Final answer:
Buy call options if you believe the true volatility is higher than the implied volatility, and to hedge your position, hold a number of shares equal to the Delta of the option for each contract purchased.
Explanation:
If the implied volatility of ExxonMobil stock call options is 28% and you believe the true volatility is 30%, you would want to buy call options. This is because options with a higher volatility are undervalued; hence, if the stock's volatility increases to the true volatility that you expect, the price of the options will rise, leading to a potential profit.
To hedge your option position, you would use the Delta of the option, which measures the rate of change of the option price with respect to the price of the underlying asset. The Delta can be found using option pricing models like the Black-Scholes model. You would hold a fraction of a share for each option contract equivalent to the Delta to be Delta-neutral. For example, if the Delta was 0.5000, you would hold 0.5000 shares for each call option purchased to maintain a hedged position.
A customer has requested that Lewelling Corporation fill a special order for 2,600 units of product S47 for $31 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $20.70: Direct materials $ 6.20 Direct labor 3.00 Variable manufacturing overhead 3.30 Fixed manufacturing overhead 8.20 Unit product cost $ 20.70 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product S47 that would increase the variable costs by $1.80 per unit and that would require an investment of $16,000.00 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:
Answer:
$27,420
Explanation:
The computation of the annual financial advantage or disadvantage for the company is shown below:
Incremental revenue (2,600 units × $31) $80,600
Incremental cost
Direct material (2,600 units × $6.20) $16,120
Direct labor (2,600 units × $3) $7,800
Variable manufacturing overhead (2,600 units × $3.30) $8,580
Additional variable cost (2,600 units × $1.80) $4,680
Special molds $16,000
Total incremental cost $53,180
Incremental profit (loss) $27,420
We simply deduct the all incremental cost from the incremental revenue so that the incremental profit or loss could come
A manufacturing company reports the following items: Finished goods inventory beginning balance: $1,000; Finish goods inventory ending balance: $1,200; Cost of goods manufactured $5,000. The cost of goods sold is $ .
Answer:
The cost of goods sold is $4,800
Explanation:
Given,
Beginning Inventory = $1,000
Ending Inventory = $1,200
Cost of goods manufactured = $5,000
Cost of goods sold = Beginning Inventory + Cost of goods manufactured - Ending Inventory.
Cost of goods sold = $1,000 + $5,000 - $1,200
Cost of goods sold = $4,800
Final answer:
The Cost of Goods Sold for the manufacturing company is calculated by adding the beginning inventory to the cost of goods manufactured and then subtracting the ending inventory. The COGS is $4,800.
Explanation:
To calculate the Cost of Goods Sold (COGS), we need to take into account the cost of goods that were ready for sale at the beginning of the period (beginning inventory), add the cost of goods manufactured during the period, and then subtract the cost of goods that are unsold at the end of the period (ending inventory).
Cost of Goods Sold Calculation
COGS = Beginning Inventory + Cost of Goods Manufactured - Ending Inventory
Using the figures provided:
Beginning Inventory = $1,000Cost of Goods Manufactured = $5,000Ending Inventory = $1,200So, COGS = $1,000 + $5,000 - $1,200
COGS = $4,800
Therefore, the Cost of Goods Sold for the manufacturing company is $4,800.
A process currently services an average of 50 custom-ers per day. Observations in recent weeks show that its utilization is about 90 percent, allowing for just a 10 percent capacity cushion. If demand is expected to be 75 percent of the current level in five years and management wants to have a capacity cushion of just 5 percent, what capacity requirement should be planned?
Answer:
40 customers
Explanation:
Expected Demand Rate*current service rate/current utilization=capacity requirement/required utilization
.75*(50/90)=x/.95
x=39.58
x=40 customers
To determine the capacity requirement, calculate the future demand and divide it by the utilization rate minus the desired capacity cushion.
Explanation:To calculate the capacity requirement that should be planned, we need to determine the future demand and the desired capacity cushion. The current demand is 50 customers per day with a utilization rate of 90% and a capacity cushion of 10%. In five years, the demand is expected to be 75% of the current level and management wants a capacity cushion of 5%.
First, we calculate the future demand by multiplying the current demand by 0.75: future demand = 50 * 0.75 = 37.5 customers per day.
Next, we calculate the required capacity by dividing the future demand by the utilization rate (1 - capacity cushion): required capacity = 37.5 / (0.90 - 0.05) = 44.12 customers per day.
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Lusk Corporation produces and sells 14,800 units of Product X each month. The selling price of Product X is $30 per unit, and variable expenses are $24 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $112,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:
Answer:
The income will decrease by $50,800
Explanation:
Giving the following information:
Product X:
Sales= 14,800*30= 444,000
Variable costs= 14,800*24= (355,200)
Contribution margin= 88,800
Fixed costs= (112,000)
Net income= (23,200)
The study shows that $74,000 of the $112,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued.
Now, we need to calculate the effect on income if Product X is discontinued.
Effect on income= net income - unavoidable fixed costs
Effect on income= 23,200 - 74,000= -50,800
The income will decrease by $50,800
Bad news messages should be delivered using ________. the direct strategy the indirect strategy a mixture of the direct and indirect strategies the direct or indirect strategy
Answer:
The direct or indirect strategy
Explanation:
When delivering a bad message there are usually five things that have to be put into consideration. They include:
- How to get the bad message to the person concerned.
- How the individual/audience will receive the message.
- Maintaining a good relationship with the receiver of the bad news.
- Maintaining a good reputation for the company.
- Avoiding any future retaliation.
(I) The Direct Approach
When using the direct approach to deliver a bad message, the message must be delivered in clear and concise statements, stating reasons why it happened and ending it in a positive note by offering solutions to the problem.
(II) The Indirect Approach
In the indirect approach it is necessary for the individual delivering the bad message to create some form of common ground with the receiver of the message to ease the tension. Then the message is delivered in clear statements. It is better to start with the positive part of the message before moving into the negative part. The message should be concluded on a positive note to avoid future retaliation.
Final answer:
Bad news messages should generally be delivered using the indirect strategy, which involves starting with a buffer statement, providing an explanation, and offering solutions or alternatives.
Explanation:
When delivering bad news messages, it is generally recommended to use the indirect strategy. This involves starting with a buffer statement to soften the blow, providing a clear explanation of the situation, and offering any potential solutions or alternatives. The goal is to ease the impact of the bad news and maintain a positive relationship with the recipient.
Using the direct strategy can be too abrupt and may cause unnecessary conflict or negative reactions. However, in some cases where the bad news is simple, the direct strategy may be appropriate.
It is important to note that a mixture of both strategies can also be used, depending on the nature of the situation and the relationship between the sender and the recipient.
Samantha, a one-third partner, has an adjusted basis of $90,000 for her partnership interest. If Samantha sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Samantha's gain or loss from the sale?
a. $10,000 capital gain.
b. $10,000 ordinary income.
c. $20,000 ordinary income; $10,000 capital gain.
d. $10,000 capital loss; $20,000 ordinary income.
Answer:
Correct option is D.
$10,000 capital loss; $20,000 ordinary income.
Explanation:
Samantha's share of unrealized receivables is $20,000 ($60,000 unrealized receivables × 1/3 interest). Susan will recognize $20,000 of ordinary income and a $10,000 capital gain determined as the difference between the total gain of $30,000 and the ordinary income of $20,000.
Answer:
$10,000 capital gain.
Explanation:
Given that:
Adjusted basis of $90,000Sell her interest for $100,000So the difference between her basis and sales interest is:
$100,000 - $90,000
= $10,000
She will have a gain on sales of her interest because she receives the only cash for the sales and the amount is greater than her basis in her partnership. Therefore, the gain will be seen as capital
Assume the market basket for the consumer price index has two products, bread and milk, with the following values in 2013 and 2018 for price and quantity: Base Year (2013) 2018 Product Quantity Price Price Milk 50 $1.20 $1.50 Bread 100 1.00 1.10 The Consumer Price Index for 2018 equals A. 116. B. 85. C. 86. D. 118.
The market basket for the consumer price index has two products, bread and milk, with the following values in 2013 and 2018 for price and quantity: Base Year (2013) 2018 Product Quantity Price Price Milk 50 $1.20 $1.50 Bread 100 1.00 1.10 The Consumer Price Index for 2018 equals (A) 116
Explanation:
The market basket for the consumer price index has two products, bread and milk, with the following values in 2013 and 2018 for price and quantity: Base Year (2013) 2018 Product Quantity Price Price Milk 50 $1.20 $1.50 Bread 100 1.00 1.10 The Consumer Price Index for 2018 equals (A) 116
The CPI is a statistical technique that estimate or make use of the prices of a sample of representative items and these prices are collected periodically.
The Consumer Price Index (CPI) is index which is used to examine the weighted average price of consumer goods and services basket , which includes transportation, food, and medical care and is calculated by taking price changes for each item in the predetermined basket of goods and averaging them out
Residual income is Select one: A. the excess of investment center income over the minimum return set by management. B. income beyond the breakeven point determined by the product's lifecycle. C. excess income earned after budgeted income has been achieved. D. a percentage of income received by an organization for its participation in a joint venture.
Answer:
Excess of investment center income over the minimum return set by the management.
Explanation:
Residual income can be defined as the continuous flow of cash after a particular work/task has been completed. This means an individual continuous to get payment after a work is done. This includes the amount of money that is acquired from business investments, royalties gotten from a published article or book, renting of an apartment, creating an application, working with different affiliates.
Residual income enables an individual to work on other business opportunities while still earning money from the previous efforts.
According to the depreciation rates used by the company and described in the Production Cost Report, if a company adds 70 new workstations at a cost of $75,000 each and also spends $10 million for an addition to its assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by:
a. 4% of $15,250,000 or $610,000.
b. $1,550,000.
c. $193,750.
d. $800,000.
e. $775,000
Answer:
Its annual depreciation costs will rise by 4% of $15,250,000 or $610,000. The right answer is a
Explanation:
In order to calculate the amount its annual depreciation costs will rise by, we would have to calculate first the total cost with the following formula:
Total cost=(Number of workstation added×cost of work station)+money spend
Total cost=(70×$75,000)+10,000,000
Total cost=$15,250,000
Therefore, Annual depreciation=4%×$15,250,000
=$610,000
Its annual depreciation costs will rise by 4% of $15,250,000 or $610,000
Final answer:
To determine the rise in annual depreciation costs after adding new workstations and expanding the assembly plant, the straight-line method of depreciation would be used. However, without the specific depreciation rate, we cannot determine the exact increase in annual depreciation costs from the provided options.
Explanation:
The question is asking about the increase in annual depreciation costs for a company after adding new workstations and expanding its assembly plant. To calculate the additional depreciation costs, we assume that the straight-line method of depreciation is used since the provided examples illustrate this method. With this method, the total cost of the asset is spread evenly over its useful life.
If the company adds 70 new workstations at a cost of $75,000 each, the total cost for the workstations is 70 times $75,000, which equals $5,250,000. The addition to the assembly plant costs $10,000,000. The combined cost is therefore $5,250,000 (workstations) + $10,000,000 (assembly plant addition) = $15,250,000.
Without the specific depreciation rate for the new assets, we cannot determine the exact increase in annual depreciation. Thus, we are unable to select the correct option among the given choices a to e. We would need the specific depreciation rate applied to the combined cost of the new workstations and the assembly plant addition to calculate the annual increase in depreciation.
Cullumber Company purchased a new machine on October 1, 2022, at a cost of $90,880. The company estimated that the machine has a salvage value of $8,640. The machine is expected to be used for 72,700 working hours during its 8-year life. Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end.
Answer:
The workings are made below;
Explanation:
Depreciation Expense for 2022 =($90,880-$,8,640)/8=$10,280*3/12=$2,570
Depreciation Expense for 2023=$10,280 ($90,880-$8,640)/8
The depreciation for 2022 is calculated on pro rata basis from the date of purchase till December 31,2022.
Where as depreciation for 2023 is charged on full year basis as the asset was used for the whole year.
Answer:
Year 2022 = $2,570
Year 2023 = $10,280
Explanation:
Original cost = $90,880
Salvage value = $8,640
Number of useful years = 8
Using the straight line method ;
Annual depreciation = (Original cost - salvage value) ÷ Number of useful years
Annual depreciation = ($90,880 - $8640) ÷ 8
Annual depreciation = $82,240 ÷ 8
Annual depreciation = $10,280
2023 depreciation value = $10,280
However, the machine was purchased in October 1, 2022:
Therefore, 2022 depreciation = 3 months;
Monthly depreciation = $10,280 ÷ 12 = $856.6667
Therefore, 2022 depreciation :
$856.6667 × 3 = $2,569.999
=$2,570
The cost to produce Part A was $12 per unit in 2019. During 2020, it has increased to $15 per unit. In 2020, Sandhill Company has offered to supply Part A for $11 per unit. For the make-or-buy decision:
a) incremental revenues are $4 per unit.
b) net relevant costs are $3 per unit.
c) differential costs are $4 per unit.
d) incremental costs are $3 per unit.
Answer:
Differential cost = $4 per unit
Explanation:
For a make or buy decision the relevant cash flows include
the differential variable of the two options savings from avoidable fixed costs associated with internal productionDifferential cost = internal cost - External purchase price
= 15- 11
= $4 per unit
The Lords' University uses automated presentations during education fairs to help prospective students get an idea about the different subjects offered and the facilities available on campus. In the context of sales communication, it can be said that the university most likely uses _____.
a.
written sales presentations
b.
directed sales presentations
c.
canned sales presentations
d.
organized sales dialogues
e.
adaptive sales presentations
Answer: c. Canned sales presentations
Explanation:
Canned Sales presentations are the "ONE SIZE FITS ALL" of Sales presentations. They are organised and structured to ensure that they can give information to multiple types of people.
Canned Sales Presentations are not very flexible. They are generally used when information has to be repeated over and over to the same.or different types of people and usually already have all information that will be needed.
The Lords' University uses this type of presentations as they used an Automated Presentation that is mostly the same period in, period out but that is built to have all the information that is needed and can be repeated to multiple people (prospective students).
Final answer:
The Lords' University most likely uses canned sales presentations for their automated presentations at education fairs. These are pre-designed to be used repeatedly and fit well with the use of computer-based media like PowerPoint in business settings.
Explanation:
The Lords' University employs automated presentations during education fairs, which are likely to be canned sales presentations. These are pre-recorded or pre-designed presentations that can be used repeatedly without alteration for numerous audiences. Given that these presentations are automated and are not likely to change based on the audience's reactions or questions, they align with the definition of canned sales presentations rather than adaptive sales presentations, which are tailored to the audience's responses.
Computer-based media tools such as PowerPoint are commonly used to create such presentations, making them both accessible and easy to distribute across different settings, from small conference rooms to large amphitheaters. Effective presentation aids are integral to conveying information clearly and keeping the audience engaged, which is crucial in business settings where oral communication is the most common method yet susceptible to listeners' minds wandering.
Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
Products
A B C D
Direct materials $16.60 $20.50 $13.50 $16.20
Direct labor 18.60 22.00 16.40 10.40
Variable manufacturing overhead 5.40 6.60 9.10 6.10
Fixed manufacturing overhead 28.50 15.40 15.50 17.50
Unit product cost 69.10 64.50 54.50 50.20
Additional data concerning these products are listed below.
Products
A B C D
Grinding minutes per unit 2.50 1.60 1.20 0.80
Selling price per unit $83.70 $76.10 $72.90 $67.60
Variable selling cost per unit $3.60 $4.10 $3.80 $4.50
Monthly demand in units 4,000 3,000 3,000 5,000
The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this company. Which product makes the MOST profitable use of the grinding machines?
Answer:
Product D
Explanation:
The contribution margin will be used for this assessment
Contribution margin is the selling price of an item less the associated variable selling cost to determine the extra profit for each unit of an item sold.
However , the grinding hour being the constraint in this scenario , the contribution per minute of production will be used.
A B C D
Direct materials 16.60 20.50 13.50 16.20
Direct labor 18.60 22.00 16.40 10.40
Variable Man. 5.40 6.60 9.10 6.10
Variable selling C. 3.60 4.10 3.80 4.50
Selling price 83.70 76.10 72.90 67.60
Contribution/unit 39.50 22.90 30.10 30.40
Minute /unit 2.50 1.60 1.20 0.8
Contribution /min 15.8 14.13 25.08 38
Product D with the highest contribution per minute of production makes the most profitable use of the machine.
Which of the following is true for American options? A. Put-call parity provides an upper and a lower bound for the difference between call and put prices B. Put call parity provides an upper bound but no lower bound for the difference between call and put prices C. Put call parity provides a lower bound but no upper bound for the difference between call and put prices D. There are no put-call parity results
The statement that holds true for the American Option is (A) Put-call parity provides an upper and lower bound for the difference between call and put prices
Explanation:
According to the Put-call parity concept when we hold the short European put and long European call of similar class the return delivered is same as holding one forward contract of the same underlying asset, that has the same expiration, forward price and which is equal to the strike price of the option
In financial management put–call parity concept is used to define the relationship that exist between the price of a European call option and European put option, and both of them have identical strike price and expiry
The formula used for calculating put call parity is
c + k = f +p
where (c) call price plus the (k) strike price of both options is equal to the futures price(f) plus the put price(p)
Put-call parity provides an upper and a lower bound for the difference between call and put prices.
Explanation:The correct answer is A. Put-call parity provides an upper and a lower bound for the difference between call and put prices.
Put-call parity is a fundamental concept in options pricing, which states that the sum of a call option and a put option with the same strike price and expiration date equals the price of the underlying asset.
Using put-call parity, we can derive upper and lower bounds for the difference between call and put prices. These bounds are based on the cost of carry and the time value of money.
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Oriole Company's trial balance of income statement accounts only for the year ended December 31, 2020 included the following:
Debit Credit
Sales revenue $277000
Cost of goods sold $168000
Administrative expenses 35000
Loss on disposal of equipment 17400
Sales commission expense 16300
Interest revenue 10300
Freight-out 5900
Loss from discontinued operations 24500
Bad debt expense 6400
Other information:
Oriole's income tax rate is 30%.
Finished goods inventory:
January 1, 2020 $158000
December 31, 2020 141000
On Oriole's multiple-step income statement for 2020, Cost of goods manufactured is:
A. $190900
B. $185000
C. $156900
D. $151000.
Answer:
$185,000
Explanation:
Cost of goods manufactured =( Opening inventory +purchase )-closing inventory
Opening inventory = $158,000
Purchase =cost of goods on trial balance = $168,000
Closing inventory = $ 141000
Cost of goods manufactured = (158,000 + 168,000)-141000 = $185,000
Rita Company buys merchandise on account from Linus Company for $590. Rita sells the goods to Ellis for $900 cash. Use a tabular summary to record the transactions for Rita Company using a perpetual inventory system.
Answer:
Record of transaction is given below
Explanation:
given data
Selling price of goods = $900
Cost of goods sold = $590
solution
we get here Record of transaction in Rita Company that is
Inventory accounts Dr $900
Account payable Cr $900
and
Record of transaction in Linus Company is
Account receive able Dr $900
Sales revenue Cr $900
and
Cost of goods sold Dr $590
Inventory Cr $590
To record the purchase and sale in Rita Company’s ledger using a perpetual inventory system, two transactions are made. First is the purchase of merchandise on account from Linus Company, second is the sale of the merchandise to Ellis for cash. This results in a gross profit of $310 for Rita Company.
Explanation:The subject of the student's question involves recording business transactions using a perpetual inventory system for Rita Company. The example provided to help the student understand how to record transactions is:
Rita Company buys merchandise on account from Linus Company for $590. Then, Rita sells the goods to Ellis for $900 cash. The tabular summary to record these transactions would involve two components: the purchase transaction and the sales transaction.
Transaction 1 (purchase on account):
- Inventory $590
- Accounts Payable $590
Transaction 2 (sale for cash):
- Cash $900
- Sales Revenue $900
- Cost of Goods Sold $590
- Inventory $590
After these entries, Rita Company would see an increase in cash by $900, an increase in cost of goods sold by $590, and a decrease in inventory by $590, resulting in a gross profit of $310 from the sale ($900 - $590).
Liquid Sleeve, Inc. is a company that makes a sealing solution for machine shaft surfaces that have been compromised by abrasion, high pressures, or inadequate lubrication. The manager is considering adding a metal-based nanoparticle (Type Al or Fe) to its solution to increase the product's performance at high temperatures.
The costs associated with each type are estimated. If the company's MARR is 30% per year, which nanoparticle type should the company select? Utilize an NPV analysis.
Type FE Type Al
First cost, $ -150,000 -280,000
Annual operating cost, $/year -92,000 -74,000
Salvage value, $ 30,000 70,000
Life, years 2 4
Answer:
Liquid Sleeve should select the Type FE because it has a lower Present Value cost of $257,455.62
Explanation:
The preferred metal-based would be the one with owner a present value cost.
So we will compute the present value of the the cost the two options.
Type FE =
Initiall cost = -150,000
PV of operating cost = -92,000× (1- (1.3)^(-2))/0.3
= 92,000 × 1.360946746
= $(125,207.10)
PV of salvage value = 30,000 × (1.3)^(-3)= 17,751.48
Total PV = (125,207.10) + (150,000) - 17,751.48 = $(257,455.62 )
Type A1
initial cost = -$280,000
PV of operating cost = 74,000 × (1- (1.3)^(-4))/0.3 = 160,301.81
PV of salvage value = 70,000 × (1.3)^(-4)= 24,508.95
Total Cost = (280,000) + -(160,301.81) + 24,508.95 = $(415,792.86)
One of the reasons that channels of distribution often pose longevity problems is that most middlemen _____. Do not maintain sufficient inventory to serve customers Lack product knowledge resulting in low sales volume Have little loyalty to their vendors Tend to slow down distribution to extract higher commissions Do not have sufficient knowledge of the target market
Answer:
Have little loyalty to their vendors.
Explanation:
Middlemen are intermediaries that buy goods from the producers and sell directly to the consumers. They assist the producers to get different feedbacks about the products from the consumer. Middlemen include wholesalers, retailers, brokers.
In some situations, middlemen increase the prices of various products thereby making it difficult for consumers to purchase, they also have little loyalty to the producers of a particular product they tend to purchase the product when there is high productivity but reject it when productivity reduces.
On April 2, Kelvin sold $80,000 of inventory items on credit with the terms 2/10, net 30. Payment on $60,000 sales was received on April 8 and the remaining payment on $20,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would be:
Tile Depot, specializing in retail of construction materials, carries a popular flooring tile. The annual demand is estimated to be 5,000 cases. The ordering cost of this tile is $250 per order and the carrying cost is $10 per case per year. Tile Depot opens six days per week that is equivalent to 300 working days per year. The lead time for this item is usually two weeks or 12 working days. The economic ordering quantity (EOQ) for this item is a.$250 b.$300 c.$400 d.$500 e.$600
Answer:
d.$500
Explanation:
Economic order quantity is the quantity at which business incur minimum cost. This is the level of order where the holding cost equals to the ordering cost of the business.
As per given data
Annual Demand = 5,000 cases
Ordering cost = $250
Carrying cost = $10
EOQ = [tex]\sqrt{\frac{2 X S X D}{H} }[/tex]
EOQ = [tex]\sqrt{\frac{2 X 250 X 5,000}{10} }[/tex]
EOQ = 500
Answer:
EOQ = 500 units
Explanation:
Explanation:
The Economic Order Quantity (EOQ) is the order quantity that minimizes the balance of holding cost and ordering cost. At the EOQ, the holding cost is exactly the same as the ordering cost.
It is calculated as follows:
EOQ = √(√2× Co D)/Ch)
Co- ordering cost - 250,
Ch - holding cost - 10
D- annual demand- 5000
So we apply the formula:
EOQ = √(2× 250 × 5,000/10)
EOQ = 500 units
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 6,950 batteries at a cost of $125 per battery. It withdrew 6,400 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company’s traveling sales staff. The remaining 6,300 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th. Required: 1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.a) raw materials
b) work in process
c) finished goods
d) cost of goods sold
e) selling expanse
2. Specify whether each of the above accounts would appear onthe balance sheet or on the income statement at April 30
Answer:
1)
Beginning inventory = 0
Plus: purchases = 6950
Less: withdraws= 6400
= ending inventory = 550
550-100 batteries used by staff= 450 batteries used in production
= 450 × $125 = $56250
Since 90% is completed, it means 10% is in WIP, i.e.,
WIP = 10% × 56250
= 5625
completed = 90% ×56250 = 50625
Since 30% of completed were unsold, it means remaining 70% were sold, which is COGS, i.e.,
COGS = 70% × 50625
= 35437
Note: selling expense cannot be deteremined from the given information.
2) WIP and Finished Goods accounts would appear on the balance sheet while COGS and selling expense would appear in income statement at April 30.
The expenses for Devon Motor Company's batteries in April are distributed across various accounts: Raw Materials $68,750, Work in Process $78,750, Finished Goods $236,250, Cost of Goods Sold $472,500, and Selling Expense $12,500. The first three appear on the balance sheet whereas the last two appear on the income statement.
Explanation:The cost of each battery is $125. The total cost of batteries purchased by the Devon Motor Company is $868,750 (6,950 batteries * $125 per battery).
Raw Materials: This will be $68,750. Because 550 batteries (6,950 purchased - 6,400 withdrawn) are still available in the storeroom on April 30 and each one costs $125. Work in Process: This represents cars that are under production but not finished yet. Here it comes to $78,750 which computes by taking 10% of 6,300 batteries (which equals 630 batteries) that were placed in production and had the battery cost multiplied by $125. Finished Goods: This pertains to cars that are ready for sale, but unsold. It comes to $236,250, calculated by taking 30% of the 90% completed cars with installed batteries (which comes around to 1,890 batteries) and multiplying that by $125 per battery. Cost of Goods Sold: This denotes the cost of the sold cars' batteries, and it is $472,500, which is calculated by taking 70% of the 90% completed cars with installed batteries (about 3,780 batteries) at $125 per battery. Selling Expense: This would be $12,500, which is the cost of the 100 batteries used by the sales staff at $125 per battery.
For the second part of your question, raw materials, work in process and finished goods are all part of the balance sheet while cost of goods sold and selling expense are part of the income statement.
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Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 3 50% chance of receiving $200 50% chance of receiving $2,000 If Erik is risk averse, which investment will he prefer?
Answer:
First one
Explanation:
1) $1100
2) 0.5(1000) + 0.5(1200)
= $1100
3) 0.5(200) + 0.5(2000)
= $1100
Since all expected values are equal.
He should go for the first one, to avoid risks
Consider the topic of the "American Politics in Comparative Perspective" feature. How would Congress be different if it had only a single chamber? Who would be the "winners and losers" under such an institutional configuration?
Answer:
American feel their democracy is the best based on his uniqueness and authenticity with respect to political institution, parties and interest groups.
The house of congress will not be the same if there is only on single chamber for a common ground for discussion and the coming together of legislative in one chamber
In the legislative house, there consist of both the upper and lower houses, who makes laws and institutes the constitutional execution for the benefit of the nation.
Explanation:
American Politics in Comparative Perspective: American have the believe that their democracy is the best in terms of uniqueness and authenticity than other countries of the world. with this they feel they have put a tremendous amount of work for their democracy to be the best in the world. The people of America thinks in regarding the areas of political institution, culture, interest group, political parties it is unique.
In the Legislative house, there are two houses which are, the upper legislative house and the lower legislative house.
The Congress would not be the same if only there is a single chamber that will have a common ground for discussion and the assembly of the legislative will be put in the single chamber only. the two l houses of legislation have a different methods to meet the compliance of the constitution. If the single chamber is available, then there will be an approach common for all the legislative processes and legislature will be taken away from the single chamber only.
Under an institutional configuration losers will be with the winners in the house and they will implement the constitutional drives in the house and make sure the nation meets its constitutional implementation for benefit of the nation
A single-chamber Congress would facilitate faster decision-making, benefiting the political majority. However, it could also lead to unchecked legislation and disadvantage minority interest groups due to a reduced system of checks and balances.
Explanation:If the Congress only consisted of a single chamber, meaning a unicameral system, the legislative process can become faster and more efficient as the entire institution would operate unilaterally. This configuration might streamline decision-making and eliminate inter-chamber disagreements which can slow down legislation. However, this framework could also reduce the checks and balances principle inherent in a bicameral system, potentially leading to more unchecked or unbalanced legislation.
The 'winners' in this case could be the political majority or the party in control of the legislature, as they would gain the ability to pass laws more quickly with fewer roadblocks. 'Losers,' on the other hand, could be the political minority or smaller interest groups. Such groups would have less opportunity to influence legislation because their ideas would be less likely to be considered with the absence of a second chamber to offer a secondary review or counterargument.
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The money multiplier is greater than one because banks: hold the entire amount of deposits as reserves. hold only a fraction of deposits as reserves. do not lend any of deposits out as loans. borrow loans from the Federal Reserve.
Answer:
hold only a fraction of deposits as reserves.
Explanation:
Money multiplier denotes the central bank's ability to create final deposits many times the initial deposits.
They do so because of their partial (fractional) reserve requirement, mandated by central bank, called as Legal Reserve Ratio = LRR
Money Multiplier = Final Deposits / Initial Deposits = 1 / Reserve Requirement
Eg : Initial Deposits = 100 , LRR = 10%
On getting 100 initial deposits, banks retain 10% ie 10 as reserve, lend out remaining 90. These 90 spent by borrower come back in the bank account of receiver. Out of 90, banks again retain 10% i.e 9 as reserves, lend 81 . Same process continues until :
Final Deposits = (1 / LRR) x Initial Deposits
Final deposits = (1 /0.1) i.e 10 times initial deposits
= 10,000
The company produced 7,771 units and sold 2,111 units for $628 each. Variable manufacturing costs were 352 per unit. Fixed manufacturing costs were $4,969. Variable selling and administrative costs were $24 per unit sold and fixed selling and administrative costs were $2,811. There was no beginning inventory. What is the contribution margin? As always, no $ and commas.
Answer:
The contribution margin is 531 972
Explanation:
Computation of contribution margin
The contribution margin is revenues - Variable costs
Sales Revenue ( 2 111 * 628) 1 325 708
Variable manufacturing costs ( 2 111 * 352) 743 072
Variable Selling and Administrative costs ( 2 111 * 24) 50 664
Contribution Margin 531 972
All costs of a fixed nature in manufacturing or selling and administrative expenses are not considered in determining the contribution margin
Cost of Goods Manufactured for a Manufacturing Company
The following information is available for Ethtridge Manufacturing Company for the month ending July 31:
Cost of direct materials used in production $1,150,000
Direct labor 966,000
Work in process inventory, July 1 316,400
Work in process inventory, July 31 355,500
Total factory overhead 490,500
Determine Ethtridge's cost of goods manufactured for the month ended July 31.
Ethtridge Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended July 31
$
Add manufacturing costs incurred during July:
$
Total manufacturing costs incurred
Total manufacturing costs $
Cost of goods manufactured $
Answer:
Cost of goods manufactured $ 2567,400
Explanation:
Ethtridge Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended July 31
Direct materials $1,150,000
Direct labor 966,000
Total factory overhead 490,500
Total manufacturing costs $ 2606500
Add July 1 Work in process inventory, 316,400
Cost of Goods Available for manufacture $ 2922,900
Less July 31 Work in process inventory, 355,500
Cost of goods manufactured $ 2567,400
When we add the direct materials. direct labor and FOH we get the total manufacturing costs .
When the total manufacturing costs are added to the opening work in process inventory we get the cost of goods available for manufacture and we get the cost of goods manufactured by subtracting the ending work in process inventory from the cost of goods available for manufacture.
Which of the following correctly explains why cheating is a common problem for cartels?
An individual cartel member has an economic incentive to sell less than its quota, thus cheating on the cartel agreement. However, if all cartel members sell less than their quotas, the cartel price will rise, and profits will increase.
An individual cartel member has an economic incentive to sell more than its quota, thus cheating on the cartel agreement. However, if all cartel members sell more than their quotas, the cartel price will fall, and profits will vanish.
Answer: An individual cartel member has an economic incentive to sell more than its quota, thus cheating on the cartel agreement. However, if all cartel members sell more than their quotas, the cartel price will fall, and profits will vanish
Explanation: A cartel is defined as group of businesses or nations that collude to limit competition within an industry or market. Thus, a major purpose of a cartel is to drive up price and profits thus restricting market output. This restriction however, requires cartel members to sell no more than their given quotas which provides individual cartel member with economic incentives to sell more than its quota resulting in cheating and a breach of cartel agreement. This leads to a fall in cartel price and vanishing profits should all members sell above their quotas which is a direct contradiction to the purpose of cartels.
Bramble Corp. recorded operating data for its auto accessories division for the year. Sales $790000 Contribution margin 260000 Total direct fixed costs 90000 Average total operating assets 250000 How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000, assuming fixed costs are held constant?
Answer:
80%
Explanation:
For computing the return on investment first we have to need the following calculations
New contribution margin = Old contribution margin + increase in contribution margin
= $260,000 + $30,000
= $290,000
And,
Net Income = Contribution margin - Total direct fixed costs
= $290,000 - $90,000
= $200,000
ROI = Net income ÷ average operating assets
= $200,000 ÷ $250,000
= 80%
The time value of a call option is I) the difference between the option's price and the value it would have if it were expiring immediately. II) the same as the present value of the option's expected future cash flows. III) the difference between the option's price and its expected future value. IV) different from the usual time value of money concept.
Answer:
I) The difference between the option's price and the value it would have if it were expiring immediately
Explanation:
Time value in options trading simply refers to the part of an option's premium (cost or price) which is attributed to the amount of the time remaining until expiration.
An addition of the option's time value and intrinsic value equals the total premium of an option.
Therefore, we can mathematically state that:
Time Value = Option Premuim(Price) - Intrinsic Value.
The Option Premuim is an amount of money known as the price or cost.
In an exchange for the right granted by the option, an option buyer pays for the premium to an option seller.
Generally, it is seen that the more time that remains until the expiration, the greater the time value of the option. This happens as a result of investors willing to pay a higher premium for more time since the longer time taken to execute contract will be profitable due to a favorable move in the underlying asset.
Also, the lesser time remaining on an option will result in lesser willingness of investors to pay because the probability for profitability is slim.
Answer:
I) The difference between the option's price and the value it would have if it were expiring immediately
Explanation:
Time value simply means the option's premium portion that is accountable to the amount of time remaining until the option contract expires.
These is the difference between the option's price and the value it would have if it were expiring immediately.
Time value is the premium amount that the those investing is desire to pay more than the intrinsic value.
Time value can be calculated using below formula;
Time Value = Options Premium - Intrinsic Value.
Call options helps to purchase shares of stock at a stable price until the expiration date.
The intrinsic value and the time value are the two areas of call option. These intrinsic value and time value helps to know when to buy the underlying stock.
However time value of the option increases with with the time remains untill expiration
Indicate whether each of the following transactions represents an increase in net exports, a decrease in net exports, an increase in net capital outflow, or a decrease in net capital outflow for the United States. Transaction Net Exports Net Capital Outflow Increase Decrease Increase Decrease The Sony pension fund buys a bond from the U.S. Treasury. A South Korean tourist buys some Sunkist oranges from an American farmer. An American buys a Toyota. An American buys a share of Sony stock.
Answer:
A. Decrease net capital outflow
B. Increase in net exports
C. Decrease in net exports.
D. Increase net capital outflow.
Explanation:
A. When the Sony pension fund buys U.S treasury then there is a inflow of capital. Hence, this will decrease the net capital outflow.
B. The Sunkist oranges is purchased by the South Korean tourist from the american farmer will increase the exports of the U.S. Hence, there is an increase in the net exports.
C. When a Toyota is purchased by an American then this will increase the imports of United states and hence, there is a reduction in the net exports.
D. The shares of Sony are purchased by an american, so there is a outflow of capital and this will increase the net capital outflow.
Each transaction impacts either net exports or net capital outflow for the U.S: buying a bond from the U.S. Treasury increases net capital inflow, buying Sunkist oranges increases net exports, buying a Toyota decreases net exports, and buying a share of Sony stock increases net capital outflow.
Explanation:When the Sony pension fund buys a bond from the U.S. Treasury, there is an increase in net capital inflow, as this represents financial capital from Japan flowing into the U.S. economy. The South Korean tourist buying Sunkist oranges from an American farmer is an increase in net exports for the U.S., as this is a sale of American goods overseas. An American buying a Toyota would lead to a decrease in net exports, as this is a purchase of foreign goods. Transactions such as an American buying a share of Sony stock would result in an increase in net capital outflow, as this is an investment of U.S. capital in a foreign company.
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