Answer:
The correct answer is: $1 trillion; $4 trillion.
Explanation:
The marginal propensity to consume is 0.8.
Government spending decreases by $1 trillion.
The real GDP will initially decline by the amount of decline in government spending.
So the decline in the real GDP will initially be $1 trillion.
The overall decrease in the real GDP will be by the size of the spending multiplier.
Total decrease in real GDP
= [tex]\Delta G \times \frac{1}{1-MPC}[/tex]
= [tex]\$ 1\times\frac{1}{1-0.8}[/tex]
= [tex]\$1 \times \frac{1}{0.2}[/tex]
= $5 trillion
Out of this $5 trillion decrease, $1 was initially decreased.
So decline in real GDP due to reduced consumption will be
= $5 trillion - $1 trillion
= $4 trillion
U.S. residents accounted for over 75 percent of cruise ship passengers, and U.S. ports had 8 million passengers leaving on cruises in 2004. The growth in cruise travel was phenomenal after the terrorist attacks on September 11, 2001. According to a situational analysis, this event created an _____ for the industry.a. internal strength
b. internal weakness
c. internal threat
d. external weakness
e. external opportunity
Answer:
e. External opportunity
Explanation:
An external opportunity is an extension of the market due to some external development outside the industry. In this case, the cruise industry has benefited in a major way due to external developments.
Situational analysis would mean that the September 11 attacks created an e. external opportunity.
What is an external opportunity?This is when an event happens outside an industry that leads to the industry experiencing growth.
The 9/11 attacks were outside the cruise ship industry but as a result of them, the Cruise ship industry recorded massive growth.
In conclusion, option E is correct.
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Fisher Steel produces steel plates for manufacturing and construction. They generally use a static budget with the following costs based on 50,000 units per month: Indirect materials, $105,000; indirect labor, $98,000; utilities, $14,000; supervision, $5,000; depreciation, $22,000. If Fisher wanted to create a flexible budget for 60,000 units, what value would they record for fixed costs?
A : $49,200
B : $32,400
C : $27,000
D : $41,000
Answer:
C : $27,000
Explanation:
Mainly there are two types of cost i.e variable cost and the fixed cost. The variable cost is that cost which is change when the production level change whereas the fixed cost is that cost which remains constant whether production level changes or not
So, the variable cost includes indirect material, indirect labor, and utilities
And, the fixed cost includes supervision and depreciation expense.
Now the fixed cost would be
= Supervision + depreciation expense
= $22,000 + $5,000
= $27,000
The following information is from the annual financial statements of Raheem Company. 2017 2016 2015 Net sales $ 445,000 $ 376,000 $ 421,000 Accounts receivable, net (year-end) 43,000 40,800 37,500 Compute its accounts receivable turnover for 2016 and 2017.
Answer:
9.60; 10.62
Explanation:
In 2016:
Average accounts receivables:
= (Beginning accounts receivable + Ending accounts receivable) ÷ 2
= (37,500 + 40,800) ÷ 2
= 39,150
Accounts receivable turnover = Net sales ÷ Average accounts receivables
= $376,000 ÷ 39,150
= 9.60
In 2017:
Average accounts receivables:
= (Beginning accounts receivable + Ending accounts receivable) ÷ 2
= (40,800 + 43,000) ÷ 2
= 41,900
Accounts receivable turnover = Net sales ÷ Average accounts receivables
= $445,000 ÷ 41,900
= 10.62
Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $270,000. A new salon will normally generate annual revenues of $65,850, with annual expenses (including depreciation) of $39,900. At the end of 15 years the salon will have a salvage value of $76,000.
Calculate the annual rate of return on the project. (Round answer to 0 decimal places, e.g. 125.)
Answer:
15%
Explanation:
The formula to compute the accounting rate of return or annual rate of return is shown below:
= Annual net income ÷ average investment
where,
Annual net income equal to
= Annual revenues - annual expenses
= $65,850 - $39,900
= $25,950
And, the average investment would be
= (Initial investment + salvage value) ÷ 2
= ($270,000 + $76,000) ÷ 2
= $346,000 ÷ 2
= $173,000
Now put these values to the above formula
So, the rate would equal to
= $25,950 ÷ $173,000
= 15%
You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $206 million, paid taxes of $47 million, and its depreciation expense was $71 million. Cruise's gross fixed assets increased by $74 million from 2007 to 2008. The firm's current assets decreased by $14 million and spontaneous current liabilities increased by $6.4 million. What is Cruise's operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?
Answer:
$230 million , $176.40 million
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
= $206 million +$71 million - $47 million
= $230 million
The computation of the free cash flow is shown below:
= Operating cash flows + Change in Net Working Capital - net capital Expenditure.
= $230 million + 20.4 million - $74 million
= $176.40 million
Sunland’s Shop can make 1000 units of a necessary component with the following costs: Direct Materials $21000 Direct Labor 6000 Variable Overhead 3000 Fixed Overhead ? The company can purchase the 1000 units externally for $39000. The unavoidable fixed costs are $2000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?
Answer:
$9,000
Explanation:
Total variable cost of manufacturing the components are as follows;
Direct materials $21,000
Direct labor 6,000
Variable overhead 3,000
————
Total $30,000
If we purchase the cost is $39,000 and the company is indifferent if they will manufacture or purchase. Therefore;
$39,000 - 30,000 = $9,000 (unavoidable fixed cost)
You own a stock portfolio invested 25 percent in Stock Q, 25 percent in Stock R, 15 percent in Stock S, and 35 percent in Stock T. The betas for these four stocks are 1.28, 0.45, 1.78, and 1.22, respectively. What is the portfolio beta?
Answer:
1.1265
Explanation:
The computation of the portfolio beta is shown below:
= Stock Q portfolio percentage × beta of Stock Q + Stock R portfolio percentage × beta of Stock R + Stock S portfolio percentage × beta of Stock S + Stock T portfolio percentage × beta of Stock Q
= 0.25 × 1.28 + 0.25 × 0.45 + 0.15 × 1.78 + 0.35 × 1.22
= 0.32 + 0.1125 + 0.267 + 0.427
= 1.1265
Which of the following is the type of logical database model that treats data as if they were stored in two-dimensional tables?
A) Open source DBMS
B) Two-tiered DBMS
C) Relational DBMS
D) Pre-digital DBMS
E) Hierarchical DBMS
Answer: (C) Relational DBMS
Explanation:
The relational database management system (DBMS) is specifically designed for the purpose of relational databases by using the concept database management system.
The relational database is basically refers to the DBMS which store the data or information in the form of structured format by using various columns and rows.
The relational DBMS makes more easy to access the values which is more specific in the database management system.
Therefore, the relational DBMS is one of the type of logical database system that basically treats the data in the form of dimensional table
C) Relational DBMS
RDBMS is a program that serves a database system whose main entity consists of tables that have relations from one table to another.
Further Explanation
RDBMS is short for Relational Database Management System.
A database consists of many tables. This table consists of many fields which are the columns. Fill in each row of this table is data.
To create an integrated database system, one table has another relationship that must always be maintained. Each table has a primary key, this primary key is then linked to the second table and becomes the foreign key for this second table.
Various kinds of relations in the database
one-to-one one-to-many many-to-many
RDBMS will maintain that the data which is the key relation of foreign_key and primary_key is data that is really related to one another. If there is data that is incorrectly connected, RDMBS will reject the data. This will make it easier for program makers (software developers) to do the coding because it is assisted by automatic checking by RDBMS.
The complaint that arises and is generally known about the existence of RDBMS is the fact that the current implementation is seen as too "static". Speculation has also arisen over the possibility of creating a new generation database system that uses a "dynamically relational" model with columns that can be created dynamically, dynamically developing sizes, dynamically defined.
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Details
Class: College
Subject: Business
Keywords: database, relational, table
It costs $60 of variable and $40 of fixed costs to produce rocking chair which normally sells for $150. A wholesaler offers to purchase 5,000 rocking chairs at $125 each. Georgia would incur special shipping costs of $10 per rocking chair if the order were accepted. Georgia has sufficient unused capacity to produce the 5,000 rocking chairs. If the special order is accepted, what will be the effect on net income?
Answer:
Total effect on income= $275,000
Explanation:
Giving the following information:
It costs $60 of variable and $40 of fixed costs to produce a rocking chair which normally sells for $150. A wholesaler offers to purchase 5,000 rocking chairs at $125 each. Georgia would incur special shipping costs of $10 per rocking chair if the order were accepted. Georgia has sufficient unused capacity to produce the 5,000 rocking chairs.
Because it is a special offer and there is unused capacity, we will not have into account the fixed costs.
Unitary variable costs= 60 + 10= 70
Contribution margin= 125 - 70= 55
Total effect on income= 5,000*55= $275,000
Accepting the special order will increase the net income by $75,000.
Explanation:The effect on net income of accepting the special order can be calculated by comparing the net income from the special order to the net income from the regular production.
For the regular production, the total cost is $100 ($60 variable cost + $40 fixed cost) per rocking chair, and the selling price is $150 per rocking chair. Therefore, the net income per rocking chair is $50.
If the special order is accepted, the selling price is $125 per rocking chair, and there will be an additional shipping cost of $10 per rocking chair. So the net income per rocking chair for the special order is
$125 - $100 - $10 = $15.
Since the company has unused capacity and can produce the 5,000 rocking chairs without incurring any additional costs, the net income from the special order can be calculated by multiplying the net income per rocking chair for the special order by the number of rocking chairs, giving a net income of
$15 * 5,000 = $75,000.
Therefore, accepting the special order will increase the net income by $75,000.
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Calculate the value of a preferred stock that pays a dividend of $6.50 per share when the market's required yield on similar shares is 14 percent. The value of the preferred stock is $ nothing per share.
Answer:
In order to find the value of a preferred stock we discount its future payments at the required yield on the stock. Because the preferred stock is perpetual in nature, meaning it pays the same amount forever, we can find it's value by dividing its dividend by its required yield. So in this case the dividend is 6.5 and the required yield is 14% so the value of the preferred stock is
6.5/0.14= $46.42
Explanation:
Lexington Corporation’s weekly payroll of $24,000 included FICA taxes withheld of $1,836, federal taxes withheld of $2,990, state taxes withheld of $920, and insurance premiums withheld of $250. Prepare the journal entry to record Lexington’s payroll.
The journal entry to record Lexington Corporation's weekly payroll includes debiting Payroll Expense for $24,000 and crediting FICA Taxes Payable, Federal Taxes Payable, State Taxes Payable, Insurance Premiums Payable, and Cash for their respective amounts.
To record Lexington Corporation's weekly payroll, which includes various deductions such as FICA taxes, federal taxes, state taxes, and insurance premiums, the following journal entry is made:
Debit Payroll Expense for the total amount of the gross payroll, $24,000.Credit FICA Taxes Payable for $1,836.Credit Federal Taxes Payable for $2,990.Credit State Taxes Payable for $920.Credit Insurance Premiums Payable for $250.Credit Cash for the net amount paid to employees.The net amount paid to employees is the gross payroll minus all deductions. This amount can be calculated as $24,000 - ($1,836 + $2,990 + $920 + $250) = $18,004.
Therefore, the journal entry would be:
Payroll Expense $24,000Becker Bikes manufactures tricycles. The company expects to sell 520 units in May and 650 units in June. Beginning and ending finished goods for May is expected to be 180 and 145 units, respectively. June’s ending finished goods is expected to be 155 units. Each unit requires 3 wheels at a cost of $22 per wheel. Becker requires 20 percent of next month’s material production needs on hand each month. July’s production units is expected to be 620 units.
Compute Becker’s direct materials purchases budget with respect to wheels for May and June.
The direct materials purchases budget for Becker Bikes with respect to wheels for May and June are $39,590 and $51,744 respectively based on their expected sales, inventories, and the cost of wheels.
Explanation:To compute Becker's direct materials purchases budget with respect to wheels for May and June, you have to know how many wheels Becker's needs each month. The number of wheels needed depends on the number of tricycles to be sold and the beginning and ending inventory for each month.
In May, Becker bikes expects to sell 520 units and has a beginning inventory of 180 units and ending inventory of 145 units. Therefore, the total number of tricycles to be manufactured in May is 520 (to be sold) + 145 (ending inventory) - 180 (beginning inventory) = 485 units. Since each tricycle requires 3 wheels, Becker needs 485 units * 3 wheels/unit = 1455 wheels for May. Since the cost for each wheel is $22, the total cost of wheels for May is 1455 wheels * $22/wheel = $31,010. As Becker needs 20% of next month's (June) production requirements on hand at the end of May, the budget for May needs to include an additional 650 (June production) * 20% * 3 (wheels per tricycle) = 390 wheels or 390 * $22 = $8,580. So, the total budget for May is $31,010 + $8,580 = $39,590.
In June, Becker wants to sell 650 tricycles and has a beginning inventory of 145 units and is targeting an ending inventory of 155 units, so it will need to produce 650 (to be sold) + 155 (ending inventory) - 145 (beginning inventory) = 660 units. Again, as each tricycle requires 3 wheels, Becker needs 660 units * 3 wheels/unit = 1980 wheels for June. Multiplying the number of wheels by the cost per wheel gives a total cost of $43,560. Additionally, Becker needs 20% of July's production (620 units) on hand at the end of June. Calculating this would result in 620 units * 20% * 3 wheels per tricycle = 372 wheels for a cost of $8,184. Therefore, the total budget for June is $43,560 + $8,184 = $51,744.
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The direct materials purchases budget for May is $38,060, and for June, it is $43,560. This considers production needs, beginning and ending finished goods, cost per wheel, and required material on hand. These calculations ensure sufficient wheels are purchased.
The student has asked how to compute Becker's direct materials purchases budget with respect to wheels for May and June. Here are the specifics:
Direct Materials Purchases Budget
May Purchases
Expected sales: 520 units
Beginning finished goods: 180 units
Ending finished goods: 145 units
Wheels per unit: 3
Cost per wheel: $22
May production needs:
Production Units = Expected Sales + Ending Finished Goods - Beginning Finished Goods
Production Units = 520 + 145 - 180 = 485 units
Total Wheels Needed = 485 × 3 = 1455 wheels
Wheels Required for June = 20% of June Production Needs
Wheels Required for June = 620 × 3 × 20% = 372 wheels
Total Wheels Needed in May = 1455 + 372 - 20% of May Wheels = 1455 + 372 - 97.2 = 1729.8 ≈ 1730 wheels
Total May Budget = 1730 × $22 = $38,060
June Purchases
Expected sales: 650 units
Beginning finished goods: 145 units
Ending finished goods: 155 units
Wheels per unit: 3
Cost per wheel: $22
June production needs:
Production Units = Expected Sales + Ending Finished Goods - Beginning Finished Goods
Production Units = 650 + 155 - 145 = 660 units
Total Wheels Needed = 660 × 3 = 1980 wheels
Wheels Required for July = 20% of July Production Needs
Wheels Required for July = 620 × 3 × 20% = 372 wheels
Total Wheels Needed in June = 1980 + 372 - 372 = 1980 wheels
Total June Budget = 1980 × $22 = $43,560
At Scorla Automobiles, a few machines in the assembly section were faulty and had to be shut down till they were repaired. This reduced the output of automobiles for the quarter. In this case, the costs incurred by Scorla Automobiles for repairing the machines are an example of _____.A. prevention costsB. appraisal costsC. internal failure costsD. external failure costs
Answer:
internal cost of failure
Explanation:
In the processing and manufacturing sectors, there are broadly four main types of quality costs. Poor quality costs comprises of internal costs of failure and external costs of failure. while good quality cost comprises of cost of evaluation and cost of prevention.
Internal costs of failure are described as the costs incurred by the company due to production failures is found before the product is delivered to the consumer.
In this situation, such machines must be reduced in manufacturing section as they were found faulty, leading in lost power of machinery. This form of loss is known as internal cost of failure.
Answer:
Prevention costs.
Explanation:
Prevention costs are cost arising due to a need to improve the manufacturing process. The manufacturing process may be machine intensive or human capital intensive. in the case of Scorla Automobiles, the repairs of faulty machines will prevent internal failure cost which may arise due to product (final product) nonconformity to required quality standards and also external cost like legal lawsuits from customers due to product failure.
Which of the following is not an advantage of ROI?
(A) It encourages managers of departments with high ROIs to invest in average ROI projects.
(B) It encourages managers to pay careful attention to the relationships among sales, expenses, and investment.
(C) It encourages cost efficiency.
(D) It discourages excessive investment in operating assets.
Answer:
(A) It encourages managers of departments with high ROIs to invest in average ROI projects.
Explanation:
The full form of ROI is Return of investment. Generally, ROI is used by different organizations to find out the profit from the expenditure. By using the concept of return of investment the organization can save money as well as time.ROI also helps to explore and measure potential returns on various investment opportunities
Therefore answer is a.
Final answer:
Option (A) is not an advantage of ROI as it may lead to underinvestment in projects with average ROI, even if they're beneficial to the company. Options (B), (C), and (D) describe true advantages of utilizing ROI.
Explanation:
The question deals with the concept of Return on Investment (ROI), which is crucial in evaluating the performance of business investments and departments. Specifically, the question is asking which option is not an advantage of using ROI.
(A) states ROI would encourage managers with high ROIs to invest in average ROI projects. This is generally considered a disadvantage of ROI because it can lead to underinvestment as managers may avoid investments that could lower their department's overall ROI, even if these investments are beneficial to the company as a whole.
On the other hand, (B) and (C) are true advantages as ROI indeed encourages managers to focus on sales, expenses, and efficiency. (D) can also be seen as an advantage because dissuading excessive investment can prevent over-capitalization and encourage the optimal use of resources.
Allise Industries manufactures and exports copper wiring to markets all over the world. It has adopted an advertising organizational structure in which its managers in each country or region have the authority to make decisions for their market. Allise Industries has a __________ organizational structure.
A) Centralized
B) Decentralized
C) Matrix
D) Individualized
E) Globalized
Answer:
Letter B is correct. Decentralized.
Explanation:
A decentralized organizational structure has as its main feature the flexible hierarchy, ie decision making is also shared with the lower hierarchical levels.
This structure model has the advantage of motivating employees, who feel valued and fundamental to organizational success. Another advantage of decentralization is the flexibility to deal with new marketing challenges and the speed of decision making, which aids in business opportunity costs.
The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2017 balance sheet. The following is provided.
1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction)
4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt.
5. Petty cash fund of $1,000
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank
8. The comp[any has two certificates of deposits, each totaling $500,000. These CDs have a maturity of 120 days.
The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
Explanation:The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is calculated by considering a combination of cash and cash equivalents. Cash and cash equivalents include:
Commercial savings account and commercial checking account balances at First National Bank of Yojimbo - $600,000 + $900,000 = $1,500,000Money market fund account at Volonte Co. - $5,000,000Travel advances - $180,000Petty cash fund - $1,000I.O.U. from Marianne Koch - $190,000Bank overdraft - $0 (since the company has no deposits at the bank)Certificates of deposits - $1,000,000Total cash to be reported on the balance sheet = $1,500,000 + $5,000,000 + $180,000 + $1,000 + $190,000 + $0 + $1,000,000 = $8,871,000. Therefore, the amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
he financial statements of Simon Co. include the following items (amounts in thousands): Income Statement For the Year Ended December 31, 2017 Net income $ 840 Depreciation and amortization expense 640 At December 31 Balance Sheets 2017 2016 Accounts receivable $ 250 $ 340 Inventory 340 300 Accounts payable 160 180 Income taxes payable 100 30 Required: Calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017. (Enter your answer in thousands. (i.e., 20,000 should be entered as 20))
Answer:
$1,580
Explanation:
The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:
Cash flow from Operating activities - Indirect method
Net income $840
Adjustment made:
Add : Depreciation and amortization expense $640
Add: Decrease in accounts receivable $90 ($250 - $300)
Less: Increase in inventory -$40 ($340 - $300)
Less: Decrease in accounts payable -$20 ($160 - $180)
Add: Increase in income tax payable $70 ($100 - $70)
Total of Adjustments $740
Net Cash flow from Operating activities $1,580
Final answer:
The net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017 is $2,120 thousand
Explanation:
To calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017, you can use the indirect method by starting with the net income and then adjusting for non-cash expenses and changes in working capital.
The formula for the net cash flow from operations is:
Net Cash Flow from Operations = Net Income + Depreciation and Amortization Expense - Increase in Accounts Receivable + Increase in Inventory - Increase in Accounts Payable - Increase in Income Taxes Payable
Using the given information in the financial statements, we can calculate:
Net Cash Flow from Operations = $840 + $640 - ($340 - $250) + ($340 - $300) - ($180 - $160) - ($100 - $30)
= $2,120 thousand
Sunny Day Manufacturing Company has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The company’s earnings’ and dividends’ growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If Sunny Day expects to incur flotation costs of 6.50% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be .
Answer:
Flotation adjusted cost of equity is 15.21% .
Explanation:
Current Stock price, P = $33.35 per share
Flotation cost, F = 6.50%
Net proceed from sale of stock = P × (1 - F)
= $33.35 × (1 - 6.50%)
= $31.18225
Net proceed from sale of stock is $31.18225.
Flotation adjusted cost of equity:
= (Expected dividend ÷ Net Proceed from sale of equity) + Growth rate
= ($2.03 ÷ $31.18225) + 8.70%
= 6.51% + 8.70%
= 15.21%
Flotation adjusted cost of equity is 15.21% .
Debra, age 51, is self-employed and has never made a lot of money. But, she has consistently saved $4632 per year into a traditional IRA. Over the years, she has taken full advantage of the tax law and deducted each year’s contribution from her tax return. If Debra started saving at age 26 and has earned an average annual return of 5%, how much is the account worth today?
A. $619398.
B. $48556.
C. $23677.
D. $221072.
Answer:
D. $221072.
Explanation:
In this question, we use the future value formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $0
Rate of interest = 5%
NPER = 25 years
PMT = 4,632
The formula is shown below:
= -FV(Rate;NPER;PMT;PV;type)
So, after solving this, the answer would be $221,071.92
According to the ________ cheating model, assuming little or no product differentiation among a small number of firms, if one firm decides to cheat on a collusive agreement by reducing its prices, others will as well and, in the long run, firms in this industry will earn no economic profits.
Answer:
Cartel, oligopoly
Explanation:
In this kind of market with little producers and little differenciation among the products there are no incentives for other companies to enter because of the barriers, so it's extremely likely that if one of them reduces their prices this industry can't generate economic profits.
You are making the inventory decisions for an international company that sells bathing suits. The product has a forecasted daily demand with mean 100 and standard deviation 36. The selling season only lasts 6 months since bathing suits are a seasonal item. You are procuring the product from your factory in China (out-sourcing) and as a result the lead time is so long (6 months) that you can only place only one order per selling season (6 months before the season begins). You want to ensure a service level of 97.5% and the cost of capital of the firm is 20% (that is, the firm faces an annual interest rate of 20%). Shipping cost is $4,500 while procurement cost (purchase cost) per item is $5.
Answer:
Please see attachment and assumptions
Explanation:
Please note that the assumption is that the full question is as follows .You are making the inventory decisions for an international company that sells bathing suits. The product has a forecasted daily demand with mean 100 and standard deviation 36. The selling season only lasts 6 months since bathing suits are a seasonal item. You are procuring the product from your factory in China (out-sourcing) and as a result the lead time is so long (6 months) that you can only place only one order per selling season (6 months before the season begins). You want to ensure a service level of 97.5% and the cost of capital of the firm is 20% (that is, the firm faces an annual interest rate of 20%). Shipping cost is $4,500 while procurement cost (purchase cost) per item is $5.1.How many bathing suits should you order from your factory in China? 2.What is the total holding cost? 3.What is the total ordering cost?Roland Company operates a small factory in which it manufactures two products: A and B. Production and sales result for last year were as follow:
A B
Units sold 8,000 16,000
Selling price per unit 65 52
Variable costs per unit 35 30
Fixed costs per unit 15 15
For purposes of simplicity, the firm allocates total fixed costs over the total number of units of A and B produced and sold.
The research department has developed a new product (C) as a replacement for product B. Market studies show that Roland Company could sell 11,000 units of C next year at a price of $80, the variable costs per unit of C are $39. The introduction of product C will lead to a 10% increase in demand for product A and discontinuation of product B. If the company does not introduce the new product, it expects next year's result to be the same as last year's.
Answer:
Check the following explanation
Explanation:
Roland Company
Basic calculation –
Contribution margin and net income of products A and B
A B
Sales (units) 8,000 16,000
Selling price $65 $52
Variable cost $35 $30
Unit Contribution margin $30 $22
Contribution margin $240,000 $352,000
Fixed Cost $120,000 $240,000
Net income $120,000 $112,000
Analysis of profitability of Product C is introduced –
10% Increase in sales of Product A
Discontinuation of Product B
Incremental revenue – 10% increase in sales of Product A
Increased units =10% x 8,000 = 800 units
Additional contribution margin = $30 x 800 =$24,000
Incremental cost – contribution loss from discontinuation of product B
16,000 x 22 =$352,000
Profitability of C
Sales price (11,000 units) $80
Variable cost $39
Unit contribution margin $41
Contribution margin $451,000 (11,000 x $41)
Add: incremental revenue $24,000 (contribution margin from additional units of Product A)
Total income $475,000
Less: Incremental cost $352,000 (loss of contribution from discontinuation of Product B)
Net increase in income $123,000
Note: The fixed costs are irrelevant for the decision to introduce Product C, as those costs are sunk costs and the firm allocates the same to products on a predetermined basis and not directly traceable.
Yes, Roland Company should introduce Product C next year.
Explanation: As the decision results in incremental revenue of $123,000 the introduction of Product C is profitable.
Final answer:
The student's question pertains to the introduction of a new product in a business and how it would change the financial outcomes of production and sales, including impacts on costs, revenues, and break-even analysis.
Explanation:
The subject of the question concerns decision making within a business context, specifically around the introduction of a new product and its impact on production and sales. To assist the student in understanding the implications of such a decision, we can refer to the concepts of total cost, variable cost, and break-even price point. An analysis typically considers how the addition of a new product would affect unit costs, sales volumes, and ultimately profit margins.
To compute the financial effects of introducing product C, we would calculate the new average variable cost, average fixed cost, and new break-even price for product A (due to increased demand) and product C. These figures would be critical in determining if product C is a profitable alternative to product B and by how much it would affect the firm's overall profitability.
Consider a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a zero scrap value after five years. For simplicity, assume straight-line depreciation to zero, a marginal tax rate of 34 percent, and a required return of 10 percent. The net present value of acquiring this machine is:A) $83.B) $449.C) $689.D) $827.E) $1,235.
Answer:
A) $83
Explanation:
First, find aftertax OCF per year
aftertax OCF = (Operating benefit - depreciation)*(1-tax) +depreciation
Depreciation per year = 10,000/5 = 2,000
Tax = 34%
aftertax OCF per year = (3,000 - 2,000)*(1-0.34) + 2,000
= 660 +2,000
= 2,660
Next, find the PV of the aftertax OCF per year. It is an annuity;
PMT = 2,660
N = 5
I/Y = 10%
FV = 0
then CPT PV = 10,083.493
Subtract the initial cost of the machine to find the Net Present Value (NPV);
NPV = -$10,000 + $10,083.493
NPV = $83.493
Valuation Using an Income Statement Multiple JAKKS Pacific Inc., a toy manufacturer, reports net income for the recent twelve months of $14.73 million. JAKKS’ has 20.05 million shares outstanding. The industry average PE (using the trailing twelve months earnings) for its competitors is 22.17. Using this industry average PE, estimate the intrinsic value of JAKKS Pacific’s equity. Do not round until your final answer. Round answer to two decimal places.
Answer:
$16.27
Explanation:
For computing the intrinsic value, first we have to compute the earning per share which is shown below:
Earning per share = (Net income) ÷ (Number of shares outstanding)
= ($14.73 million) ÷ (20.05 million shares)
= 0.734
Now the intrinsic value would be
= Earning per share × P/E ratio
= 0.734 × 22.17
= $16.27
To calculate the intrinsic value of JAKKS Pacific's equity, we multiply the earnings per share by the industry average P/E ratio and then by the number of shares outstanding, resulting in an estimated equity value of $326,414,000.
Explanation:To estimate the intrinsic value of JAKKS Pacific's equity using the industry average P/E ratio, we first calculate JAKKS' earnings per share (EPS) by dividing its net income by the number of shares outstanding. This gives us an EPS of $14.73 million / 20.05 million shares = $0.7347 per share. We then multiply the EPS by the industry average P/E ratio of 22.17 to estimate the intrinsic value per share. Hence, the intrinsic value per share would be $0.7347 * 22.17 = $16.28. The total estimated intrinsic equity value of JAKKS would be the value per share multiplied by the total number of shares, which equals $16.28 * 20.05 million shares = $326,414,000.
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Maker-Bot Corporation has 10,000 shares of 10%, $90 par value, cumulative preferred stock outstanding since its inception. No dividends were declared in the first two years. If the company pays $400,000 of dividends in the third year, how much will common stockholders receive?
A. $355,000
B. $270,000
C. $0
D. $130,000
E. $140,000
Answer:
How much will common stockholders receiveD. $130,000
Explanation:
Total Dividends to Preferred Stockholders
10.000 Shares
10% cumulative preferred stock outstanding
$90 Par Value
Dividends: 10,000 * 10% * $90 = $90.000
Preferred dividends in arrears for two years.
$90,000*2 Years = $180.000
Preferred dividends for the current year
$90,000
Total Dividends to Preferred Stockholders
$180,000 + $90,000 = $270,000
Total Dividends to be paid by the company
$400,000
Preffered Stockholers : $270,000
Common Stockholers: $130,000
Two versions of the purchasing power parity (PPP) are the absolute PPP and the relative PPP. Suppose the government releases information that causes expectations that the purchasing power of money in the future will be less than previous expectations. What will happen to the exchange rate today? Will both absolute PPP and relative PPP hold here or will only one hold?
Answer:
Please see attachment
Explanation:
Please see attachment
What will you need to change to make the message appropriate for both a colleague and your supervisor?
a. Give a complete summary of the survey plan in case your colleague has forgotten what you talked about.
b. Describe what you had for lunch and what the kids look like in detail.
c. Make the message more formal, remove the personal discussion, and give more specifics about the survey plan.
Answer:
Letter c is correct. Make the message more formal, remove the personal discussion, and give more specifics about the survey plan.
Explanation:
A poorly written message can damage an employee's image within an organization. So when sending a message to a colleague and a supervisor at the same time, it is ideal that personal discussions are removed and the focus is only on business matters. Formality must be maintained to convey respect and professional attitude in order to avoid communication noise and achieve clarity in the message.
Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $50,000 but that employee income taxes totaling $7,000 and FICA taxes totaling $2,625 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. Assume Lightning Electronics must also pay $250 of unemployment taxes for this pay period.
Prepare the journal entry or entries that Lightning would use to record the payroll. Include both employee and employer taxes
Journal Entires for:
1. Record the wages expense for November 1-14 time period, including payroll deductions
2. Record the payroll tax expense.
Answer:
Journal entries for the following will be shown below:
Explanation:
1.
Journal entries for the wages expense is as follows:
Wages expense A/c.........................Dr $50,000
Income Tax Payable A/c................Cr $7,000
FICA taxes payable A/c...................Cr $2,625
Cash A/c...............................................Cr $40,375
Working Note:
Cash = Wage expense - Income tax payable - FICA taxes payable
= $50,000 - $7,000 - $2,625
= $40,375
2.
Journal entry for the payroll expenses is as follows:
Payroll tax expense A/c............................Dr $2,875
FICA taxes payable A/c............................Cr $2,625
Unemployment taxes payable A/c.........Cr $250
To record the payroll of Lightning Electronics, debit the Wages Expense for the gross wages earned and then credit the specific withholdings: Income Taxes Payable, FICA Taxes Payable, and Net Pay Payable to Employees. When recording the employer's payroll tax expense, debit the Payroll Tax Expense for the FICA taxes and unemployment taxes, and then credit the corresponding tax liabilities.
Explanation:Lightning Electronics would use the following journal entries to record this payroll:
When recording the wages expense for November 1-14 inclusive of payroll deductions:Debit Wages Expense: $50,000Credit Income Taxes Payable: $7,000Credit FICA Taxes Payable: $2,625Credit Net Pay Payable to Employees: $40,375 (This is the wages expense minus the income and FICA taxes).When recording the payroll tax expense:Debit Payroll Tax Expense: $2,625 for FICA taxes and $250 for unemployment taxes. These are employer contributions.Credit FICA Taxes Payable: $2,625Credit Unemployment Taxes Payable: $250The first set of entries records the total wages earned and the amounts deducted for tax purposes. The second set of entries focuses on the employer's payroll tax expense.
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Net public debt is gross public debt minus all government interagency borrowing, all public debt plus all government interagency borrowing. all public debt minus all money owed on the federal income tax. all federal public debt irrespective of who owns it. QUESTION 5 How does the federal government finance a budget deficit? It borrows funds by selling Treasury bonds. It cuts spending on entitlement programs. It purchases U.S. Treasury bonds. It redeems its lous.
Answer:1. All public debt minus all money own on the federal income tax.
2 It cuts spending on entitlement programs
Explanation:
Public debts refers to sum total of goverments debts, in relation to net public debts this refers to the gross debts minus all debts payments that are due to the government of which tax income is an example
Deficit budget is a situation where the budgeted incomes for the coming. year is less than the budgeted expenditures for the coming year. The government is faced with the issue of raising funds to finance the budget an one of such ways is reducing spending on the expenditures.
Buying treasury bonds or redemption of ( iou) will only reduce the already not enough funds available to fund the budget and invariably increasing the deficit.
LA Diversified Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3.8%. The stock has a beta of 0.88. The current risk-free rate is 2.4% and the market return is 10.9%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Answer:
$51.22
Explanation:
For computing the intrinsic value, first we have to determine the current year dividend and expected rate of return which is shown below:
The computation of the next year dividend is shown below:
= $3 + $3 × 3.8%
= $3 + 0.114
= $3.114
And, the expected rate of return would be
= Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 2.4% + 0.88 × (10.9% - 2.4%)
= 2.4% + 0.88 × 8.5%
= 2.4% + 7.48%
= 9.88%
Now the intrinsic value would be
= Next year dividend ÷ (Required rate of return - growth rate)
= $3.114 ÷ (9.88% - 3.8%)
= $3.114 ÷ 6.08%
= $51.22
The intrinsic value of the stock is $45.45, calculated using the dividend discount model and the Capital Asset Pricing Model.
Explanation:To calculate the intrinsic value of the stock, we can use the Capital Asset Pricing Model (CAPM).
First, we need to calculate the required rate of return using the CAPM formula:
Risk-free rate + Beta * (Market return - Risk-free rate)
Plugging in the given values:
Required rate of return = 2.4% + 0.88 * (10.9% - 2.4%) = 9.1%
To calculate the intrinsic value, we can use the dividend discount model:
Intrinsic value = Dividends per share / (Required rate of return - Dividend growth rate)
Plugging in the given values:
Intrinsic value = $3 / (9.1% - 3.8%) = $45.45
Therefore, the intrinsic value of the stock is $45.45.
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