Answer:
Correct option is B) $120,000
Explanation:
Relevant cost are the cost which will not be incurred in case the product is not manufactured, that includes the direct manufacturing or variable cost only. The other allocated costs will still be incurred even in case no manufacturing is done of Product A but might not be allocated to Product A.
Here, direct variable cost = $12
Total relevant cost per unit = $12
Total Relevant cost = $12 X 10,000 units = $120,000
Correct option is B) $120,000
The total relevant cost of producing 10,000 units of Product A internally by Nakatomi Corporation is $150,000.
Explanation:The total relevant cost of producing Product A internally by Nakatomi Corporation is the sum of the variable costs and the allocated manufacturing overhead costs, ignoring the allocated general administrative costs as they are not relevant in this scenario. The variable costs per unit are $12 and the manufacturing overhead costs are $3 per unit. Thus, the total relevant costs per unit is $12 + $3 = $15. Since Nakatomi Corporation is producing 10,000 units, the total relevant cost of producing the units internally is $15 * 10,000 = $150,000.
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Several years ago, Regis Corporation, a very large hair styling salon company, purchased 60 "Your Father's Mustache" salons. Although this was initially an acquisition, the merging of these two businesses was a(n) __________. Regis went on to purchase several hair care product companies. Joining forces with hair care product companies would represent a ___________.
Answer:
The correct answers for the first blank is horizontal merger and for the second blank is vertical merger
Explanation:
When Regis corporation merged with the your father's mustache salons, this type of merger is know as horizontal merger , which is a type of merger where two corporations or firms who are in same industry and are competing with each other for the same market , comes together and merge with each other that merger is called horizontal merger.
But when Regis corporation went on to merge with the hair product corporations that would mean that it is a vertical merger , which is that type of merger where two corporations joins their forces together at a different production stages related to business. An example of this merger can be like a manufacturer of goods merging with supplier of his goods.
Regis Corporation's purchase of 'Your Father's Mustache' salons was a corporate merger, while its acquisition of hair care product companies is considered vertical integration.
When Regis Corporation, a large hair styling salon company, purchased 60 'Your Father's Mustache' salons, although this was an acquisition, the merging of these two businesses was a corporate merger. This process involved combining both companies into a single firm. Later, when Regis went on to purchase several hair care product companies, joining forces with hair care product companies would represent a form of vertical integration, because it combined companies from different stages of production and distribution within the same industry.
James employs an apprentice in his guitar store who gets firsthand knowledge of craftsmanship and the process involved in becoming a professional luthier. This allows James to have a reliable hand who can assist him in his work without requiring him to hire a professional luthier. It also enables him to use his financial resources on procuring high-quality materials to make the guitars. The opportunity of _____ is highlighted in the given scenario.
Answer: Having lower opportunity costs.
Explanation: Opportunity cost can be defined as the cost of next best alternative foregone. In this case, James is saving his money by taking work of a professional from a new recruit also he gets the opportunity to procure high quality materials which he was earlier not able to. Thus, he is saving a major portion of income because of a less costly alternative available.
You have the following information on a potential investment. Capital investment - $70,000 Estima... You have the following information on a potential investment. Capital investment - $70,000 Estimated useful life - 5 years Estimated salvage value - zero Estimated annual net cash inflow - $20000 Required rate of return - 8% What is the net present value of the investment (to the nearest dollar)? a. -56388 b. 20000 c. 9,854 d. 79854 You have the following information on a potential investment. Capital investment - $80,000 Estimated useful life - 5 years Estimated salvage value - 5000 Estimated annual net cash inflow - $6375 What is the annual rate of return on the investment (to the nearest dollar)?
Answer:
Part I
Net Present Value = $9,860
Part II
Annual rate of Return = 8.5%
Explanation:
Part I
Calculating net present value = Present value of cash inflow - Present value of cash outflow.
Present value of cash outflow = $70,000
Present value of cash inflow = Annual cash inflow X Present value factor @ 8 % for 5 years
= $20,000 X 3.993
= $79,860
Net Present Value = $79,860 - $70,000 = $9,860
Part II
Capital outlay = $80,000
Salvage value = $5,000
Annual net cash inflow = $6,375
Annual rate of return = [tex]\frac{Annual cash inflow}{Capital outlay - Salvage value} \times 100[/tex]
= [tex]\frac{6,375}{80,000 - 5,000} \times 100 = 8.5%[/tex]
Final Answer
Part I
Net Present Value = $9,860
Part II
Annual rate of Return = 8.5%
Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000. Required: 1) Prepare a traditional income statement. 2 )Prepare a contribution format income statement.
Answer:
1) Traditional Income Statement
Particulars Value Total Amount
Sales 20,000 units @ $30 = $600,000
Less: Manufacturing Expenses
Cost of goods sold $24,000 + $180,000 - $44,000 $160,000
Gross Margin $440,000
Less: Operating Expenses
Administrative Expense $70,000
Selling expense $120,000 $190,000
Operating Income $250,000
Note: In traditional statement fixed and variable are not segregated and only direct cost associated is subtracted to calculate cost of goods sold, then gross margin is calculated. After that selling and administration expenses are deducted to calculate net operating income.
2) Contribution format income Statement
Particulars Total Amount
Sales 20,000 units @ $30 = $600,000
Less : Variable Costs
Cost of goods sold $24,000 + $180,000 - $44,000 $160,000
Variable selling expense $4 X 20,000 $80,000
Variable Administrative Cost $2 X 20,000 $40,000
Contribution Margin $320,000
Less: Fixed Cost
Fixed Selling expense $40,000
Fixed Administration Expense $30,000
Net operating Income $250,000
Note: In contribution statement fixed and variable expenses are segregated and firstly after deducting variable expense contribution margin on sales is calculated, and then after that deducting fixed cost we get net operating income.
Here, we are going to Prepare the traditional income statement and contribution format income statement.
Traditional Income Statement
Particulars Amount Amount
Sales $600,000
(20,000 units * $30)
Less: Manufacturing Expenses
Cost of goods sold $160,000
($24,000 + $180,000 - $44,000)
Gross Margin $440,000
Less: Operating Expenses
Administrative Expense $70,000
Selling expense $120,000 $190,000
Operating Income $250,000
Contribution format income Statement
Particulars Amount Amount
Sales $600,000
(20,000 units*$30)
Less: Variable Costs
Cost of goods sold $160,000
($24,000 + $180,000 - $44,000)
Variable selling expense $80,000
($4 X 20,000)
Variable Administrative Cost $40,000 $280,000
($2 X 20,000)
Contribution Margin $320,000
Less: Fixed Cost
Fixed Selling expense $40,000
Fixed Administration Expense $30,000
Net operating Income $250,000
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Two methods are used to predict how many customers will call in for help in the next four days. The first method predicts the numbers of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual numbers of callers turn out to be 23, 10, 15, and 19. Which method has the bigger forecast bias?
Answer:
The method 1 will have a bigger forecast bias ( whose value is 5 ) than the method 2 ( whose value 0 ).
Explanation:
To know which method will have the bigger forecast bias , we will see the deviation of both methods from the actual forecast numbers and then by seeing which one is having a bigger deviation value , we can say which one is having bigger forecast bias.
FORECAST BIAS = ACTUAL NUMBER - FORECAST NUMBER
Actual Forecast Forecast Forecast Forecast
caller turn method 1 method 2 bias method 1 bias method 2
23 23 20 0 3
10 5 13 5 -3
15 14 14 1 1
19 20 20 -1 -1
TOTAL 5 0
from the above information we can say that the method 1 with forecast bias value of 5 is much bigger than the method 2 with forecast bias value of 0.
Miller Company's total sales are $120,000. The company's direct labor cost is $15,000, which represents 30% of its total conversion cost and 40% of its total prime cost. Its total selling and administrative expense is $18,000 and its only variable selling and administrative expense is a sales commission of 5% of sales. The company maintains no beginning or ending inventories and its manufacturing overhead costs are entirely fixed costs. Required:1. What is the total manufacturing overhead cost? 2. What is the total direct materials cost? 3. What is the total manufacturing cost? 4. What is the total variable selling and administrative cost? 5. What is the total variable cost? 6. What is the total fixed cost? 7. What is the total contribution margin?
Answer:
1. Total manufacturing overhead cost = $35,000
2. Total Direct Material cost = $22,500
3. Total manufacturing cost = $72,500
4. Total Variable Selling and Administrative Cost = $6,000
5. Total variable cost = $43,500
6. Total Fixed Cost = $47,000
7. Total contribution margin = $76,500
Explanation:
Provided Sales = $120,000
Direct labor Cost = $15,000 which = 30% of total conversion cost
Total conversion cost = $15,000/30% = $50,000
Conversion cost = Labor cost + Manufacturing cost, manufacturing cost = $50,000 - $15,000 = $35,000
Provided Direct labor cost is 40% of total prime cost.
Total prime cost = Direct material + direct labor = $15,000/40% = $37,500
Direct material = $37,500 - $15,000 = $22,500
Provided selling and distribution expense = $18,000
Variable = Sales commission of 5% on sales = $120,000 X 5% = $6,000
Fixed Selling expenses = $18,000 - variable $6,000 = $12,000
Manufacturing Overhead cost is completely fixed = $35,000
Now we have total manufacturing cost = material + labor + manufacturing overheads = $22,500 + $15,000 + $35,000 = $72,500
Total variable cost = Material + labor + Selling & Administration
= $22,500 + $15,000 + $6,000 = $43,500
Total fixed cost = Manufacturing + Selling & Administrative
= $35,000 + $12,000 = $47,000
Total contribution margin = Selling Value - Total Variable Cost = $120,000 - $43,500 = $76,500
Final Answer
1. Total manufacturing overhead cost = $35,000
2. Total Direct Material cost = $22,500
3. Total manufacturing cost = $72,500
4. Total Variable Selling and Administrative Cost = $6,000
5. Total variable cost = $43,500
6. Total Fixed Cost = $47,000
7. Total contribution margin = $76,500
All else being equal, which is true about a firm with high operating leverage relative to a firm with low operating leverage? Select one: A. A higher percentage of the high operating leverage firm's costs are fixed. B. The high operating leverage firm is exposed to less risk. C. The debt payments limit the high operating leverage firm's opportunities to turn a big profit. D. The high operating leverage firm has more debt.
Answer:
A. A higher percentage of the high operating leverage firm's costs are fixed.
Explanation:
Let's first focus on what is operating leverage:
It represents the degree on which an increase in sales revenue, will also increase the operating income of the company
So Being Contribution Margin the amount generate for sales, dividing that for the profit, we got the relationship between sales and income.
[tex]\frac{ContributionMargin}{Profit} = $Operating Leverage\\[/tex]
We can expand those like this
[tex]\frac{Q * CM} {Q * CM - Fixed Cost} = $Operating Leverage\\[/tex]
Where Q is the uantity of units sold
and CM is the contribution margin per unit.
Resuming: relationship between sales and operating income
That definition cuts "C" and "D" because they talk about debt, this measurement doesn't involve debt.
Now let's check "A"
It state that higher fixed cost amkes the leverage go higher, let's see if that is true:
[tex]\frac{Q * CM} {Q * CM - Fixed Cost} = $Operating Leverage\\[/tex]
Fixed Cost is subtracting in the divisor, so higher fixed cost makes the divisor lower.
When this happens, the result of the division is higher.
[tex]\lim_{n \to 0} \frac{a}{n}= \infty[/tex]
So this example is true
As an example:
If you have 100 CM and 80 Fixed cost then
[tex]\frac{100}{100-80}= 100/20 = 5\\[/tex]
IF you have 100 CM and 50 Fixed cost then
[tex]\frac{100}{100-50}= 100/50 = 2\\[/tex]
The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $7 per share. Common stock (30,000 shares at $1 par) $ 30,000 Capital in excess of par 30,000 Retained earnings 150,000 Total equity $ 210,000 The firm intends to first declare a 15 percent stock dividend and then pay a 20-cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction.
Western Pipe Co. After Stock Dividend
Common stock
Capital in excess of par
Retained earnings
Total equity
-------------------------
Western Pipe Co.After Stock Dividend
Common stock
Capital in excess of par
Retained earnings
Total equity
Answer:
(1)
CS 34,500
Capital in excess of par 57,000
RE 118,500
Total equity 210,000
(2)
CS 34,500
Capital in excess of par 57,000
RE 111,600
Total equity 203,100
Explanation:
(1)
RE 31,500
Common Stock 4,500
Capital in excess of par 27,000
(2)
RE 6,900
Dividends 6,900
34,500 shares outstanding x 0.2 per share = 6,900
Tommy McCartney is a sixteen-year-old high school student. He has worked forty hours per week at the local convenience store over the last year, and has diligently saved $6,000 for the purchase of his first car. While visiting a local car dealership, Tommy finds the “car of his dreams,” a used yellow Camaro. Tommy walks into the dealership, announces to the dealership owner that he is “ready to buy,” negotiates $6,000 as the purchase price, and leaves the dealership a proud car owner. Over the course of the next six months, Tommy drives the Camaro eight thousand miles, wears the tires thin, dents the left front fender, and regrets his purchase. He realizes that in two short years college will beckon, and he knows that his parents cannot afford to pay for his higher education. In short, he wants his money back. On a Saturday morning, Tommy returns to the car dealership, walks into the sales office, and hands the keys to the seller, asking for the return of his $6,000. The dealer chuckles, and then his look turns stern, saying “Son, I don’t owe you anything. You’ve just learned a lesson in the ‘School of Hard Knocks.’ The car is still yours, and the money is still mine!” Who will prevail? Is it legal and/or ethical to allow Tommy to escape his contractual obligations?
Explanation:
First of all, the dealer should not have sold the car to the sixteen year old boy without the presence of his parents or any guardian. It is illegal to have a contract with a child who is not legally allowed to drive the car before the age of eighteen.
Now secondly if the dealer has somehow sold the car to the boy, the boy cannot come back after few months and ask for returning his money because he purchased the car, the condition of the condition of the car got worse during the whole time when car was with him, and also there is no legal clause in the agreement which allows him to demand his money back after using the car for this long time. So demanding his money back from the dealer is totally unethical as well as illegal. The dealer is true that the car is still the property of the boy and the money is still the dealer's money.
A company’s balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show that that the company has 10 million shares of stock; the total of common stock and retained earnings is $30 million. The current stock price is $7.5 per share. The current return required by stockholders, rS, is 12 percent. The company has a target capital structure of 40 percent debt and 60 percent equity. The tax rate is 40%. What weighted average cost of capital should you use to evaluate potential projects
Answer:
The weighted average cost of capital should you use to evaluate potential projects is 9.87%
Explanation:
Weighted average cost of capital (WACC) : The WACC shows the total proportion towards debt and equity.
The debt should always be calculated after considering tax.
The computation of weight-age average cost of capital is shown below:
For debt = Yield to maturity × (1 - tax rate )
= 11.11% × (1-0.40)
= 6.67%
For equity it is given in the question i.e = 12%
As, the capital structure is give, 40% is for debt and 60% is for equity. After considering these capital structure, the computation can be made.
= Cost of equity × weighted of equity + cost of debt × weight-age of debt
= 12% × 60% + 6.67% × 40%
= 7.2% + 2.67%
= 9.87%
Thus, the weighted average cost of capital should you use to evaluate potential projects is 9.87% .
EarlKeen Co. sold $260,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 4% of the sales price. On August 15, a customer required a $100 part replacement plus $50 of labor under the warranty. Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
warranty expense 10,400 (260,000 x 4%)
warranty liablity 10,400
warranty liability 150
wages payable 50
inventory 100
Explanation:
we recognize the expected warranty expense at the moment of the sale.
Then expenses associate with the warranty will decrease the prevision "warranty liability"
The part used come from the company's inventory
and the wages for work on the product, will have to be paid.
Note: it could be cash directly instead of using wages payable account. But because there is no information about those wages being paid I assume are not.
Coronado Industries can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $80 and takes two machine hours to make and Fancy has a unit contribution margin of $93 and takes three machine hours to make. There are 2400 machine hours available to manufacture a product. What should Coronado do?
Answer:
It will be better to produce all the units of Plain we can sell, then use any remaining machine hours to produce Fancy. This is because Plain, generated more contribution per hour than Fancy.
Explanation:
We have to calculate the Contribution Margin per machine hours
This means check which product makes a better use of the scarse resourse
[tex]\frac{Plain\: CM}{Plain \: Machine \: Hours } = CM \: per \:Machine\:Hour\\\\ 80 \div 2 = 40[/tex]
[tex]\frac{Fancy\: CM}{Fancy\: Machine \: Hours } = CM \: per \:Machine\:Hour\\\\ 93 \div 3 = 31[/tex]
It will be better to produce all the units of Plain we can sell, then use any remaining machine hours to produce Fancy
If the inflation rate was 3.40% and the nominal interest rate was 5.60% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. Round intermediate calculations to four decimal places.
Answer:
2.1276%
Explanation:
[tex]\ $Real Rate$ = \frac{1+nominal}{1+inflation} - 1 [/tex]
1.056/1.034 -1 = 0,021276595744681 rounding to 4 decimal places:
2.1277%
The reasoning behind this formula is the following:
there is a rate that generate the combine effect of the nominal and the inflation rate
Principal (1+real rate) = Principal x (1+nominal) / (1+ inflation)
removing the principal for clearence:
1+real rate =(1+nominal) x (1+ inflation)
real rate = (1+nominal) x (1+ inflation) - 1
Final answer:
To calculate the real interest rate, subtract the inflation rate of 3.40% from the nominal interest rate of 5.60%. The resultant real interest rate is approximately 2.20% for the last year.
Explanation:
The question asks us to calculate the real interest rate given a nominal interest rate of 5.60% and an inflation rate of 3.40% over the last year. According to the Fisher equation, the real interest rate can be approximated by subtracting the inflation rate from the nominal interest rate. This formula does not require cross-product terms, so we use a simple arithmetic subtraction for this calculation.
To find the real interest rate, we follow this basic formula:
Start with the nominal interest rate: 5.60%
Subtract the inflation rate: 3.40%
The result is the real interest rate
Therefore, the calculation would be:
Real Interest Rate ≈ Nominal Interest Rate – Inflation Rate
Real Interest Rate ≈ 5.60% – 3.40% = 2.20%
Hence, the real rate of interest over the last year was approximately 2.20%.
You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gummies, flopsicles, and mookies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gummies increases by 5%, the quantity of flopsicles sold decreases by 4% and the quantity of mookies sold increases by 5%. Your job is to use the cross-price elasticity between guppy gummies and the other goods to determine which goods your marketing firm should advertise together.
By utilizing the concept of cross-price elasticity, the data indicates that guppy gummies and flopsicles, due to their negative cross-price elasticity, are complementary goods and should be advertised together. Guppy gummies and mookies, having a positive cross-price elasticity, are substitutes and are not typically consumed together.
Explanation:Based on the data provided, we can use the concept of cross-price elasticity to determine which products are complements and which are substitutes. Remember that substitute goods have positive cross-price elasticities: if the price of good A increases, the quantity consumed of good B also increases. On the other hand, complement goods have negative cross-price elasticities: if the price of good A increases, the quantity consumed of good B decreases.
In the case of guppy gummies and flopsicles, when the price of guppy gummies increases by 5%, the quantity of flopsicles sold decreases by 4%. This negative cross-price elasticity suggests that these goods are complements, meaning they are consumed together. Hence, it's a good idea to advertise these two products together.
Alternatively, when the price of guppy gummies increases by 5%, the quantity of mookies sold increases by 5%. This positive cross-price elasticity implies that guppy gummies and mookies are substitute goods, and they are not typically consumed together. Thus, it's not advisable to advertise these two products together.
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The slogan of Natural Care Products is "Loving the Earth." This is more than just an advertising message. The company hires people who not only have job-related skills but also a commitment to sustainability and enjoyment of nature. The employees regularly have opportunities to sign up for service projects such as river cleanups and recycling drives. Employees are enthusiastic about developing and marketing products made with all-natural ingredients sustainably sourced. The HR department uses its communication tools to remind employees about how everyone contributes to realizing this eco-friendly vision for the company. Together, these efforts at Natural Care Products create _____.
Answer:
The correct answer would be Brand Alignment.
Explanation:
In simple words, Brand alignment is the alignment of your company's employees behaviors, sales promotions, product development, sales and marketing efforts, etc, with the goal of the company. In this example, The slogan of Natural Care Products is 'Loving the Earth', which means the goal of the company is to actually love the earth by making efforts for it to clean it and make it pollution free and to do everything which makes the earth live longer. In this regard, the Natural Care Products Company not only hires enthusiastic employees who are inclined towards saving the earth, but also creates their products from all natural sources, plus arrange many opportunities for the employees to sign up for recycling activities. Their all such activities come under the Brand Alignment.
As a result of immigration, the demand for labor would _______, thesupply of labor would ______, and the real wage would ________.a. remain the same, decrease, decreaseb. increase, decrease, remain the samec. remain the same, increase, decreased. decrease, increase, remain the samee. decrease, increase, decrease
Answer:
The correct answer is option c.
Explanation:
As a result of immigration the population will increase. This will further cause the supply of labor to increase. The increase in supply of labor will further lead to a rightward in the labor supply curve. Consequently, wage rate will fall.
The demand for labor will not be affected by influx of workers.
So, option c is the correct answer.
As Willard’s business grows and propsers, his company’s total assets requirements will equal ___________. total sources of financing less net assets and owner’s investment spontaneous debt financing plus bank loans plus owner’s investment less retained earnings spontaneous debt financing plus bank loans plus owner’s investment plus retained earnings total sources of financing less owner’s investment and retained earnings
Answer: Spontaneous debt financing plus bank loans plus owners investment plus retained earnings.
Explanation: It is the general rule in accounting that assets of any business entity will always be equal to the capital invested from different sources and the liabilities taken over by the business for funds. Debt, owners equity and retained earnings are a source of capital whereas bank loans is a liability .
Answer:
As the company grows and prospers, it's total assets requirement will be equal to spontaneous debt financing plus bank loans plus owner's investment plus retained earnings.
Explanation:
The total asset requirement can be defined as the book value of a set of assets that are just adequate to meet a particular solvency test. The company's total asset requirement will include company's capital and liabilities. Here, the bank loans can be classified as liability. While the others are source of capital for the company.
An audit plan of substantive procedures for cash would not includeA. request a cutoff bank statement be mailed to the client. B. request client to prepare bank reconciliations. C. prepare a schedule of interbank transfers for a period of ten business days before and after year-end date.D. obtain a written client representation concerning compensating balance agreements.
Answer:
The correct answer is option A.
Explanation:
Substantive is a type of auditing procedure. It involves the process of examining financial statements and other related documents to check for error.
These tests are conducted to ensure that the financial records are complete and correct.
These procedures are conducted by an auditor and include examining journal entering, testing account balances and transactions.
Though it does not include requesting a cut off bank statement to be mailed to the client.
Selected financial information for Feemster Company for 2012 follows. Sales $ 2,000,000 Cost of goods sold 1,400,000 Merchandise inventory Beginning of year 155,000 End of year 195,000. Required: Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turnover during 2012?
The merchandise inventory turnover for Feemster Company in 2012 was 8 times; this was calculated by dividing the cost of goods sold, which was $1,400,000, by the average inventory amount of $175,000.
Explanation:To calculate the merchandise inventory turnover rate for Feemster Company in 2012, we need to use the formula:
Inventory Turnover = Cost of Goods Sold / Average Inventory
First, we find the average inventory for the year:
Average Inventory = (Beginning Inventory + End Inventory) / 2
Average Inventory = ($155,000 + $195,000) / 2
Average Inventory = $175,000
Then, we use the Cost of Goods Sold and Average Inventory to calculate the inventory turnover:
Inventory Turnover = $1,400,000 / $175,000
Inventory Turnover = 8 times
Thus, the inventory turned over 8 times during the year 2012.
Which step in the STP process develops descriptions of the different segments, which helps firms better understand the customer profiles in each segment?
Answer: Step Four - Construct Segments Profile
Explanation:
When practical market segments have been resolved, segment profiles are then created. Segment profiles are point by point depictions of the purchasers in the segments – portraying their needs, behaviors, preferences for the goods, socio economics, shopping styles, etc. This is much similarly that the age accomplices of Baby Boomers, Generation X and Generation Y have a name.
The step in the STP process that involves developing descriptions of different customer segments is the Segmentation stage. Here, the market is divided into groups based on shared characteristics and needs, which are profiled to assist with tailored marketing approaches.
Explanation:In the STP (Segmentation, Targeting, Positioning) process, the step that involves developing descriptions of the different segments to better understand customer profiles in each segment is the Segmentation stage. During Segmentation, the market is divided into distinct groups of customers based on shared characteristics, needs or behaviors that might require separate marketing strategies. Each segment is profiled in terms of demographics, psychographics, behavioral characteristics and customer needs. This allows firms to fully understand who their customers are, their needs and how best to approach them with tailored marketing strategies.
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A customer sells short 100 shares of ABC at $35 and buys 1 ABC Jul 35 Call @ $3. The stock falls to $30 and the customer closes the option contract at $1 and buys the stock at the current market price. The customer has a:A. $200 lossB. $300 lossC. $200 gainD. $300 gain
Answer:
The answer is $300 gain.
Explanation:
Operations:
Short 100 shares of ABC at $35 each= 100 * 35 = + $3,500Buy 1 ABC Jul 35 Call @ $3 (one call equals to 100 shares)= 100 * (3) = $(300), accumulated = + 3,500 - 300 = + 3,200Closes the option contract at $1 = 100 * 1 = + $100, accumulated = + 3,200 + 100 = + 3,300Buys the stock at the current market price (buys 100 stock @ $30 each)= 100 * (30) = $(3,000), accumulated = + 3,300 - 3,000 = + $300.Fine Industries uses activity-based costing to assist management in setting prices for the company's three major product lines. The following information is available: Activity Cost Pool Estimated Overhead Expected Use of Cost Driver per Activity Cutting 900,000 25,000 labor hours Stitching 8,000,000 320,000 machine hours Inspections 2,800,000 160,000 labor hours Packing 800,000 64,000 finished goods units.
Compute the activity-based overhead rates.
The activity-based overhead rates for Fine Industries are:
Cutting: $36 per labor hour
Stitching: $25 per machine hour
Inspections: $17.50 per labor hour
Packing: $12.50 per finished goods unit
Based on the information provided, we can calculate the activity-based overhead rates for Fine Industries' four activity cost pools:
1. Cutting:
Cost pool total: $900,000
Cost driver: Labor hours
Estimated use of cost driver: 25,000 labor hours
Overhead rate: $900,000 / 25,000 labor hours = $36 per labor hour
2. Stitching:
Cost pool total: $8,000,000
Cost driver: Machine hours
Estimated use of cost driver: 320,000 machine hours
Overhead rate: $8,000,000 / 320,000 machine hours = $25 per machine hour
3. Inspections:
Cost pool total: $2,800,000
Cost driver: Labor hours
Estimated use of cost driver: 160,000 labor hours
Overhead rate: $2,800,000 / 160,000 labor hours = $17.50 per labor hour
4. Packing:
Cost pool total: $800,000
Cost driver: Finished goods units
Estimated use of cost driver: 64,000 finished goods units
Overhead rate: $800,000 / 64,000 finished goods units = $12.50 per finished goods unit
Therefore, the activity-based overhead rates for Fine Industries are:
Cutting: $36 per labor hour
Stitching: $25 per machine hour
Inspections: $17.50 per labor hour
Packing: $12.50 per finished goods unit
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 350 Revenue ($450.00q) $ 157,500 Expenses: Wages and salaries ($11,500 + $124.00q) 54,900 Supplies ($4.00q) 1,400 Equipment rental ($2,500 + $23.00q) 10,550 Insurance ($3,800) 3,800 Miscellaneous ($510 + $1.46q) 1,021 Total expense 71,671 Net operating income $ 85,829 During May, the company’s actual activity was 340 diving-hours. Required: Prepare a flexible budget for May
Answer:
Flexible Budget for May Value Percentage of sales
Sales Revenue 340 hours 450 X 340 = $153,000
Wages and salaries $11,500 + ($124 X 340) = $53,660 35.07%
Supplies $4 X 340 = $1,360 0.88%
Equipment rental $2,500 + ($23 X 340) = $10,320 6.745%
Insurance $3,800 = $3,800 2.48%
Miscellaneous $510 + (1.46 X 340) = $1,006.4 0.657%
Total Expense = $70,146.4 45.85%
Net Operating Income = $82,853.6 54.153
In a flexible budget all items are shown as a percentage of total revenue (Sales). Further the budget is adjusted based on sales level, where all variable expenses are proportionate to sales.
The flexible budget for Puget Sound Divers for May, considering 340 hours of actual diving activity, shows total revenue of $153,000, total expenses of $70,144, and a net operating income of $82,856.
Explanation:The flexible budget is a budget that adjusts or flexes for changes in the volume of activity. With 340 hours of actual diving activity in May, the flexible budget changes. Let's break down the flexible budget calculation by each component:
Revenue: The rate is $450 per diving hour. Therefore, Revenue would be $450 * 340 = $153,000. Wages and salaries: The fixed component is $11,500. The variable component is $124 per diving hour. Therefore, Wages and Salaries would be $11,500 + ($124 * 340) = $53,260. Supplies: This is a variable cost at $4 per diving hour. Therefore, Supplies would be $4 * 340 = $1,360. Equipment rental: The fixed component is $2,500. The variable component is $23 per diving hour. Therefore, Equipment rental would be $2,500 + ($23 * 340) = $10,220. Insurance: This is a fixed cost of $3,800. Miscellaneous: The fixed component is $510. The variable component is $1.46 per diving hour. Therefore, Miscellaneous expenses would be $510 + ($1.46 * 340) = $1,004.
Adding all these costs, the total expense is $70,144. Subtracting this from the revenue, the net operating income is $153,000 - $70,144 = $82,856.
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The basic WACC equation The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. _______ is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation. Wyle Co. has $3.9 million of debt, $3 million of preferred stock, and $3.3 million of common equity. What would be its weight on common equity? a. 0.29 b. 0.26 c. 0.32 d. 0.23
Answer:
[tex]R{_s}[/tex] is the symbol of cost of raising capital from retained earnings.
Weight of common equity = c) 0.32
Explanation:
[tex]R{_s}[/tex] is the symbol that represents the cost of raising capital through retained earnings in weighted average cost of capital.
Wyle Co.
Total of capital structure = Debt + Preferred Stock + Common Equity
= $3.9 million + $3 million + $3.3 million = $10.2 million
Weight on common equity = Equity/Capital structure
= [tex]\frac{3.3 million}{10.2million}[/tex] = 0.32
As weight is share of common equity out of total capital. It can be stated in percentage or decimal value.
[tex]R{_s}[/tex]
C) 0.32
Answer:
The weighted average cost of capital (WACC) formula calculates a company's cost of borrowing money, taking both debt and equity into consideration. Investors and analysts use the WACC to evaluate an investor's return on an investment (ROI) in a company.
Explanation:
Option C is the correct answer.
[tex]\text{GIVEN}:\\ \text{Debt} = 3.9 \text{ million}\\ \\\text{Preferred Stock} = 3 \text{ million}\\ \\\text{Common Equity} = 3.3 \text{ million} \\[/tex]
[tex]\\\text{Total value of capital structure}: \\ = 3.9 + 3 + 3.3\\ = 10.2\\\\\text{Weight of common equity}:\\= \text {Common equity / Total value of Capital structure}\\ \text{Weight of common equity} = 0.32[/tex]
Therefore, the weight on common equity will 0.32.
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ells Company's delivery truck, with a cost of $56,000 was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $38,000. The company received $32,000 reimbursement from its insurance company. The gain or loss as a result of the fire was
Answer:
The company will earn a gain of $14,000.
Explanation:
The original cost of the ells company's delivery truck was $ 56,000 and the accumulated depreciation account had a balance of $38,000, which means a provision for the $38,000 was made in case something bad happens to the truck, and it eventually did as the truck was destroyed by fire and hence the amount of $18,000 ($56,000 - $38,000) was left which was not covered by the company.
The company received $32,000 as insurance , which means the $18,000 loss would be covered here - $32,000 -$18,000 = $14,000, and also the company will gain $14,000.
The required return on the stock of Moe's Pizza is 12.2 percent and after tax required return on the company's debt is 3.82 percent. The company's market value capital structure consists of 72 percent equity. The company is considering a new project that is less risky than current operations and it feels the risk adjustment factor is minus 2.1 percent. The tax rate is 35 percent. What is the required return for the new project?
Answer:
WACC 7.71894%
Explanation:
[tex]WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})[/tex]
Ke = 0.101
ER = 0.72
Kd = 0.0382
DR = 0.18
t = 0.35
WACC 7.71894%
Final answer:
The required return for Moe's Pizza's new less risky project is 6.65%, calculated using the weighted average cost of capital formula with a risk adjustment factor applied to the company's equity return.
Explanation:
The question seeks to determine the required return for a new project Moe's Pizza is considering. Given that the project is less risky than the current operations, a risk adjustment of minus 2.1 percent is applied to the company's required return on equity. Moe's Pizza requires a 12.2 percent return on equity and a 3.82 percent after-tax return on debt, with a capital structure of 72 percent equity and 28 percent debt (calculated as 100% - 72%).
To calculate the weighted average cost of capital (WACC) for the new project, which represents the new project's required return, we use the following formula:
WACC = E/V × Re × (1 - Risk Adjustment) + D/V × Rd × (1 - Tax Rate)
Substituting the given values:
WACC = 0.72 × 12.2% × (1 - (-0.021)) + 0.28 × 3.82% × (1 - 0.35)
After calculations:
WACC = 0.72 × 12.2% × 1.021 + 0.28 × 3.82% × 0.65
WACC = 8.97% × 0.72 + 0.69% × 0.28
WACC = 6.46% + 0.19%
Required return for the new project = WACC = 6.65%.
This value takes into account the tax shield on the debt and the risk adjustment for the new project being less risky than the current operations.
You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashies, flopsicles, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashies decreases by 1%, the quantity of flopsicles sold decreases by 18% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between splishy splashies and the other goods to determine which goods your marketing firm should advertise together.
Using the concept of cross-price elasticity, one can infer that cannies are a substitute good for splishy splashies and that flopsicles and splishy splashies are complementary goods. Based on this, splishy splashies and flopsicles should be promoted together.
Explanation:To determine which products are either substitutes or complements, we look at the provided cross-price elasticity data. Substitute goods have positive cross-price elasticities of demand. When the price of one good decreases, the quantity of the substitute good sold increases. This is demonstrated in the increase of cannies sales when the price of splishy splashies decreases. Thus, cannies could be a substitute for splishy splashies.
Complement goods, on the other hand, have negative cross-price elasticities. This means that when the price of one good decreases, the quantity sold of the complement good also decreases. In this case, when the price of splishy splashies decreases, the quantity of flopsicles sold decreases. Therefore, flopsicles and splishy splashies could be considered complementary goods.
Considering this, your firm should promote splishy splashies and flopsicles together, as consumers are likely to consume these two products together.
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The following direct materials data pertain to the operations of Wright Co. for the month of December. Standard materials price $5.00 per pound Actual quantity of materials purchased and used 16,500 pounds The standard cost card shows that a finished product contains 4 pounds of materials. The 16,500 pounds were purchased in December at a discount of 4% from the standard price. In December, 4,000 units of finished product were manufactured. Calculate the materials variances. Identify whether the variance is favorable or unfavorable?
Answer:
There are various material variances, but main are Material Price Variance and Direct Material Quantity Variance and with the combination of these 2 variances we have Material Usage Variance
Material Price Variance = (Standard Price - Actual Price) X Actual Quantity
Given standard Price = $5 per unit
Actual Price = $5 - 4% = $4.8
Material Price Variance = ($5 - $4.8) X 16,500 = $3,300 Favorable
Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price
Standard Quantity = 4,000 units X 4 pounds per unit = 16,000 pounds
Material Quantity Variance = (16,000 - 16,500) X $5 = - $2,500 Unfavorable
Material Usage Variance = Standard Price X Standard Quantity - Actual Price X Actual Quantity
= ($5 X 16,000) - ($4.8 X 16,500)
= $80,000 - $79,200 = $800 Favorable = Material Price Variance + Material Quantity Variance = $3,300 + (-$2,500) = $800 Favorable
Material Price Variance = $3,300 Favorable
Material Quantity Variance = - $2,500 Unfavorable
Material Usage Variance = $800 Favorable
What is the principle of quality? What is the principle of quantity? Give an example in which a physical activity professional would use each principle to design an appropriate physical activity experience.
Answer:
The principle of quality states that the experiences that engage us in the most critical components of an activity are most likely to increase our capacity to perform that activity. Critical components are the elements of an activity that are most important for performing it at a high level. To be really good at an activity, you must focus on what factor you need most and improve that area.The principle of quantity states that when all other factors are equal, increasing the frequency of our engagement with the critical components of an activity usually
results in the largest performance improvement in that activity. Generally, the performer whose experiences have engaged her most often in the critical components of an activity usually becomes the most competent in that activity.A physical activity professional asked to create a plan to decrease the time in a marathoner’s performance would begin by conducting a analysis. The critical components in this activity relate to physical performance capacity more than skill.
Explanation:
The principle of quality in physical activities refers to the importance of the type of activity, while the principle of quantity refers to the amount or volume of the activity. In designing physical activity experiences, professionals use these principles along with the understanding of physical principles and physical quantities.
Explanation:The principle of quality refers to the concept that in physical activities, the type of physical activity (for instance, its intensity and level of difficulty) is important in achieving certain goals. For example, a physical education instructor refers to this principle when planning a circuit training activity that includes high-intensity exercises for students aiming to improve body strength and endurance.
On the other hand, the principle of quantity refers to the idea that the amount or volume of a physical activity (such as its duration, frequency, and repetition) is crucial in yielding desired outcomes. A professional trainer may apply this principle in designing a running program for a beginner where the distance covered gradually increases over time, helping the trainee improve stamina over a given period.
The application of these principles requires the understanding of physical principles and physical quantities. Understanding how to measure and compute physical quantities, and how physical principles work in different scenarios, allow fitness professionals to design more effective physical activity experiences.
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It is July 1, and Eduardo wants to purchase an engagement ring for his soon-to-be fiancée. He visits several jewelry stores and finds the perfect ring. The cost of the ring is $1,800. Eduardo doesn't want to put the purchase on a credit card, so he decided to put the ring on layaway. Since he needs the ring in 6 months so that he can propose on New Year’s Eve, he agrees to pay the store $300 per month. Since Eduardo knows exactly how much money he needs to pay each month, this is a(n) __________ goal
Answer:
This an example of measured goal.
Explanation:
Eduardo wants to purchase an engagement ring. The price of the ring is $1800. It is July 1 and Eduardo needs ring after 6 months. So he keeps it on layaway. He needs to pay $300 to the store per month. Since he is aware of the amount he needs to pay every month. This will be classified as a measured goal.
Eduardo has set a SMART goal in order to purchase the engagement ring within 6 months by making monthly payments of $300, and he can track his progress, making his goal Specific, Measurable, Attainable, Relevant, and Time-bound.
Explanation:In Eduardo's case, his plan to pay for the ring over the course of 6 months is an example of a SMART goal. SMART is an acronym that stands for Specific, Measurable, Attainable, Relevant, and Time-based. Eduardo has a Specific goal, which is to buy the ring by paying $300 per month. It's Measurable because he can track his progress by the payments he makes each month. This goal is Attainable assuming Eduardo has a steady income. The goal is Relevant as he wants to buy the ring for his soon-to-be fiancée. Lastly, it is Time-based as he plans to accomplish this within 6 months.
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