Answer and Explanation:
The computation is shown below:
Fixed cost per unit is
= Higher Profit under Absorption costing ÷ units exceeded than sales
= $16,000 ÷ 1,000 units
= $16 per unit
Sales price per unit
= Contribution Margin Per Unit ÷ Contribution Margin Ratio
= ($16 + $14) ÷ (62.50%)
= $48
Variable Cost Per Unit is
= Sales Price Per Unit - Contribution Margin Per Unit
= $48 - $30
= $18 per unit
Unit sales volume is
= Total Profit under Absorption costing ÷ profit per unit
= $168,000 ÷ $14 per unit
= 12000 units
We simply applied the above formulas
The fixed cost per unit is $16. The sales price per unit is $22.40, the variable cost per unit is $8.40 and the unit sales volume of total profit under absorption costing is 10,857 units.
Explanation:If Walnut Inc. had a full-year profit of $168,000 under absorption costing, they would have had a total profit of $152,000 under variable costing (which is $16,000 less). The difference between variable costing and absorption costing profit gives us insight into the fixed manufacturing overhead per unit. Since production exceeds sales by 1,000 units, the fixed cost per unit would be $16 (the $16,000 difference divided by the 1,000 units).
Since the contribution margin is 62.5% and under absorption costing the profit per unit is $14, the selling price per unit is $14 divided by 62.5% which is $22.40. Therefore, the variable cost per unit would be the selling price minus profit per unit, which means $22.40 - $14 = $8.40.
To find the unit sales volume, we'll subtract the difference between absorption and variable costing profits from the absorption costing total profit and divide that result by the profit per unit under absorption costing. Hence, ($168,000 - $16,000) ÷ $14 = 10,857 units (rounded to the nearest whole number).
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Melbourne Company uses the perpetual inventory system and LIFO cost flow method. Melbourne purchased 2,300 units of inventory that cost $15.50 each. At a later date, the company purchased an additional 2,400 units of inventory that cost $16.00 each. If the company sells 2,600 units of inventory, what amount of ending inventory will appear on a balance sheet prepared immediately after the sale
Answer:
$32,550
Explanation:
LIFO means last in first out. It means that it is the last purchased inventories are the first to be sold.
Total inventory = 2,300 + 2,400 = 4,700
Ending inventory = 4700 - 2600 = 2,100
The ending inventory would be the first purchased inventory
Ending inventory = 2100 x $15.50 = $32,550
I hope my answer helps you
Final answer:
Using the LIFO cost flow method and the perpetual inventory system, the ending inventory for Melbourne Company after selling 2,600 units would be calculated as the remaining units from the initial purchase multiplied by their cost, resulting in an ending inventory value of $32,550.
Explanation:
The subject of the question is the calculation of ending inventory using the perpetual inventory system and the LIFO cost flow method in the context of accounting for a company's inventory transactions. To calculate the ending inventory after the sale of 2,600 units when Melbourne Company uses the LIFO method, we need to determine the cost of the units remaining.
Firstly, Melbourne purchased 2,300 units at $15.50 each. Then, they bought another 2,400 units at $16.00 each. After selling 2,600 units, and considering that LIFO means 'last in, first out', the most recent purchases are sold first.
Therefore, 2,400 units will be sold from the second purchase and 200 units from the first purchase, leaving the company with 2,100 units remaining from the initial purchase at $15.50 each. The calculation of the ending inventory is 2,100 units times $15.50, which equals $32,550. This will be the amount of the ending inventory appearing on the balance sheet immediately after the sale.
One disadvantage of a functional structure is that _____.
1.it does not allow the setting up of cross-functional teams
2.it cannot be converted into an ambidextrous structure
3.it does not facilitate rich and extensive communication between members of the same department
4.it frequently lacks effective communication channels across departments
Answer:
It frequently lacks effective communication channels across department.
Explanation:
A functional structure is an organizational structure that is used to coordinate employees on the basis of their various skills. It helps in the categorizing of workers into smaller groups based on their area of specialty.
Advantages of functional structure include:
1) The grouping of workers into their area of specialty makes the work more efficient.
2) The individuals in a group share their various knowledge to make productivity faster.
Diasvantages of functional structure include:
1) There could be a lack of coordination among the workers.
2) Competition may arise between individuals in a group.
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect. Maloney's, Inc. has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. The firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt. What is the after-tax weighted average cost of capital for Maloney's, if it is subject to a 40 percent marginal tax rate
Answer:
The WACC is 11.64%
Explanation:
The weighted average cost of capital or WACC is the cost to firm of raising its total capital based on its capital structure. The capital structure of the firm can contain debt, preferred stock and common stock. The WACC take the weight of each component as a proportion of total value of assets and multiply it by the rate of return or cost of each component.
WACC = wD * rD * (1-tax rate) + wE *rE
Where,
wD and wE represent the weights of debt and equity as a proportion of total assetsrD and rE are the cost of debt and cost of equityWe multiply rD by (-tax rate) because we take after tax cost of debt for WACC calculationWeight of debt = 2000000 / (2000000 + 3000000) = 2/5 or 0.4
Weight of equity is = 1 - 0.4 = 0.6
WACC = 0.4 * 0.06 * (1-0.4) + 0.6 * 0.17
WACC = 0.1164 or 11.64%
Corporations must hold meetings for stockholders and keep accurate records of business transactions. How are these regulations beneficial for the corporation’s stockholders?
Answer:
These regulations are not only beneficial for the corporation's stockholders but also encourages them to keep their money invested in the company's stocks. This way the stock holders feel a sense a security about their invested money when they see the accurate records of the business transactions of the company.
Hope this clear things up
Good luck.
Corporations are required to hold meetings for stockholders and keep accurate records of business transactions, which bring benefits to the stockholders through transparency, protection of rights, and shareholder value.
Explanation:The regulations requiring corporations to hold meetings for stockholders and keep accurate records of business transactions are beneficial for the corporation's stockholders in several ways:
Transparency and Accountability: Holding meetings and maintaining records provide transparency to stockholders, allowing them to make informed decisions about their investments. It also ensures accountability from the corporation's management.Protection of Rights: Regulations help protect stockholders' rights by ensuring their voices are heard and their interests are represented in decision-making processes.Shareholder Value: Accurate records and regular meetings can contribute to the overall success and stability of the corporation, ultimately benefiting the stockholders by preserving and increasing their investments' value.Learn more about Regulations for Corporations here:https://brainly.com/question/35453552
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When we compare the factors of production in wealthy and poor nations, we find: A. poor nations have plenty of land and knowledge, but very little labor.B. poor and wealthy nations (both) have an abundance of knowledge, it is the land that varies, with rich nations always having more.C.wealthy nations have knowledge and entrepreneurial opportunities, while poor nations are often lacking in these areas.D. wealthy nations have land and labor, while poor nations have capital and entrepreneurship
Answer:
C.wealthy nations have knowledge and entrepreneurial opportunities, while poor nations are often lacking in these areas
Explanation:
Factors of production includes:
1. Land - land includes all natural resources
2. Capital - includes machinery, tools used in the production of goods and services
3. Labour - includes all human effort expended in the production of goods and services
4. Entrepreneurship - coordinates all factors of production.
Poor countries have high levels of illiteracy, so they don't have an abundance of knowledge. Poor countries are usually overpopulated, so they usually have high Quanitity of labour.
On the other hand, rich countries have high literacy levels, so, they have an abundance of knowledge.
I hope my answer helps you
Wealthy nations tend to have access to advanced knowledge and entrepreneurial opportunities, utilizing the latest production technologies and enjoying robust education and infrastructure. Poor nations often lack these resources. The concept of comparative advantage shows that wealthy nations are usually capital-rich relative to their labor force, affecting their economic performance.
When looking at the factors of production in wealthy and poor nations, a significant difference lies in access to knowledge and entrepreneurial opportunities. Wealthy nations typically have access to advanced production technologies and state-of-the-art machinery, as well as sophisticated education systems and infrastructure. This provides them with a technology frontier where they use the most advanced production techniques available. In contrast, poor nations often lack these resources, and their factories may not use modern machinery or sophisticated production techniques, which are crucial for productivity and economic growth.
Additionally, the concept of comparative advantage and factor endowments suggests that wealthy countries, like the United States, are often well endowed with physical capital relative to their labor force. In contrast, many less developed countries have larger labor forces with less physical capital. This contributes to the differences in economic performance, as rich countries can produce capital-intensive goods more efficiently, while poorer countries might specialize in labor-intensive goods.
The disparity in capital availability also means that wealthy nations, surprisingly, may still attract investment despite poorer nations having a higher return on investment potential, due to other inputs such as human capital, social infrastructure, and natural resources that influence economic outcomes.
Pets Inc. makes 2 products, dog collars and cat collars. Each passes through the cutting machine, which is the binding constraint. Dog collars take 6 minutes on the cutting machine and have a contribution margin per unit of $10. Cat collars take 4 minutes on the cutting machine and have a contribution margin per unit of $8.Assume that there are 2,000 hours available on the cutting machine and that the demand for each product is 15,000 units. How many of each product should be made
Answer:
Dog Collar 10,000 units
Cat Collar 15,000 units
Explanation:
We have only constraint of 2,000 hours on the cutting machine.
First we will calculate the Contribution margin per hour
Contribution margin per hour = Contribution margin per unit / Numbers of hours required per unit
Dog Collar = $10 / (6/60)hours = 10 / 0.1 = $100 per hour
Cat Collar = $8 / (4/60) hours = $120 per hour
Pets Inc. will make Cat collar more than dog
Hours required for 15,000 unit of Cat Collar = 15000 x 4 / 60 = 1,000 hours
Hours for Dog Collars = 2,000 - 1000 = 1000 hour
Unit of Dog Collar = 1000 hours / (6/60) = 10,000 units
How does the planning and control of variable manufacturing overhead costs differ from the planning and control of fixed manufacturing overhead costs? Planning and control of ▼ manufacturing overhead costs has both a long-run and a short-run focus. The long-run focus involves Revolutions planning to ▼ and for the short-run focus to ▼ manage the cost drivers of value-added overhead activities undertake only value-added overhead activities in the most efficient way. Planning and control of ▼ fixed variable manufacturing overhead costs have primarily a long-run focus. It involves ▼ managing the cost drivers of value-added fixed overhead activities undertaking only value-added fixed-overhead activities for a budgeted level of output. Revolutions makes ▼ none most of the key decisions that determine the level of overhead costs at the start of the accounting period.
Answer and Explanation:
The variable manufacturing overhead costs are indirect manufacturing costs of an organization that change as the level of production or sales change such as factory power. Fixed manufacturing overhead costs differ from the former as they are indirect but do not change with change in production level or sales
Planning and control of variable manufacturing overhead costs encompasses both long-run and short-run focus. It involves solutions planning for overhead activities that add value which takes the long-run view while managing the cost drivers of those activities efficiently is the short run aspect of planning and control of variable manufacturing overhead costs. On the other hand planning and control of fixed manufacturing overhead costs have primarily a long-run focus.
Variable manufacturing overhead costs, which include variable factors like raw materials and energy costs, can be managed in both the short and long run, focusing on production levels and efficiency. Fixed manufacturing overhead costs, such as management salaries and lease payments, are static in the short run but become variable in the long run where all costs can be adjusted with strategic planning. The time horizon is crucial in determining the treatment and control of these costs.
The planning and control of variable manufacturing overhead costs take into account the costs directly tied to production levels, such as raw materials, salaries of production workers, and utility costs. These costs fluctuate with the number of units produced and can be managed in the short run by controlling cost drivers and focusing on efficiency in value-added activities.
Fixed manufacturing overhead costs, on the other hand, include expenses like management salaries and lease payments, which are contractually set for a period and are independent of the production volume. These costs are considered fixed in the short run but can become variable in the long run as contracts can be renegotiated, and operational changes can be implemented. In the long run, the firm can plan for these changes, turning fixed costs into variable as production factors and structure of costs can be altered.
The planning and control of variable and fixed manufacturing overhead costs involve different management practices due to the inherent nature of these costs over different time horizons. While variable costs can be managed both in the short and long run, fixed costs are often primarily a consideration for the long-term planning process as their variability comes into play over extended periods.
1. Universal Claims Processors processes insurance claims for large national insurance companies, most claim processing is done by a large pool of computer operators, some of whom are permanent and some of whom are temporary. The company has 40 computer workstations for operators. A permanent operator can process 16 claims per day, whereas a temporary operator can process 12 per day. On average, the company processes at least 450 claims each day. A permanent operator generates about 0.5 errors per day, whereas a temporary operator generates about 1.4 errors per day. The company wants to limit claims with error to 25 per day. A permanent operator is paid $64 per day and a temporary operator is paid $42 per day. The company wants to determine the number of permanent and temporary operators to hire to minimize costs.
Find the attachments for step by step solution
Figure Help
The given linear programming problem consists of feasible region.
Explanation
The points are plotted on coordinate axes and obtain the feasible region and optimum solution.
The question involves finding the optimal allocation of permanent and temporary workers for a claim processing company using the techniques of linear programming. The aim is to minimize cost while also meeting daily processing requirements and keeping errors within acceptable levels.
Explanation:This question can be framed as a problem of linear programming, which is a mathematical model used in operations research. The objective function here is cost minimization for Universal Claims Processors, provided they meet the minimum output of 450 claims per day and do not exceed 25 errors. Therefore, the company needs to balance the number of permanent and temporary operators per day based on their productivity (16 and 12 claims respectively), error rates (0.5 and 1.4 errors respectively), and salaries ($64 and $42 respectively).
Let's denote the number of permanent operators as p and the number of temporary operators as t. We need to solve the following equations to minimize costs:
Constraintsp + t ≤ 40 (due to the number of workstations)16p + 12t ≥ 450 (to meet the claim processing requirement)0.5p + 1.4t ≤ 25 (to maintain an acceptable error rate)Objective FunctionMinimize C = 64p + 42t (to minimize costs)
This problem can be solved using linear programming techniques.
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Swifty Company had net credit sales during the year of $1450000 and cost of goods sold of $700000. The balance in accounts receivable at the beginning of the year was $200000, and the end of the year it was $90000. What was the accounts receivable turnover
Answer:
Account Receivable Ratio = 10
Explanation:
Account Receivable Turnover Ratio:
The Account Receivable Turnover Ratio is an accounting measure that indicates the effectiveness of company's ability to collect its receivables from its customers.
A high turnover ratio represents good credit policy and aggressive collections department with good portfolio of customers.
A low turnover ratio indicates excess amount of old receivables being tied up in working capital.
Formula: Net Credit Sales ÷ (Opening receivable + closing receivable/2)
Receivable Turnover Ratio = $ 1,450,000 ÷ ( $200,000+$90,000/2)
=$1,450,000 ÷ $145,000
= 10
QUESTION 47 Standard, Inc. reported EBIT of $42.00 million for last year. Depreciation expense totaled $20 million and capital expenditures came to $7 million. The company increased net working capital by $2 million. Free cash flow is expected to grow at a rate of 6.10% for the foreseeable future. Standard faces a 40% tax rate and has a 0.40 debt to equity ratio with $200 million (market value) in debt outstanding. Standard's equity beta is 1.24, the risk-free rate is currently 5% and the market risk premium is estimated to be 6%. What is the current total value of Standard, Inc. (in millions)? What is the current value (in millions) of Standard's equity?
Answer:
Equity Value = $634.72 mn
Explanation:
Given Data:
Market value in debt outstanding = $200 million
Depreciation expense totaled = $20 million
capital expenditures = $7 million
Free cash flow rate = 6.10%
Standard's equity beta = 1.24
Risk-free rate = 5%
Market risk premium = 6%
The current value of standard equity is calculated using the formula;
Equity Value = Firm Value - Market Value of Debt---------1
But,
Firm Value = FCFF*(1+g)/(r-g) ------------------------2
FCFF = EBIT(1-t) + Depreciation - Capital Expenses - Changes in NWC. -------3
FCFF = 42*0.6 + 20 - 7 - 5
= $33.2 mn
Putting the value obtained from equation 3 into equation 2, we have;
Firm Value = FCFF*(1+g)/(r-g)
Firm Value = 33.2 x (1.061)/(0.1032 - 0.061)
= $834.72 mn
Putting the value obtained from equation 2 into equation 1, we have;
Equity Value = Firm Value - Market Value of Debt
= 834.72 - 200
= $634.72 mn
Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $88,500 of revenue on account during 2016. During 2016, Hancock collected $70,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, 2016 balance sheet would be:
Answer:
$17,615
Explanation:
Hancock Medical Supply Co net realizable value of receivables on the December 31, 2016 balance sheet
Beginning accounts receivable $0
Add revenue on account $88,500
Less collected cash $70,000
Ending account receivable $18,500
Beginning allowance balance $0
Add uncollectible account expenses
($88,500×1%) $885
Ending Allowance balance $885
Net Realizable value of Receivables =
$18,500-$885
=$17,615
Therefore Hancock Medical Supply Co net realizable value of receivables on the December 31, 2016 balance sheet will be $17,615
Planners for a company that makes several models of skateboards are about to prepare the aggregate plan that will cover six periods. They have assembled the following information:Period 1 2 3 4 5 6 totalForecast 200 200 300 400 500 200 1800CostsOutput Regular Time = $2 per skateboardovertime = $3 per skateboardsubcontract = $6 per skateboardInventory = $3 per skateboardBack orders = $5 per skateboard per periodThey now want to evaluate a plan that calls for a steady rate of regular-time output, mainly using inventory to absorb the uneven demand but allowing some backlog. Overtime and subcontracting are not used because they want steady output. They intend to start with zero inventory on hand in the first period. Assume a level output rate of 300 units (skateboards) per period with regular time (i.e., 1,800/6 = 300). Note that the planned ending inventory is zero. There are 15 workers, and each can produce 20 skateboards per period.The president of the firm has decided to shut down the plant for vacation and installation of new equipment in period 4. After installation, the cost per unit will remain the same, but the output rate for regular time will be 450. Regular output is the same for periods 1, 2, and 3; 0 for period 4; and 450 for each of the remaining periods. Note, though, that the forecast of 400 units in period 4 must be dealt with.Prepare the aggregate plan, and compute its total cost. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Answer:
Total costs = $4,850.
Please refer to the attached for the answered table.
Steady/fixed Production planning with the objective of saving on overtime and subcontract costs is a form of aggregate planning that organizations pursue in managing its total costs of production.
As a result of this model of planning, we will have inventory on hand in some periods and we will run partially or completely out of stock in others. But because the production unit is aware of their production targets , overtime will be zero and there will be no need for subcontracting.
However delayed order fulfillment will be made up for at additional costs as in the example we are solving. This provisions must be made for such eventualities.
Synergy Inc. produces plastic grocery bags. Synergy has developed a static budget for the month of July based on 10,000 direct labor hours. During the quarter, the actual activity was 12,000 direct labor hours. Data for July are summarized as follows: Static budget (10,000 hours) Actual costs (13,000 hours) Direct materials cost $ 86,000 $108,000 Power 30,000 37,000 Salary of plant supervisor 7,000 7,000 Total $123,000 $152,000 Direct materials cost and power are variable costs. Salary of plant supervisor is a fixed cost. What is the flexible budget amount for July?
Answer:
$146,200
Explanation:
Synergy Inc
Flexible budget amount for July:
Direct materials cost [($86,000 / 10,000 hours) × 12,000 hours] $103,200
Power [($30,000 / 10,000 hours) × 12,000 hours] $36,000
Salary of plant supervisor
$7,000
Total flexible budget amount $146,200
Therefore the flexible budget amount for July is $146,200
At the end of 2020, Concord Company has accounts receivable of $784,000 and an allowance for doubtful accounts of $39,200. On January 16, 2021, Concord Company determined that its receivable from Ramirez Company of $5,880 will not be collected, and management authorized its write-off.
Prepare the journal entry for Concord Company to write off the Ramirez receivable.
Answer:
Journal Entry
Dr. Allowance for doubtful accounts $5,880
Cr. Account Receivable $5,880
Explanation:
When a receivable of the business is considered to be non-collectible from a customer, it is written off from the accounts. This event will decrease the account receivable balance and allowance for the doubtful accounts too. a Debit entry in the Allowance for doubtful account and a credit entry in accounts receivable is made to incorporate the effect of this transaction.
Terry Williams sustained physical. injuries in an accident involving, a' vehicle driven by Kellie Meagher. At the time' of the accident, Meagher was allegedly using a cellular phone furnished by Cingular Wireless. Williams later' sued: Meagher and Cingular in an Indiana court. In the portion of the complaint pertaining to Cingular, Williams alleged that Cingular was negligent in furnishing a cellular phone to Meagher when it knew, or should have known, that the phone would be used while the user operated a motor vehicle. Cingular filed a motion to dismiss for failure to state a claim on which relief could be granted. After the trial court granted Cingular's motion, Williams appealed to the Indiana Court of Appeals. Was the trial court correct in granting Cingular's motion to dismiss?
Answer:
Negligent tort is a tort which is submitted by the disappointment so as to go about as a reasonable and levelheaded individual with somebody, to whom s/he may owe an obligation, according to law in specific situations.
Individual T recorded a suit against Company C and individual K as he endured physical wounds while in a mishap with Person K. Around then, individual K was utilizing a phone, which was outfitted by Company C. Individual T asserted that C realized that the telephone could be utilized while riding an engine vehicle and was careless about it. C documented a movement for excusing the case because the offended party had neglected to express the case to which help could be allowed. A preliminary court allowed the movement recorded by C. Be that as it may, individual T claimed against that award.
According to the legitimate rules, so as to demonstrate the tort of carelessness, the offended party must demonstrate that the carelessness was the real and proximate reason for injury endured by the offended party. For this situation, the party in question was just the driver and C had no immediate or backhanded relations with the case, despite the fact that Person K was utilizing a mobile phone. There was no chance to get wherein C could determine if the telephone would wind up in a destroyed vehicle. Additionally, the risk for a mishap like this is just on the individual utilizing the telephone, not on the organization. Hence, it tends to be expressed that the preliminary court was directly in its choice of allowing C's movement to excuse the case.
The Closed Fund is a closed-end investment company with a portfolio currently worth $195 million. It has liabilities of $20 million and 5 million shares outstanding. a. What is the NAV of the fund? (Round your answer to 2 decimal places.) b. If the fund sells for $40 per share, what is its premium or discount as a percent of net asset value? (Input the amount as a positive value. Round your answer to 2 decimal places.)
Answer:
NAV is $35 per share
premium is 14.30%
Explanation:
The formula for net asset value can be used in calculating the NAV of thi closed fund before comparing the NAV with selling price of the fund in order to ascertain whether a discount or premium has been recorded on the fund as shown below:
NAV=Total assets- total liabilities/number of shares
total fund assets is worth $195 million
total fund liabilities is $20 million
there are 5 million shares outstanding
NAV=$195 million-$20 million/5 million
=$175 million/5 million
=$35.00 per share
Premium on the fund=($40-$35)/$35
=$5/$35
=14.30% premium
The fund has 14.30% premium
Revenue expenditures
a. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
b. Are known as balance sheet expenditures because they relate to plant assets.
c. Extend the asset's useful life. Substantially benefit future periods.
d. Are debited to asset accounts when incurred.
Answer:
Answer A
Explanation:
Revenue expenditures are the expenditures during period in which the asset has been put into its usage. They are often discussed in the context of fixed assets. For instance if a company installs new equipment and has monthly costs of its maintenance, these costs are revenue expenditures. Therefore, they only present additional costs that do not necessarily increase asset's life.
Additional Information A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. The only changes affecting retained earnings are net income and cash dividends paid. New equipment is acquired for $71,600 cash. Received cash for the sale of equipment that had cost $62,600, yielding a $3,400 gain. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. All purchases and sales of inventory are on credit. (2) Compute the company’s cash flow on total assets ratio for its fiscal year 2019.
Answer:
The cash flow statement guides a company in understanding its true use and source of cash funding.
It helps breakdown the Net income and give confidence or allow an analyst/investor heighten his risk profile of the business returns on Invested funds.
The attached documents show details of the full questions which are missing from the submitted question and the Cash flow statement .
Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $70 and has variable costs of $45. The sales mix of the three sets is: Sleek, 50%; Smooth, 30%; and Potent, 20%.
What is the weighted-average unit contribution margin?
Answer:
Weighted average unit contributIoN = $17
Explanation:
Weighted average contribution margin is applicable where a business sells more than one product in a constant mix or proportion. It gives an idea of how much is made on the average as contribution from th sale of a unit.
It is determined as follows
Step 1
Contribution per unit
Contribution per unit = selling price - unit variable cost
Sleek Smooth Potent
Selling price 30 50 70
Variable cost (18) (30) (45)
Contribution ($) 12 20 25
step 2
weighted average unit contribution
= (50%×12) + (30%×20) + (20%×25)
= $17
Accessory Industries has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $22 per share, the preferred shares are selling for $10.50 per share, and the bonds are selling for 96 percent of par ($1,000), what would be the weights used in the calculation of Accessory's WACC for common stock, preferred stock, and bonds, respectively
Answer:
Equity is 0.29
Debt is 0.64
Preferred stock 0.07
Explanation:
WACC=Ke*E/V+Kd*D/V*(1-t)*Kp*P/V
However, the requirements of the question is weights of the bonds,equity and preferred stock which are E/V,D/V and P/V respectively
E is the value of equity=2,000,000*$22=$44,000,000
D is the value of debt =100,000*$1000*96%=$96,000,000
P is the value of prefered stock=1,000,000*$10.50=$10,500,000
Total firm's finance(V) $150,500,000
E/V=$44,000,0000/$150,500,000=0.29
D/V=$96,000,0000/$150,500,000=0.64
p/v=$10,500,000/$150,500,000=0.07
Answer:
Common Stock = 29.2%
Preferred Stock = 7%
Bonds = 63.8%
Explanation:
Weights used in the WACC are based on the market value of the each capital option. Market value can be calculated by multiplying the numbers of shares or bonds with respective market value of each. Dividing these market values by the total capital will result in the weight of each capital.
Market Value
Common stock = Numbers of common stock shares x market value of each share = 2,000,000 x $22 = $44,000,000
Preferred stock = Numbers of common stock shares x market value of each share =1,000,000 x $10.5 = $10,500,000
Bond = Numbers of Bonds x market value of Bond =100,000 x ( $1,000 x 96% ) = $96,000,000
Weights = Market value / Total Capital
Total Capital = $44,000,000 + $10,500,000 + $96,000,000 = $150,500,000
Common Stock = $44,000,000 / $150,500,000 = 0.292 = 29.2%
Preferred Stock = $10,500,000 / $150,500,000 = 0.07 = 7%
Bonds = $96,000,000 / $150,500,000 = 0.638 = 63.8%
8. An oil price shock (hard): Suppose the economy is hit by an unexpected oil price shock that permanently raises oil prices by $50 per barrel. This is a temporary increase in o in the model: the shock o becomes positive for one period and then goes back to zero. (a) Using the full short-run model, explain what happens to the economy in the absence of any monetary policy action. Be sure to include graphs showing how output and inflation respond over time. (b) Suppose you are in charge of the central bank. What monetary policy action would you take and why
Answer:
An oil cost shock is an exogenous shock and it will in general move the short run total stockpile bend SRAS upwards showing an expanded expense of creation.
a. From introductory balance, value level in the economy for all time rises and this moves the economy to another balance to bring down short-run yield level.
Phillips bend, indicating the impact of swelling, climbs in period one and afterwards moves back. Fisher's condition portrays the reverse connection between genuine loan fee and expansion through ostensible financing cost. On the off chance that the national bank is failing to help controlling swelling, at that point this suggests it needs to keep up the first ostensible financing cost.
This decreases the genuine loan fee when ostensible financing cost is kept unaltered. With LM moving downwards, it animates the economy to an expanding lower level of genuine loan cost as expansion rises for all time.
b. Since an oil value stun upsets the economy through swelling channel, national bank ought to fix the financial arrangement to decrease it for one period. In spite of the fact that this damages the economy all the more however this will last just for one period. As the genuine financing cost ascend in the following time frame, swelling falls and balance in the economy is reestablished.
A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $600,000, and reduce depreciation expense from $125,000 to $100,000. However, the ratio of variable costs to sales would increase from 68% to 80%. What would be the change in the break-even level of revenues?
Answer:
break-even level of revenues increases from $2,890,625 to $3,500,000
Explanation:
Break even point is the level of sales at which the company makes neither a Profit nor a loss.
Break -even Sales revenue = Fixed Cost / Contribution Margin Ratio
Old Break -even Sales revenue
Break -even Sales revenue = ( $800,000 + $125,000)/(1.00-0.68)
= $925,000/ 0.32
= $2,890,625
Old Break -even Sales revenue
Break -even Sales revenue = ( $600,000 + $100,000)/(1.00-0.80)
= $700,000/ 0.20
= $3,500,000
You were hired as a consultant to restructure operating capital. The recommended goal is for the firm to have a capital structure is 33% debt, 8% preferred, and 59% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 11.25%, and the tax rate is 28%. The firm will not be issuing any new stock. The firm's projected WACC is ______%
Answer:
The WACC is 8.66%
Explanation:
The WACC or weighted average cost of capital is the cost to firm of its capital structure which can have 3 components namely debt, preferred stock and common stock. We take the weighted average of these components and their respective costs to calculate WACC. Furthermore, we take the after tax cost of debt for WACC calculation and that is why we multiply the cost of debt by (1-tax rate).
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
WACC = 0.33 * 0.065 * (1-0.28) + 0.08 * 0.06 + 0.59 * 0.1125
WACC = 0.086619 or 8.86619% rounded off to 8.66%
The firm's projected Weighted Average Cost of Capital (WACC), calculated based on the given capital structure, costs of debt, preferred equity, retained earnings, and tax rate, is 8.15%.
The question involves calculating the Weighted Average Cost of Capital (WACC) for a firm with a specific capital structure. The firm's goal is to have a structure of 33% debt, 8% preferred equity, and 59% common equity. Given the interest rates and costs associated with each type of capital and the firm's tax rate, we can calculate the WACC. The cost of debt will be adjusted for taxes, as interest is tax-deductible, leading to an after-tax cost of debt.
To compute the WACC, use the formula: WACC = (% of debt * after-tax cost of debt) + (% of preferred equity * cost of preferred equity) + (% of common equity * cost of common equity). Therefore, after-tax cost of debt = 6.50% * (1 - 0.28) = 4.68%. Using the data provided:
Weight of debt = 33%After-tax cost of debt = 4.68%Weight of preferred equity = 8%Cost of preferred equity = 6.00%Weight of common equity = 59%Cost of retained earnings (common equity) = 11.25%WACC = (0.33 * 4.68%) + (0.08 * 6.00%) + (0.59 * 11.25%) = 8.15%.
Therefore, the firm's projected WACC is 8.15%%.
Which of the following is true about the equilibrium federal funds rate? A. The equilibrium federal funds rate is constant because of structural forces. B. The Fed can increase the equilibrium federal funds rate by decreasing reserve demand. C. The Fed can increase the equilibrium federal funds rate by decreasing the supply of reserves. D. The equilibrium federal funds rate is determined at the point where money demand exceeds money supply.
Answer:
C) The Fed can increase the equilibrium federal funds rate by decreasing the supply of reserves.
Explanation:
The Federal fund rate is the interest rate at which the banks use to lend money to each other overnight. It can simply be called the interest rate for interbank reserve loans. It can also be the interest rate which is used to conduct monetary policies.
Here, money demanded is equal to the amount of money supplied. The Fed can change the equilibrum funds rate by decreasing the money supplied to the banks, which in turn, makes the federal fund demand increase and the federal also fund rate increases.
Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, or $80 million. These outcomes are all equally likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the risk-free interest rate is 5% and assume perfect capital markets.
a) What is the initial value of Gladstone’s equity without leverage? Now suppose Gladstone has zero-coupon debt with a $100 million face value due next year.
b) What is the initial value of Gladstone’s debt?
c) What is the yield-to-maturity of the debt? What is its expected return?
d) What is the initial value of Gladstone’s equity? What is Gladstone’s total value with leverage? Suppose Gladstone has 10 million shares outstanding and no debt at the start of the year.
e) If Gladstone does not issue debt, what is its share price?
f) If Gladstone issues debt of $100 million due next year and uses the proceeds to repurchase shares, what will its share price be? Why does your answer differ from that in part e)?
Answer: SEE EXPLANATION
Explanation:
Given the following ;
Values depending on Success
$150M, $135M, $95M, $80M
Risk free rate = 5% = 0.05
Pervebtage to be lost in case of bankruptcy = 25% = 0.25
A.) 0.25 × [( 150 + 135 + 95 + 80) ÷ 1.05] = $109.52 million
Assume a zero-coupon debt with a $100million face value
B.) 0.25 × [( 100 + 100 + (95×0.75) + (80×0.75)) ÷ 1.05] = $78.87 million
C.) Yield to maturity (YTM)
(100M÷78.87M) - 1
1.2679 - 1 = 0.2679 = 26.79%
Expected return = 5%
D.) Equity value
0.25 × [( 150 + 135 + (95×0.75) + (80×0.75)) ÷ 1.05] = $99.11 million
E.) share if no debt is issued
109.52 ÷ 10 = 10.95 per share
F.) Share price if debt of $100M is issued
99.11 ÷ 10 = 9.91 per share
The price differs because bankruptcy cost will Lower the share price.
Final answer:
The initial value of Gladstone Corporation's equity without leverage is $109.52 million, and the initial value of its debt with leverage is $95.24 million. With leverage, the initial equity value is $14.28 million, and the total value of the firm with leverage remains unchanged. Share price differs when debt is issued and used to repurchase shares due to the changed equity structure.
Explanation:
Calculating the Value of Gladstone Corporation's Equity and Debt
To calculate the initial value of Gladstone’s equity without leverage, we need to consider the expected value of the corporation next year, which is the average of the four possible values. Since all outcomes are equally likely, we find the average: (150 + 135 + 95 + 80) million / 4 = $115 million. To find the present value, we discount this at the risk-free rate of 5%, giving us an initial equity value of $115 million / (1 + 0.05) = $109.52 million.
With zero-coupon debt of $100 million face value due next year, the value of the debt is the present value of the face value, discounted at the risk-free rate. Hence, the initial value of the debt is $100 million / (1 + 0.05) = $95.24 million. The yield-to-maturity (YTM) of the debt would be the rate at which this present value grows to $100 million in one year, which is 5%. However, because the risk is diversifiable and there is a possibility that the firm value falls below the debt value (in two out of four scenarios), the expected return will also factor in the probability of default, which would be different from the YTM.
The initial value of Gladstone’s equity with the leverage is the total firm value minus the value of debt, so it’s $109.52 million - $95.24 million = $14.28 million. The total value with leverage remains the same because leveraging doesn't change the total value of the firm, just how it is divided between debt and equity. With 10 million shares outstanding, the share price without issuing debt is $109.52 million / 10 million = $10.95 per share.
If debt is issued and proceeds are used to repurchase shares, the shares' price will adjust to reflect the new equity value, which is now $14.28 million. If all $100 million is used to buy back shares, the number of shares will decrease. The new share price will be higher than before because there are fewer shares that now represent the equity value of $14.28 million. The price differs from part e) because of the change in equity structure due to the debt issue and share repurchase.
On July 1, 2019, Pharoah Company purchased new equipment for $80,000. Its estimated useful life was 8 years with a $16,000 salvage value. On January 1, 2022, before making its depreciation entry for 2022, the company estimated the remaining useful life to be 10 years beyond December 31, 2022. The new salvage value is estimated to be $5,000. (a) Correct answer iconYour answer is correct. Prepare the journal entry to record depreciation on December 31, 2019.
Final answer:
The straight-line depreciation for Pharoah Company's equipment acquired on July 1, 2019, for the year ending December 31, 2019, is $8,000. This is recorded with a debit to Depreciation Expense and a credit to Accumulated Depreciation - Equipment.
Explanation:
To calculate depreciation for the equipment purchased by Pharoah Company, we will use the straight-line method. Initially, the equipment had a useful life of 8 years and a salvage value of $16,000. The straight-line depreciation expense can be calculated using the initial cost minus the salvage value, divided by the useful life:
Initial Depreciation Expense = (Cost - Salvage Value) / Useful Life
= ($80,000 - $16,000) / 8 years
= $64,000 / 8 years
= $8,000 per year
The journal entry to record depreciation on December 31, 2019, would be:
This entry represents the first year of depreciation for the equipment.
Final answer:
The depreciation expense for Pharoah Company for the year ending on December 31, 2019, is $4,000, calculated using the straight-line method on a prorated basis. The necessary journal entry would include a debit to Depreciation Expense and a credit to Accumulated Depreciation - Equipment for this amount.
Explanation:
To prepare the journal entry to record depreciation on December 31, 2019, for Pharoah Company, we first need to calculate the depreciation expense for the year using the straight-line method. The depreciation expense is calculated by subtracting the salvage value from the cost of the equipment and then dividing by the useful life of the equipment.
The initial cost of the equipment is $80,000 and the initial salvage value is $16,000, leaving a depreciable base of $64,000. The useful life of the equipment was 8 years. So the annual depreciation expense is calculated as ($80,000 - $16,000) / 8 = $8,000.
Since the equipment was purchased on July 1, 2019, only half of the year's depreciation applies for 2019. Therefore, for 2019, the depreciation expense is $8,000 / 2 = $4,000.
The journal entry dated December 31, 2019, would be:
Debit Depreciation Expense: $4,000
Credit Accumulated Depreciation - Equipment: $4,000
This entry reflects the decrease in value for half a year's use of the new equipment.
On December 31, 2020, Hoosier Inc. establishes an allowance for doubtful accounts of 3% of its accounts receivable balance of $180,000. Hoosier Inc. decides on March 15, 2021, not to pursue collection of Smith’s $1,000 account. The likelihood of collection does not support further collection efforts. What is the net realizable value (NRV) of accounts receivable before and after the write-off of the Smith account?
Answer:
The answer is given below;
Explanation:
Accounts Receivable-before write off $180,000*(1-3%)=$174,600
Accounts Receivable-after write off $179,000*(1-3%)=$173,630
Accounts receivable after write off does not include smith receivable as it has been specifically provided before providing allowance for doubtful accounts.This is the major difference between both workings.
Merger Co. has 10 employees, each of whom earns $1,950 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $128,400 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. Prepare the March 31 journal entry to record the March payroll taxes expenses.
Answer: Please refer to Explanation
Explanation:
March 31
DR Payroll Taxes Expenses
$2,661.75
CR FICA Social Security taxes (6.2% * 1,950 *10) $1,209
CR FICA Medicare taxes (1.45% *1,950 * 10) $282.75
CR FUTA taxes (0.6% * 1,950 * 10) $117
CR SUTA taxes ( 5.4% * 1,950 * 10) $1,053
(To record Employer Payroll Taxes for month of March)
If you need any clarification do react or comment.
The total expenditure for the company's payroll taxes for the month of March would be a total of $5,691.75, consisting of $1,209 for FICA Social Security, $282.75 for FICA Medicare, $420 for FUTA and $3780 for SUTA.
Explanation:
To solve this, you would need to calculate the FICA Social Security taxes, FICA Medicare taxes, FUTA taxes and SUTA taxes for each of the 10 employees at Merger Co. for the month of March.
For the FICA Social Security taxes, since each employee earns $1,950 per month and the rate is 6.2% of the pay, each employee would pay $1,950 * 6.2% = $120.90. Since there are 10 employees, the total for the company would be $120.90 * 10 = $1,209. The FICA Medicare taxes would be calculated similarly, using the rate of 1.45%, which gives $1,950 * 1.45% = $28.28 per employee and $282.75 in total for the company.
Next, the FUTA taxes would be the first $7,000 of each employee's pay multiplied by 0.6% which gives $7,000 * 0.6% = $42 each for FUTA and $420 for the company. SUTA is calculated similarly and provides $7,000 * 5.4% = $378 each for SUTA and $3780 for the company. Thus, the journal entry on March 31 to record the March payroll taxes expenses would show a total expenditure of $1,209 (FICA Social Security) + $282.75 (FICA Medicare) + $420 (FUTA) + $3780 (SUTA) = $5,691.75.
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Whatever, Inc., has a bond outstanding with a coupon rate of 5.73 percent and semiannual payments. The yield to maturity is 6.7 percent and the bond matures in 23 years. What is the market price if the bond has a par value of $1,000?
a)889.56
b)904.76
c)887.02
d)887.80
e)888.39
Answer:
The market price if the bond has a par value of $1,000 is $887.02 . The right answer is c.
Explanation:
In order to calculate the market price if the bond has a par value of $1,000, we need first to make the following calculations according to given data:
Coupon Rate = 5.73/2 = 2.865%
Interest = 1000 * 2.865% = $ 28.65
YTM = 6.7/2 = 3.35%
Time = 23*2 = 46 periods
Therefore, the market price would be calculated using the following formula:
Price of Bond = Interest * PVIFA(3.35%,46) + Par Value * PVIF(3.35%,46)
= $28.65 * 23.2942 + 1000 * 0.2196
= $667.38 + $219.64
Hence, Price of Bond = $887.02
The market price if the bond has a par value of $1,000 is $887.02
Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you have estimated that the yield on 20-year bonds changes by 10 basis points for every 15-basis-point move in the yield on 5-year bonds. You hold a $1 million portfolio of 5-year maturity bonds with modified duration 4 years and desire to hedge your interest rate exposure with T-bond futures (20 year maturity), which currently have modified duration 9 years and sell at F0 = $95. How many futures contracts should you sell?
To hedge the interest rate risk, one needs to sell around 4444 futures contracts. This is so that the change in the bond portfolio's value when interest rates move is offset by the change in the futures contracts' value.
Explanation:To hedge interest rate exposure, one needs to make sure the change in the value of the bond portfolio is offset by the change in the value of the short positions in the bond futures. This can be achieved through duration matching. The modified duration of a bond is a measure of the percentage change in the bond price for a unit change in yield. You hold a portfolio of 5 year bonds with a face value of $1 million and a modified duration of 4 years. Hence, a 1% increase in yield would result in about a $40,000 decrease in value. On the other hand, you are considering shorting T-bond futures which have a modified duration of 9 years. So a 1% increase in yield would lead to a $9 change in the price of each future contract. Number of futures contracts to sell can be calculated by dividing the change in the value of the bond portfolio by change in price of one future contract. Therefore you should sell approximately 4444 futures contracts to hedge your interest rate risk.
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