Answer:
Sales ( 118,000 × $ 320) 37,760,000
Less Cost of Goods Sold : (14,909,500)
Opening Stock (3,000 units × $135) 40,500
Add Cost of Goods Manufactured
Direct materials ($ 40 × 118,000 units) 4,720,000
Direct labor ($ 62 × 118,000 units) 7,316,000
Variable overhead 3,220,000
Less Closing Stock (3,000 × ($ 40+$ 62+$27)) (387,000)
Contribution 22,850,500
Less Operating Expenses :
Fixed overhead (7,400,000)
Selling and administrative costs :
Variable ( 1,416,000)
Fixed (4,600,000)
Net Income 9,434,500
Explanation:
Variable Product Cost = Direct Materials + Direct Labor + Variable Overheads
Variable Costing - Period Cost = Fixed Overheads + All Non- Manufacturing Expenses
Answer:
Income Statement - Oak Marttotal sales $320 x 118,000 units sold = $37,760,000
variable COGS ($15,355,000)
variable beginning inventory = ($405,000)
variable direct costs ($40 + $62) x 115,000 = ($11,730,000)
variable overhead = ($3,220,000)
manufacturing margin $22,405,000
variable administrative and selling costs ($1,416,000)
contribution margin $20,989,000
fixed costs ($12,000,000)
fixed overhead = ($7,400,000)
administrative and selling = ($4,600,000)
net income $8,989,000
When you are calculating variable costing, COGS only includes variable costs. All fixed costs are included as period costs at the end. Fixed costs are not carried forward either.
When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is: A. variable cost of producing a unit of product. B. the full absorption cost of producing a unit of product. C. the market price charged to outside customers, less costs saved by transferring internally. D. the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.
Answer:
C. the market price charged to outside customers, less costs saved by transferring internally.
Explanation:
Divisional manager performance is evaluated separately from one department to another. The Selling department need a minimum price equivalent to price the items fetch in market transaction to raise performance.
However goal congruence has to be met, therefore the price must exclude savings as a result of Internal transfer for the interest of the firm as a whole.
On January 3, 2014, Trusty Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Trusty spent $3,000 painting it, $1,500 replacing tires, and $4,500 overhauling the engine. The truck should remain in service for five years and have a residual value of $9,000. The truck's annual mileage is expected to be 22,500 miles in each of the first four years and 10,000 miles in the fifth year - 100,000 miles in total.
In deciding which depreciation method to use, Mikail Johnson, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance).
Answer:
Accumulated depreciation for Years 1 - 5 under:
the Straight-line method is $90,000.the Units-of-production method is $90,000.the Double-declining-balance method is $86,170.Explanation:
The total cost of the asset is $90,000 + $3,000 + $1,500 + $4,500 = $99,000, since all the other costs were directly attributable cost and were necessary to bring the asset to usable form.
The painting is capitalized because it is the first time Trust Delivery would be using the asset, otherwise it would have been expendedOverhauling cost can be regarded as a separate asset, if we were provided with different useful lives - componentization.Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($99,000 - $9,000) / 5 years = $18,000 yearly depreciation expense.
Accumulated depreciation for Years 1 to 5 is $18,000 x 5 years $90,000.
The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($99,000 - $9,000) / 100,000 miles x 22,500 miles = $20,250/year
Accumulated depreciation for the first four years is $20,250 x 4 years = $81,000.
At Year 5, depreciation = $90,000 / 100,000 miles x 10,000 miles = $9,000
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Years 1 - 4.
Accumulated depreciation expense for Years 1 to 5, under this method, is $90,000 (addition of first four years and the Year 5).
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/5years = 20%, then 20% multiplied by 2 to give 40%
At Year 1, 40% X $99,000 = $39,600
At Year 2, 40% X $59,400 ($99,000 - $39,600) = $23,760
At Year 3, 40% X $35,640 ($59,400 - $23,760) = $14,256
At Year 4, 40% X $21,384 ($35,640 - $14,256) = $8,554 approximately (the depreciation expense would stop at this stage since the amount falls below the residual value).
Accumulated depreciation expense for Years 1 to 4, under this method, is $86,170 (addition of all the yearly depreciation).
7. Suppose that people expect inflation to equal 3%, but in fact, prices rise by 5%. Describe how this unexpectedly high inflation rate would help or hurt the following: 1. the government 2. a homeowner with a fixed-rate mortgage 3. a union worker in the second year of a labor contract 4. a college that has invested some of its endowment in government bonds
Answer:
The answer is:
1. Help
2. Help
3. Hurt
4. Hurt
Explanation:
1. Help. This unxpected increase in inflation will help the government because this will increase its revenue and also reduce the real value of government outstanding debts.
2. Help. Paying at a fixed rate that was agreed when the interest rate was 3percent will be of help with the home owners because the real interest rate he will be paying lower. The lenders lose during this period.
3. Hurt. It will hurt this worker because the contract was agreed when the interest rate was 3percent. Now that prices of goods and services have increased, purchasing power will be reduced.
4. Hurt. Because with increased inflation, interest rates will be lower. So the college is earning lower interest rate.
Consider returns R on a stock XYZ in the follwoing 4 states of he economy. each with probability p Boom state: p=0.15, R=35% Normal state: p=x?, R=8% Slowdown state: p=0.1, R=1% Recession state: p=0.2, R = -33% What is the expected return for stock XYZ? Quote your answer to 1 decimal place, but do not type the "%" Do not round intermediate results.
Answer:
The return on stock XYZ is 3.2
Explanation:
The expected return on a stock whose returns differ based on different scenarios can be calculated by multiplying the return in a scenario by the probability of that scenario and taking a sum of all such scenario returns after they have been multiplied by their respective probabilities.
The formula can be written as,
Return on a stock = rA * pA + rB * pB + ... + rN * pN
Where,
r represents the scenario returnsp represents the probability of scenariosProbability of normal state (x) = 1 - (0.15 + 0.1 + 0.2) = 0.55
Return on stock XYZ = 0.35 * 0.15 + 0.08 * 0.55 + 0.01 * 0.1 + (-0.33) * 0.2
Return on stock XYZ = 0.0315 or 3.15% rounded off to 3.2%
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 14 comma 700 units. Southeastern estimates its annual holding cost for this item to be $24 per unit. The cost to place and process an order from the supplier is $76. The company operates 300 days per year, and the lead time to receive an order from the supplier is 3 working days. a) What is the economic order quantity? nothing units (round your response to the nearest whole number).
Answer:
305 units
Explanation:
The calculation of the economic order quantity is given below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is 14,700 units
Ordering cost is $76 per order
And, the holding cost or carrying cost is $24 per unit
So the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{14,700}\times \text{\$76}}{\text{\$24}}}[/tex]
= 305 units
We simply applied the above formula to determine the economic order quantity
Scenario 15-6 The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WaR 2 Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc.
Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $50 per ticket?
The concert promoters can earn an additional $100,000 by charging each type of fan their willingness to pay instead of a flat price of $50 per ticket.
To calculate the additional profit from charging each type of fan their willingness to pay compared to a flat price of $50 per ticket, we first consider the revenue from each pricing strategy. If die-hard fans are charged $150 and casual fans are charged $50, and assuming all tickets are sold, the total revenue would be (1,000 die-hard fans times $150) + (500 casual fans times $50) = $150,000 + $25,000 = $175,000. The cost of putting on the concert is $50,000, so the profit under this differential pricing strategy would be $175,000 - $50,000 = $125,000.
Under a flat pricing strategy where every ticket is sold for $50, with all 1,500 seats sold, the revenue would be (1,500 tickets times $50) = $75,000. The profit would then be $75,000 - $50,000 = $25,000. Therefore, the additional profit from charging each customer their willingness to pay is $125,000 - $25,000 = $100,000.
Indigo Corporation significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $35,100 and ending receivables of $196,800. Credit sales were $361,800.
(a) Determine cash collections during the period.
(b) Cash collections during the period $
Answer:
(a) $200,100
(b) $200,100
Explanation:
The movement in the accounts receivable balance at the start and end of an accounting period is due to cash payments, additional credit sales, and any amount written off during the period.
This may be expressed mathematically as
opening balance + sales - cash collected - amount written off = closing balance
$35,100 + $361,800 - cash collected = $196,800
Cash collected = $35,100 + $361,800 - $196,800
= $200,100
In an effort to reduce pipe breakage, water hammer, and product agitation, a French chemical company plans to install several chemically resistant pulsation dampeners. The cost of the dampeners today is €125,000, but the chemical company has to wait until a permit is approved for its bidirectional port-to-plant product pipeline. The permit approval process will take at least 2 years because of the time required for preparation of an environmental impact statement. Because of intense foreign competition, the manufacturer plans to increase the price only by the inflation rate of 4% each year. Determine the cost of the dampeners in 5 years in terms of (a) then-current euros and (b) constant-value euros?
The cost of dampeners in terms of then-current euros is_________ € .
The cost of dampeners in terms of constant-value euros is______ € .
Answer:
a) €152081.6128
b) €125000
Explanation:
a) The cost of dampners in terms of then-current euros :
current cost x(1 + inflation rate)ⁿ where n is the number of years.
Since the price of dampners is expected to increase only by 4% per year from the current price of €125,000 in 5 years:
We calculate : 125000 (1+0.04)⁵ = €152081.6128
The cost of dampeners in terms of then-current euros is €152081.6128
b) The cost of dampners in terms of constant value will remain as at today's current price if the value of Euros remains constant . Therefore, The cost of dampeners in terms of constant-value euros is €125,000.
Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in three years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer: a) $40.76
b) $45.72
c) $72.36
Explanation:
We shall use the dividend discount model of stock valuation to solve for this with the following formula,
P0 = D1 / (Ke - g)
Where,
P0 = Current Price
D1 = Expected Div AFTER 1 YEAR
Ke = Cost of Equity
g = Growth Rate
We have only the current dividend so we will apply the growth rate to find the next one.
a) Current Price
PO = D(1+g) / Ke - g
PO = 2.55(1+0.039) / 0.104 - 0.039
PO = $40.76
b) In 3 years. So we would need to use the dividend, 4 years from now to be able to calculate
P3 = D(1+g)^4 / Ke - g
P3 = 2.55(1+0.039) ^4 / 0.104 - 0.039
P3 = $45.72
c) In 15 years. So we would need to use the dividend, 16 years from now to be able to calculate,
P15 = D(1+g)^16 / Ke - g
P15 = 2.55(1+0.039) ^16 / 0.104 - 0.039
P15 = $72.36
If you need any and I mean any clarification, do comment. Cheers.
To find the current price of the stock, we can use the Gordon Growth Model (also known as the Dividend Discount Model), which is a method used to calculate the value of a stock that assumes that dividends will increase at a constant growth rate indefinitely. The formula for the model is:
P0 = D1 / (r - g),
where:
- P0 = Current price of the stock
- D1 = Dividend expected next year
- r = Required rate of return (or discount rate)
- g = Growth rate of dividends
Given that the last dividend (D0) was $2.55 and it is expected to grow at a rate of g = 3.9% per year, we first need to calculate the dividend expected next year (D1):
D1 = D0 * (1 + g) = $2.55 * (1 + 0.039) = $2.55 * 1.039 = $2.64945.
Now we can calculate the current stock price (P0) using the required rate of return r = 10.4%:
P0 = D1 / (r - g) = $2.64945 / (0.104 - 0.039) = $2.64945 / 0.065 = $40.76.
To find the price of the stock in three years, we need to understand that the price at that time will be based on the dividends expected in the fourth year, as stock value is based on future dividends. So we need to calculate the dividend in the fourth year (D4) and then discount it back to the price in the third year using the constant growth rate.
Let's calculate D4:
D4 = D0 * (1 + g)^4 = $2.55 * (1 + 0.039)^4 = $2.55 * (1.039)^4.
This result gives us the expected dividend in the fourth year. Now we use the Gordon Growth Model again to find the price (P3) at the end of year three:
P3 = D4 / (r - g).
We then calculate the expected dividend in the 16th year (D16) to find out the price in fifteen years, bearing in mind that the stock value in year 15 (P15) will be based on the dividend expected in year 16:
D16 = D0 * (1 + g)^16 = $2.55 * (1 + 0.039)^16.
Then, again, use the model:
P15 = D16 / (r - g).
Let's compute the actual numbers. First, calculate D4:
D4 = $2.55 * (1.039)^4 = $2.55 * 1.169858 = $2.98314.
Now calculate P3:
P3 = D4 / (r - g) = $2.98314 / 0.065 = $45.90.
Now calculate D16:
D16 = $2.55 * (1.039)^16 = $2.55 * 1.816892 = $4.63307.
Finally, calculate P15:
P15 = D16 / (r - g) = $4.63307 / 0.065 = $71.28.
Therefore, the current price of the stock is $40.76, the price in three years will be $45.90, and the price in fifteen years will be $71.28. These prices are based on the given growth rates and required return, using the Gordon Growth Model. Remember that the results may vary slightly due to rounding differences in the intermediate calculations. Rounded to two decimal places, your final prices may read:
- Current price: $40.76
- Price in three years: $45.90
- Price in fifteen years: $71.28
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Marvin Gaye's song "Gotta Give It Up" was protected by ___________ .
a
not selected option a collective mark
b
not selected option b utility parent
c
not selected option c trademark
d
not selected option d copyright
e
not selected option e design patent
Answer:
d. not selected option d copyright
Turnbull Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing $100,000 of debt at a before-tax cost of 9.6%, $30,000 of preferred stock at a cost of 10.7%, and $140,000 of equity at a cost of 13.5%. The firm faces a tax rate of 40%. What will be the WACC for this project
Answer:
10.32%
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs. weightage can be calculated by using the market value of the equity and debt.
The formula for WACC is
Weighted average cost of capital = (Cost of Common stock x Weightage of Common stock) + (Cost of debt (1 - tax ) x Weightage of debt) + (Cost of Preferred stock x Weightage of Preferred stock)
Weighted average cost of capital = (13.5% x 140,000 / 270,000) + (9.6%(1 - 0.4) x $1,00,000 / $270,000 ) + (10.7% x $30,000 / $270,000 )
Weighted average cost of capital = 7% + 2.13% + 1.19% = 10.32%
The Weighted Average Cost of Capital (WACC) for Turnbull Co.'s project, given the provided funding mix and costs, is approximately 10.36%.
Explanation:The Weighted Average Cost of Capital (WACC) for Turnbull Co. will be calculated by taking the percentage of each type of debt in the total capital and multiplying it with its related cost. Each of these resulting values is then summed up. For the debt: ($100,000 / $270,000) * 9.6% * (1 - 0.40) = 0.02133 or 2.133%. For the preferred stock: ($30,000 / $270,000) * 10.7% = 0.0119 or 1.19%. For common equity: ($140,000 / $270,000) * 13.5% = 0.07037 or 7.037%. So, the total WACC for this project will be 2.133% + 1.19% + 7.037% = 10.360, or approximately 10.36%.
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Assume you’ve just started a new business to manufacture Fry-Plate, a new solar-powered cooking pan for camping. Your business analyst tells you that in the long run Fry-Plate will sell for $32.50 because, after a few years pass, similar products will be introduced by your competitors. Assume that, in the long run, you want to earn $4.50 on each unit of Fry-Plate sold. What is the target price? What is the target profit? What is the target cost? (Round your answers to 2 decimal places.)
Answer:
Target price $32.50
Target profit $4.50
Target cost $28.00
Explanation:
Target price $32.50
Target profit $4.50
Target cost ($32.50-$4.50)
$28.00
Therefore the target price is $32.50,
The target profit is $4.50 while the target cost is $28.00
Answer:
First of all let's understand that Target costing is a system under which a company plans the price, costs, and the margins that it wants to achieve for a new product in advance. The following are the three terms that should be familiarized.
(a) Target price – It is the price the company is expected to sell.
(b) Target profit – It is the required margin the company is expected to gain on selling price.
(c) Target cost – It is the cost the company is expected to incur on manufacturing of the product.
Based on the given information, the target price, target profit and target cost is determined as below:
(a) Target price is the selling price. That is $32.50.
(b) Target profit is the amount we wish to earn. That is $4.50.
(c) Target cost is the difference between the target price and the target profit. That is $28 ($32.50 - $4.50).
Explanation:
Set up the payoff matrix. You are deciding whether to invade France (F), Sweden (S) or Norway (N), and your opponent is simultaneously deciding which of these three countries to defend. If you invade a country that your opponent is defending, you will be defeated (payoff: −1), but if you invade a country your opponent is not defending, you will be successful (payoff: +1).
Answer:
Suppose:
F stands for France, S stands for Sweden, and N stands for Norway.
The game according to the given condition is:
[ Find the matrix in attachment ]
Each point indicates that you invaded.
Each of these items must be considered in preparing a statement of cash flows for Irvin Co. for the year ended December 31, 2017. For each item, state how it should be shown in the statement of cash flows for 2017. (a) Issued bonds for $200,000 cash. Choose the type of cash inflows and outflows (b) Purchased equipment for $180,000 cash. Choose the type of cash inflows and outflows (c) Sold land costing $20,000 for $20,000 cash. Choose the type of cash inflows and outflows (d) Declared and paid a $50,000 cash dividend. Choose the type of cash inflows and outflows
Answer:
(a) Issued bonds for $200,000 cash. - cash inflow from financing activity;
(b) Purchased equipment for $180,000 cash. - cash outflow from investing activity;
(c) Sold land costing $20,000 for $20,000 cash. - cash inflow from investing activity;
(d) Declared and paid a $50,000 cash dividend. - cash outflow from financing activity
JT Engineering is deciding between two machines. Machine A costs $352,000, with inflows of $209,000 and outflows of $154,000. Machine B costs $380,000, with inflows of $231,000 and outflows of $166,000. Both have a 10-year life and no salvage value. JT uses the straight-line method for depreciation and requires a return of 12%. How desirable are the machines? Use annual rate of return to determine the answer.
Answer:
Machine B is preferrable with annual rate of return of 14.21%,higher than the required annual rate of return of 12%
Explanation:
Annual rate of return of both machine needs to ascertained ,then compared with the required annual rate of rate of 12% in order to determine which machine gives at least 12% annual rate of return and worth investing in.
Annual rate of return=net income/average investment
net income=inflows-outflows-depreciation
Machine A average investment=$352,000/2=$176,000
Machine B average investment=$380,000/2=$190,000
Machine A net income=$209,000-$154,000-($355,000/10)
=$209,000-$154,000-$35,500
=$19,500
Machine B net income=$231,000-$166,000-($380,000/10)
=$231,000-$166,000-$38,000
=$27,000
Machine A annual rate of return=$19,500/$176,000
=11.08%
Machine B annual rate of return=$27,000/$190,000
=14.21%
The Machine B is more preferable because its annual rate of return (14.21%) is higher than the required annual rate of return (12%).
The Annual rate of return of both machine needs to known to encourage comparison with the required annual rate of return
Given Information
The required annual rate of rate = 12%
Machine A average investment = $352,000/2
Machine A average investment = $176,000
Machine B average investment = $380,000/2
Machine B average investment = $190,000
Net income = Inflows - Outflows - DepreciationMachine A Net income = $209,000 - $154,000 - ($355,000/10)
Machine A Net income = $209,000 - $154,000 - $35,500
Machine A Net income =$19,500
Machine B Net income = $231,000 - $166,000 - ($380,000/10)
Machine B Net income = $231,000 - $166,000 - $38,000
Machine B Net income = $27,000
Annual rate of return = Net income/Average investmentMachine A Annual rate of return = $19,500/$176,000
Machine A Annual rate of return = 11.08%
Machine B Annual rate of return =$27,000/$190,000
Machine A Annual rate of return = 14.21%
Therefore, the Machine B is more preferable because its annual rate of return (14.21%) is higher than the required annual rate of return (12%).
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Alkyl Fliers Company produces model airplanes. During the month of November, it produced 3,000 planes. The actual labor hours were 5 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $8 per hour. At the end of November, Alkyl Fliers found that it had a favorable labor rate variance of $12,000. What was Alkyl Fliers' actual cost per labor hour
Answer:
$108,000
Explanation:
Favorable rate variance arises when the actual cost is lower than the implied cost. Implied cost can be calculated by multiplying standard rate with actual hours.
Labor rate variance = Actual Labor cost - Implied Labour cost
Favorable Labor rate variance = Implied Labour cost - Actual Labor cost
Favorable Labor rate variance = (Standard rate x Actual hours) - Actual Labor cost
$12,000 = ($8 x (5 x 3000)) - Actual Labor cost
$12,000 = ($8 x 15,000) - Actual Labor cost
$12,000 = $120,000 - Actual Labor cost
Actual Labor Cost = $120,000 - $12,000 = $108,000
Annual starting salaries for college graduates with degrees in business administration are generally expected to be between $43,000 and $61,600. Assume that a 95% confidence interval estimate of the population mean annual starting salary is desired. (Round your answers up to the nearest whole number.)
Answer: 332
Explanation:
Lowest value = $43,000
Highest value = $61,600
Range = ( HV - LV ) / 4
= ( $61,600 - $43,000 ) / 4
= $4650
Where p = $4650
Required sample size (n)
n = ( Za /2 × P/E )²........... equation 1
Using 95% confidence level
Za/2 = Z 1 - 0.95
= Z0.025
= 1.96 using Z-table
Substituting Z into equation 1
n = ( 1.96 × 4650/500 )²
= ( 1.96 × 9.3 )²
= 332.25
To the nearest whole number
= 332
Shao Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares is expected to be zero, and the company's cost of capital is 11%.By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for reach plane?
Answer:
1. If this is accepted the value of the company will increase by $27.0084 million.
2. The equivalent annual annuity for each plane:
Plane A = $2.973 million
Plane B = $4.586 million
Explanation:
1. Let's calculate Net Present Value (NPV) for Plane A:
Initial investment = $100 million
Annual cash flows = $30 million per year
Cost of capital = 11%
n = 5 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = (30 million ×PVIFA (11%, 5) - 100 million
NPV = (30 million × 3.659) - 100 million
NPV = $10.877 million
Let's calculate Net Present Value (NPV) for Plane B:
Initial investment = $132 million
Annual cash flows = $27 million per year
Cost of capital = 11%
n = 10 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = ($27 million ×PVIFA (11%, 10) - $132 million
NPV = ($27 million × 5.8892) - $132 million
NPV = $27.0084 million
In conclusion, the better project is Plane B as it has a higher net present value. If this is accepted the value of the company will increase by $27.0084 million.
2. equivalent annual annuity = NPV/ Present Value Annuity Factor
For Plane A:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 5)
equivalent annual annuity = $10.877 million/ 3.659
equivalent annual annuity = $2.973 million
The equivalent annual annuity for plane A is $2.973 million
For Plane B:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 10)
equivalent annual annuity = $27.0084 million/5.8892
equivalent annual annuity = $4.586 million
The equivalent annual annuity for plane B is $4.586 million
Cara, who is 42 years old, had some unexpected medical expenses during the year. To pay for these expenses (which were claimed as itemized deductions on her tax return), she received a $10,000 distribution from her traditional IRA (she has only made deductible contributions to the IRA). Assuming her marginal ordinary income tax rate is 22%, what amount of taxes and/or early distribution penalties will Cara be required to pay on this distribution
Answer:
Answer is given below;
Explanation:
Distribution received from IRA $10,000
Marginal income tax rate 22%
Income Tax $10,000*22% $2,200
She will have to pay $2,200 as income tax on her receipt of traditional IRA distribution.There shall be no penalty as she has only made deductible contributions to IRA.
Imagine your employer asks you to assist in determining whether their DC plan meets several of the criteria to be considered a qualified plan. For each of the following plan features, please indicate whether or not the plan meets the requirements. If so, explain why. If not, please explain how the plan can be changed to ensure that the plan complies. (Do not worry about plan qualification requirements that are not listed.)
a. The plan requires individuals to wait 6 months before becoming eligible to participate.
b. The employer has 250 employees, 40 of whom are considered highly compensated. 38 of the highly compensated employees are covered by the plan. 145 of the non-highly compensated employees are also covered by plan.
c. Employer contributions vest according to the following schedule:
After this many years of service Employee is vested in this % of employer contributions
1 15
2 30
3 45
4 60
5 80
6 100
Answer:
a) meets the requirements. It sets eligibiity criteria for the plan.
b) doesn't meet the requirements. This feature doesn't give out details of the employees as to why or why they aren't covered by the plan. The details of highly compensated employees covered or not covered by plan must be listed.The details of non-highly compensated employees must also be listed.
c) meets the requirements. The employees who have spent greater number of years with the companies must get larger contribution from the employer in the plan. This feature meets this requirement
Explanation:
Every defined contribution plan or DC plan must have an eligibility criteria. It must have complete records and details of employees who are going to be covered or not covered by the plan. It must also have the details of amount of benefit that will be received by employees and the details of contribution made by the employer. The plan must also differentiate the amount of benefit received by different groups of employees.
The following information relates to Halloran Co.'s accounts receivable for 2018: Accounts receivable balance, 1/1/2018 $ 844,000 Credit sales for 2018 3,470,000 Accounts receivable written off during 2018 54,000 Collections from customers during 2018 3,050,000 Allowance for uncollectible accounts balance, 12/31/2018 205,000 What amount should Halloran report for accounts receivable, before allowances, at December 31, 2018?A. $1,210,000.B. $1,264,000.C. $1,005,000.D. None of these answer choices are correct.
Answer:
The correct option is A.
Explanation:
Let us journalize the effects of the transactions as follows:
Debit Accounts receivable $3,470,000
Credit Sales revenue $3,470,000
(To record credit sales during the year)
Debit Allowance for doubtful accounts $54,000
Credit Accounts receivable $54,000
(To write-off accounts receivable)
Debit Cash $3,050,000
Credit Accounts receivable $3,050,000
(To record collections on account)
The net effects of the above journals on Accounts receivable is: $844,000 + $3,470,000 - $54,000 - $3,050,000 = $1,210,000
In 2021, the controller of Sytec Corporation discovered that $62,000 of inventory purchases were incorrectly charged to advertising expense in 2020. In addition, the 2020 year-end inventory count failed to include $40,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material. Required: 1. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors.
Answer:
Reduction is retained earnings by $40,000
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
Explanation:
The impact of the omitted consigned inventory and the inventory purchases debited to advertising expenses are shown below
increase in purchases $62,000
omitted closing inventory ($40,000)
increase in cost of goods sold $22,000
Reduction in advertising expenses $62,000
Increase in retained earnings $40,000
The implication of this is that the closing inventory was lower by $40,000 and retained earning was lower by the same amount
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
It is noteworthy that a lower closing inventory means a higher cost of goods ,as a result a lower operating profit and retained earnings
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,000. The division sales for the year were $1,049,000 and the variable costs were $859,000. The fixed costs of the division were $192,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
a. 57600 decrease
b. 132400 decrease
c. 54700 decrease
d. 190000 decrease
e. 190000 increase
Answer:
The impact on operating income for eliminating this business segment would be a decrease in profit of $132,400. The right answer is b.
Explanation:
According to the data, we have the following details:
division sales=$1,049,000
variable costs= $859,000
Hence, contribution= division sales-variable costs
=$1,049,000-$859,000
=$190,000
30% of the fixed costs allocated to that division could be eliminated
Decrease in fixed cost=$192,000×30%= $57,600
Therefore, the impact on operating income for eliminating this business segment would be $190,000-$57,600= $132,400, which means that there would a decrease in profit.
Answer:
Net decrease in operating income $132,400
Explanation:
The relevant cash flows to determine the impact of eliminating the division are:
lost contribution from shut down Savings in fixed cost from shut downPlease, note that only 30% of the fixed costs to be saved is relevant, the balance is not relevant for this decision. Simply because they would be incurred either way.
$
The impact on operating income:
Lost contribution = ( 1,049,000 - 859,000)= (190,000)
Savings in fixed cost = 30% ×192,000 = 57,600
Net decrease in operating income 132,400
A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units? Use a contribution margin format. You must show how you calculated each number for credit. Use the template below for all of the remaining problems. Check: Operating income should be greater than $43,000. (3 points)Sales $Variable costs $Contribution margin $Fixed costs $Operating income $
Answer:
Calculation of Operating Income if company produces and sells 70,000 units
Sales ($96,000/60,000 units × 70,000) $112,000
Less variable costs ( $36,000/60,000×70,000) ($42,000)
Contribution $70,000
Less Period Costs
fixed costs (26,000)
Operating Income 44,000
Explanation:
First Determine the Standard Cost or Revenue
Then Flex the Budget to the new level of 70,000 units produced and sold
A company purchased an asset for $3,400,000 that will be used in a 3-year project. The asset is in the 3-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively. What is the book value of the equipment at the end of the project?
1. Peter's Audio Shop has a before-tax cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?
Answer:
9.14%
Explanation:
The computation of the weighted average cost of capital is shown below:-
Debt = $500,000 × 1.02
= $0.51 m
Preferred = 40,000 × $34
= $1.36 m
Common = 104,000 × $20
= $2.08 m
Total = $0.51 m + $1.36 m + $2.08 m
= $3.95 m
So, Weighted average cost of capital = ($2.08 ÷ $3.95 m × 0.11) + ($1.36 m ÷ $3.95 m × 0.08) + (($0.51 m ÷ 3.95 m × 0.07 × (1 - 0.34))
= 0.057924 + 0.027544 + 0.005965
= 0.091433
or 9.14%
Therefore for computing the weighted average cost of capital we simply applied the above equation.
On December 31, 2018, Perry Corporation leased equipment to Admiral Company for a five-year period. The annual lease payment, excluding nonlease components, is $ 43,000. The interest rate for this lease is 12%. The payments are due on December 31 of each year. The first payment was made on December 31, 2018. The normal cash price for this type of equipment is $ 150,000 while the cost to Perry was $ 126,000. For the year ended December 31, 2018, by what amount will Perry's earnings increase due to this lease (ignore taxes)?
Answer:
The correct answer is $24,000.
Explanation:
According to the scenario, the computation of the given data are as follows:
Fair value of equipment = $150,000
Cost to Perry = $126,000
So, we can calculate the earning by using following formula:
Profit = Fair value of equipment - Cost to Perry
By putting the value in the formula, we get
Profit = $150,000 - $126,000
= $24,000
Operating profits and losses for the seven industry segments of Cullumber Corporation are:
Penley $94 Cheng $(18 )
Konami (41 ) Takuhi 34
KSC 27 Molina 136
Red Moon 50
Based only on the operating profit (loss) test, which industry segments are reportable?
Penley ReportableNot Reportable Cheng ReportableNot Reportable
Konami ReportableNot Reportable Takuhi ReportableNot Reportable
KSC ReportableNot Reportable Molina ReportableNot Reportable
Red Moon ReportableNot Reportable
Answer:
Penley Reportable
Cheng Not Reportable
Konami Reportable
Takuhi Not Reportable
KSC Reportable
Molina Not Reportable
Red Moon Reportable
Explanation:
total profits pf projectable segments
= 94 + 18 + 41 + 27 + 136 + 50
= $400
operating profit(loss) test = $400*10%
= $40
On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years. Carper earned income and paid cash dividends as follows: NI Div Paid 2009 $105,000 $54,600 2010 $134,400 $61,600 2011 $154,000 $84,000 On December 31, 2011, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition. 1. Show the acquisition date FV allocation, which includes detailed steps such as allocation to BV, FV over BV, and Goodwill allocation, between controlling and noncontrolling interests.
Answer:
Goodwill allocations
Goodwill attributed to Vacker co. - 70% = $104000
Goodwill attributed to non-controllable interest - 30% = $36000
Explanation:
Showing the acquisition date FV allocation , which includes detailed steps such as allocation to BV,FV over BV and Goodwill allocation, between controlling and nocontrolling interests
$28000 was set out as the fair value of the building and will be amortized within ten years remaining
$80000 were to be recognized and amortized over 20 years
Amortized assets are : building and copyright
Goodwill = fair value of the assets acquired - controlling interests
The assets acquired include : copyright, common stocks , retained earnings and buildings
controlling interests = non-controlling interest * 30%
Goodwill allocations
Goodwill attributed to Vacker co. - 70% = $104000
Goodwill attributed to non-controllable interest - 30% = $36000
The industry-low, industry-average, and industry-high cost benchmarks on p. 6 of each issue of the Footwear Industry Report are of considerable value to the managers of companies considering building additional facility space and/or adding more footwear-making equipment to boost production capabilities. are worth careful scrutiny by the managers of all companies because they help managers determine the degree to which their company's costs for the benchmarked cost categories are competitive with those of rival companies. are sometimes historically interesting but are of little or no value to managers when it comes to making decisions in the upcoming decision round. only have value to the managers of companies whose costs are below the industry averages. are of little value to company managers in making decisions to improve company performance in the upcoming decision round, unless a company is losing money and its managers do not understand why.
Answer:
only have value to the managers of companies whose costs are below the industry averages.
Explanation:
It provides help for the manager to the manage and to control the problem of high cost in the organization. It also helps to the manager to tackle the problem of low cost.
The industry benchmarks from the Footwear Industry Report help managers evaluate if their company's costs are competitive. They provide insights for strategic planning and decision-making, particularly when considering the expansion of production capabilities. An understanding of cost components like fixed, marginal, and variable costs is essential for optimizing operations and controlling costs.
Explanation:The benchmark costs provided in the Footwear Industry Report, such as industry-low, industry-average, and industry-high are crucial tools for managers. These benchmarks help managers assess the competitiveness of their company's costs in critical categories compared to their rivals. This comparison is essential for strategic decision-making especially when considering investments in facility expansions or new equipment to increase production capabilities.
Understanding the different components of costs, namely fixed cost, marginal cost, average total cost, and average variable cost, is fundamental because it provides detailed insights into the firm’s financial health and operational efficiency. Firms can have different cost structures, with some having high fixed costs and low marginal costs, while others operate under the opposite pattern. Managers can use these insights to optimize production levels and control costs effectively.
Finally, the pattern of costs can vary across industries and firms, making it vital for managers to not only rely on general measures but also to consider the unique aspects of their own firm when making decisions. A keen understanding of the cost of production is as much an art as a science and is indispensable for improving company performance in upcoming decision rounds and for financial planning.
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