Answer:
a. Manufacturing margin = $269,500
b. Contribution margin = $436,100
c. Operating income = $318,500
Explanation:
The formula of Manufacturing margin , Contribution margin & operating income is shown below. Along with it, the computation is also made.
Manufacturing margin = Sales - Variable cost of goods sold
= $490,000 - $220,500
= $269,500
Contribution margin = Sales - Variable selling and administrative expenses
= $490,000 - $53,900
= $436,100
Operating income = Contribution margin - (Fixed manufacturing costs + Fixed selling and administrative expenses )
= 436,100 - $(83,300 + 34,300)
= $318,500
Thus, a. Manufacturing margin = $269,500
b. Contribution margin = $436,100
c. Operating income = $318,500
The most recent financial statements for Alexander Co. are shown here: Income Statement Balance Sheet Sales $ 43,100 Current assets $ 17,660 Long-term debt $ 37,120 Costs 35,600 Fixed assets 68,400 Equity 48,940 Taxable income $ 7,500 Total $ 86,060 Total $ 86,060 Taxes (22%) 1,650 Net income $ 5,850 Assets and costs are proportional to sales. The company maintains a constant 40 percent dividend payout ratio and a constant debt-equity ratio. What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$3,328.61
Explanation:
In this question to find out the maximum dollar increase in sales without issuing new equity , we need to take help of sustainable growth rate, whose formula =
(Return on equity x Retention ratio) / [1 - (Return on equity x Retention ratio)]
Here we need to take out the sustainable growth rate and multiply it by total sales .
So lets take out the sustainable growth rate by first calculating its components -
Return on equity = Net income / Total equity
= $5,850 / 48,940
= .1195
Retention ratio = 1 - Dividend payout ratio
= 1 - 40%
= 1 - .4
= .6
Now calculating substantial growth rate =
(Return on equity x Retention ratio) / [1 - (Return on equity x Retention ratio)]
= (.1195 x .6) / [1 - (.1195 x .6)]
= .0717 / [1 - .0717]
= .0717 / .9283
= .07723 ( multiplying by 100 to make in percentage)
= 7.723%
Now multiplying this by total sales,
MAXIMUM INCREASE IN SALES = $43,100 X 7.723%
= $ 3,328.61
Final answer:
To calculate Alexander Co.'s maximum sustainable sales increase without new equity, first determine the retention ratio by subtracting the dividend payout ratio from one. Then, calculate the return on equity and the sustainable growth rate. Multiply the sustainable growth rate by the current sales to find the maximum dollar increase in sales.
Explanation:
The student is asking how to calculate the maximum increase in sales that can be supported without issuing new equity for Alexander Co., given its financial statements and some operational constraints that include a constant dividend payout ratio and a constant debt-equity ratio. When assets and costs are proportional to sales, we can use the sustainable growth rate formula, which is the rate at which equity grows without the need for additional external financing. To find the maximum dollar increase in sales, we calculate the sustainable growth rate (SGR) and apply it to current sales.
First, calculate the retention ratio (b) as 1 minus the dividend payout ratio. The dividend payout ratio is 40%, so b = 1 - 0.40 = 0.60. The return on equity (ROE) can be found by dividing net income by equity, ROE = $5,850 / $48,940. The sustainable growth rate (SGR) is then ROE multiplied by the retention ratio, SGR = ROE * b. Finally, the maximum increase in sales (Increase in Sales) is calculated as SGR times the current sales, Increase in Sales = SGR * $43,100. Doing these calculations gives us the maximum dollar increase in sales Alexander Co. can sustain without issuing additional equity.
Exercise 10-7 Direct Materials Variances [LO10-1] Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 5.70 pounds $ 2.50 per pound $ 14.25 Direct labor 0.50 hours $ 7.50 per hour $ 3.75 During the most recent month, the following activity was recorded: Eleven thousand pounds of material were purchased at a cost of $2.40 per pound. The company produced only 1,100 units, using 9,900 pounds of material. (The rest of the material purchased remained in raw materials inventory.) 650 hours of direct labor time were recorded at a total labor cost of $7,800. Required: Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
Answer:
Direct Material Price Variance = $1,100 Favorable
Direct Material Quantity Variance = - $9,075 Unfavorable
Explanation:
Direct Material Price Variance = (Standard Price - Actual Price) X Actual Quantity
Provided Standard Price = $2.50
Actual Price = $2.40
Actual Quantity = 11,000 pounds
Direct Material Price Variance = ($2.5 - $2.4) X 11,000 pounds
= $1,100 Favorable
This is favorable because actual price is less than Standard Price.
Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price
Standard Quantity for Actual Output = 1,100 X 5.70 pounds per unit = 6,270 pounds
Actual Quantity used = 9,900 pounds
Standard Price = $2.50
Direct Material Quantity Variance = (6,270 - 9,900) X $2.5
= - $9,075 Unfavorable
This is unfavorable because as per standard norms only 6,270 pounds of raw material was needed to produce 1,100 units of Zoom.
Final Answer
Direct Material Price Variance = $1,100 Favorable
Direct Material Quantity Variance = - $9,075 Unfavorable
Final answer:
To calculate the materials price variance, subtract the standard price from the actual price and multiply by the actual quantity purchased, resulting in a favorable variance of $1,100. To calculate the materials quantity variance, subtract the standard quantity allowed from the actual quantity used and multiply by the standard price, resulting in an unfavorable variance of $9,075.
Explanation:
The student is asking how to calculate the materials price variance and the materials quantity variance for the production of a cleaning compound named Zoom. Here are the calculations:
Materials Price Variance = (Actual Price - Standard Price) × Actual Quantity Purchased
Materials Price Variance = ($2.40 - $2.50) × 11,000 pounds
Materials Price Variance = $0.10 × 11,000 pounds
Materials Price Variance = $1,100 (F)
Materials Quantity Variance = (Actual Quantity Used - Standard Quantity Allowed) × Standard Price
Materials Quantity Variance = (9,900 pounds - (1,100 units × 5.70 pounds/unit)) × $2.50/pound
Materials Quantity Variance = (9,900 pounds - 6,270 pounds) × $2.50/pound
Materials Quantity Variance = 3,630 pounds × $2.50/pound
Materials Quantity Variance = $9,075 (U)
Suppose that an particular economy has a real GDP of 24.0 trillion in 2004. It grows to 30.0 trillion in 2005. Meanwhile, the national debt was 16.0 trillion in 2004. In 2005 the federal government ran a budget deficit of 1.6 trillion, which was totally financed by borrowing. Given this set of circumstances the national debt as a percentage of real GDP has A. decreased. B. increased. C. remained constant. D. doubled.
Answer:
A. decreased
Explanation:
Debt / GDP ratio is one of the indicators of the health of an economy. It is the amount of a country's public debt as a percentage of its Gross Domestic Product (GDP).
For 2004 figures, in the economy in question, the ratio was 16 trillion / 24 trillion = 0.66
In 2005 GDP jumped to 30 trillion and debt increased to 17.6 trillion. Thus, the ratio was 17.6 rail / 30 rail = 0.58
The economy's debt-to-GDP ratio has declined, a good indication that the economy produces a large number of goods and services and that it probably has profits that are high enough to repay its debts.
The national debt as a percentage of real GDP has increased. So, option B is correct.
The national debt as a percentage of real GDP has increased.
To determine this, we calculate the debt/GDP ratio for both years. In 2004, the debt/GDP ratio was 16.0/24.0 = 0.67 or 67%. In 2005, it was 17.6/30.0 = 0.587 or 58.7%. Since 58.7% is less than 67%, the debt/GDP ratio has increased.
On January 1, Puckett Company paid $1.6 million for 50,000 shares of Harrison’s voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison declared a $2 per share dividend during the year and reported net income of $560,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31
Answer:
The $1,724,000 is the investment amount which is to be recorded as of December 31.
Explanation:
For computing the investment income, the calculation is shown below:
= Paid value + net income percentage - dividend
where,
Paid value= $1.6 million
Net income percentage = Net income × percentage
= $560,000 × 40%
= $224,000
And, dividend = number of shares × per share
= 50,000 × 2
= $100,000
So, the investment amount would be
= Paid amount + net income percentage - dividend
= $1,600,000 + $224,000 - $100,000
= $1,724,000
Hence, the $1,724,000 is the investment amount which is to be recorded as of December 31.
Final answer:
The balance in the Investment in Harrison account at year-end is $1.724 million, after accounting for Puckett's share of Harrison's net income and subtracting dividends received.
Explanation:
When Puckett Company invested in Harrison's common stock, they paid $1.6 million for a 40 percent stake, which amounts to 50,000 shares. To calculate the balance in the Investment in Harrison account at year-end, we must consider the equity method, which includes any dividends received and Puckett's share of Harrison's net income.
The equity method accounting involves adjusting the investment account for Puckett's share of Harrison's earnings and dividends distributed:
Calculate Puckett's share of Harrison's net income: $560,000 (Harrison's net income)Therefore, the balance in the Investment in Harrison account at the end of the year is $1.724 million.
he following information applies to the questions displayed below:Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.)Requirements:1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes?Total annual cash inflows $ 2. Find the internal rate of return promised by the new machine. (Round your answer to two decimal places.)Internal rate of return %3. In addition to the data given previously, assume that the machine will have a $4,125 salvage value at the end of six years. Under these conditions, compute the internal rate of return. (Round your answer to two decimal places.)Internal rate of return %
Final answer:
The total annual cash inflows associated with the new donut-making machine for Wendell's Donut Shoppe are $5,000. To find the internal rate of return, both with and without including salvage value, a financial calculator or specialized software would be required due to the complexity of the IRR calculation.
Explanation:
To calculate the total annual cash inflows associated with the new donut-making machine for Wendell's Donut Shoppe, we need to consider two factors: the cost savings from reduced part-time help and the additional revenue from the sale of the new donut style.
Cost Savings: $3,800 per year.Additional Revenue: 1,000 dozen donuts * $1.20 per dozen = $1,200 per year.Add these together to get the total annual cash inflows: $3,800 + $1,200 = $5,000 per year.
To find the internal rate of return (IRR) for the new machine without considering the salvage value, we would use the IRR formula that considers the initial outlay, annual cash inflows, and the life of the machine. The calculation would require either financial calculator or specialized software due to the complexity of the formula.
When incorporating a salvage value of $4,125 at the end of six years, the IRR calculation would change to include this end-of-period cash inflow. The calculation would become more complex, and again, a financial calculator or specialized software will be needed.
Video Planet (“VP”) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $2,040, sells the remote separately for $120, and offers the installation service separately for $240. The entire package sells for $2,300. Required: How much revenue would be allocated to the TV, the remote, and the installation service?
Answer:
TV 1,955
REMOTE 115
INSTALLATION 230
Explanation:
We are going to calculate the total sum of the element of the offer and then cross-multiply
[tex]\left[\begin{array}{ccc}$TV&2040&a\\$Remote&120&b\\$Installation&240&c\\$Total&2400&2300\\\end{array}\right][/tex]
[tex]a = \frac{2040}{2400 } * 2300 = 1,955[/tex]
[tex]b = \frac{120}{2400 } * 2300 = 115[/tex]
[tex]c = \frac{240}{2400 } * 2300 = 230[/tex]
To allocate the revenue to the TV, remote, and installation service, we use the relative standalone selling price method. The allocation for the TV is $1,950, for the remote is $115, and for the installation service is $235.
Explanation:To allocate the revenue to the TV, remote, and installation service, we need to determine the standalone selling prices of each component. The standalone selling prices are the prices at which each component is sold separately. According to the information given, the standalone selling price of the TV is $2,040, the standalone selling price of the remote is $120, and the standalone selling price of the installation service is $240.
To calculate the allocation of revenue, we can use the relative standalone selling price method. This method allocates revenue based on the proportionate value of each component in relation to the total standalone selling price of all components.
The total standalone selling price is $2,400 ($2,040 + $120 + $240). To calculate the allocation for the TV, we divide the standalone selling price of the TV by the total standalone selling price and multiply it by the total package price.
Allocation for TV = ($2,040 / $2,400) * $2,300 = $1,950
Similarly, we can calculate the allocations for the remote and installation service.
Allocation for remote = ($120 / $2,400) * $2,300 = $115
Allocation for installation service = ($240 / $2,400) * $2,300 = $235
A new manager starts his work by talking with each member of his team, getting to know their strengths and weaknesses, and helps them create a plan to build their individual skills and develop their talents.According to Goleman’s model, which type of leadership is exemplified in this scenario?
Answer: the correct answer is coaching leadership.
Explanation:
The Coaching Leadership Style is a relatively new and guiding leadership style. The leader has these skills when he is able to develop and improve the performance and competences of his employees. The basis of the Coaching Leadership Style is the dynamic interaction between the leader and the employee.
Under Pick Co.'s job order costing system, manufacturing overhead is applied to Work-in-Process using a predetermined annual overhead rate. During January, Pick's transactions included the following: Direct materials issued to production $ 120,000 Indirect materials issued to production 11,000 Manufacturing overhead incurred 170,000 Manufacturing overhead applied 158,000 Direct labor costs 144,500 Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in January? (CPA adapted)
Answer:
Total Cost of the jobs: 434,500
Explanation:
DM 120,000
DL 144,500
MO applied 158,000
adjustment for MO to COGS 12,000
(because is a job order costing, in most cases the actual manufacturing overhead is know after the job is done)
Notice the indirect mateirals represent MO so it will be as part of that concept.
Total cost:
120,000+ 144,500 + 158,000 + 12,000 = 434,500
The adjusted trial balance of Antoine Corporation at December 31 shows that sales revenue for the year was $ 540,000 and other revenue was $ 49,000. Cost of goods sold for that same period was $ 290,000, while other expenses totaled $ 230,000. The corporation declared and paid dividends of $ 14, 000 during the year. The balance of retained earnings before closing entries was $ 475,000. Prepare the closing entries for revenues, expenses, dividends for the year. (Record debits first, then credits. Exclude explainations from any. Begin by recording the entry to close out the revenue accounts)
Answer:
sales revenue 540,000
other revenue 49,000
income summary 589,000
to close revenue accounts
income summary 520,000
COGS 290,000
other expenses 230,000
to close expense accounts
income summary 14,000
dividends 14,000
to close dividends expense
income summary 55,000
Retained Earnings 55,000
Explanation:
We use incomme summary to close the temporary accounts.
The revenues has credit normal balance, so we debit them to close them.
The expenses has debit normal balance so we credit to close them.
We do this using the income summary account to balance the entries.
We also close dividends account against Income Summary
Finally we move the balance of income summary to retained earnings
Leilani enters into a contract with Metro Taxi Company to work as a cabdriver. Under the plain meaning rule, if the contract’s writing is clear and unequivocal, the meaning of the terms must be determined from a. any relevant extrinsic evidence. b. only evidence not contained in the document. c. the later testimony of the parties. d. only the face of the instrument.
Answer:
The correct option is d) only the face of the instrument
Explanation:
Here when Leilani is entering in to a contract with Metro taxi company to work as a cabdriver, the contract made by the Metro taxi company has clearly stated the terms of condition for the job of cabdriver and it is told in the question that the terms of contract were unequivocal which means all the terms and condition were clearly stated and there was no confusion regarding any of the detail.
So when under the plain meaning rule, the meaning of the terms would be determined only the basis of what is written in the contract not on any extrinsic evidence or something which is not there but only on the face of the instrument.
At some point, everyone will have to deliver bad news. The bad feelings associated with this type of message can be alleviated if the receiver knows the reason for the bad news, feels the news is revealed sensitively, thinks the matter is treated seriously, and believes that the decision is fair. When applying these strategies, make sure to follow the writing process and determine whether to use a direct or an indirect pattern in your message. Determine what strategy should be used in the following situation. You are going to deliver your product 24 hours late this month.
Answer: There are several factors that need to be considered while delivering the bad news some of which are careful explanation, deadlines for change, direct message and showing of concern.
Explanation: The above points can be explained as follows :-
a. An honest explanation should be given to the receiver behind the delay in product and reasons should be mentioned .
b. The deadlines and action decided to be taken for not repeating such delay in future again should also be explained.
c. The message should be delivered in plain language that could be easily understood.
d. concern and apology should be shown while delivering the message to whom the delivery is to be made.
Effectively delivering unfavorable news of a product delay involves combining several strategies. These include a problem-and-solution approach, choice of tone relating to the audience, timing, and the use of an indirect message pattern. Choosing the appropriate strategy can help maintain your client relationship and manage their expectations.
Explanation:To effectively deliver the unfavorable news of product delay, selecting an appropriate strategy based on sensitivity and timing is essential. It should be directed towards maintaining the relationship with the client while managing their expectations.
Firstly, adopting a problem-and-solution approach can be helpful. You would identify the issue (the 24-hour delay) and then provide a solution (what steps are being taken to avoid future delays, expedite the current order, or offer compensation for this delay).
Prior to delivering the news, consider the tone relating to your audience. A professional, honest, and apologetic tone can make the audience feel respected and valued. They are more likely to react positively to your message if it is subtle yet transparent.
The timing of your message is critical as well. As noted, if there's a delay after the first message before the receiver needs to make a decision, the last point presented is more persuasive. In this case, it would be better to first provide some positive information about the product or your company before telling them about the delay.
Handling this situation sensitively using the indirect pattern, illustrated with facts and rationale, boosts your credibility, promotes honesty, and can alleviate disappointment. Summarizing all, direct, honest communication implemented with sensitivity and timely can guide to effectively managing an unfavorable situation.
Learn more about Delivering Bad News in Business here:https://brainly.com/question/30437913
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Mauro Products distributes a single product, a woven basket whose selling price is $16 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $10,000. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Answer:
1. 2,500 units
2. $40,000
3. Revised Unit Sales - 2,650 units & Revised dollar sales - $42,400
Explanation:
Break even Point : The break even point is that point in which the firm has no profit or no loss or we can say that total revenue is equal to total expenditure.
1. Computation of break-even point in unit sales:
Break even point in unit sales = Fixed cost ÷ (Sales per unit - variable cost per unit)
= $10,000 ÷ ($16 - $12)
= 2,500 units
where, contribution = Sales per unit - variable cost per unit
Thus, the break-even point in unit sales is 2,500 units.
2. Calculation of break-even point in dollar sales :
The formula is shown below:
= Fixed cost ÷ Profit volume ratio
where, Profit volume ratio = (Contribution ÷ Sales) × 100
= ($4 ÷ $16) × 100
= 25%
So, Break even point in dollar sales = $10,000 ÷ 25%
= $40,000
Thus, the Break even point in dollar sales is $40,000
3. Calculation of new break-even point in unit sales is shown below:
Revised Fixed cost = $10,000 +$600 = $10,600
And, contribution is same.
So, new break-even point in unit sales = Fixed cost ÷ Contribution per unit
= $10,600 ÷ $4
= 2,650 units
Thus, new break-even point in unit sales is 2,650 units.
By applying the formula, the calculation of new break-even point in dollar sales is shown below:
New break-even point (BEP) in dollar sales = Fixed cost ÷ Profit volume ratio
Since, the Profit volume ratio remains same.
So, break-even point (BEP) in dollar sales = $10600 ÷ 25%
= $42,400
Hence, New break-even point (BEP) in dollar sales is $42,400
Twisty Pretzel Company produces bags of pretzels that are sold in cases and retailed throughout the United States. Its normal selling price is $30 per case; each case contains 15 bags of pretzels. The variable costs are $19 per case. Fixed costs are $25,000 for a normal production run of 5,000 cases per month. Twisty Pretzel received a special order from an existing customer which it could accommodate without exceeding capacity. The order was for 1,500 units at a special price of $20 per case; a variable selling cost of $1 per case included in the variable costs would not be relevant for this order. If the order is accepted, the impact on operating income would be a(n) ________.
Answer:
The impact on operating income would be an increase in the operating income by $3000
Explanation:
Twisty pretzel company has received an order for 1500 units at a special price of $20 per case, so the revenue which twisty pretzel can make on this order is =
REVENUE = Number of units made x Selling price
= 1500 x $20
= $30,000
Now it is told to us that initial variable cost per case is $19 but here as per new order the variable selling cost of $1 included in the variable cost would now become excluded , so therefore the variable cost for this order would be $19 - $1 = $18 per case
COST = Number of units x Cost price
= 1500 x $18
= $27,000
so by subtracting the cost from revenue we get the increase in operating income,
=$30,000 - $27,000
= $3000
Answer:it would become a question
Explanation:
Before starting Pedigree Pajamas, the owner of the company realized that he was treating his dog as if it were a child and that a lot of his friends did the same thing. So in what he perceived as a dog-friendly environment, he launched a line of doggie pajamas—available from size 6 for Chihuahuas to size 30 for Great Danes. The ads for Pedigree Pajamas had to convince people that dogs slept better in pajamas. A product that has to create primary demand is more than likely in the _____ stage of the product life cycle.
A. pioneering
B. introductory
C. maturity
D. growth
E. revitalization
Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 14 percent on the company’s stock, how much will you pay for a share today?
Answer:
i will pay $80.47 or lower, to achieve 14% yield or higher.
Explanation:
We have to calcualte the present value of the dividends cash flow.
because the dividends will growth until a certain date, we cannot use the gordon model.
[tex]\left[\begin{array}{ccc}Month&Dividend&PV&Year1&13&11.40&Year2&19&14.62&Year3&25&16.874&Year4&31&18.35&Year5&37&19.21&Year6&43&19.591&Intrinsic&Value&80.47\end{array}\right][/tex]
For each dividend, we do previous year + 6
Then for Present value:
[tex]\frac{Dividends}{(1 + rate)^{time} } = PV[/tex]
for example year 3
[tex]\frac{25}{(1.14)^{3} } = 16.874[/tex]
The price you should pay for a share of Maloney, Inc.'s stock today is approximately 78.29 dollars per share.
To determine the current price of Maloney, Inc.'s stock today, we need to calculate the present value of the dividends that will be paid over the next five years, and also consider the price of the stock at the end of the fifth year when no more dividends will be paid.
Given:
- Current dividend: $7 per share
- Dividend growth rate: $6 per share per year for 5 years
- Required return (discount rate): 14%
Step 1: Calculate Dividends for Years 1 to 5
The dividends for each year are as follows:
- Year 1: $7 per share
- Year 2: $13 per share (7 + 6)
- Year 3: $19 per share (13 + 6)
- Year 4: $25 per share (19 + 6)
- Year 5: $31 per share (25 + 6)
Step 2: Calculate Present Value of Dividends
Now, calculate the present value (PV) of the dividends using the formula for the present value of a growing annuity:
[tex]PV = \frac{D_1}{(1 + r)^1} + \frac{D_2}{(1 + r)^2} + \frac{D_3}{(1 + r)^3} + \frac{D_4}{(1 + r)^4} + \frac{D_5}{(1 + r)^5}[/tex]
Where:
[tex]D_1 = $7 \\\\ D_2 = $13 \\\\ D_3 = $19 \\\\ D_4 = $25 \\\\ D_5 = $31 \\\\ r = 14% or 0.14[/tex]
Let's calculate each term:
[tex]PV = \frac{7}{(1 + 0.14)^1} + \frac{13}{(1 + 0.14)^2} + \frac{19}{(1 + 0.14)^3} + \frac{25}{(1 + 0.14)^4} + \frac{31}{(1 + 0.14)^5} \\\\ PV = \frac{7}{1.14} + \frac{13}{1.14^2} + \frac{19}{1.14^3} + \frac{25}{1.14^4} + \frac{31}{1.14^5} \\\\[/tex]
Calculating each term:
[tex]PV = \frac{7}{1.14} + \frac{13}{(1.14)^2} + \frac{19}{(1.14)^3} + \frac{25}{(1.14)^4} + \frac{31}{(1.14)^5} \\\\ PV \approx 6.14 + 10.84 + 13.90 + 15.71 + 15.60\\\\ PV \approx 62.19[/tex]
Step 3: Calculate Price of Stock Today
Finally, add the present value of the dividends to the price of the stock at the end of Year 5 (when no more dividends will be paid), discounted back to the present value:
[tex]\text{Price today} = PV + \frac{D_5}{(1 + r)^5} \\\\ \text{Price today} = 62.19 + \frac{31}{(1.14)^5}[/tex]
Calculate [tex]\frac{31}{(1.14)^5}[/tex] :
[tex]\frac{31}{(1.14)^5} \approx \frac{31}{1.925 } \approx 16.10 \\\\ \text{Price today} = 62.19 + 16.10 \\\\ \text{Price today} \approx 78.29[/tex]
Therefore, the price you should pay for a share of Maloney, Inc.'s stock today is approximately 78.29 dollars per share.
August, Inc. had the following transactions in 2018, its first year of operations:
• Issued 29,000 shares of common stock. The stock has par value of $2.00 per share and was issued at $14.00 per share.
• Issued ,500 shares of $200.00 par value preferred stock at par.
• Earned net income of $39,000. bullet• Paid no dividends.
At the end of 2018, what is total stockholders' equity?
Answer:
Total 545,000
Explanation:
29,000 x 2 = 58,000 common stock
29,000 x 12 = 348,000 additional paid-in capital
500 x 200 = 100,000 preferred stock
Net income 39,000
Dividends none
Total 545,000
Splish Brothers Inc. started the year with total assets of $322000 and total liabilities of $262000. During the year the business recorded $635000 in revenues, $329000 in expenses, and dividends of $57000. Stockholders’ equity at the end of the year was:
Answer:
Ending Equity 235,000
Explanation:
assets = liabilities + equity
We post our know values to solve for equity
322,000 = 262,000 + equity
322,000 - 262,000 = equity
beginning equity 60,000
net income = revenues - expenses
635,000 - 329,000 = 232,000 net income
dividends 57,000
beginning equity + net income - dividends = ending equity
60,000 + 232,000 - 57,000 = 235,000 ending equity
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. The value of a perpetuity cannot be determined. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.
Answer:
The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.
Explanation:
The perpetuities can becalculate as follow
C/rate = Perpetuities
the reasoning behind this formula:
[tex]C * \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
If we calculate limit whe ntime is infite,
because at more time 1 + r gets closer and closer to 0
we get on the dividend
1 - 0
So we have C x 1/i = C/i
Next part would be why the first cash flow is more relevant than the subsequent cash flow:
[tex]\frac{Principal}{(1 + rate)^{time} } = PV[/tex]
Here if time increases, then the divisor get closer to ∞ so we have
P ( a constant) /∞ = 0
So the first cashflow is more relevant than the more distant cash flow
Final answer:
Perpetuities are financial instruments with indefinite cash flows, and their value can be calculated by discounting those cash flows to present value, with near-term cash flows having a stronger impact on its value than distant ones.
Explanation:
Perpetuities are financial instruments that provide a stream of cash flows indefinitely. One of the key characteristics of a perpetuity is that its value can indeed be determined using a formula that discounts its cash flows back to their present value. Furthermore, due to the nature of discounting, the current value of a perpetuity is indeed affected more by the discounted value of its nearer cash flows compared to those that are more distant in the future. This is because as time goes on, the present value of the future payments becomes less significant due to the higher discount rate applied over a longer period.
Scarlett Corp. uses no debt. The weighted average cost of capital is 6.4 percent. The current market value of the equity is $27 million and the corporate tax rate is 35 percent. What is EBIT? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Answer:
EBIT = 2,658,461.54
Explanation:
Assuming the Company fullfil his expected return
Equity x WACC = Net Income
27,000,000 x 0.064 = 1,728,000 Net Income
Net income x (1-tax-rate) + interest = EBIT
1,728,000 x (1-.35) + 0 = EBIT
EBIT = 2,658,461.54
If Scarlett Corp uses no debt, then thre are no interest.
Miller Company sells several products. Sales reports show that the sales volume of its most popular product has increased the past three quarters while overall profits have decreased. How might production cost reports assist management in making decisions about this product?
Production cost reports can assist management in making decisions about the most popular product by providing information on the cost of producing and selling the product. By analyzing these reports, management can identify any cost drivers or inefficiencies in the production process, and take steps to address them.
Explanation:Production cost reports can assist management in making decisions about the most popular product by providing information on the cost of producing and selling the product. By analyzing these reports, management can identify any cost drivers or inefficiencies in the production process, and take steps to address them. For example, if the sales volume of the product has increased but overall profits have decreased, it may indicate that the cost of producing the product has also increased. Management can use the cost reports to identify areas where they can reduce costs, such as renegotiating supplier contracts or optimizing the production process.
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Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $86,000 to produce 2,400 units that can be sold now for $67,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $260 per unit. If Holmes processes further, the units can be sold for $395 each. Compute the incremental income if Holmes processes further.
Answer:
The incremental income if processes further is 256,500
Explanation:
We need to compare the income on each stage:
currently
67500 revenues
- 86000 cost =
-18500 loss
further process
revenues$ 395x 2,400 units 948,000
cost
86,000 Beginning (previous stage cost)
2,400 units x $260. each
624,000 added during the process
total cost 710,000
revenues - total cost = income
948,000 - 710,000 = 238,000
incremental income
[tex]incremental \: income = next \: stage \: income - current \: stage \: income[/tex]
238,000 - (-18,500) = 256,500
When calculating the incremental income for the Holmes Company, we find that if they choose to process their product further, the incremental income would be $324,000. This is calculated by subtracting the cost to further process the units from the total revenue gained by selling the processed units.
Explanation:The Holmes Company has a decision to make regarding whether to sell their product as is, or process it further to receive a higher selling price. The cost to produce the 2400 units is $86,000, and could be sold as is for $67,500, or processed further at a cost of $260 per unit and then sold for $395 each.
First, let's calculate the incremental cost if Holmes processes the product further: The incremental cost to process the 2400 units is 2400 units * $260/unit = $624,000. If these units are then sold at $395 each, the total revenue would be 2400 units * $395/unit = $948,000.
The incremental income would then be calculated by taking the total revenue from selling the processed units and subtracting the cost to process them further. So, the incremental income would be $948,000 - $624,000 = $324,000. Therefore, if Holmes chooses to process the units further, the incremental income would be $324,000.
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River Falls Manufacturing uses a normal cost system and had the following data available for 2018: Direct materials purchased on account $148,000 Direct materials requisitioned 88,000 Direct labor cost incurred 127,000 Factory overhead incurred 148,000 Cost of goods completed 299,000 Cost of goods sold 250,000 Beginning direct materials inventory 34,000 Beginning WIP inventory 70,000 Beginning finished goods inventory 55,000 Overhead application rate, as a percent of direct-labor costs 105 percent The ending balance of work-in-process inventory is
Answer:
The ending balance of work-in-process inventory is $64,000
Explanation:
Opening Raw Material = $34,000
Opening WIP Inventory = $70,000
Opening Finished Goods Inventory = $55,000
Raw material purchased = $148,000
Raw materials requisitioned = $88,000
Closing Raw Material = Opening + Purchase - Requisitioned
= $34,000 + $148,000 - $88,000 = $94,000
Closing Finished Goods Inventory = Opening + Cost of goods produced - Cost of goods sold
= $55,000 + $299,000 - $250,000 = $104,000
Expense total incurred on goods entered for production = Material requisitioned + Labor cost incurred + Factory overhead
= $88,000 + $127,000 + $148,000 = $363,000
Out of which cost of completed goods = $299,000
Thus remaining is work in process = $363,000 - $299,000 = $64,000
That is Closing WIP Inventory = $64,000
Note: It is obvious that the expense of labor and overheads incurred in this period includes expense incurred to convert opening WIP in to finished goods and the balance is closing WIP.
The ending balance of work-in-process inventory is $64,000
The ending balance of work-in-process inventory for River Falls Manufacturing is $119,350, calculated by adding the beginning WIP inventory with the total manufacturing costs and subtracting the cost of goods completed.
Explanation:To determine the ending balance of work-in-process (WIP) inventory for River Falls Manufacturing, we use the following formula:
Total manufacturing costs = Direct materials used + Direct labor + Factory overhead applied
We already have the direct materials used (which is the direct materials requisitioned), direct labor, and we calculate the factory overhead applied by using the overhead application rate given. The overhead rate is 105% of direct labor costs, so factory overhead applied would be 105% x Direct labor cost incurred.
For 2018:
Direct materials requisitioned = $88,000
Direct labor cost incurred = $127,000
Factory overhead applied = 105% x $127,000 = $133,350
Total manufacturing costs = $88,000 + $127,000 + $133,350 = $348,350
Now we total the WIP beginning balance with the total manufacturing costs and subtract the cost of goods completed to find the ending WIP inventory.
Ending WIP inventory = (Beginning WIP inventory + Total manufacturing costs) - Cost of goods completed
Ending WIP inventory = ($70,000 + $348,350) - $299,000
Ending WIP inventory = $119,350
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How would a bicycle producer likely react to a shortage of its product?a. by holding special clearance sales of its inventoryb. by keeping storers open longer hoursc. by raising prices and reducing quantity supplyd. by raising prices and increasing quantity supply
Answer:
The correct option here is D) by raising prices and increasing quantity supply.
Explanation:
If a producer knows that the product in which he or she deals is in shortage in the overall market , then the producer will increase the prices of that product because in the market its supply is less than the demand , which means producer can increase the prices of its products and consumers would have to buy the product at that price only if they want to satisfy their need . Also producer would want to increase the quantity of its products too because with high prices and more sales, the producer would be able to book higher profits.
In 2017, HD had reported a deferred tax asset of $126 million with no valuation allowance. At December 31, 2018, the account balances of HD Services showed a deferred tax asset of $165 million before assessing the need for a valuation allowance and income taxes payable of $98 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2018. What amount should HD report as income tax expense in its 2018 income statement? (Round your calculations to the nearest whole million.)
Answer: 108.5 million
Explanation: As we know that :-
Total income tax expense in 2018= reduction in deferred tax asset in 2018 + income tax payable in 2018
now computing the above values :
Reduction in deferred tax asset in 2018 = deferred tax asset balance-realizable deferred tax asset
= 126million - (165million*70%)
= 126million - 115.5 million
= 10.5 million
Total income tax expense in 2018= 98 million + 10.5 million
= 108.5 million
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions.) b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)
Final answer:
To fund the plan with an immunized position, you need to calculate the market value of each zero-coupon bond. The market value of the 5-year maturity bond is $620,921.32 and the market value of the 20-year maturity bond is $148,644.31.
Explanation:
To fund the plan with an immunized position, you need to calculate the market value of each zero-coupon bond. Let's start with the 5-year maturity bond. We'll use the formula:
Market value = Face value / (1 + interest rate)years to maturity
For the 5-year bond, the market value will be:
Market value = $1,000,000 / (1 + 0.10)5 = $620,921.32
Next, let's calculate the market value of the 20-year maturity bond:
Market value = $1,000,000 / (1 + 0.10)20 = $148,644.31
Blackwelder Factory produces two similar products-small lamps and desk lamps. The total plant overhead budget is $643,000 with 503,000 estimated direct labor hours. It is further estimated that small lamp production will require 284,000 direct labor hours and desk lamp production will need 219,000 direct labor hours. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 188,000. a. $551,982 b. $971,340 c. $240,640 d. $402,360
Answer:
c. $240,640
Explanation:
[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]
we have to distribute the overhead cost over the cost driver
643,000 / 503,000 = 1.27833 = 1.28 rate
then we multiply this rate by the actual hours of desk lamp production
actual desk lamp hours x rate = alllocated MO
188,000 x 1.28 = 240,640
The factory overhead allocated to desk lamp production, using the single plantwide factory overhead rate and the actual direct hours for the period of 188,000, is $240,640.
Explanation:To calculate the overhead allocated to desk lamp production using a single plantwide factory overhead rate based on direct labor hours, first determine the overhead rate per labor hour by dividing the total plant overhead budget by the estimated direct labor hours. The total plant overhead budget is $643,000 and the estimated direct labor hours are 503,000 hours. Therefore, the overhead rate is $643,000 / 503,000 = $1.28 per labor hour.
Next, we multiply this rate by the actual direct labor hours for the desk lamp production to find the allocated overhead. If the actual direct hours for desk lamp production is 188,000 hours, the allocated overhead will be 188,000 hours x $1.28 = $240,640.
Thus, the factory overhead allocated to desk lamp production is $240,640, which corresponds to option c.
On January 2, 2016, Alpha Corporation issued 15,000 shares of $10 par value common stock for $15 per share. On March 1, 2016, Alpha reacquired 1,000 of these shares when they were trading $20 each. September 1, 2016, when the market was soaring, Alpha reissued 500 shares of treasury stock at the going market rate of $25 per share. Use this information to prepare the General Journal entry (without explanation) for September 1.
Answer:
Given:
On January 2, 2016:
Issued 15,000 shares of $10 par value
Common stock for $15 per share
On March 1, 2016: Alpha reacquired 1,000 of these shares when they were trading $20 each.
On September 1, 2016: Alpha reissued 500 shares of treasury stock at the going market rate of $25 per share.
The general journal entry for reissuing 500 shares of treasury stock at $25 per share involves debiting Cash for $12,500, crediting Treasury Stock for $10,000, and crediting Paid-in Capital from Treasury Stock for $2,500.
Explanation:The general journal entry for Alpha Corporation on September 1, 2016, when it reissued 500 shares of treasury stock at a market rate of $25 per share, would be as follows:
Cash (500 shares * $25) = $12,500Treasury Stock (500 shares * $20, the cost when Alpha reacquired the stock) = $10,000Paid-in Capital from Treasury Stock (The excess $2,500 ($12,500 - $10,000)) = $2,500This entry assumes that the Alpha Corporation uses the cost method to account for treasury stocks, whereby the treasury stock account is debited for the reacquisition cost, and then credited for the same cost when the stock is reissued. Any excess proceeds from reissuance would be credited to additional paid-in capital.
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Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery equipment $7,000, and insurance on delivery equipment $1,000. Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2017
Answer:
[tex]\left[\begin{array}{ccccc}Sales&170,000&180,000&190,000&200,000\\sales \: commissions&10,200&10,800&11,400&12,000\\advertizing&6,800&7,200&7,600&8,000&traveling&5,100&5,400&5,700&6,000&Total \: Variable&22,100&23,400&24,700&26,000&Fixed&43,000&43,000&43,000&43,000&Total \: Selling \: expense&65,100&66,400&67,700&69,000&\end{array}\right][/tex]
Explanation:
First
we apply the percent rate to each sales level
for example
advertizing for sales 200,000 x 4% = 8,000
Second,
we add them to get total variable
Third,
we add all the fixed cost together
Forth,
and last, we calculate the total cost.
An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $50 comma 000. If the economy grows at a moderate pace, the investment will result in a profit of $20 comma 000. However, if the economy goes into recession, the investment will result in a loss of $50 comma 000. You contact an economist who believes there is a 20% probability the economy will remain strong, a 60% probability the economy will grow at a moderate pace, and a 20% probability the economy will slip into recession. What is the expected profit from this investment?
Profit when economy is strong = $ 50,000
Profit when economy is at moderate pace = $ 20,000
Loss when economy is at reccession = $ 50,000
P (economy remain strong) = 20/100 = 0.2
P (economy at moderate pace) = 0.6
P (economy at reccession) = 0.2
Expected profit = Total x P (2)
= (0.2 × 50,000) + (0.6 × 20,000) - (0.2 × 50,000)
= 10,000.0 + 12,000.0 - 10,000.0
= $ 12,000
••• Expected profit = $ 12,000
Further Explanation
New profits arise in economic activities using the financial system. Profit is not obtained by chance, but thanks to the special efforts of people who use money.
Because of the relationship with money transactions, profitability specifically takes place in the context of capitalism.
Declining this view, capitalists include 3 main elements: private property institutions, the practice of profit-seeking, and competition in a free-market economic system.
Relative Advantage Profit is a benchmark to assess the health of a company or the efficiency of a company, Profit is a sign that the product or service is valued by the public, Profits are a whip to increase effort, Profit is a condition of the company's survival, Benefits offset the risks in the business.
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Details
Class: College
Subject: Business
Keyword: probability, Opportunity, theory
The expected profit from this investment is $12,000.
Explanation:To calculate the expected profit from this investment, we will multiply the profit for each outcome by its corresponding probability and then sum up the results.
For a strong economy, the profit is $50,000 with a probability of 20%. So the expected profit for a strong economy is 50,000 × 0.20 = $10,000.
For a moderate-paced economy, the profit is $20,000 with a probability of 60%. So the expected profit for a moderate-paced economy is 20,000× 0.60 = $12,000.
For a recession, the profit is -$50,000 with a probability of 20%. Hence, the expected loss for a recession is 50,000 × 0.20 = -$10,000.
To calculate the total expected profit, we add up the expected profits and losses: $10,000 + $12,000 - $10,000 = $12,000.
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2018 2019 Beginning inventory $ 21,000 $ 32,500 Cost of goods purchased 151,500 187,500 Cost of goods available for sale 172,500 220,000 Ending inventory 32,500 35,500 Cost of goods sold $140,000 $184,500 Bramble’s made two errors: (1) 2018 ending inventory was overstated $3,150, and (2) 2019 ending inventory was understated $6,250. Compute the correct cost of goods sold for each year.
Answer:
Real COGS 143,150 178,250
Explanation:
[tex]\left[\begin{array}{ccc}-&2018&2019\\Beg.Inv&21,000&29,350\\Purchase&151,500&187,500\\Available&172,500&216,850\\End.Inv&32,500&35,500\\COGS&140,000&184,500\\Adj.End.Inv&-3,150&6,250\\Real COGS&143,150&178,250\\Real End-Inv&29,350&41,750\\\end{array}\right][/tex]
When overstated, it means an inventory with a book value of 100 is really 95
When understated, it means an inventory with a book value of 100 is really 105
This makes the COGS lower than it should in the first case
and higher than it should in the second
Notice:
Because of 2018 adjustment, beginning and availalbe good must be recalculate for 2019