Answer: The cost of the inventory reported in the balance sheet according to:
A. The concept of absorption costing is 289440.
B. The concept of variable costing is 264480.
Explanation: A. The concept of absorption costing charges to the cost of finished products: direct materials, direct labor, factory fixed overhead and factory variable overhead. We must calculate the cost of inventory by multiplying the number of units produced by unit manufacturing costs.
Direct materials: 4800 x $ 30.70 = 147360
Direct Labor: 4800 x $ 19.80 = 95040
Factory fixed overhead: 4800 x $ 5.20 = 24960
Factory variable overhead: 4800 x $ 4.60 = 22080
The total sum = 147360 + 95040 + 24960 + 22080 = 289440 is the inventory cost reported in the balance sheet.
B. The concept of variable costing charges only the variable elements at the cost of finished products: direct materials, direct labor and variable factory overhead. We must calculate the cost of inventory by multiplying the number of units produced by unit manufacturing costs:
Direct materials: 4800 x $ 30.70 = 147360
Direct Labor: 4800 x $ 19.80 = 95040
Factory variable overhead: 4800 x $ 4.60 = 22080
The total sum = 147360 + 95040 + 22080 = 264480 is the inventory cost that is reported in the balance sheet.
As Jake began his market research, he discovered that there wasn't another retail boating supply business for more than 100 miles. In fact, there was no large lake or river, either. Jake concluded that
A. he would have to offer lower prices. B. his marketing should stress quality and service. C. the competition gave up too soon. D. there was no market for his product.19.
Answer:
As Jake began his market research, he discovered that there wasn't another retail boating supply business for more than 100 miles. In fact, there was no large lake or river, either. Jake concluded that there was no market for his product.- D.
Assume that, after analyzing its business transaction, a firm has the following ending balances: accounts payable $3,400, accounts receivable $2,000, cash $1,000, capital $3,600, equipment $3,000, prepaid rent $600, and supplies $400. What is the total amount of assets that will be reported on the firm’s balance sheet?
Answer:
Total Assets = $7,000
Explanation:
Total assets are sum of fixed and current assets
Fixed assets = Assets held for a period more than a year.
Here Equipment is fixed asset with a value of $3,000
Current Assets = Accounts Receivable, Cash balance, Prepaid rent, Supplies
= $2,000 + $1,000 + $600 + $400
=$4,000
Total assets = $3,000 + $4,000 = $7,000
The firm's total assets, which include cash, accounts receivable, equipment, prepaid rent, and supplies, amount to $7,000.
To calculate the total amount of assets that will be reported on the firm’s balance sheet, we must add up all the individual asset balances. Assets typically include cash, accounts receivable, equipment, prepaid expenses, and supplies. In this case, the ending balances for the firm's assets are: cash of $1,000, accounts receivable of $2,000, equipment of $3,000, prepaid rent of $600, and supplies of $400. These figures combine to give a total asset value.
Therefore, the total assets would be calculated as follows:
Cash + Accounts Receivable + Equipment + Prepaid Rent + Supplies
$1,000 + $2,000 + $3,000 + $600 + $400 = $7,000.
Hence, the firm will report a total of $7,000 in assets on its balance sheet.
Listed here are the total costs associated with the 2017 production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $528 each. Costs 1. Plastic for casing—$21,000 2. Wages of assembly workers—$81,000 3. Property taxes on factory—$8,000 4. Accounting staff salaries—$37,000 5. Drum stands (1,000 stands purchased)—$38,000 6. Rent cost of equipment for sales staff—$24,000 7. Upper management salaries—$215,000 8. Annual flat fee for factory maintenance service—$16,000 9. Sales commissions—$13 per unit 10. Machinery depreciation, straight-line—$40,000 Required: 1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)
Answer:
1. Classifying each cost as Variable or Fixed
When total cost changes with change in output then it is variable in nature and when it remains constant then it is fixed cost.
Plastic for casing = (a) Variable cost (b) Product as will depend on number of casing. = $21,000 / 1000 units = $21 per casing if casing is per unit done individually.Wages of assembly workers = (a) Variable Costs (b) Period it will depend on number of hours worked, in piece rate system it will depend on number of units, but generally it is based on number of hours so it is period.Property taxes on factory = (a) Fixed Costs (b) Period as this does not depend on number of units produced it is fixed in nature, with time duration.Accounting staff salaries = (a) Fixed Costs (b) Period as this is not related to number of units produced and will be fixed for a month.Drum Stands = (a) Variable cost (b)Product as will be required for each drum individually manufactured.Rent cost of equipment for sales staff = (a) Fixed Cost (b) Period as rented is fixed for a specified period generally paid monthly and is not based on number of units produced.Upper management salaries = (a) Fixed Cost (b) Period as this is fixed annually and not based on number of units produced.Annual flat fee for factory maintenance service = (a) Fixed Cost (b) Period as this is fixed annually and has no relation with number of units produced.Sales commissions = (a) Variable Costs (b) Product as this is based on number of units sold and defined per unit.Machinery depreciation, straight-line = (a) Fixed Cost (b) Period as this is not based on number of units produced and is fixed annually.A surplus or shortage in the money market is eliminated by adjustments in the price level according to classical theory, but not liquidity preference theory. liquidity preference theory, but not classical theory. neither liquidity preference theory nor classical theory. both liquidity preference theory and classical theory.
Answer:
The correct answer is option A.
Explanation:
According to the classical theory, the quantity of money is directly related to price level. So, any shortage or surplus in the money market can be corrected by increasing or decreasing price level.
According to the liquidity preference theory, however, money is demanded for transactionary, precautionary and speculative motive. So, only price level does not affects the quantity of money. Interest rates also effect the demand for money.
So, option A is the correct answer.
Final answer:
A surplus or shortage in the money market is eliminated by adjustments in the price level according to liquidity preference theory, but not classical theory.
Explanation:
In the context of the money market, a surplus or shortage is eliminated by adjustments in the price level according to liquidity preference theory, but not classical theory.
In classical theory, the money market is assumed to be in equilibrium at all times, with any surplus or shortage quickly eliminated by adjustments in the price level. However, in liquidity preference theory, changes in the money supply can lead to changes in interest rates, which in turn affect the demand for money and the equilibrium in the money market.
In summary, the correct answer is liquidity preference theory, but not classical theory.
Bonds payable—various issues On July 1, 2013, $6 million face amount of 7%, 10-year bonds were issued. The bonds pay interest on an annual basis on June 30 each year. The market interest rates were slightly higher than 7% when the bonds were sold.
Required:
a. How much interest will be paid annually on these bonds?
b. Were the bonds issued at a premium or discount? Explain.
c. Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? Explain your answer.
Answer:
(A) 420,000 cash disbursements
(B) discount.
(C) It will be more than the cash disbursements
Explanation:
6,000,000 x 0.07 = 420,000 cash disbursements
(B) the bonds were issued at discount, because the market rate was higher than 7% so the price fall below face value to match the market price.
(C) It will be more than the cash disbursements. There is adiference between face value and cash proceed from the issuance of the bonds, this diference is amortize each period increasing the interest expense of the bond.
The interest paid annually on the bonds is $420,000. The bonds were neither issued at a premium nor a discount. The annual interest expense on the bonds will be equal to the amount of interest paid each year.
Explanation:a. The interest paid annually on these bonds can be calculated by multiplying the face amount of the bonds ($6 million) by the stated interest rate (7%). Therefore, the annual interest payment is $420,000 ($6 million x 7%).
b. Whether the bonds were issued at a premium or discount depends on the market interest rates at the time of the bond issuance. If the market interest rates were lower than 7%, the bonds would be issued at a premium, and if the market interest rates were higher than 7%, the bonds would be issued at a discount.
c. The annual interest expense on these bonds will be equal to the amount of interest paid each year. This is because the stated interest rate of 7% is the same as the market interest rate at the time of issuance, so there is no premium or discount.
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Why are intermediate goods not included in GDP?a. to avoid counting them twice in GDPb. to make sure only nondurable goods are included in GDPc. to keep goods that are not bought and sold out of the GDPd. to ensure that only goods produced in the US are included in GDP
Answer: Option (a) is correct.
Explanation:
Correct option (a): to avoid counting them twice in GDP.
Intermediate goods are the goods which are utilize in the production of final goods. Intermediate goods are like inputs in the production of final goods.
While calculating GDP of an economy, it includes the market value all the final goods and services that are produced in an economy.
While calculating GDP from value added method, this includes the value of all the stages that are included in the production of final goods.
So, the value of intermediate goods is not included in GDP, this is happened to avoid counting them twice in GDP.
Intermediate goods are not included in GDP to prevent counting them twice. They are the goods used in production, and their value is already embodied in the final goods' price.
Explanation:The reason intermediate goods are not included in Gross Domestic Product (GDP) is option 'a', to avoid counting them twice. Intermediate goods are goods used in the production of other goods. They are part of the cost of producing the final goods. Thus, their value is already included in the final goods' market price. If we count intermediate goods separately, we would be double-counting them leading to an inflated and inaccurate measure of GDP.
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The value of a business owner's time is an example ofa. an opportunity cost. b. a fixed cost. c. an explicit cost. d. total revenue.
Answer: Opportunity cost
Explanation:
A. Opportunity cost can be defined as the next best alternative foregone , it is the cost of profit the business looses while choosing one alternative over other.
B. Fixed cost are those cost that do not change with the level of output produced in the firm.
C. In simple words the direct costs a business pay to the outsiders for running its operations is called explicit cost.
D. Total revenue is the amount of income a company has before deducting its expenses occurred to earn that income.
So from the above explanations we can conclude that value of a business owner's time is an example of opportunity cost.
Final answer:
The value of a business owner's time is an example of an opportunity cost, representing the potential benefits forgone by not choosing the next best alternative, such as income from another job or personal leisure time.
Explanation:
The value of a business owner's time is an example of an opportunity cost. Opportunity cost is a key concept in economics that involves the notion of implicit costs, which are not directly billed or paid out but represent the potential benefits that are forgone by choosing one alternative over another. In the context of a business owner, this could include the income they could have earned in another occupation, or the value of their leisure time that is lost when they dedicate time to their own business. Implicit costs like these are subtle and include the depreciation of goods, materials, and the owner's time which could have been used for other activities or opportunities.
Mary's Baskets Company expects to manufacture and sell 30,000 baskets in 2019 for $5 each. There are 4,000 baskets in beginning finished goods inventory with target ending inventory of 4,000 baskets. The company keeps no work-in-process inventory. What amount of sales revenue will be reported on the 2019 budgeted income statement?
Answer:
budgeted sales revenue will be 150,000
Explanation:
It expects to sell 30,000 at $5 each
so sales revenue would be
[tex]30,000 \times 5 = 150,000[/tex]
The beginning and ending inventory has no relevance. The question is already telling us how many unis the company expecs to sell and their unit price.
We just have to multiply
Banyan Co.’s common stock currently sells for $53.25 per share. The growth rate is a constant 8%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 10.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.
Answer:Cost of New Equity ([tex]K_{e}[/tex]) = 20.75%
Explanation:
Banyan Company’s common stock currently sells([tex]P_{0}[/tex]) = $53.25
Growth rate is constant (g) = 8%
Expected dividend yield = 2%
Expected long-run dividend payout ratio = 20%
Expected return on equity (ROE) = 10%
Flotation cost(F) = 15%
We know that ;
Growth rate = (1-Dividend payout ratio) (ROE)
8% = (1-0.20)[tex]\times[/tex](0.10)
Cost of new equity (ke) = [tex][\frac{D_{1} }{P_{0}\times (1 - F) }] + g[/tex]
where;
F = Flotation cost
([tex]D_{1}[/tex]) = Expected Dividend
([tex]P_{0}[/tex]) = Current Stock price
g = Dividend growth rate
Calculating expected dividend:
Dividend yield = [tex][\frac{D_{1} }{P_{0}}[/tex]
15% = [tex][\frac{D_{1} }{53.25}[/tex]
[tex]D_{1}[/tex] = 15%[tex]\times[/tex] 53.25
Expected Dividend ([tex]D_{1}[/tex]) = $7.9875
Cost of New Equity ([tex]K_{e}[/tex]) = [tex][\frac{7.9875}{53.25\times (1 - 0.15) }] + 0.08[/tex]
= [tex][\frac{7.9875}{62.64}] + 0.08[/tex]
= 0.207 (or) 20.75%
Cost of New Equity ([tex]K_{e}[/tex]) = 20.75%
Actually Investors required rate of return i.e. ROE = 10% on the stock, but because of flotation costs the company must earn more than 10%.
Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 10.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August 23,400 units September 22,100 units October 23,500 units November 24,700 units December 24,400 units The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 11,600 kilograms of Jurislon were on hand. The cost of Jurislon is $26 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:
Answer:
The total cost of Jurislon to be purchased in August is: $7,293,260
Explanation:
We will calculate the kilograms needed to fulfil the sales and the desired ending inventory.
Then we will subtract the beginning balance, to know how many kilograms do we need to purchase for the requirement.
Last we multiply by the unit cost to get the cost in dollars
August 23,400 units x 10.5 = 245,700
ending 20% september
20% x 22,100 x 10.5 = 46,410
Total requirement 292,110
beginning (11,600)
total purchase in kilograms 280,510
280,510 x $26 = $7,293,260 total cost for August
The only difference between variable and absorption costing is the expensing of ________.A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) variable administrative costs
Answer:
The correct answer is C. fixed manufacturing costs
Explanation:
We can see that in Absorption costing, all the costs are included and that includes fixed costs. on the other hand, in the variable costing, it is only included the variable costs that are directly incurred in production.
Assume that Sandhill Co. uses a periodic inventory system and has these account balances: Purchases $420,800; Purchase Returns and Allowances $11,900; Purchase Discounts $8,100; and Freight-in $17,700. Sandhill Co. has beginning inventory of $58,100, ending inventory of $92,600, and net sales of $643,000. Determine the amounts to be reported for cost of goods sold and gross profit.
Answer:
Cost of goods Sold = $384,000
Gross Profit = $259,000
Explanation:
Cost of goods sold = Opening Inventory + Net Purchase - Closing Inventory
Opening Inventory = $58,100 Closing Inventory = $92,600
Net Purchases = Purchase - Purchase Return - Discounts + Freight in
Freight in forms part of cost of purchase because without this expense inventory cannot be bought in.
Net Purchases = $420,800 - $11,900 - $8,100 + $17,700 = $418,500
Cost of goods Sold = $58,100 + $418,500 - $92,600 = $384,000
Gross Profit = Sales - Cost of Goods Sold
= $643,000 - $384,000 = $259,000.
In the long run, both monopolistic competition and competitive markets result in: a) a wide variety of brand-name choices for consumers. b) an inefficient allocation of resources. c) zero economic profit for firms. d) excess capacity. e)insufficient capacity.
Answer:
c) zero economic profit for firms.
Explanation:
In both cases, while there is room for economic gain, market structures - perfect competition and monopolistic competition - will attract entrants to compete. In the long run, the market goes into balance when economic profit is zero.
Recalling that the concept of economic profit is different from accounting profit.
Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2nd, 2017. On July 31st, 2017, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31st, 2017, should be
Answer:
The total amount that will be debited to the patents account on July 31, 2017 will be $35,000.
Explanation:
The amount of $150,000 will not be included in the patents account because this patent was developed by the Martha beyerlein company not purchased from any other firm , so the cost incurred here will be debited to the research and development account. And only the $35,000 that was paid for legal fees will be debited to the patents account.
You are going to buy a new computer at a downtown store that is a 25-minute drive each way and has the computer for $900. You earn $16 per hour at your job and will have to take time off to go buy the computer. You can expect to spend 40 minutes in the store making your purchase. What is the opportunity cost of buying the computer, measured in dollars? Enter an answer such as 42.00 or 34.50, with two decimal places. Do not enter a dollar sign.
Answer: The opportunity cost of buying computer is $337.5.
Explanation:
The total time taken in travelling to buy a computer at a downtown store:
= 25 minutes for one side × 2
= 50 minutes
Given that,
expect 40 minutes spend in a store for making purchase
So,
total time taken by a individual = time taken in a store + time taken in travelling
= (50 + 40) minutes
= 90 minutes
Also given that,
a individual earns $16 per hour at job
Hence, he earns = [tex]\frac{60}{16}[/tex]
= $3.75 per minute
so,
Total opportunity cost = earning per minute × total time taken
= $3.75 × 90 minutes
= $337.5
Paolucci Corporation's relevant range of activity is 6,900 units to 14,500 units. When it produces and sells 10,700 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.85 Direct labor $ 3.75 Variable manufacturing overhead $ 1.75 Fixed manufacturing overhead $ 3.30 Fixed selling expense $ 1.05 Fixed administrative expense $ 0.75 Sales commissions $ 1.00 Variable administrative expense $ 0.65 If 9,700 units are sold, the variable cost per unit sold is closest to:
Answer:
Total Variable Cost per Unit $14
Explanation:
We re asked for the variable cost per unit which are constant at unit level.
The fixed cost are not relevant.
So we just need to add the current variable cost.
Direct materials $ 6.85
Direct labor $ 3.75
Variable manufacturing overhead $ 1.75
Sales commissions $ 1.00
Variable administrative expense $ 0.65
Total Variable $14
The variable cost per unit for the Paolucci Corporation remains the same within the relevant range of activity. The costs per unit of direct materials, labor, variable manufacturing overhead, and variable administrative expense add up to $12.95, which applies to both 10,700 and 9,700 units sold.
Explanation:To calculate the variable cost per unit sold, we need to consider the costs that vary with production. The average costs given for 10,700 units include direct materials, direct labor, variable manufacturing overhead, and variable administrative expense. These four costs are summed up to find the total variable cost per unit. To find the variable cost per unit for 9,700 units sold, we will use the same costs per unit since variable costs per unit remain constant within the relevant range of activity.
Total Variable Cost per Unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable administrative expense
Total Variable Cost per Unit for 10,700 units = $6.85 + $3.75 + $1.75 + $0.65 = $12.95 per unit
Since we are within the relevant range (6,900 to 14,500 units), the variable cost per unit will not change based on the activity level. Thus, the variable cost per unit sold for 9,700 units will also be $12.95 per unit.
Liability management refers to: a bank's handling of the assets in individual trust funds. a bank's handling of loans and other assets. how a bank attracts deposits and what it pays for them. how a bank manages its accounts receivable.
Answer:
Liability management refers to how a bank handles it loans and other assets.
Explanation:
Liability management is a practice adopted by banks to keep a balance between assets and liabilities, so that they possess enough liquidity to facilitate lending and also a healthy balance sheet is maintained. Banks need to keep a balance between maturity of their assets and liabilities. It is a mechanism to address the risk of mismatch in bank's assets and liabilities.
The following information applies to Jasmine, who is single, for 2017:Salary $56,000Interest income from First Bank of Lexington 1,500Dividends from Watters Company stock 3,000Contribution to a traditional IRA 4,000Loan repayment from her friend 1,000Capital loss from sale of personal vehicle (2,300)Number of potential dependents ?Age 44Jasmine maintains a household for her sister, who has $9,000 from Social Security. In addition, Jasmine's aunt lives with her and has income of $3,000.The personal exemption amount for 2017 is $4,050.Calculate Jasmine's Taxable Income for 2017.
Answer:
Jasmine's taxable income for the year 2017 is $ 42,050
Explanation:
we are going to do a step wise calculation for taking out the taxable income of Jasmine,
the first step is to take out the gross income of Jasmine,
GROSS INCOME =
Salary + interest income from first bank of Lexington + Dividend income
= $56,000 + $1500 + $ 3000
= $60,500
Next step is to take out adjusted gross income by subtracting contribution to IRA from gross income,
ADJUSTED INCOME =
gross income - contribution to IRA
= $60,500 - $4000
= $56,500
Next step would be to subtract standard deduction ($6350 as of 2017) and personal exemption ( $8100 - $4050 x 2, multiplied by 2 because Jasmine's aunt live with her) from adjusted gross income,
TAXABLE INCOME =
=$56,500 - $ 6350 - $8100
= $ 42,050
On January 1, 2020, Blossom Company had $1,335,000 of common stock outstanding that was issued at par. It also had retained earnings of $750,500. The company issued 45,000 shares of common stock at par on July 1 and earned net income of $405,000 for the year. Journalize the declaration of a 16% stock dividend on December 10, 2020, for the following independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (a) Par value is $10, and market price is $19. (b) Par value is $5, and market price is $22
Answer:
(A)
Retained Earnings 527,440 debit
Common Stock 277,600 credit
Additional Paid-In 249,840 credit
(B)
Retained Earnings 1,080,640 debit
Common Stock 245,600 credit
Additional Paid-In 835,040 credit
Explanation:
1,335,000 common stock
RE 750,500
(A)
40,000 at par value = 10 = 400,000 issued stocks July 1st
Stock dividends 16%
1,735,000 x .16 = 277,600 CS
173,500 x .16 x 19 = 527,440 market value of the bond dividends
Retained Earnings 527,440 debit
Common Stock 277,600 credit
Additional Paid-In 249,840 credit
(B)
40,000 x 5 = 200,000 issued stocks July 1st
Stock dividends 16&
1,535,000 x .16 = 245,600 CS
307,000 shares x .16 x 22 = 1,080,640 market value of the bonds dividends
Retained Earnings 1,080,640 debit
Common Stock 245,600 credit
Additional Paid-In 835,040 credit
Nazaro's Boot Company makes specialty boots for the rodeo circuit. On December 31, 2016, the company had (a) 300 pairs of boots in finished goods inventory and (b) 1,200 heels at a cost of $8 each in raw materials inventory. During 2017, the company purchased 35,000 additional heels at $8 each and manufactured 16,600 pairs of boots. Determine the unit and dollar amounts of raw materials inventory in heels at December 31. 2017.
Answer:
Ending inventory 3,000 units
Ending Inventory $24,000
Explanation:
I'm going to assume 2 heels are use to get a pair of boots complete
16,600 boots x 2 = 33,200 heels used in production
Then:
[tex]$$Beginning Inventory + Purchase - used = Ending Inventory [/tex]
beginning 1,200 at 8
purchase 35,000 at 8
used in production (33,200)
Ending Inventory 3,000 at 8 = 24,000
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's total price including installation and delivery is $70,000. The machine falls into the four-year class using straight line depreciation method, and it will be sold after four years for $0. The use of this new machine will bring revenue of $25,000 annually for 4 years, and will have annual maintenance expense of $5,000. The firm's marginal tax rate is 40 percent and the required rate of return is 10%. (Please show your work)
a. What is the initial investment ? (keep your number as a whole number: example of answer format: $1,000)
b. What is the Cash Flow at year 1 ? ( keep your number as a whole number: example of answer format: $1,000 )
c. What is the Cash Flow at year 4 ? ( keep your number as a whole number: example of answer format: $1,000 )
d. What is NPV ? ( keep your number to two decimals: example of answer format: $1,000.00 or if it's negative, then -$1,000.00)
Answer:
Explanation: download the manual if you may get and get solutions
The actual and planned data for Underwater University for the Fall term were as follows: Actual Planned Enrollment 4,500 4,125 Tuition per credit hour $120 $135 Credit hours 60,450 43,200 Registration, records, and marketing cost per enrolled student $275 $275 Instructional costs per credit hour $64 $60 Depreciation on classrooms and equipment $825,600 $825,600 Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. a. Prepare a variable costing income statement showing the contribution margin and income from operations for the Fall term.
Answer:
Variable Costing Income Statement
Sales Revenue = 60,450 X $120 = $7,254,000
Less: Variable Cost
Reg, records, marketing = $275 X 4,500 = $1,237,500
Instructional cost = $64 X 60,450 = $3,868,800
Contribution Margin = $2,147,700
Less:
Fixed Cost
Depreciation $825,600
Net Operating Income = $$1,322,100
To prepare a variable costing income statement, calculate tuition revenue, variable costs, contribution margin, and subtract fixed costs to find income from operations. For Underwater University, the income from operations for the Fall term would be $1,322,100.
Variable Costing Income Statement
To prepare a variable costing income statement for Underwater University, we need to calculate the total tuition revenue, total variable costs (registration, records, marketing, and instructional costs), and subtract fixed costs to determine the income from operations for the Fall term.
Total Variable Costs = Variable Costs Per Enrolled Student + Instructional Costs = $1,237,500 + $3,868,800 = $5,106,300
Contribution Margin = Tuition Revenue - Total Variable Costs = $7,254,000 - $5,106,300 = $2,147,700
Fixed Costs: Depreciation on Classrooms and Equipment = $825,600
Income from Operations = Contribution Margin - Fixed Costs = $2,147,700 - $825,600 = $1,322,100
This is the income from operations Underwater University would have for the Fall term based on the given actual data and the costing method applied.
Night Flights is preparing a contribution margin report segmented by route. The following information is available: Miami/LA Atlanta/ New York New York/ Chicago Average ticket price per passenger $1,250 $900 $750 Total passengers served 5,400 8,800 12,200 Total miles flown 190,000 176,000 97,600 The variable costs per unit are as follows: Fuel $25 per mile Wages $45 per mile Food/beverage service $7 per passenger Selling $70 per passenger What is the contribution margin ratio for the New York/Chicago route (to the closest tenth of a percent)?
The contribution margin ratio for the New York/Chicago route is approximately -138.8%.
Explanation:The contribution margin ratio for the New York/Chicago route can be calculated using the following steps:
Calculate the total revenue generated from the route by multiplying the average ticket price per passenger by the total number of passengers served.Calculate the total variable costs for the route by multiplying the variable costs per unit (fuel, wages, food/beverage service, and selling) by the total miles flown.Subtract the total variable costs from the total revenue to get the contribution margin for the route.Finally, divide the contribution margin by the total revenue and multiply by 100 to get the contribution margin ratio.Applying these steps to the New York/Chicago route:
Total revenue = $750 (average ticket price per passenger) x 12,200 (total passengers served) = $9,150,000Total variable costs = ($25 (fuel per mile) + $45 (wages per mile) + $7 (food/beverage service per passenger) + $70 (selling per passenger)) x 97,600 (total miles flown) = $21,840,000Contribution margin = Total revenue - Total variable costs = $9,150,000 - $21,840,000 = -$12,690,000Contribution margin ratio = (Contribution margin / Total revenue) x 100 = (-$12,690,000 / $9,150,000) x 100 = -138.76%The market price of a security is $26. Its expected rate of return is 13%. The risk-free rate is 5% and the market risk premium is 7.0%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Final answer:
The new market price of the security after the correlation coefficient with the market portfolio doubles cannot be accurately determined based on the information provided. One would need to know the security's beta or dividend growth rate, which is not mentioned in the question.
Explanation:
The market price of a security is influenced by its expected rate of return and its correlation with the market portfolio. If the correlation coefficient of the security with the market portfolio doubles, it implies a higher risk associated with the security. Using the Capital Asset Pricing Model (CAPM), we can understand that as risk (beta) increases, so does the required rate of return. However, without a formula directly correlating market price and beta in the given scenario, we cannot precisely calculate the new market price without additional information on the security's beta or its cash flows such as dividends.
It is also important to note that when the security promises a constant dividend in perpetuity, the price can be figured out using the Gordon Growth Model (assuming constant growth rate for dividends), but this requires the growth rate, which hasn't been provided in the question. Therefore, based on the given information, we cannot accurately determine what the new market price of the security would be if its correlation coefficient with the market were to double.
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $380 million on July 1, 2018, at a price of $370 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Prepare the journal entry to record interest at the effective interest rate at December 31. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2018, if it uses the direct method?
Answer:
Part 1 Journal Entry
Journal Entry to record interest
Interest Expense A/c Dr. $17.1 million
To Interest Payable A/c $17.1 million
(Interest expense of Agee Technology on bonds of face value of $380 million @9% for 6 months.)
Interest Payable A/c Dr. $17.1 million
To Cash a/c $17.1 million
(Interest paid on the bonds for 6 months)
Part 2 Cash Flow
Amount related to bonds to be reported in cash flow statement
Issue of bonds = $370 million. (Financing Activity)
Less: Interest paid on 1 July = $380 million X 9% X 6/12 = $17.1 million
Less: Interest paid on 31 December = $380 million X 9% X 6/12 = $17.1 million
Net cash inflow from financing activities = $335.8
Explanation:
Since bonds are dated 1 January though issued on 1 July interest for 6 months i.e. 1 January to 30 June will be paid.Market rate of yield does not make any impact in calculations.Interest will be calculated on face value of bonds, issue price does not matter.The interest for the period from Jan to June will be paid on issue of bonds, i.e. on 1 July 2018 itself.On 31 December interest will be paid only for 6 months.In cash flow statement under direct method there is a change of pattern in reporting operating activities, there is no change in disclosing financing activities.
To record the interest on Agee Technology, Inc.'s bonds at the effective rate, debit Interest Expense for $18.5 million, credit Discount on Bonds Payable for $1.4 million, and credit Cash for $17.1 million. On the statement of cash flows using the direct method, they would report a $17.1 million cash outflow for interest payment.
Explanation:You are asking about the journal entry for the interest payment of bonds at the effective interest rate and the reporting on the statement of cash flows using the direct method for Agee Technology, Inc. Here is how you would calculate and record these figures:
First, since the bonds were issued at a discount (price less than face value), the effective interest method is used to amortize the discount over the life of the bond. The carrying amount of the bond initially is $370 million, and the semiannual interest payment at the stated rate of 9% on the face amount of $380 million is $17.1 million (0.09 x $380 million x 1/2). The effective semiannual interest expense, however, is calculated on the carrying amount at the market rate, which is 10% or 5% semiannually on $370 million, resulting in $18.5 million (0.05 x $370 million).
To record the interest payment and the amortization of the discount, the entry at December 31, 2018, would be:
In the statement of cash flows using the direct method, Agee would report $17.1 million as an outflow under operating activities for the interest payment. The amortization of the bond discount is a non-cash adjustment and does not appear on the statement of cash flows.
The net present value of a project is zero. The minimum desired rate of return used to obtain the net present value is 8%. Which of the following statements is TRUE? A. The project is desirable if the minimum desired rate of return is 6%. B. The project is undesirable if the minimum desired rate of return is 6%. C. The project is desirable if the minimum desired rate of return is 6% or 10%. D. The project is desirable if the minimum desired rate of return is 10%.
Answer:
A. The project is desirable if the minimum desired rate of return is 6%.
Explanation:
If the NPV of a project is zero at an 8% rate it means it yields 8%
Remember:
PV = net cash flow at present value using a given rate - investment
So if PV = 0 then
net cash flow at given the rate = investment
Which makes the business profitable at that rate.
So if the desired minimum is 6% the project yields above that. Making it profitable and therefore, desirable
_____ may be daunting and perhaps risky, but the challenge of it grabs people in the gut and gets their juices flowing and creates tremendous forward momentum. Such goals are achieved through a breakthrough in the organization’s products or services.
Answer: the correct answer is BHAGs or Big Hairy Audacious Goals.
Explanation: BHAGs are those goals that can be achieved if there is a great idea or invention that makes the company move forward and stay ahead of the competition.
A small apartment property is estimated to have potential gross income of $ 25,000. Vacancy and collection losses are expected to average 5 percent over the life of the property. Operating expenses are expected to average about 30 percent of effective gross income. An overall capitalization rate of 12 percent is derived from market transactions of similar properties. What is the market value?
Answer:
the market value of the property would be $138,542.
Explanation:
To calculate the market value of the property , we need to divide the net operating income by the capitalization rate, in the question we have been given the capitalization rate but the operating income is not available to us. So with the help of given potential gross income we will calculate the effective gross income and then from it we will calculate the net operating income, lets see how to do step wise calculation -
POTENTIAL GROSS INCOME - $25,000
(-) VACANCY AND COLLECTION LOSSES = 5% X $25,000
= $1250
EFFECTIVE GROSS INCOME = $23,750
Now from this we will subtract the operating expenses to get net operating income -
EFFECTIVE GROSS INCOME = $23,750
(-) OPERATING EXPENSES = 30% X $23,750
= $7125
NET OPERATING INCOME = $16,625
Now for calculating market value putting these value sin the formula -
NET OPERATING INCOME / MARKET CAPITALIZATION RATE
= $16,625 / 12%
= $138,541.66
= $138,542 ( APPROXIMATELY )
Matt's retail store offers all its products at $2 lesser than its competitors throughout the year. The store never runs any promotional campaigns or offers any additional special discounts. Matt's retail store is following a(n) ________.
Answer:
The everyday low pricing policy is the policy that Matt's retail store is following.
Explanation:
Everyday low pricing policy is the kind of a pricing strategy in which any company or firm keeps the prices of its products at low over a long period of time rather than putting any kind of sale or promotional activities. So here the consumers don't have to wait for the sale to start, the prices are already at everyday low. An important assumption to understand here is that in this kind of pricing strategy cost of production is assumed not be changed, that is why a company is able to implement this policy over a long period of time.
So therefore as here Matt's retail store is giving $2 lesser price for its product than its competitors , it means that Matt's retail store has applied everyday low pricing strategy.
Matt's retail store is employing an everyday low pricing strategy, consistent with a horizontal supply curve and the Law of Demand.
This pricing strategy reflects an understanding of the Law of Demand, where lowering prices leads to an increase in the quantity demanded, assuming that demand is elastic. In competitive retail markets, setting a unique, consistent price without fluctuating with sales or promotions allows buyers to purchase as much as they desire at that price, aligning with the concept of a horizontal supply curve.
A company sold merchandise for $24,000 on account with terms of 5/15, n/30. The company uses a perpetual inventory system. After two days, it received defective merchandise worth $4,000. The journal entry to record the cash receipt for the sale if the payment is received within 10 days of the invoice date would include ________. A) a debit to Cash for $20,000, a credit to Merchandise Inventory for $1,000, and a credit to Sales Revenue for $19,000. B) a debit to Cash for $19,000, a debit to Sales Discount for $1,000, and a credit to Accounts Receivable for $20,000 C) a debit to Cash for $20,000, a debit to Merchandise Inventory for $4,000, and a credit to Accounts Receivable for $24,000. D) a debit to Sales Revenue for $24,000, a credit to Accounts Receivable for $20,000, and a credit to Sales Discounts for $4,000
Answer:
OPTION B
Cash debit for 19,000
Sales Discount debit for 1,000
Account receivable credit for 20,000
Explanation:
First, notice that this entry to record the payment of the invoice, so we are settlng this customer account, we are not recording the sale, that was done 10 days ago.
Same applies to the merchandise return, that was 2 days ago so we don't have to record that, only the cash payment from the customer.
The company sold merchandise for 24,000
Then the customer return 4,000
so the total value of the account at payment date is 20,000
Because it is done within 10 days it will give a 5% discount because the term are 5/15 (5% discount within the first 15 days) n/30 (nominal AKA no discount within 30 days)
So 20,000 sale x 5% discount = $1,000 discount
lastly, nominal - discount = cash outflow
$20,000 - $1,000 = $19,000
Resuming:
Cash debit for 19,000 (cash receive fro mthe customer)
Sales Discount debit for 1,000 (discount according to the sales term)
Account receivable credit for 20,000 (write-off the account)
The journal entry to record the cash receipt for the sale if the payment is received within 10 days of the invoice date would include a debit to Cash for $19,000, a debit to Sales Discount for $1,000, and a credit to Accounts Receivable for $20,000. Thus, option B is correct.
What is Journal entry?A Journal entry can be defined as an accounting record in which the transaction is being made. Every commerce has two reactions and all these are being accounted for with the help of a journal entry.
The information provided is:
The business received $24,000 for the goods it sold.
The customer then returns 4,000.
The user's account total worth at the time of payment was $20,000.
Since the term is 5/15, n/30, it will grant a 5% reduction because it is completed within 10 days
20,000 sales x 5% off is $1,000 off.
Last but not least, nominal - discount = cash outflow
$20,000 - $1,000 = $19,000
The calculation willl be:
19,000 in cash is deducted (cash receive from the customer)
For 1,000, the sales discount is debited (discount according to the sales term)
20 000 in credit for accounts receivable (write-off the account)
Therefore, option B is the correct option.
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