Answer:
A. D) $189,583
B. B. $49,500
Explanation:
A. The computation of the flexible budget will report for the variable cost is shown below:-
= Static Variable cost ÷ Static sales volume × Actual sales volume
= $175,000 ÷ 12,000 × 13,000
= $189,583.33
B. The number of fixed costs in both flexible budget and static budget would be the same
= $49,500
So, flexible budget will report $49,500 for the fixed costs
Suppose there are two firms (1 and 2) located along a surface water resource and that the profit functions of each firm are provided below, where 7iNSYsLDJFEN13ZU0zrrDQ8e1tBLr7r8AAAAAElF is the quantity of water used by firm i.
Firm a:wPHcbYArNlLhwAAAABJRU5ErkJggg==
Firm b: O4fW7gxNIFgAAAABJRU5ErkJggg==
If each firm uses the amount of water that maximizes its own profits, what is the total quantity of water that will be used?
Suppose that there are only 20 total units of water available. What is the allocation of the 20 units of water across the two firms that maximizes total profits?
Relative to the allocation of water that you found in part (b), by how much do total profits decrease if the 20 units are instead evenly distributed to the two firms (in other words, each firm is allocated 10 units of water)?
Answer:
See attached files
Explanation:
An employee earned $42,700 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:
Answer: $3,266.55
Explanation: The employee's salary scale falls between $1 and $128,400 so the FICA tax rate for social security of 6.2% and Medicare of 1.45% applies to him.
Social security tax payable
$42,700 x 6.2% / 100 = $2,647.4
Medicare tax payable
$42,700 x 1.45% / 100 = $619.15
Total tax payable by the employee
$2647.4 + $619.15 = $3,266.55
Dennis and Rhonda are married with two boys, Blake and Chase. They have the following accounts with the following balances at their local bank: Dennis (single account) $300,000 Rhonda (single account) $100,000 Dennis & Rhonda (joint account) $400,000 Rhonda & Blake (joint account) $100,000 How much of all of their accounts will be insured by the FDIC?
Answer:
$850000
Explanation:
Dennis ( SINGLE ACCOUNT ) = $300000
Rhonda (single account ) = $100000
Dennis and Rhonda ( joint account ) = $400000
Rhonda and Blake (joint account ) = $100000
The FDIC will insure individual accounts up to the tune of $250000 and also shares of each individual in every joint account will also be insured as well
From Dennis single account : $250000 is insured
From Rhonda single account : $100000 is insured
from Dennis share in the joint account with Rhonda : $200000 is insured
likewise Rhonda's share which is also : $200000
Rhonda and Blake shares from their joint account will be insured as well : $10000
Total insured amount by FDIC = 250000 + 100000 + 200000 +200000 +100000 = $850000
ABC opened for business on January 1, 2018, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What was the balance in ABC's Prepaid Insurance account as of December 31, 2018
Answer:
$18,000
Explanation:
Data provided in the question
Liability policy for 18 months = $36,000
And, the crop damage policy = $12,000 for two years
So by considering the above information, the balance in the ending prepaid insurance account is
= Liability policy ÷ number of years
= $36,000 ÷ 2 years
= $18,000
By dividing the liability policy with the number of years we can get the ending balance and the same is shown above
Suppose your firm just issued a 20-year, $1000 par value bond with semiannual coupons. The coupon interest rate is 9%. The bonds sold for par value, but flotation costs amounted to 5% of the price. You have a 21% corporate tax rate. What is your firm’s after-tax cost of debt? Group of answer choices
Answer:
4.78%
Explanation:
From the question given, we solve the issue
the calculation of he bond price is:
Price of bond = per value * (1- flotation cost)
$1000 * (1- 0.05)
= $950
For the calculation of semi-annual coupon payments,
Semi -annual coupon payment = Par value * Interest/2
$1000 * 0.09/2 = $45
Calculation of semi- annual yield to maturity
Let recall the following
YTM = yield to maturity
C = The semi-annual coupon payment
FV= Face value or par value
PV= Price of a bond
n = Maturity years of the bond
Therefore,
YTM= C + FV - PV/n/ FV + PV/2
which is
$45 + $1000 - $950/40/$1000 + $950 / 2 = 4.78%
The firm’s after-tax cost of debt is $45 + $1000 - $950/40/$1000 + $950 / 2 is semi- annual yield to maturity is = 4.78%
What is the Tax cost?
From the question given, we solve the issue
Then the calculation of the bond price is:
Price of bond is = per value * (1- flotation cost)
$1000 * (1- 0.05)
Therefore, = $950
For the calculation of semi-annual coupon payments,
Then Semi -annual coupon payment is = Par value * Interest/2
$1000 * 0.09/2 = $45
Computation of semi- annual yield to maturity
Let recall the following are:
Then YTM is = yield to maturity
After that C is = The semi-annual coupon payment
Then FV is = Face value or par value
Now, PV is = Price of a bond
n is = Maturity years of the bond
Thus,
YTM is = C + FV - PV/n/ FV + PV/2
which is $45 + $1000 - $950/40/$1000 + $950 / 2 is = 4.78%
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On June 1, 2017, Windsor, Inc. was started with an initial investment in the company of $22,420 cash. Here are the assets, liabilities, and common stock of the company at June 30, 2017, and the revenues and expenses for the month of June, its first month of operations:Cash$ 4,830 Notes payable$12,460Accounts receivable4,470 Accounts payable970Service revenue7,730 Supplies expense1,100Supplies2,300 Maintenance and repairs expense700Advertising expense400 Utilities expense200Equipment26,230 Salaries and wages expense1,630Common stock22,420 In June, the company issued no additional stock but paid dividends of $1,720.Prepare an income statement for the month of June.
Answer:
The answer is attached
Explanation:
At December 31, 2020, Pharoah Company has outstanding three long-term debt issues. The first is a $2,370,000 note payable which matures June 30, 2023. The second is a $5,580,000 bond issue which matures September 30, 2024. The third is a $12,850,000 sinking fund debenture with annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.Prepare the required note disclosure for the long-term debt at December 31, 2020.
Answer:
The first is a $2,370,000 note payable which matures June 30, 2023.
The second is a $5,580,000 bond issue which matures September 30, 2024.
annual sinking fund payments of $2,570,000 in each of the years 2022 through 2026.
Year Amount of long term debt Working
2021 $0
2022 $2,570,000
2023 $4,940,000 = $2,570,000 + $2,370,000
2024 $8,150,000 = $,2,570,000 + $5,580,000
2025 $2,570,000
2026 $2,570,000
Long term debt is debt that must be paid in a period of time longer than one year. Debts that are due in less than one year are classified as current debts or liabilities. That is why there is no long term debt for 2021 (current year).
Long Construction Company uses the percentage-of-completion method of accounting for long-term construction contracts. During 2021, Long began work on a $400 million fixed-fee construction contract, which was completed in 2024. Cost incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
Cost Incurred
Estimated Costs to Complete as of December 31
2021
$60
$240
2022
$84
$176
For the year 2022, Long should have recognized gross profit on this contract of:
a.$20 million.
b.$18 million.
c.$16 million.
d.$14 million.
Answer:
$400 million less ($176+$84)=$14 million
Explanation:
the percentage of completion method of accounting is more like of income statement because it is used to assess the companys performance and financial position
Briefly explain what the term "balance of trade" refers to from a macroeconomic perspective and include a brief description of how exports and imports influence the balance of trade.
Answer:
In a macroeconomic perspective, the balance of trade (BOT) simply refers to the difference between the value of the imports and exports of a country. In measuring the relative strength of a country's economy, economists make use of the balance of trade. Also, in considering the balance of payments, the balance of trade is the largest component considered.
In balance of trade, TRADE DEFICIT and TRADE SURPLUS are usually considered in relation to their import and export activities
The Trade Deficit results when a country imports more good and services than it exports. While the Trade Surplus results when a country exports more goods and services than it imports.
Since 1976, the United States had a trade deficit. This was as a result of their dependency on oil imports and consumer products. While since 1995, China which produces and exports many of the world's consumable goods has recorded a trade surplus.
When trade deficit occurs, countries affected borrow money to pay for their goods and services but when trade surplus occurs in a country, such country lends money to deficit countries.
Formula for BOT = Total Value Of Imports minus (➖) Total value of exports.
Answer: balance of trade is used to show the major difference between a country import and export over a specified period of time.
Explanation: Balance of trade is used to show the major difference between a country import and export over a specified period of time. Macroeconomics is the study of the whole factors that affect a countries economy.
When exports is greater than import, this leads to what is called unbalanced or unfavorable balance trade ( trade surplus) same applies when import exceeds export. The balance of trade is a part of a large economic unit this is where it relates to macroeconomics.
The Retained earnings account has a credit balance of $23,800 before closing entries are made. Of total revenues for the period are $75,200, total expenses are $55,000, and dividends are $12,600, what is the ending balance in the Retained earnings account after all closing entries are made
Answer:
The ending balance in the retained earnings account is $31400.
Explanation:
The ending balance in the retained earnings accounts is equal to the opening balance of the retained earnings account plus the addition to the retained earnings for the year.
The addition to retained earnings will be the Net income less dividends.
The net income for the year was = 75200 - 55000 = $20200
Addition to Retained earnings = 20200 - 12600 = $7600
Closing balance of retained earnings = 23800 + 7600 = $31400
On July 1, Alaskan Adventures issues a $120,000, eight-month, 6.5% note. Interest is payable at maturity. What is the amount of interest expense that the company would record in a year-end adjustment on December 31
Answer:
December 31 Interest expense $3900 Dr
Interest Payable $3900 Cr
Explanation:
The interest and principal is both payable at maturity thus we need to accrue the interest payment and create a liability against the amount of interest due. The adjustment is made 6 months from the issue of the note thus the interest for 6 months is due. The entry would be to record 6 month's interest that relates to this year. The interest expense will be,
120000 * 0.065 * 6/12 = $3900
As the payment is not made until maturity we will credit interest payable by this amount.
The company would record an interest expense of $3,260.27 in a year-end adjustment on December 31.
Explanation:The interest expense recorded in a year-end adjustment on December 31 can be calculated using the formula: Interest = (Principal x Rate x Time) / Days in a Year. In this case, the principal is $120,000, the rate is 6.5%, and the time is 8 months. To convert the time to a fraction of a year, divide by 12, which gives us 8/12 or 2/3. Since the interest is payable at maturity, we can assume that the note will be held to the full 8 months. We also need to consider that December has 31 days, so the number of days in a year is 365.
Using the formula, the interest expense can be calculated as follows: Interest = ($120,000 x 0.065 x (2/3)) / 365. Solving this equation, we get Interest = $3,260.27.
Therefore, the company would record an interest expense of $3,260.27 in a year-end adjustment on December 31.
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George Large (SSN 000-11-1111) and his wife Marge Large (SSN 000-22-2222) live at 2000 Lakeview Drive, Cleveland, OH 49001 and want you to prepare their 2017 income tax return based on the information below: George Large worked as a salesman for Toyboat, Inc. He received a salary of $80,000 ($8,500 of federal income taxes withheld and $1,800 of state income taxes withheld) plus an expense reimbursement from Toyboat of $5,000 to cover his employee business expenses. George must make an adequate accounting to his employer and return any excess reimbursement, none of the reimbursement was related to the meals and enter- tainment. Additionally, Toyboat provides George with medical insurance worth $7,200 per year. George drove his car a total of 24,000 miles during the year, and he placed the car in service on June 1, 2015. His log indicates that 18,000 miles were for sales calls to customers at the customers' offices and the remainder was personal mileage. George uses the standard mileage rate method. George is a college basketball fan. He purchased two season tickets for a total of $4,000. He takes a customer to every game, and they discuss some business before, during, and after the games. George also takes clients to business lunches. His log indicates that he spent $1,500 on these business meals. George also took a five-day trip to the Toyboat headquarters in Musty, Ohio. He was so well-prepared that he finished his business in three days, so he spent the other two days sightseeing. He had the following expenses during each of the five days of his trip: Airfare $200 Lodging $85/day Meals $50/day Taxicabs $20/day Marge Large is self-employed. She repairs rubber toy boats in the basement of their home. The total square footage of the Larges' home, including the basement, is 3,000 square feet. The portion of the basement used in Marge's business is 750 square feet. The busi- ness code is 811490. She had the following income and expenses: Income from rubber toy boat repairs $15,000 Cost of supplies 5.000 Contract labor 3,500 Telephone (business) 500 The Larges use the simplified method to figure their deduction for Marge's business use of their home. The Larges incurred the following total other expenses: Real estate taxes 2,500 Mortgage interest 4,500 Cash charitable contributions 3.500
Prepare Form 1040, Schedules A, C, and SE for Form 1040, and Form 2106 for the 2017 year. (Assume no depreciation for this problem and that no estimated taxes were paid by the Larges.)
Answer:
Check the explanation
Explanation:
1040 form
Your first name : George Last Name: Large SSN:000-11-1111
Spouse’s first name :Marge Last Name: Large SSN:000-22-2222
Home address:
2000, Lake View Drive,
City, town or post office, state, and ZIP code:
Cleveland, OH,49001
Filing Status:
2) Married filing jointly
Income :
7)Salary:::::::::::::::::::::::::::::::::::::::::::$80,000
12 Business income:::::::::::::::::::::::::$4,375(SCHEDULE C)
22) Gross income=$84,375
27 Deductible part of self-employment tax.=$669.37
($4,375 * 15.3%/100=$669.37( $117,000 or less, multiply line 4 by 15.3% as per irs for 2014)
36 Add lines 23 through 35 = $669.37
37 Subtract line 36 from line 22. =$84,375 - $669.37=$83,705.63
38) Amount from line 37 (adjusted gross income) =$83,705.63
40 Itemized deductions:::::::::::::::::::::::::::::::::::::::::$18,870.89(see SCHEDULE A)
41 Subtract line 40 from line 38 :::::::::::::::::::::::::$64,923.98($83,793.12 - $18,870.89=$64,922.23)
42) Exemptions:::::::::::::::::NIL
43)Taxable income Subtract line 42 from line 41::::::::::::::::$64,922.23
55) Taxable income(no other credits and Tax)::::::::::::::::::::::$64,923.98
other taxes :
56 Self-employment tax:::::::::::::::::::::: $669.37
61) total tax =$669.37
Payments
62 Federal income tax withheld:$8,500
72 ) total payments= $8,500
_______________________________________________________
SCHEDULE A (Form 1040) Itemized Deductions
Taxes paid
6 Real estate taxes :::::::::::::::::::::::::::::$2,500
9 Add lines 5 through 8::::::::::::::::::::::::$2,500
10 Home mortgage interest :::::::::::::::::$3,375 *75/100=$3,375)
15 Add lines 10 through 14 .:::::::::::::::::$3,375
16 Gifts to Charity::::::::::::::::::::::::::::::::$3,500
19 Add lines 16 through 18 :::::::::::::::::::$3,500
21 Unreimbursed employee expenses:::$11,170( see the explanation 2106 form)
24 Add lines 21 through 23::::::::::::::::::$11,170
25 Enter amount from Form 1040, line 38 :::::::$83,793.12
26 Multiply line 25 by 2%:::::::::::::::::::::::::::::::$1 674.11
($83,705.63* 2/100=1 674.11)
27 Subtract line 26 from line 24=$9,494.14
($11,170 - 1 674.11=$9,495.89)
29)Total Itemized Deduction
29 Add the amounts in the far right column for lines 6 through 28. Also, enter this amount on Form 1040, line 40=$18,870.89
($2,500 +$3,375+$3,500+$9,495.89=$18,870.89
_______________________________________________________________________
SCHEDULE C (Form 1040)
Name of proprietor:Marge Large SSN:000-22-2222
A) Principal business: Repair Rubber Toy Boats:::::::::::::Business Code::::::::811490
Part 1
1) Gross receipts or sales::::::::::::::::::::::::::::$15,000
7 Gross income:::::::::::::::::::::::::::::::::::::::::::$15,000
Part II
Expenses:
11 Contract labor=$3,500
16 Interest: a Mortgage=$1,125($4,500 *25/100=$1,125)
22 Supplies =$5,000
25 Utilities=$500($2,000 * 25/100=$500)
27a)Other expenses= $500(phone )
28) Total expenses : Add lines 8 through 27a:$10,625
29 Tentative profit Subtract line 28 from line 7 =$4,375
_________________________________________________
Form 2106
Employee Business Expenses
Part 1
Expense
1) Vehicle Expense :$ 10080 (0.56 cents * 18,000 miles)
3 Travel expense::::::::::::::::::::::::::$515($200 + $255 + $60)
(Airfare =$200
Loding = $85 per day * 3days= $255
Taxicabs=$20 per day *3days=$60)
5)Meals and entertainment expenses=$50 *50/100 per day *3 days=$75 +$5,500=$5,575
(Customer means and Entertainment=$1500+$4,000=$5,500)
6) total Expense =$16,170
7)reimbursements received =$5,000
8)Subtract line 7 from line 6=$16,170 - $5,000=$11,170
George Corporation had the following transactions occur in the current year: 1. Cash sale of merchandise inventory. 2. Sale of delivery truck at book value. 3. Sale of George Corporation common stock for cash. 4. Issuance of a note payable to a bank for cash. 5. Sale of a debt security held as an available-for-sale investment. 6. Collection of loan receivable. How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? Two items Three Items Four Items Five or more items
Answer: Three items will appear being;
2. Sale of delivery truck at book value
5. Sale of a debt security held as an available-for-sale investment
6. Collection of loan receivable.
Explanation:
The Investment Section of the Cash Flow Statement contains activities related to investment such as the buying or selling of fixed assets and the buying or selling of other company stocks or bonds.
Out of the above therefore, there are 3 activities that would fall under this section of the Cash Flow Statement.
They are;
2. Sale of delivery truck at book value.
- This refers to the sale of a Fixed asset and as such it goes to the investment section.
5. Sale of a debt security held as an available-for-sale investment.
- As a debt security of another firm that was considered available for sale, this goes to the Investment Section as well.
6. Collection of loan receivable.
- Finally, collection of loan receivable means that the company loaned money to another company making it an investment related cash inflow as it is a long term Investment income source.
When estimating wage equations we expect that young, inexperienced workers will have relatively low wages and that with additional experience their wages will rise, but then begin to decline after middle age, as the worker nears retirement. This life-cycle pattern of wages can be captured by introducing experience and experience squared to explain the level of wages. If we also include years of education and a dummy variable for the sex (0 if male, 1 if female) we have the following equation:
W AGE = β1 + β2 EDUC + β3 EXPER + β4 EXPER^2 + β5 SEX + e
a. What is the marginal effect of experience on wages?
b. What signs do you expect for each of the coefficients β2, β3, β4 and β5 Why?
c. After how many years of experience do wages start to decline (Since you are not provided with OLS estimates of the regression coefficients, cast your answer in terms of the theoretical coefficients β).
The marginal effect of experience on wages can be calculated mathematically, coefficient signs show the expected impact of each variable on wages, and the point when wages start to decline can be determined from the wage equation.
Explanation:The marginal effect of experience on wages can be calculated by taking the derivative of the wage equation with respect to experience. This would be the sum of the coefficients β3 and 2 times the coefficient β4 multiplied by the level of experience.
The signs expected for the coefficients β2, β3, β4, and β5 would be positive for β2 (education increases wages), positive for β3 (experience typically increases wages), negative for β4 (experience squared captures the decline in wages after a certain point), and the sign for β5 would depend on whether being female positively or negatively impacts wages in the specific context of the data.
Wages start to decline after the number of years of experience indicated by the point where the marginal effect of experience on wages changes from positive to negative, which occurs at -β3 / (2*β4) in the wage equation.
MIRR calculation) Emily's Soccer Mania is considering building a new plant. This project would require an initial cash outlay of $10.2 million and would generate annual cash inflows of $3.2 million per year for years one through four. In year five the project will require an investment outlay of $5.2 million. During years 6 through 10 the project will provide cash inflows of $5.2 million per year. Calculate the project's MIRR, given a discount rate of 8 percent.'
Answer:
The project's MIRR is 14.54% as found in the attached
Explanation:
The MIRR which is the modified internal rate of return can be computed using excel formula MIRR which stated thus:
=MIRR(values,finance_ rate,reinvest_rate)
values are the cash flows both inflows and outflows derivable from the projects such as $10.2 million in year 1,$3.2 million in the first four years as well as the $5.2 million cash outflow in year 5 and the $5.2 inflows from year six onward.
The finance rate and reinvest rate are same as the discount rate of 8%.
Eventually,the MIRR gave 14.54% as computed in the attached spreadsheet.
The Molson Company had budgeted production for the year as follows: Quarter 1 2 3 4 Production in units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials. Budgeted purchases of raw materials in the second quarter would be:
Answer:
49,600 pounds
Explanation:
Prepare a Production Budget as Follows :
Q1 Q2 Q3 Q4
Budgeted Production 10,000 12,000 16,000 14,000
Budgeted Materials 40,000 48,000 64,000 56,000
Add Budgeted c/stock 4,800 6,400 5,600
Total Materials 44,800 54,400 69,600
Less Budgeted o/stock (4,000) (4,800) (6,400)
Budgeted Material Purch 40,800 49,600 63,200
Therefore Budgeted purchases of raw materials in the second quarter would be 49,600 pounds.
The following data for Romero Products Inc. are available:
For the Year Ended December 31 Actual Planned Difference
Sales $8,360,000 $8,200,000 $160,000
Variable costs:
Variable cost of goods sold $3,496,000 $3,280,000 $216,000
Variable selling and administrative expenses 760,000 902,000 (142,000)
Total variable costs $4,256,000 $4,182,000 $74,000
Contribution margin $4,104,000 $4,018,000 $86,000
Number of units sold 38,000 41,000
Per unit:
Sales price $220 $200
Variable cost of goods sold 92 80
Variable selling and administrative expenses 20 22
Prepare an analysis of the sales quantity and unit price factors.
Answer:
Sales quantity factor = - $600,000
Unit price factor = $760,000
Explanation:
sales quantity factor is the effect of change in number of units sold with respect to the budgeted price or planned price.
Unit price factor is the change in price per unit with respect to the actual number of units sold.
Unit price factor $(220-200)×38,000 = $760,000
Sales quantity factor (38,000 - 41,000) × $200 = -$600,000
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An analysis of Romero Products Inc.'s performance reveals a shortfall in the sales quantity factor given fewer units were sold than planned. However, the unit price factor was positive as higher prices were achieved than planned. Additionally, despite an increase in variable cost of goods, a favourable variances in variable selling and administrative expenses led to a higher contribution margin than planned.
Explanation:The sales quantity factor can be analyzed by looking at the difference in the number of units sold. While Romero Products Inc. planned to sell 41,000 units, they only sold 38,000 units. This difference of 3,000 units is a negative factor for the company since it represents lost potential revenue.
The unit price factor can be analyzed by comparing the actual and planned sales price per unit. Romero Products Inc. was able to sell their product at a higher price than planned - $220 per unit instead of the projected $200 per unit. This $20 advantage per unit is a positive factor for the company as it increases revenue.
It's essential to recognize that the variable costs also increased, with the cost of goods sold being higher than planned ($92 against the planned $80). However, variable selling and administrative expenses were lower than planned ($20 compared to $22). Therefore, the company's contribution margin - the sales revenue minus the variable costs - was higher than planned.
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Aikmen Lab plans to purchase a new centrifuge machine for its Georgia facility. The machine costs $279,000 and is expected to have a useful life of 7 years, with a terminal disposal value of $50,000. Savings in cash operating costs are expected to be $63,000 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $30,000 needs to be maintained at all times, but this investment is fully recoverable (will be "cashed in") at the end of the useful life. Aikmen Lab's required rate of return is 10%. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Aikmen Lab uses straight-line depreciation for its machines.
Required:
1. Calculate net present value.
2. Calculate internal rate of return.
3. Calculate accrual accounting rate of return based on net initial investment.
4. Calculate accrual accounting rate of return based on average investment.
5. You have the authority to make the purchase decision. Why might you be reluctant to base your decision on the DCF methods?
Answer:
initial outlay costs of the project = $279,000 (machine) + $30,000 (additional working capital) = $309,000
CF1 = $63,000CF2 = $63,000CF3 = $63,000CF4 = $63,000CF5 = $63,000CF6 = $63,000CF7 = $63,000 + $50,000 (salvage value) + $30,000 (working capital) = $143,000discount rate = 10%
using an excel spreadsheet:
1) =NPV(10%,63000,63000,63000,63000,63000,63000,143000) = $347,763 - $309,000 = $38,763
2) =IRR(-309000,63000,63000,63000,63000,63000,63000,143000) = 13.34%
3) accounting rate of return based on net initial investment = average net profit / net initial investment
average net profit = $63,000 - $32,714 (depreciation cost) = $30,286net initial investment = $309,000accounting rate of return based on net initial investment = $30,286 / $309,000 = 9.8%
4) accounting rate of return based on average investment = average net profit / average investment
average net profit = $63,000 - $32,714 (depreciation cost) = $30,286average investment = ($309,000 + $80,000) / 2 = $194,500accounting rate of return based on average investment = $30,286 / $194,500 = 15.57%
5) Generally the discounted cash flow method is the most widely accepted way to determine whether a project should be accepted or not, and to be honest the NPV is positive and the IRR is higher than the required rate of return. The only rate that was lower was the accounting rate of return on net investment (9.8%) but it was really close.
If I was the manager that decided whether or not to carry out the project I would go for it.
Catamount Company had current and accumulated E&P of $585,000 at December 31, 20X3. On December 31, the company made a distribution of land to its sole shareholder, Caroline West. The land's fair market value was $234,000 and its tax and E&P basis to Catamount was $292,500. The tax consequences of the distribution to Catamount in 20X3 would be:
Answer and Explanation:
No loss will be recognized in the year 20X3 and a provide a reduction in E&P of $292,500
Given:
Current and accumulated E&P = $585,000
Fair market value = $234,000
Profit on accumulation:
Profit on accumulation = Current and accumulated E&P - Fair market value Profit on accumulation = $585,000 - $234,000
Profit on accumulation = $351,000
Distribution is divided because accumulated profit in year 20X3 is higher then distribution.
Bonita Industries produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 60000 Direct labor 165000 Variable overhead 80000 Fixed overhead 175000 If Bonita buys the part from an outside supplier, $45000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $73, net income will increase (decrease) by $145000. $(60000).$85000. $(15000).
Bonita Industries will save $80000 and therefore increase their net income by the same amount if they buy part A12E from the outside supplier instead of producing it in-house.
Explanation:In determining whether Bonita Industries should produce part A12E in-house or buy from an outside supplier, we first need to calculate the total cost of producing the part in-house. The total cost of producing 5000 units of part A12E in-house is $60000 (direct materials) + $165000 (direct labor) + $80000 (variable overhead) + $175000 (fixed overhead) = $490000. Since $45000 of the fixed overhead is avoidable if the part is bought from an outside supplier, the true cost of producing the part in-house is $490000 - $45000 = $445000.
The cost of buying the part from an outside supplier is $73 * 5000 units = $365000. Comparing this with the in-house production cost, Bonita Industries will save $445000 - $365000 = $80000 if they buy from the outside supplier. Therefore, the net income will increase by $80000 if Bonita buys part A12E from the outside supplier.
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Why is cash flow important to government entities? How does an administrator plan for cash flow? What tools are available for this purpose?
Answer:
Cash flow is important to government entities because:
As with non-government entities, cash flow is important to government organizations because it is required for the operations of any organization regardless of whether they are government-owned or not, for-profit or not.
The measurable difference in the cash balance of any organization from one period to the next is referred to as Cashflow. No business or entity can continue operations if they keep taking out or spending more cash than they can make.
An administrator can plan for cash flow using a Cash Flow Planner.
This can take the form of a simple excel spread sheet with one column showing on one side all the monies that one is expecting to come in (Account Receivables) and an adjacent column showing all the monies one is expecting to pay out (Account payables).
At the bottom of the excel, you can show the bank balance.
There are specialised apps that help perform this function. An example would be Quickbooks, Planware, Cash Flow Planner, etc.
Cheers!
Develop a production schedule to produce the exact production requirements by varying the workforce size for the following problem. The monthly forecasts for Product X for January, February, and March are 1,150, 1,530, and 1,190, respectively. Safety stock policy recommends that half of the forecast for that month be defined as safety stock. There are 22 working days in January, 19 in February, and 21 in March. Beginning inventory is 520 units. Storage cost is $5 per unit per month based on ending inventory level, standard pay rate is $7 per hour, hiring and training cost is $200 per worker, layoff cost is $300 per worker, and worker productivity is 0.1 unit per hour. Assume that you start off with 42 workers and that they work 8 hours per day.
Answer:
developing a production schedule to produce the exact workforce requirement is explicitly explained at the attachment below. The total cost of the production schedule is $ 316,592
Explanation:
The Pecking Order view on capital structure:
a. Argues that firm's first choice for capital is new equity due to the fact that dividends are not contractually required.
b. Argues that the firm's first choice for capital is new debt as interest payments are tax-deductible.
c. Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
d. Argues that firms are indifferent between new equity, debt and retained earnings as sources of capital.
Answer:
c. Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
Explanation:
The Pecking order theory states that a business should first of all seek for internal funds (retained earnings) as a first choice of capital.
When internal funds are depleted, it can now look to debt as a source of finance.
In turn when debt options have been exhausted the last resort is to look for funding from equity.
So the Pecking order argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
Suzanne, an HR specialist, is assessing training and development needs at
her firm by reviewing job descriptions. Which type of analysis is Suzanne
most likely conducting?
Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $0.65 at the end of the year. Its dividend is expected to grow at a constant rate of 9.50% per year. If Walter’s stock currently trades for $12.00 per share, what is the expected rate of return?
Answer:
14.90%
Explanation:
We know,
Current stock price, [tex]P_{0}[/tex] = [tex]\frac{D_{1}}{r_{s} - g}[/tex]
Given,
Current stock price, [tex]P_{0}[/tex] = $12.00
growth rate, g = 9.50% = 0.095
Expected annual dividend, [tex]D_{1}[/tex] = $0.65
We have to determine the expected rate of return ([tex]r_{s}[/tex]).
Putting the values into the above formula, we can get,
Current stock price, [tex]P_{0}[/tex] = [tex]\frac{D_{1}}{r_{s} - g}[/tex]
or, $12.00 = $0.65 ÷ ([tex]r_{s}[/tex] - 0.095)
or, $12.00 × ([tex]r_{s}[/tex] - 0.095) = $0.65
or, [tex]r_{s}[/tex] - 0.095 = $0.65 ÷ $12.00
or, [tex]r_{s}[/tex] - 0.095 = 0.0542
or, [tex]r_{s}[/tex] = 0.054 + 0.095
Therefore, [tex]r_{s}[/tex] = 0.149
The expected rate of return = 0.149 or 14.90%
Radisson Enterprises sells a product for $69 per unit. The variable cost is $40 per unit, while fixed costs are $206,045. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $75 per unit.
Answer:
1. 7,105 units
2. 5,887 units
Explanation:
The computation of given question is shown below:-
a. Contribution margin per unit = Sale price - Variable cost
= $69 - $40
= $29
Break-even point in sales units = Fixed costs ÷ Contribution margin per unit
= $206,045 ÷ 29
= 7,105 units
b. Contribution margin per unit
= $75 - $40 = $35
Break-even point = Fixed cost ÷ Contribution margin per unit
$206,045 ÷ $35
= 5,887 units
The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 40 cars per month. The cars cost $60 each, and ordering costs are approximately $15 per order, regardless of the order size. The annual holding cost rate is 20%.
(a) Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
If required, round your answers to two decimal places.
Q* =
Total Cost = $
(b) Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars.
If required, round your answers to two decimal places.
S* =
Total Cost = $
(c) What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year.
If required, round your answer to two decimal places.
Length of backorder period = days
(d) Would you recommend a no-backorder or a backorder inventory policy for this product? Explain.
If required, round your answers to two decimal places.
Recommendation would be - Select your answer -backorderno-backorderItem 6 inventory policy, since the maximum wait is only days and the cost savings is $ .
(e) If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies?
If required, round your answers to two decimal places.
Reorder point for no-backorder inventory policy is .
Reorder point for backorder inventory policy is .
Answer:
Task a:Task a.1EOQ = 34.64 orders
Task a.2Total annual cost = $29,215.69
Task b:Task b.1Total Cost Minimum inventory policy=( bS2/ 2Qbo) + P (Qbo- S)2/2Qbo + K(D/Qbo)
Task b.2Total annual cost = $207.91
Task cThe maximum number of days = 6.09 days
Task dThe saving in using backorder is $207.79
Task eTask e.1:Reorder point = 9.6
Task e.2:Reorder point = 3.51
Explanation:
Demand per month= 40 cars
Annual Demand (D)= 12*40 = 480
Ordering cost per order (K)= $15
Holding Cost= 20% of cost= $60 *0.2 = 12
Task aDetermine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
If required, round your answers to two decimal places.
Task a.1Calculate EOQEOQ = [tex]\sqrt\frac{2CoD}{Ch}[/tex]
EOQ = [tex]\sqrt\frac{2*15*480}{12}[/tex]
EOQ = 34.64 ordersTask a.2Total annual cost:
Total annual cost = P×D + Co × ([tex]\frac{D}{EOQ}[/tex]) + Ch × ([tex]\frac{EOQ}{2}[/tex])
Total annual cost = 60 × 480 + (15 × [tex]\frac{480}{34.64}[/tex]) + (12 × [tex]\frac{34.64}{2}[/tex])
Total annual cost = $28,800 + $207.85 + $207.84
Total annual cost = $29,215.69
Task b:Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars.
If required, round your answers to two decimal places.
S* =
Total Cost = $
Solution:
Task b.1Minimum cost inventory policy:Backorder Cost (b)= $45
Qbo= Q* × √( b+h/ h)
= 35*√(12+45/ 45)
= 35* 1.12
=39.28
Shortage (S)= Qbo * (K/K+b)
= 39* (15/15+45)
= 39* 0.25
= 9.75
Total Cost Minimum inventory policy=( bS2/ 2Qbo) + P (Qbo- S)2/2Qbo + K(D/Qbo)
Task b.2Total annual cost = 45* 9.752 / 2* 392 + 60 (39-9.75)2/ 2* 392 + 15 ( 480/39)
= 1.40+ 21.9.+ 184.61
=$207.91
Task c:What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year.
If required, round your answer to two decimal places.
Solution:Length of backorder days (d) = Demand ÷ amount of working days
d = 480 ÷ 300
d = 1.6
Calculate the backorders as the maximum number of backorders divided by the demand per day
s/d = 9.75/1.6 = 6.09 days (answer)
Task dWould you recommend a no-backorder or a backorder inventory policy for this product? Explain. If required, round your answers to two decimal places.
Recommendation would be inventory policy, since the maximum wait is only days and the cost savings is $._____
Solution:
Calculate the difference in total between not using backorder:
$207.85 + $207.85 - 207.91 = $207.79
The saving in using backorder is $207.79.
Task eIf the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies? If required, round your answers to two decimal places.
Task e.1Reorder point for no-backorder inventory policy is .
Task e.2Reorder point for backorder inventory policy is .
Solution:Task e.1Reorder point for no-backorder inventory policy is .
Reorder point = d*lead timeReorder point = 1.6*6
Reorder point = 9.6
Task e.2Reorder point for backorder inventory policy is .
Reorder point = d*lead time - S
Reorder point = 1.6*6 - 6.09
Reorder point = 3.51
To determine the Economic Order Quantity (EOQ) and total annual cost:
EOQ Calculation: EOQ formula is:Total Cost without backorders: $29520.55
Backorder Cost Calculation: Minimum cost policy with backorders involves EOQ with backorder cost (C) taken into account:Maximum number of backorder days:
Given: Hobby Shop open for 300 days per year
Length of backorder period = (Q*/D) * (P/P+S), where P is the number of backorders filled during the cycle and S = remaining time backorder is held.
Therefore, maximum waiting time = (20.55/480) * 300 = 0.12 * 300 = 36 days.
Recommendation
It would be prudent to recommend a backorder policy because the cost savings of $21,122.18 annually outweigh the inconvenience of 36 days of potential backorders.Reorder PointWithout backorders:19. Which of the following statements is FALSE? A) Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress. B) When a firm is highly levered, creditors themselves will closely monitor the actions of managers, providing an additional layer of management oversight. C) According to the empire building hypothesis, leverage increases firm value because it commits the firm to making future interest payments, thereby reducing excess cash flows and wasteful investment by managers. D) Managers of large firms tend to earn higher salaries, and they may also have more prestige and garner greater publicity than managers of small firms. As a result, managers may expand (or fail to shut down) unprofitable divisions, pay too much for acquisitions, make unnecessary capital expenditures, or hire unnecessary employees.
Answer: C) According to the empire building hypothesis, leverage increases firm value because it commits the firm to making future interest payments, thereby reducing excess cash flows and wasteful investment by managers.
Explanation:
This statement is false because it is not the definition of the Empire Building Hypothesis.
It is rather, the definition of the Free Cash Flow Hypothesis which essentially believes that a company that is making a lot of free cashflow is not as disciplined in handling money as a company that has debt obligations. It claims that when a company has a lot of free cash flow it tends to invest in bad projects.
The FREE CASH FLOW HYPOTHESIS not the Empire Building Hypothesis therefore believes that leverage increases firm value because it commits the firm to making future interest payments, thereby reducing excess cash flows and wasteful investment by managers.
Rick agreed to buy two campers from McMahon and made a deposit of $1,000 as partial payment. Rick then wired McMahon not to ship the campers and explained his reasons for delaying shipment. Later, Rick decided not to buy the campers and demanded a return of his $1,000. Was Rick's instruction not to ship an anticipatory repudiation that will justify McMahon's retention of the $1,000? Explain.
Answer:
Rick instruction not to ship is an anticipatory repudiation and it justifies McMahon's retention of the $1000
Explanation:
Rick instruction not to ship is an anticipatory repudiation and it justifies McMahon's retention of the $1000
when a contract is entered by two parties and one party provides a clear inability/unwillingness to keep to the original terms of the contract the party is said to have committed an anticipatory repudiation and the decision to accept or reject such inability lies with the second party because the second party may have to lose something due to the inability of the first party keeping to the contract hence McMahon's retention of the initial deposit of $1000 is within his rights
Happy Company wants to raise $2 million with debt financing. The funds are needed to finance working capital, and the firm will repay them with interest in one year. Happy Company’s treasurer is considering three options:
a. Borrowing U.S. dollars from Security Pacific Bank at 8 percent.
b. Borrowing British pounds from Midland Bank at 14 percent.
c. Borrowing Japanese yen from Sanwa Bank at 5 percent.
If Happy borrows foreign currency, it will not cover it; that is, it will simply change foreign currency for dollars at today’s spot rate and buy the same foreign currency a year later at the spot rate that is in effect. Happy Company estimates the pound will depreciate by 5 percent relative to the dollar and the yen will appreciate 3 percent relative to the dollar in the next year. From which bank should Happy Company borrow?
Explanation:
Happy Company will consider both capital expenses and foreign exchange threats.
If Happy's calculations are right, borrowing from Minland Bank is the best choice.
However, since forecasts are based solely on estimation, the choice is still centered on Happy Company's risk appetite, whether to take an 8 per cent flat rate, a strong 14 per cent rate, but with a chance of decline or a small 5 per cent rate, but with a possibility of appreciation.
Considering the interest rates and currency valuation changes, Happy Company should borrow either from Security Pacific Bank in the US or from Sanwa Bank in Japan. Both options equate to an 8% interest rate, resulting in a repayment amount of $2.16 million.
Explanation:In order to determine from which bank Happy Company should borrow, we'll need to take into account not only the initial interest rates, but also the expected appreciation or depreciation of each currency relative to the dollar over the next year.
From Security Pacific Bank, borrowing in USD at 8% means Happy Company would need to repay $2.16 million.
Borrowing from Midland Bank in pounds at 14%, plus the estimated 5% depreciation of the pound relative to the dollar, effectively gives an interest rate of 9%. This would require repayment of approximately $2.18 million.
Finally, borrowing from Sanwa Bank in yen at 5% interest, plus the 3% expected appreciation of the yen relative to the dollar, would be equivalent to an interest rate of 8%. This totals to a repayment of $2.16 million.
Given these calculations, the best option would likely be to borrow either from Security Pacific Bank, or from Sanwa Bank, as both would require the same repayment amount. However, there may be other factors not considered in this calculation such as transaction fees or exchange rate volatility that could impact the final decision.
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