20% of that is $14 (20% of $70). So, for the first 3 years, the additional cost will be $14 per month on top of the net premium, making the total monthly premium $84 ($70 + $14).
However, this is not the final gross premium. The question states that the gross monthly premium, after the 3 years, is $100. This $100 includes the net premium plus any additional fees or costs the insurance company adds to the net premium to get to the gross premium. Since we do not have information about other fees or costs, we have to assume that the 20% extra premium is the only additional cost. Therefore, to get the gross premium during the first 3 years, you add the additional cost ($14) to the stated gross premium after three years ($100), resulting in a total gross premium of $114 ($100 + $14) for the first 3 years.
Consider a no-load mutual fund with $580 million in assets and 20 million shares at the start of the year and with $630 million in assets and 21 million shares at the end of the year. During the year investors have received income distributions of $6 per share and capital gain distributions of $0.50 per share. Assuming that the fund carries no debt, and that the total expense ratio is 2%, what is the rate of return on the fund
Answer: 25.86%
Explanation:
Solving this question requires that we use all gains made and divide it by the original Nat Asset Value.
Here goes,
Opening NAV
NAV = Total Assets / No. Of shares
NAV = 580/20
Opening NAV = $29
Closing NAV
NAV = Total Assets / No. Of shares
NAV = 630/21
Closing NAV = $30
Rate of Return.
Calculating the rate of return will be as follows,
= (Closing NAV - Opening NAV + Capital gains distributions + income distributions) / Opening NAV
= (30 - 29 + 6 + 0.5) / 29
= 0.25862068965
= 25.86%
The rate of return on the fund is 25.86%
On January 1, Year 1, Friedman Company purchased a truck that cost $41,000. The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 20,000 miles. Friedman uses the units-of-production method. What is depreciation expense in Year 2
Answer:
$6,600
Explanation:
The units-of-production depreciation expense = (miles driven in year 2 / total estimated miles) × (cost of asset - Salvage value)
(20,000 / 100,000) x ($41,000 - $8,000)
0.2 x $33,000 = $6,600
I hope my answer helps you
Penland Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock.
Feb. 1 Issued 40,000 shares for cash at $51 per share.
July 1 Issued 60,000 shares for cash at $56 per share.
Instructions
(a) Journalize the transactions.
(b) Post to the stockholders' equity accounts. (Use T‐accounts.)
(c) Discuss the statement presentation of the accounts.
Answer and Explanation:
a. The journal entries are shown below:
Cash Dr $2,040,000 (40,000 shares × $51)
To Preferred stock $2,000,000 (40,000 shares × $50)
To Paid in capital in excess of par - Preferred stock $40,000
(Being the issuance of preferred stock is recorded)
Since the cash is increased so it would be debited along with it the stockholder equity is also increased so preferred stock is credited and the remaining balance is transferred to the paid in capital
Cash Dr $3,360,000 (60,000 shares × $56)
To Preferred stock $3,000,000 (60,000 shares × $50)
To Paid in capital in excess of par - Preferred stock $360,000
(Being the issuance of preferred stock is recorded)
Since the cash is increased so it would be debited along with it the stockholder equity is also increased so preferred stock is credited and the remaining balance is transferred to the paid in capital
b. The posting is as follows
Preferred Stock
Date Debit Date Credit
1-Feb $2,000,000
1-Jul $3,000,000
Paid in capital in excess of par - Preferred stock
Date Debit Date Credit
1-Feb $40,000
1-Jul $360,000
c. As we know that the stockholder equity comprises of common stock, preferred stock, retained earning, treasury stock, etc
So, the presentation of the accounts is
Preferred stock, $50 par value, 100000 outstanding and issued - $5,000,000
Paid in capital in excess of par - Preferred stock - $400,000
These amount are a sum of preferred stock and paid in capital in excess of par
Final answer:
Journal entries for Penland Corporation's preferred stock issuance record cash inflows and the value of the stock at par, along with additional paid-in capital representing the premium over the par value. T-accounts reflect these transactions in stockholders' equity. The preferred stock would be presented in the equity section of the balance sheet, showing both the par value and the premium.
Explanation:
The student's question relates to journalizing and posting the preferred stock transactions for Penland Corporation and discussing the statement presentation of the preferred stock accounts.
Journal Entries:
Feb. 1 - Cash $2,040,000Preferred Stock $2,000,000Paid-in Capital in Excess of Par, Preferred $40,000(To record issuance of 40,000 shares of preferred stock at $51)
July 1 - Cash $3,360,000
Preferred Stock $3,000,000Paid-in Capital in Excess of Par, Preferred $360,000(To record issuance of 60,000 shares of preferred stock at $56)
T-Accounts for Stockholders' Equity
Account - Credit
Preferred Stock $5,000,000
Paid-in Capital in Excess of Par, Preferred $400,000
The statement presentation of the preferred stock would show the par value times the number of shares issued, with an additional line item for the 'Paid-in Capital in Excess of Par' representing the premium over the par value paid by investors. The total stockholders' equity would include these amounts as part of the total equity.
Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2016, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date, $8 per share. Options cannot be exercised prior to January 1, 2018, and expire December 31, 2022. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The income tax rate is 40%.
Required: 1. Determine the total compensation cost pertaining to the stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)
2. Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
1. Record compensation expense on December 31, 2016.
2. Record any tax effect related to compensation expense recorded in 2016.
3. Record compensation expense on December 31, 2017.
4. Record any tax effect related to compensation expense recorded in 2017.
5. Record the exercise of the options on March 20, 2021 when the market price is $12 per share.
6. Record any tax effect related to the exercise of the options.
Answer:
Explanation:
1. Determine the total compensation cost pertaining to the stock option plan:-
Estimated fair value per option $2
X Option granted 40 million
Total compensation $ 80 million
Suppose a sailboat factory and a fishing boat factory exist in the same town. Employees at both factories have the same skills and are initially paid the same wage rate. If the sailboat manufacturer increases the hourly wage paid to his employees, then the
Answer:
quantity supplied of labor at the sailboat factory will increase.
Explanation:
If it happens that the sailboat manufacturer increases the hourly wage paid to his employees, then the more employees will rush to the sailboat thereby increasing the quantity supplied of labor at the sailboat factory.
EcoMart establishes a $1,050 petty cash fund on May 2. On May 30, the fund shows $312 in cash along with receipts for the following expenditures: transportation-in, $120; postage expenses, $369; and miscellaneous expenses, $240. The petty cashier could not account for a $9 shortage in the fund. The company uses the perpetual system in accounting for merchandise inventory Prepare the (1) May 2 entry to establish the fund, (2) May 30 entry to reimburse the fund, and (3) June 1 entry to increase the fund to $1,200.
Answer:
See the explanation below:
Explanation:
(1) May 2 entry to establish the fund
Details Dr ($) Cr ($)
Petty cash account 1,050
Cash 1,050
To record the establishment of petty cash fund
(2) May 30 entry to reimburse the fund
Details Dr ($) Cr ($)
Transportation-in 120
Postage expenses 369
Miscellaneous expenses 240
Shortage of fund 9
Petty cash account 738
To record petty cash transactions during May
Petty cash account 738
Cash 738
To record the reimbursement of the petty cash fund.
(3) June 1 entry to increase the fund to $1,200.
Additional amount to add = 1,200 - 1,050 = $150
The journal entries will be as follows:
Details Dr ($) Cr ($)
Petty cash account 150
Cash 150
To record the increase of the petty cash fund to N1,200
Before Sarah makes any changes based on the Budget Performance Report for September, she wants to be sure she understands the results, and has the following questions for you. Answer the following questions (1) and (2). All questions pertain to the September data. 1. What caused the total cost variance for direct materials
Complete Question:
Sarah has learned a lot from you over the past two months, and has compiled the following data for Sole Purpose Shoe Company for September using the techniques you taught her. She would like your help in preparing a Budget Performance Report for September. The company produced 3,000 pairs of shoes that required 10,500 units of material purchased at $8.20 per unit and 8,100 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $25,200. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.
Use the data in the following table to prepare the Budget Performance Report for Sole Purpose Shoe Company for September.
Manufacturing Costs Standard Price Standard Quantity Standard Cost Per Unit
Direct materials $8.40 per unit 3.6 units per pair $30.24
Direct labor $8.50 per hour 2.8 hours per pair 23.80
Factory overhead $2.80 per hour 2.8 hours per pair 7.84
Total standard cost per pair $61.88
Sole Purpose Shoe Company
Budget Performance Report
For the Month Ended September 30
1 Manufacturing Costs Actual Costs Standard Cost at Actual Volume
Cost Variance - (Favorable) Unfavorable
2 Direct materials
3 Direct labor
4 Factory overhead
5 Total manufacturing costs
Before Sarah makes any changes based on the Budget Performance Report for September, she wants to be sure she understands the results, and has the following questions for you.
Answer the following questions (1) and (2). All questions pertain to the September data.
1. What caused the total cost variance for direct materials? Check all that apply.
The actual quantity of direct materials per unit was less than the standard quantity.
A factor other than those listed caused the total cost variance for direct materials.
The actual price for direct materials per unit was less than the standard price.
The favorable price variance dominated the unfavorable quantity variance, causing the total cost variance for direct materials to be favorable.
The unfavorable quantity variance dominated the favorable price variance, causing the total cost variance for direct materials to be unfavorable.
2. What caused the total cost variance for direct labor? Check all that apply.
The actual rate for labor hours per unit was less than the standard rate.
The actual number of labor hours per unit was less than the standard number.
A factor other than those listed caused the total cost variance for direct labor.
The unfavorable rate variance was larger than the favorable time variance, causing the total cost variance for direct labor to be unfavorable.
The favorable time variance was larger than the unfavorable rate variance, causing the total cost variance for direct labor to be favorable.
Answer and explanation:
Sole purpose shoe company
Budget performance report
For the month ended September 30
check the attached image for a well formatted table
S&P Enterprises will pay an annual dividend of $2.08 a share on its common stock next year. The firm just paid a dividend of $2.00 a share and adheres to a constant rate of growth dividend policy. What will one share of S&P common stock be worth ten years from now if the applicable discount rate is 8 percent?
Answer:
The price of the stock will be $76.97
Explanation:
We first need to determine the constant growth rate on dividends.
Growth rate (g) = (D1 - D0) / D0
Growth rate (g) = (2.08 - 2.00) / 2 = 0.04 or 4%
To calculate the price of a stock today whose dividends are growing at a constant rate, we use the constant growth model of DDM. The price of the stock today under this model is,
P0 = D1 / ( r - g )
Where,
D1 is the dividend expected for the next yearr is the required rate of returng is the growth rateThus, to calculate the price of the stock today at t=10, we will use the dividend expected in Year 11 or D11.
D11 = D0 * (1+g)^11
Where P10 is the price 10 years from today.
P10 = 2 * (1+0.04)^11 / (0.08 - 0.04)
P10 = $76.97
In 2019, Morley, a single taxpayer, had an AGI of $30,000 before considering the following items: Loss from damage to rental property ($6,000) Loss from theft of bonds (3,000) Personal casualty gain 4,000 Personal casualty loss (after $100 floor) (9,000) The personal casualties occurred in a Federally declared disaster area. Determine the amount of Morley's itemized deduction from the losses.
Answer:
$5,600
Explanation:
AGI after casualties = AGI before casualties - Loss from damage to rental property + Personal casualty gain + Personal casualty loss = $30,000 - $6,000 + $4,000 - $4,000 = $24,000
AGI limit on casualty loss = $24,000 × 10% = $2,400
Itemized deductions = Casualty Loss - AGI limit on casualty loss + Loss from theft of bonds = $5,000 -$2,400 + $3,000 = $5,600
Sunland Construction Company uses the percentage-of-completion method of accounting. In 2021, Sunland began work on a contract it had received which provided for a contract price of $31500000. Other details follow: 2021 Costs incurred during the year $15600000 Estimated costs to complete as of December 31 9600000 Billings during the year 13500000 Collections during the year 8900000 What should be the gross profit recognized in 2021
Answer:
$3900000
Explanation:
The gross profit is the difference between the revenue earned during the year and the cost of sales. The percentage of completion method is one in which the revenue is recognized based on the cost incurred to date on the project.
Revenue to be recognized in 2021
= $15600000/($15600000 + $9600000) * $31500000
= $19500000
Though the billings for the year is lower, the difference may be recognized as unbilled receivable.
As such, the gross profit for the year
= $19500000 - $15600000
= $3900000
Final answer:
To calculate the gross profit recognized by Sunland Construction Company in 2021, the percentage of the project completed is first determined. This percentage is then used to recognize revenue, and the gross profit is calculated by subtracting the costs incurred from the recognized revenue. Sunland Construction Company should recognize a gross profit of $3,898,500 for the year 2021.
Explanation:
How to Calculate Gross Profit Recognized in 2021
The percentage-of-completion method for accounting requires estimating the percentage of the project that has been completed in the fiscal year to recognize revenue and corresponding gross profit accordingly. The gross profit is calculated based upon the costs incurred, estimated total costs, and the contract price.
The formula for the percentage of completion is:
Percentage of Completion = Costs Incurred to Date / (Costs Incurred to Date + Estimated Costs to Complete)
Then, we calculate the revenue to be recognized by:
Revenue Recognized = Contract Price * Percentage of Completion
Finally, we get the gross profit recognized by subtracting the costs incurred from the revenue recognized:
Gross Profit Recognized = Revenue Recognized - Costs Incurred
Using the provided information, the calculation steps are as follows:
Calculate the percentage of completion:
Percentage of Completion = $15,600,000 / ($15,600,000 + $9,600,000) = 0.619
Calculate the revenue to be recognized:
Revenue Recognized = $31,500,000 ×0.619 = $19,498,500
Calculate the gross profit recognized:
Gross Profit Recognized = $19,498,500 - $15,600,000 = $3,898,500
Therefore, Sunland Construction Company should recognize a gross profit of $3,898,500 for the year 2021.
Suppose that the market demand for 32-oz. wide mouth Nalgene bottles is Q = 50,000p^-1.076, where Q is the quantity of bottles per week and p is the price per bottle. The market supply is Q = 0.01p^7.208. What is the equilibrium price and quantity? What is the consumer surplus? What is the producer surplus?
Final answer:
To find the equilibrium price and quantity for Nalgene bottles, set the demand and supply functions equal and solve for the price, then plug that into either function. Consumer surplus is the difference between what consumers are willing to pay versus what they pay, while producer surplus is what producers get over their minimum acceptable price.
Explanation:
To find the equilibrium price and quantity for 32-oz. wide mouth Nalgene bottles, we need to set the market demand function Q = 50,000p^-1.076 equal to the market supply function Q = 0.01p^7.208 and solve for p. Once we find the equilibrium price, we substitute it back into either the demand or supply function to find the equilibrium quantity.
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, and producer surplus is the difference between the price at which producers are willing to sell and the price they actually receive.
To calculate consumer and producer surplus, we would need to determine the area above the supply curve and below the demand curve up to the equilibrium price. This involves integrating the demand function from zero to the equilibrium price for consumer surplus and integrating the supply function from zero to the equilibrium price for producer surplus.
A project to build a new bridge seems to be going very well since the project is well ahead of schedule and costs seem to be running very low. A major milestone has been reached where the first two activities have been totally completed and the third activity is 75% complete. The planners were expecting to be only55% through the third activity at this time. The first activity involves prepping the site for the bridge. It was expected that this would cost $1,435,000 and it was done for only $1,315,000. The second activity was the pouring of concrete for the bridge. This was expected to cost $10,515,000 but was actually done for $9,015,000. The third and final activity is the actual construction of the bridge superstructure. This was expected to cost a total of $8,515,000. To date, they have spent $5,015,000 on the superstructure. Calculate the schedule variance, schedule performance index, and cost performance index for the project to date.
Answer:
Explanation:
Attached is the solution
The schedule variance is $83,000, the schedule performance index is approximately 1.005, and the cost performance index is approximately 1.090.
To calculate the schedule variance (SV), schedule performance index (SPI), and cost performance index (CPI) for the project to date, we need to use the following formulas:
1. Schedule Variance (SV): SV = (Earned Value) - (Planned Value)
2. Schedule Performance Index (SPI): SPI = (Earned Value) / (Planned Value)
3. Cost Performance Index (CPI): CPI = (Earned Value) / (Actual Cost)
First, we need to determine the Earned Value (EV), Planned Value (PV), and Actual Cost (AC) for each activity and for the project as a whole.
For the first activity (prepping the site):
- EV = AC = $1,315,000 (since the activity is 100% complete)
- PV = $1,435,000 (as planned)
For the second activity (pouring concrete):
- EV = AC = $9,015,000 (since the activity is 100% complete)
- PV = $10,515,000 (as planned)
For the third activity (construction of the bridge superstructure):
- EV = $8,515,000 x 0.75 = $6,386,250 (since the activity is 75% complete)
- PV = $8,515,000 x 0.55 = $4,683,250 (as planned)
- AC = $5,015,000 (as spent)
Now, we can calculate the total EV, PV, and AC for the project:
- Total EV = [tex]EV1 + EV2 + EV3[/tex] = $1,315,000 + $9,015,000 + $6,386,250 = $16,716,250
- Total PV =[tex]PV1 + PV2 + PV3[/tex] = $1,435,000 + $10,515,000 + $4,683,250 = $16,633,250
- Total AC = [tex]AC1 + AC2 + AC3[/tex] = $1,315,000 + $9,015,000 + $5,015,000 = $15,345,000
Now we can calculate the SV, SPI, and CPI:
1. Schedule Variance (SV): SV = Total EV - Total PV
SV = $16,716,250 - $16,633,250 = $83,000
2. Schedule Performance Index (SPI): SPI = Total EV / Total PV
SPI =[tex]$16,716,250 / $16,633,250 ≈ 1.005[/tex]
3. Cost Performance Index (CPI): CPI = Total EV / Total AC
CPI = [tex]$16,716,250 / $15,345,000 ≈ 1.090[/tex]
Therefore, the schedule variance is $83,000, the schedule performance index is approximately 1.005, and the cost performance index is approximately 1.090. This indicates that the project is slightly ahead of schedule and under budget.
You buy one Home Depot June $60 call contract and one June $60 put contract. The call premium is $5 and the put premium is $3. At expiration, you break even if the stock price is equal to
Answer:
if price increases above $68 or decreases below $52, a profit is realized
Explanation:
At expiration, the break even if the stock price is equal to Call is :
-$60 + (-$5) + $3 = $68 (break even)
Put: -$3+ $60 + (-$5) = $52 (break even)
Therefore At expiration, your break even if the stock price is equal to:
if price increases above $68 or decreases below $52, a profit is realized.
You run a regression of a stock’s excess return on the market excess return and obtain the following results: E left square bracket R subscript i vertical line space R subscript M right square bracket space equals space 0.4 plus 0.7 asterisk times R subscript M With an R-square of 0.12. The alpha of the stock is
Answer:
7%
Explanation:
Data provided as per the question
Risk free rate = 0.4
Beta = 0.7
The computation of alpha of the stock is shown below:-
Expected return = Risk free rate + (Beta × Market rate of return)
Expected return = 0.4 + (0.7 × Market rate of return)
= 0.7
or 7%
Therefore for computing the alpha of the stock, we have applied the above formula.
Final answer:
In the regression equation for a stock's excess return, the alpha or the y-intercept is 0.4, signifying the stock's expected excess return when market excess return is zero. The R-square of 0.12 tells us that 12 percent of the stock's return variation is explained by the market's return variation.
Explanation:
The alpha of a stock, in a regression of the stock's excess return on the market excess return, represents the intercept of the regression equation. Given the regression equation E[Ri | RM] = 0.4 + 0.7*RM, the alpha of the stock is 0.4. This value indicates the expected excess return of the stock when the market excess return is zero. The value of alpha can provide insight into the stock's performance independent of the market's movements.
The R-square value of 0.12 or 12 percent indicates that only this percentage of the stock's excess return variation is explained by the market's excess return variation. Thus, the majority, that is, 88 percent (1 - R-square), of the variation in the stock's excess return is not explained by the market's excess return within this model.
The Filling Department of Eve Cosmetics Company had 3,900 ounces in beginning work in process inventory (90% complete). During the period, 64,600 ounces were completed. The ending work in process inventory was 3,200 ounces (80% complete). What are the total equivalent units for direct materials if materials are added at the beginning of the process
Answer:
67,800 ounces
Explanation:
The amount of units produced by the manufacturer in a period is called equivalent units of production. It is calculated for the unit under process. We use the percentage of completion to calculate this. It includes the completed units and partially completed units.
In respect of Material
Units completed = 64,600 ounces
Partially completed = 3,200 (80% completed)
Equivalent Units = Unit completed and transferred to Finished goods + Units in Work in Process x Completion percentage
Because the material is added at the beginning so all the units are considered as Equivalent units
Equivalent Units = 64,600 + 3,200= 67,800 ounces
Answer:
The total equivalent units for direct materials if materials are added at the beginning of the process =
63,900
Explanation:
Since the direct materials are added at the beginning of the process, it simply means they are 100% complete
• Units started and completed=
(64,600-3,900) * 100%
= 60,700 * 100%
= 60,700
• Ending work in progress =
3,200 * 100%
= 3,200
Total equivalent units for direct materials if the materials are added at the beginning of the process=
60,700 + 3200
= 63,900
The Polaris Company uses a job-order costing system. The following data relate to October, the first month of the company’s fiscal year.
Raw materials purchased on account $210,000.
Raw materials used to production, $190,000 ($178,000 direct materials amd $12,000 indirect materials).
Direct labor cost incurred, $90,000; indirect labor cost incurred, $110,00.
Depreciation recorded on factory equipmentnt, $40,000.
Other manufacturing overhead costs incurred during October, $70,000 (credit Accounts Payable).
The company applies manufacturing overhead cost to production on the basis of $8 per machine-hour. A total of 30,000 machine-hours were recorded for October.
Production orders costing $520,00 according to their job cost sheets were completed during October and transferred to Finished Goods.
Production orders that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 25% above cost.
Required: 1. Prepare journal entries to record the information given above.
Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant information about to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42,000.
Answer:
Requirement 1
J1
Raw materials $210,000 (debit)
Trade Payable $210,000 (credit)
J2
Work -In- Progress - Direct materials $178,000 (debit)
Work -In- Progress - Indirect materials $12,000 (debit)
Raw materials $190,000
J2
Work -In- Progress - Direct labor $90,000 (debit)
Work -In- Progress - Indirect labor $110,000 (debit)
Wages and Salaries Payable $200,000(credit)
J4
Work -In- Progress - Depreciation $40,000 (debit)
Accumulated Depreciation - factory equipment $40,000 (credit)
J5
Overheads $70,000 (debit)
Payable $70,000 (credit)
J6
Work -In- Progress $240,000 (debit)
Overheads $240,000 (credit)
J7
Finished Goods $520,000 (debit)
Work - In - Progress $520,000 (credit)
Requirement 2
Manufacturing Overhead Account
Debit :
Payable $70,000
Under-Applied Overheads $170,000
Credit:
Work-in-Progress $240,000
Work in Process Account
Debit :
Work in Process Beginning $42,000
Raw materials $190,000
Wages and Salaries Payable $200,000
Accumulated Depreciation - factory equipment $40,000
Credit:
Finished Goods $520,000
Work in Process Ending $42,000
Explanation:
Prepare the journals as appropriate.
Rayya Co. purchases and installs a machine on January 1, 2017, at a total cost of $201,600. Straight-line depreciation is taken each year for four years assuming a seven-year life and no salvage value. The machine is disposed of on July 1, 2021, during its fifth year of service.
Prepare entries to record the partial year's depreciation on July 1, 2021, and to record the disposal under the following separate assumptions:
(1) The machine is sold for $63,000 cosh.
(2) An Insurance settlement of $52.920 is received due to the machine's total destruction in a fire.
Answer:
Debit Depreciation expense $14,400
Credit Accumulated depreciation $14,400
(1) Debit Other income/disposal account (p/l) $201,600
Credit Fixed Asset account $201,600
Debit Accumulated depreciation account $129,600
Credit Other income/disposal account (p/l) $129,600
Debit Cash account $63,000
Credit Other income/disposal account (p/l) $63,000
(2) Debit Other income/disposal account (p/l) $201,600
Credit Fixed Asset account $201,600
Debit Accumulated depreciation account $129,600
Credit Other income/disposal account (p/l) $129,600
Debit Cash account $52,920
Credit Other income (p/l) $52,920
Explanation:
Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.
It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset
Mathematically,
Depreciation = (Cost - Salvage value)/Estimated useful life
Annual Depreciation = $201,600/7
= $28,800
Between January and July 1 is 6 months hence depreciation
= 6/12 * $28800
= $14,400
Accumulated depreciation at time of sale/destruction
= 4*$28800 + $14400
= $129,600
When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal. The proceed from the disposal of an asset may be recorded in the disposal or other income account.
On disposal, the carrying amount of the asset is derecognized by
Debit Other income/disposal account (p/l)
Credit Asset account
with the cost of the asset, then,
Debit Accumulated depreciation account
Credit Other income/disposal account (p/l)
With the accumulated depreciation of the asset at the date of disposal,
Furthermore,
Debit Cash account
Credit Other income/disposal account (p/l)
with the amount received from the disposal or sale of the asset
Answer:
Entries to record the partial year's depreciation on July 1, 2021:
Debit Depreciation expense ($28,800x0.5) $14,400
Credit Accumulated depreciation $14,400
(To record accumulated depreciation - Jan. 1 - July 1, 2021)
(1) The following journals apply, if the machine is sold for $63,000 cash:
Debit Accumulated depreciation $129,600
Debit Loss on asset disposal $9,000
Debit Cash $63,000
Credit Machine cost (fixed asset) $201,600
(To record asset disposal)
(1) The following journals apply, if there was an insurance settlement of $52,920:
Debit Accumulated depreciation $129,600
Debit Loss on asset disposal ($52,920 - $72,000) $19,080
Debit Cash $52,920
Credit Machine cost (fixed asset) $201,600
(To record asset disposal)
Explanation:
Under straight-line method, depreciation is an allocation of the cost of an asset over its estimated useful life and it is expressed with this formula: (cost - residual value) / No of years = ($201,600 - 0) / 7 years = $28,800 yearly depreciation expense.
Accumulated depreciation on July 1, 2021 (4.5 Years) is $28,800 x 4.5 years $129,600.
So, the net book value (NBV) of the asset (expressed as Cost - Accumulated depreciation) is $201,600 - $129,600 = $72,000
Gain or loss on disposal = Sales proceed - NBV = $63,000 - $72,000 = $9,000 (loss)
The local government removes a tax on the production of beer in Riverside in an effort to stimulate the economy. At the same time, UC Riverside students (beer consumers) return from Spring Break ready to party in the new quarter. Given these two effects, what can we say about the equilibrium price and quantity of beer in Riverside?
a. Equilibrium price will decrease, equilibrium quantity will increase.
b. Equilibrium quantity will decrease; the effect on price is ambiguous.
c. Equilibrium price will increase; the effect on quantity is ambiguous.
d. Eaulibaum ammtitv will increase: the effect on orice is ambiguous.
Answer:
Equilibrium quantity will increase; Equilibrium price is ambiguous.
Explanation:
If the government removes a tax on the production of beer then as a result the producers of beer will increase their production level and this will increase the supply of beer in an economy. Therefore, there is a rightward shift in the supply curve of beer.
Simultaneously, the students are ready to party in the new quarter which indicates that the demand for beer increases. This will shift the demand curve for beer rightwards.
As a result of these shift in the demand curve and in the supply curve of beer, the equilibrium quantity of beer increases and the effect on equilibrium price of beer is ambiguous because that will be dependent upon the magnitude of the shift in the demand and supply curve.
For example, electricity costs are $1,300 per month plus $0.08 per car washed. The company expected to wash 8,400 cars in August and to collect an average of $6.40 per car washed. The company actually washed 8,500 cars in August.
Answer:
Explanation:
Revenue ($6.40 × 8,500) = $54,400
Cleaning supplies ($0.80 × 8,500) = $6,800
Electricity ($1,300 + ($0.15 × 8,500)) = $2,575
Maintenance ($0.20 × 8,500) = $1,700
Wages and salaries ($5,000 + ($0.30 × 8,500)) = $7,550
Administrative expenses ($4,000 + ($0.10 × 8,500)) = $4,850
Takelmer Industries has a different WACC for each of three types of projects. Lowminusrisk projects have a WACC of 8.00%, averageminusrisk projects a WACC of 10.00%, and highminusrisk projects a WACC of 12%. Which of the following projects do you recommend the firm accept?Project Level of Risk IRRA Low 9.50%B Average 8.50%C Average 7.50%D Low 9.50%E High 14.50%F High 17.50%G Average 11.50%
Answer:
A,D,E,F &G
Explanation:
IRR is the discount rate at which the Net Present value of a project becomes zero and over this rate the Net present value become negative. All the Projects with IRR Less than the relevant WACC will not be acceptable.
WACC
High = 12%
Average = 10%
Low = 8%
Compare all of the above WACC with each of the relevant WACC to find whether a project is acceptable or not.
Project Level of Risk IRR Relevant WACC Acceptable
A Low 9.50% 8% Yes
B Average 8.50% 10% No
C Average 7.50% 10% No
D Low 9.50% 8% Yes
E High 14.50% 12% Yes
F High 17.50% 12% Yes
G Average 11.50% 10% Yes
Michelle's Monopoly Mutant Turtle (MMMT) has the exclusive right to sell Mutant t-shirts in the United States. The demand for these t-shirts is Qequals=StartFraction 22 comma 500 Over Upper P squared EndFraction 22,500 P2. The firm's short-run cost is SRTCequals=10761076plus+66Q, and its long-run cost is LRTCequals=77Q. What quantity should MMMT sell to maximize profit in the short run?
Complete Question:(in order)
Michelle's Monopoly Mutant Turtle (MMMT) has the exclusive right to sell Mutant t-shirts in the United States. The demand for these t-shirts is
[tex]Q = \frac{22,500}{P^2}[/tex]
The firm's short-run cost is
SRTC = 1641 + 4Q,
and its long-run cost is
RTC-7Q
What quantity should MMMT sell to maximize profit in the short run?
MMMT should sell 351.56 units. (Enter a numeric response rounded to two decimal places,)
What price should MMMT charge in the short run?
MMMT should charge a price of $ 7.95. Enter a numeric response rounded to two decimal places)
How much profit does it make?
Profit equals $-234.740. (Enter a numeric response rounded to three decimal
Would it be better off shutting down in the short run?
The firm would be better off producing in the short run.
What quantity should MMMT sell in the long run?
MMMT should sell 114.80 units. (Enter a numeric response rounded to two decimal placos)
What price should MMMT charge in the long run?
MMMT should charge a price of $ (Enter a numeric response rounded to two decimal places)
Answer:
From the given parameters
the demand for these t-shirts is
[tex]Q = \frac{22500}{P^2}[/tex]
The firms short run cost is SRTC = 1641 + 4Q
Long run cost is LRTC = 7Q
[tex]=> Q = \frac{22500}{P^2}=> P^2 = \frac{22500}{Q}\\=> P = \sqrt{\frac{22500}{Q}} = \frac{150}{\sqrt{Q}} = 150(Q)^{1/2}\\[/tex]
Thus revenue on the product of price and quantity becomes
[tex]PQ = 150Q^{-1/2}Q = 150Q{1-1/2} = 150Q^{1/2}[/tex]
Check the attached files for additional solution
Clementine Company makes skateboards. They prepare master and flexible budgets and then perform variance analysis after the budget plan period elapses. Their data is as follows: Budget Actual Selling price per unit $109 $103 Variable cost per unit $59 $55 Quantity sold 948 935 What is the Clementine's flexible budget variance for VARIABLE COSTS? If the variance is unfavorable put a minus sign in front of your answer. Enter your answer without commas or decimals.
Answer:
$3,740 favorable
Explanation:
The computation of the flexible budget variance for VARIABLE COSTS is shown below:
= Standard variable cost - actual variable cost
where,
Standard variable cost is
= 935 units × $59
= $55,165
And, the actual cost is
= 935 units × $55
= $51,425
So the flexible budget variance for variable cost is
= $55,165 - $51,425
= $3,740 favorable
Since the standard cost is more than the actual cost which leads to favorable variance
The flexible budget variance for variable costs for Clementine Company, calculated by subtracting the actual variable cost from the budget and then multiplying it by the actual quantity sold, is $3,740. This is a favorable variance as actual costs were below budget.
Explanation:The flexible budget variance for variable costs refers to the difference between the budgeted variable cost and the actual variable cost during a specific period. According to the provided figures, we can calculate the variance by multiplying the difference in unit variable costs ($59 budgeted - $55 actual) by the actual quantity of units sold (935 units).
So, Flexible Budget Variance for Variable Costs = (Budgeted Variable Cost per Unit - Actual Variable Cost per Unit) × Actual Quantity Sold.
Applying values, we have Flexible Budget Variance for Variable Costs = ($59 - $55) × 935 = $3,740. Hence, the flexible variance for variable costs for Clementine Company is $3,740. As actual costs were less than budgeted, we don't need to put a minus sign in front of our answer. This is considered a favorable variance because the actual costs for the company were less than what was budgeted.
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