Answer: it reduces the supply of loanable funds which raises the interest rate
Explanation: Contractionary monetary policy is a monetary policy that reduces the supply of money and increases interest rates and is carried out by the Fed through selling of bonds. This reduces the supply of loanable funds and increases the interest rate. It is driven by increases in the various base interest rates with a goal to reduce inflation by limiting the amount of active money in circulation.
Benefits and Costs of Global Sourcing A key activity in supply chain management is the approach an international company takes in determining where and how to source its inputs. Supply chain management has become an increasingly popular and strategically important topic in international business in recent years. An important activity in supply chain management is the approach an international company takes in determining where and how to source its inputs. This exercise examines potential benefits and costs associated with global sourcing. Read the case below and answer the questions that follow. MyBad Boards designs and manufactures high performance skateboards and related gear used in extreme sports. The company's products are sold widely in North America, Europe, Australia, and East Asia, with sales of more than $20 million last year. The company currently manufactures all of its products in the United States, using raw materials and components sourced domestically. However, after experiencing rapid growth during the past five years, the company is considering the alternative of purchasing some or all of its materials from international suppliers. Which is not a reason that MyBad Boards might choose to source globally
Answer:
1. "The potential for highly competitive local markets".
This is not a reason for sourcing globally. All of the other listed items are drivers for MyBadBoards to source globally.
Explanation:
Answer:
Explanation:
The question is incomplete because the options are absent but from the first sentence "Benefits and Costs of Global Sourcing (of raw materials used in the production of goods and services)", there is good enough information.
In Supply Chain Management, a company determines where and how to source it's inputs or raw materials (land, labour, capital and entrepreneur). MyBad Boards is an international company - it exports its goods or it sells them outside of the country of production which is the USA.
The company made sales revenue exceeding $20 million last year (the 5th year of experiencing rapid growth). The company manufactures all of its products in the United States ONLY. This means that the company has manufacturing plant(s) in the USA alone. All the company's inputs are also sourced from within the USA.
The company has now decided to consider purchasing SOME or ALL of its inputs globally (outside the United States). The question is which of the options (missing options) is not a reason for this decision? This means that ALL BUT ONE of the options will be possible reasons for the new decision/consideration.
I will herefore give possible reasons for the new consideration. They will be benefit-seeking reasons rather than cost-raising reasons. Any reason in your options (which are missing here) that is in negation with any of the below options, would be the answer you are looking for.
(A) MyBad Boards will consider global sourcing of inputs if the prices or cost of these inputs has increased domestically (that is, in the USA).
(B) MyBad Boards will consider global sourcing of inputs - after 5 years of doing so domestically - if there is now a high competition (with other extreme-sports gear producers) for these raw materials hence a shortage in their availability; within the United States.
(C) MyBad Boards will consider global sourcing of inputs if it wants to have a new production plant outside of the United States.
(D) MyBad Boards will consider global sourcing of inputs if it feels/discovers that it can get the same quality of raw materials for lower prices, outside of the United States.
(E) MyBad Boards will consider global sourcing of inputs if it wants to start a new production line and the inputs needed for this new product are unavailable or of low quality or of a relatively high price in the United States.
1. If Bodin Company plans to sell 480,000 units during the year, compute the number of units the firm would have to manufacture during the year. Hilton, Ronald. Managerial Accounting: Creating Value in a Dynamic Business Environment (p. 405). McGraw-Hill Higher Education. Kindle Edition.
Answer:
450,000 Units
Explanation:
The complete part of the question is as below:
Bodin Company budgets on an annual basis. The following beginning and ending inventory levels (in units) are planned for the year 20x1. Two units of raw material are required to produce each unit of finished product.
January 1 December 31
Raw material 35,000 45,000
Work in process 12,000 12,000
Finished goods 80,000 50,000
Solution:
Units to be manufactured to sell 480,000 Units = Sales + Closing Inventroy - Opening Inventory
= 480,000 + 50,000 - 80, 000 = 450, 000 Units
The number of units Bodin would have to manufacture is 450,000 Units
Answer:
A.
Bodin will have to manufacture 450,000 units and procure materials of 910units (if it plans to sell 480,000 units in the year)
B.
If it plans to sell 500,000 units however, it will have to produce additional stock of 470,000 units and procure materials of 950,000 units.
Explanation:
Production planning is a key requirement during the budget process
It works side by side with the sales budget. It is intended to fulfill the projected demand the business is positioning itself for in the period being reviewed.
It considers all levels of production needs in achieving each unit of production. Raw material, labour, conversion costs etc.
Kindly review the attached for the detailed presentation of answers.
Valutech Manufacturing uses job order costing for its production of MP3 players. The cost incurred for the current year for the production of the MP3 players totaled $12,000 of materials, $6,000 of direct labor costs, and $4,000 of manufacturing overhead applied. The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning work in process totaled $10,000, and the ending balance is $6,000. During the year the company completed production for 400 MP3 players.
Required:
1. What is the cost per unit for each MP3 player?
Answer:
$65 per unit
Explanation:
For computing the cost per unit first we have to determine the cost of goods manufactured which is shown below:
Cost of goods manufactured = Opening work in process + direct material cost + direct labor cost + manufacturing overhead cost - ending work in process
= $10,000 + $12,000 + $6,000 + $4,000 - $6,000
= $26,000
And, there is a production of 400 MP3 players
So, the cost per unit is
= $26,000 ÷ 400 MP3 players
= $65 per unit
Jovan's Movers rents out trucks with a crew of two on a daily basis, usually to homeowners who are moving or to companies with delivery problems. On one particular day Jovan is a truck short and intends to hire one from a local truck rental firm. However, he does not know how large the load is that needs to be moved.How big a truck should he rent? A large truck costs $200 per day (including insurance, fuel, etc.), a small truck $130 per day. A small truck is cheaper but if the load is too large, the crew may have to make two trips. Jovan assesses the additional cost of making two trips (overtime and truck mileage) at $150 beyond the costs for a single trip. He assesses the probability that two trips will be necessary if he rents a small truck at 0.40. Assume that if Jovan rents a large truck it can accommodate any size load in a single trip.a. Assuming there are no other ramifications to the decision, should Jovan rent a large truck or a small truck? Construct a decision tree (manually or using PrecisionTree) to support your answer and explain your recommendation. Would your answer change if the probability that two trips will be necessary is 50% instead of 40%?b. What is the most Jovan would pay to know for sure whether a small truck or a large truck would be adequate for the job? For example, suppose he could hire someone to inspect the contents of the move in advance. Construct a second decision tree to support your answer and estimate if the probability of needing two trips with a small truck is set to 40% as in part a).c. Suppose Jovan is risk averse, with a risk tolerance value of $1,000 (assume the exponential utility function applies). Would this change your answer to part a)?
Answer:
Explanation:
In this problem business of Jovan is to rent out trucks and earn revenues. On a particular day there is a shortage of one truck. It can be taken on rent from other party. If a big truck is hired, then any load can be carried. But the rental cost is $200. Small truck cannot carry weight beyond a range. In that case two trips are needed. Rental of one trip of small truck is $130. Cost of two trip is $150 extra. So it is $130+$150=$280. Probability of two trips is 40%. So based on these data, following decision tree diagram is draw:
From this decision tree expected rental cost of small truck based on probability is-
Expected rental of small truck =0.6 x $130 + 0.4 x $280
=$78+\$112
=$190
Decision: Since expected rental of small truck is $190, it is lower than rental of big truck of $200. So small truck is recommended.
If probabilities of trips are 50:50, then expected rental of small truck is-
Expected rental of small truck =0.5 x $130 + 0.5 x $280
=$65 + $140
=$205
Now it is more than rental of big truck. So hiring of big truck is recommended.
b) Now Jovan wants to hire an outside consultant. He will assess and recommend whether to hire a big truck or a small truck. If he recommend for big truck, then big truck will be hired. Otherwise a small truck will be bought. As per current situation probability of two trip is 40%. If consultant approves this situation, then big truck will be hired. Thus probability of hiring big truck is 40% under recommended scenario. So probability of hiring small truck with one trip is 60%. On this basis decision chart is drawn below:
Based on this diagram, expected cost of hiring a truck is-
Expected rental =0.4 x $200 + 0.6 x $130
= $80 + $78
= $158
If you compare this expected cost with the expected cost of $190 in part (a), then it is lower by $190-$158=$32
Hence, maximum $32 can be paid to consultant for hiring and taking perfect decision.
c) Now Jovan has been taken as risk averser. His risk tolerance value is $1,000. Suppose utility function is exponential of following form-
U=e^{P} where p is the probability of two trips by small truck
As a risk averser he will undertake risk only when this U value is $1,000.
U=e^{P} = $1,000
Take log on both side to get-
Plog e = log1,000
{P}{log}2.71828 = log1,000 [ since e =2.71828]
{P}= 3 / 0.43429189
=6.929 percent
So the risk averse Jovan will go for small truck only when probability of two trips for small car is 6.929 percent. Here it is 40%. So big truck will be hired.
g Texas Corporation purchases a piece of equipment on January 1 for $300,000 and the equipment has an expected useful life of ten years. Its salvage value is estimated to be $20,000. Assuming Texas uses the double-declining balance depreciation method, what would be the accumulated depreciation at the end of the second year
Answer:
$108,000
Explanation:
For computing the accumulated depreciation for the end of the second year
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 10
= 10
Now the rate is double So, 20%
In year 1, the original cost is $300,000, so the depreciation is $60,000 after applying the 20% depreciation rate
And, in year 2, the depreciation is
=($300,000 - $60,000) × 20% = $48,000
So, the accumulated depreciation at the end of the second year is
= $60,000 + $48,000
= $108,000
Fanning Company started year 1 with $135,000 in its cash and common stock accounts. During year 1, Fanning paid $101,250 cash for employee compensation and $31,050 cash for materials. Required Determine the total amount of assets and the amount of expense shown on the year 1 financial statements assuming Fanning used the labor and materials to make 1,500 chairs. Further, assume that Fanning sold 1,200 of the chairs it made. State the name(s) of the expense account(s) shown on the income statement. Determine the total amount of assets and the amount of expense shown on the year 1 financial statements assuming Fanning used the labor and materials to provide dental cleaning services to 500 patients. State the name(s) of the expense account(s) shown on the income statement.
Answer:
Fanning Company
A) Total amount of assets and total amount of expense & names of expenses in Financial Statements, assuming Fanning used labor and materials to make 1,500 chairs and sold 1,200:
i) Total Assets =
Cash = beginning cash balance less expenses plus revenue = $(135,000 - 101,250 - 31,050 + 105,840) = $108,540
Inventory $(132,300 - 105,840) = $36,460
Total = $135,000
ii) Names and Total Amount of Expenses on Income Statement:
a) Manufacturing Wages = $101.250
b) Direct Materials = $31,050
Total Production Costs = $132,300
Less Cost of Sales (1,200 x ($132,300/1,500)) = $105,840
Closing Inventory ((1,500 - 1,200) x ($132,300/1,500)) = $26,460
B) Total amount of assets and total amount of expense & names of expenses in Financial Statements, assuming Fanning used labor and materials to provide dental cleaning services to 500 patients.
i) Total Assets =
Cash = beginning cash balance less expenses plus revenue = $(135,000 - 101,250 - 31,050 + 132,300) = $135,000
Total = $135,000
ii) Names and Total Amount of Expenses on Income Statement:
a) Service Materials = $31,050
b) Service Labour = $101,250
Explanation:
a) For a manufacturing company, there is inventory of unsold finished goods to account for. The inventory value is the difference between the cost of goods sold and the cost of goods available for sale.
b) For a service company, there is no much inventory to account for, especially in this case. The whole expenses were used for rendering dental cleaning services for 500 patients.
c) In this example, we have assumed that revenue was equal to the cost of sales. There was no profit to be calculated. So it is assumed that the cash balance increased by the amount of cost of sales/revenue.
d) The total assets did not change because at the end of the activities no profit value was made. The assets would have increased or decreased if some profits or losses were recorded in both cases.
Final answer:
The total amount of assets and expenses for Fanning Company would differ depending on whether they manufacture chairs or provide services. Assets include remaining cash and inventory if applicable, while expenses are the cost of labor and materials. The financial statements would show these under Employee Compensation Expense and Materials Expense.
Explanation:
To determine the total amount of assets and the amount of expense shown on the year 1 financial statements for Fanning Company when they are creating chairs, we initially consider the opening cash balance and subtract the cash paid for wages and materials. This results in a remaining cash balance. For the chairs that are not sold, they remain as inventory on the balance sheet, which is an asset. As for the sold chairs, the revenue from the sales should be added to the total assets.
The expenses shown in this scenario would be the cost of labor and materials associated with the manufactured chairs. Therefore, the expense accounts shown on the income statement would be Employee Compensation Expense and Materials Expense.
When providing dental cleaning services, the expenses would likely be the same (Employee Compensation and Materials), assuming all labor and materials were utilized in providing the service. As a service, there would be no inventory, so all expended costs would directly reflect on the income statement as expenses, and any remaining cash would be part of the assets.
If we consider the provided reference information, the accounting profit is calculated by subtracting the total expenses (labor, capital, and materials) from the sales revenue. Therefore, the accounting profit would be: $1,000,000 (sales revenue) - $600,000 (labor) - $150,000 (capital) - $200,000 (materials) = $50,000.
Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.8, while the other comes up with an estimate of 1.4. Explain why these estimates are different in terms of the assumptions that each economist is making. A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed. B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both. C. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both. D. Unlike the first economist, the second economist must be assuming that the government expenditure is devoted to useful projects.
Answer:
B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both.
Explanation:
Walker, Inc., uses a standard cost system. Overhead cost information for Product One for the month of October follows: Total actual overhead incurred $14,750 Fixed overhead budgeted $1,800 Total standard overhead rate per direct labor hour $4.25 Variable overhead rate per direct labor hour $3.75 Standard hours allowed for actual production 3,500 What is the overall (or net) overhead variance?
Answer:
$125
Explanation:
Total actual overhead incurred $14,750
Less Standard hours allowed for actual production 3,500 ×Total standard overhead rate per
direct labor hour $4.25 ($14,875)
Overhead variance $125
Therefore the overall (or net) overhead variance is $125
McCoy's Fish House purchases a tract of land and an existing building for $990,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $2,900. The company also pays $13,800 in property taxes, which includes $8,900 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $4,900 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $49,500 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $4,800 and pays an additional $10,900 to level the land. Required: Determine the amount McCoy’s Fish House should record as the cost of the land
Answer:
$ 1,001,800
Explanation:
The following costs will be included in th cost of land
Purchase cost: 990,000
Closing cost: 2,900
Back Taxes: 8,900
(land taxes are payed every year, so they can't be included in the cost of land)
Total cost of land= 990,000+2,900+8,900= 1,001,800
Del Gato Clinic's cash account shows a $15,307 debit balance and its bank statement shows $13,567 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $1,199. The June 30 bank statement lists a $15 bank service charge. Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398. The June 30 cash receipts of $2,933 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. 1.Prepare its bank reconciliation using the above information.
Answer and Explanation:
The preparation of the bank reconciliation is presented below:
Del Gato Clinic's
Bank reconciliation statement
June 30
Particulars Amount Particulars Amount
Bank cash balance $13,567 Company cash balance $15,307
Add: Deposits Add: Recording error $9
in transit $2,933
Less: Outstanding Less: service fee -$15
Check - $1,199
Bank balance Company balance
After reconciliation $15,301 After reconciliation $15,301
The recording error is come from
= $398 - $389
= $9
And we do the adjustment accordingly that increased and decreased the company cash and bank cash balance
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
what role does profit play in a mixed market economy
Answer:
A mixed economy has three of the followingcharacteristics of a market economy.
Answer:
it acts as an incentive for people to start businesses
Explanation:
profit is a reward for entrepreneurial activity, including risk taking and innovation
had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year
Answer:
$1,503.75
Explanation:
Sales $12,500
Operating costs $7,025
Operating income (EBIT) $5,475
WACC 9.5%
Tax rate 40%
Investor-supplied capital $18,750
EVA = EBIT(1 - T) - Investor Capital × WACC
EVA = $3,285.00 -$1,781.25
EVA = $1,503.75
Therefore the management add $1,503.75 value to stockholders' wealth during the year.
All of the following are steps in the budgetary control process except: Multiple Choice Establish new objectives and a new budget. Take corrective and strategic actions. Develop the budget from planned objectives. Compare actual results to budgeted amounts and analyze differences. Communicate differences to supervisors to facilitate promotion decisions.
Answer:
Communicate differences to supervisors to facilitate promotion decisions
Explanation:
Budgets are used to control firm activities. In the process of controlling activities, managers and supervisors might meet the targets, this would be a good thing as the practices they applied are used in areas not meeting targets. thus budgets are used for motivation purposes instead of facilitating promotion decisions
Final answer:
The budgetary control process includes steps such as establishing objectives, developing the budget, and taking corrective actions, but does not include communicating differences for promotion decisions, which is outside its primary focus.
Explanation:
The budgetary control process is a crucial aspect of organizational management, ensuring that operations align with the financial goals and objectives set at the beginning of a financial period. Each step in this process is designed to enhance efficiency, accountability, and performance. Of the options provided, all steps are part of the budgetary control process except for "Communicate differences to supervisors to facilitate promotion decisions." This option does not directly contribute to the control or management of budgets but rather deals with personnel decisions which are outside the primary focus of budgetary control. The key steps in the budgetary process include establishing objectives, developing a budget based on these objectives, comparing actual results with budgeted amounts, and taking corrective actions as necessary.
Analysts project the following cash flows for Hopkin’s Corporation during the next three years: Year 1: – $27 million (this is negative $27 million), Year 2: $42 million, Year 3: $52 million. Free cash flow is then expected to grow at a constant 6% rate. Hopkin’s weighted average cost of capital is WACC = 11%. 12) (8 pts) What is Hopkin’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.
Answer:
The terminal value is $1102.4 million
Explanation:
The terminal value is the value of future cash flows discounted back to the period from where the cash flow growth becomes constant. The calculation of terminal value is important in Discounted cash flow models because terminal value contains a large percentage of the company's value. The formula to calculate the terminal value of this company will be,
Terminal value = FCF3 * (1+g) / (WACC - g)
Terminal Value = 52 * (1+0.06) / (0.11 - 0.06)
Terminal Value = $1102.4 million
Trio Company reports the following information for the current year, which is its first year of operations.
Direct materials $11 per unit
Direct labor $19 per unit
Overhead costs for the year
Variable overhead $ 2 per unit
Fixed overhead $90,000 per year
Units produced this year 22,500 units
Units sold this year 16,500 units
Ending finished goods inventory in units 6,000 units
Compute the cost per unit of finished goods using 1) absorption costing and 2) variable costing.
Answer:
Absorption costing
Full cost per unit = $36
Variable costing
marginal cost = $32
Explanation:
Absorption costing
Absorption costing values inventories and units produced using full cost per unit.
Full cost per unit
= Direct material cost + Direct labour + variable overheads + Fixed prod overhead
Fixed overhead per unit
= 90,000/22,500
= $4 per unit
Full cost per unit = 11 + 19 +2 + 4 =$36
Variable costing method
Variable (marginal) costing methods values inventories and units produced using variable cost per unit i.e marginal cost
Marginal cost = Direct material cost + Direct labour + variable overheads
Cost per unit = 11 + 19 +2 =$32
"Noise" (in the traditional communication process) refers to: A. any distractions that reduce the effectiveness of the communication process. B. radio advertising interference only. C. messages which are too loud or bold. D. efforts by a firm's competitors to block its message channel. E. the encoded message before it is decoded.
Answer:
A. any distractions that reduce the effectiveness of the communication process
Explanation:
Noise is the disturbance occurs between the sender and the receiver or the sender and the audience through which the distractions of the persons could occur
With the presence of the noise, it is very difficult to communicate with someone as there is a chance of miscommunications that reflects the reduction in the effectiveness of the communication process. It can be in terms of the sound of the machine, a mental disturbance, etc
Norton Co., a U.S. corporation, sold inventory on December 1, 2018, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate: $ 1.7241 Dec. 31 Spot rate: $ 1.8182 Jan. 30 Spot rate: $ 1.6666 What amount of foreign exchange gain or loss should be recorded on January 30?
Answer:
exchange loss on 30 January is -$1,516
Explanation:
The amount of loss or gain to recognize in the books on January 30 depends on the movement in exchange rate between December 31 and January 30.
Invariably,exchange rate has declined by -0.1516 (1.6666-1.8182) between December 31 and January 30,hence the exchange loss that should be recorded on January is shown below:
exchange loss= -0.1516 *10,000=-$1,516
Suppose velocity is constant, the growth rate of real GDP is 3% per year, and the growth rate of money is 5% per year. Calculate the long-run rate of inflation according to the quantity theory in each of the following cases:
a. What is the rate of inflation in this baseline case?
b. Suppose the growth rate of money rises to 10% per year.
c. Suppose the growth rate of money rises to 100% per year.
d. Back to the baseline case, suppose real GDP growth rises to 5% per year.
e. What if real GDP growth falls to 2% per year?
f. Return to the baseline case and suppose the velocity of money rises at 1% per year. What happens to inflation in this case? Why might velocity change in this fashion?
Answer:
Explanation:
a)What is the rate of inflation in this baseline case?
( 5% - 3% = 2%
b)Suppose the growth rate of money rises to 10% a year.
10% - 3% = 7%
c)Suppose the growth rate of money rises to 100% a year.
One should be careful here. As we mentioned in the early days, the equalities on growth rates work if the growth rates are small. Here, we have a large growth rate and therefore we should measure Inflation using the initial quality of the quantity theory of money.
Inflation is 94%. (Check the attached document for workings)
d. Back to the baseline case, suppose real GDP growth rises to 5% per year.
5% - 5% = 0%
e)What if real GDP growth falls to 2% per year?
5% - 2% = 3%
f)Return to the baseline case and suppose the velocity of money rises at 1% per year. What happens to inflation in this case? Why might velocity change in this fashion?
NB: the second attached document has the workings.
Inflation increases as compared to original situation. Velocity of money might increase if people are making more transactions on average. The advent of ATMs may increase the velocity of money.
Work in process, beginning:
Units in process 900
Percent complete with respect to materials 60 %
Percent complete with respect to conversion 10 %
Costs in the beginning inventory:
Materials cost $ 600 Conversion cost $ 2,150
Units started into production during the month 14,000
Units completed and transferred out 14,500
Costs added to production during the month:
Materials cost $ 39,872
Conversion cost $ 396,630
Work in process, ending:
Units in process 400
Percent complete with respect to materials 70 %
Percent complete with respect to conversion 70 %
Using FIFO methods, determine the equivalent units of production for materials and conversion costs.
Answer:
FIFO Equivalent Units Materials = 15,320
FIFO Equivalent Units Conversion = 15,680
Explanation:
FIFO methods,
The equivalent units of production
Materials and conversion costs.
Particulars Units % of Completion Equivalent Units
Materials C. Costs Materials C. Cost
Beg WIP 900 60 10 540 90
Units Transferred 14500 100 100 14500 14500
WIP Ending 400 70% 70% 280 280
Total 14900 15,320 15,680
FIFO Equivalent Units Materials = 15,320
FIFO Equivalent Units Conversion = 15,680
In Fifo method the percentage of the worked units is calculated to find the equivalent units of production.
A one-year call option contract on Cheesy Poofs Co. stock sells for $1,250. In one year, the stock will be worth $57 or $78 per share. The exercise price on the call option is $70. What is the current value of the stock if the risk-free rate is 2 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
Value of call option = 3.92
Explanation:
Stock price - Exercise price, 0
When share price is $57,
Payoff = Max (57 - 70, 0)
Payoff = Max (-13, 0)
Payoff = 0
When share price is $78
Payoff = Max (78 - 70, 0)
Payoff = Max (8, 0)
Payoff = 8
Value of call option = (Expected payoff * Probaliltiy) / (1 + Interest for the period)
Considering probability as 50% for each stock
Value of call option = (0 * 0.5 + 8 * 0.5) / (1 + 0.02)
Value of call option = 3.92
Software Distributors reports net income of $53,000. Included in that number is depreciation expense of $9,000 and a loss on the sale of land of $4,800. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $23,000, a decrease in inventory of $14,000, and an increase in accounts payable of $43,000. Required Prepare the operating activities section of the statement of cash flows using the indirect method.
Answer and Explanation:
Cash flows (Indirect method) from Operating Activities.
Particular Amount
Net Income $53,000
Adjustment:
Add: Depreciation expense $9,000
Loss on sale of land $4,800
Decrease in A/c receivables $23,000
Decrease in Inventory $14,000
Increase in A/c payable $43,000
Net Cash flows from Operating activities $146,800
First National Bank charges 13.9 percent compounded monthly on its business loans. First United Bank charges 14.2 percent compounded semiannually. Calculate the EAR for First National Bank and First United Bank.
Answer:
EAR for First National Bank is 14.82%
EAR for First United Bank = is 14.70%
Explanation:
Effective Annual Rate (EAR) = (1 + stated rate/ number of compounding periods)^number of compounding periods - 1
EAR for First National Bank = (1+13.9%/12)^12 - 1 = 14.82%
EAR for First United Bank = (1+14.2%/2)^2 - 1 = 14.70%
Chang Industries has bonds outstanding with a par value of $216,000 and a carrying value of $227,000. If the company calls these bonds at a price of $221,000, the gain or loss on retirement is:
A. 5,000 gainB. 6,000 gainC. 6,000 lossD. 5,000 lossE. 11,000 gain
Answer:
A. $6,000 gain
Explanation:
Data provided
Carrying Value = $227,000
Call Price = $221,000
The computation of gain or loss on retirement is shown below:-
Gain on Retirement = Carrying Value - Call Price
= $227,000 - $221,000
= $6,000
Therefore for computing the gain on retirement we simply deduct the call price from carrying value.
Here are the 2018 and 2019 (incomplete) balance sheets for Newble Oil Corp.BALANCE SHEET AT END OF YEAR(Figures in $ millions)Assets 2018 2019 Liabilities and Shareholders' Equity 2018 2019Current assets $ 319 $ 465 Current liabilities $ 255 $ 249Net fixed assets 1,290 1,465 Long-term debt 875 1,010a&b. What was shareholders' equity at the end of 2018 and 2019?c. If Newble paid dividends of $145 million in 2019 and made no stock issues, what must have been net income during the year?d. If Newble purchased $345 million in fixed assets during 2019, what must have been the depreciation charge on the income statement?e. What was the change in net working capital between 2018 and 2019?f. If Newble issued $218 million of new long-term debt, how much debt must have been paid off during the year? (Enter your answer in millions.)
Answer:
Newble Oil Corp Balance Sheet for 2018:
Current Assets - $319 million
Net Fixed Assets - $1,290 million
Total Assets = $1,609 million
Current Liabilities - $255 million
Long-term Debts - $875 million
Total Liabilities = $1,130 million
a) Equity = Total Assets ($1,609 million) minus Total Liabilities ($1,130 million) = $479 million
Newble Oil Corp Balance Sheet for 2019:
Current Assets - $465 million
Net Fixed Assets - $1,465 million
Total Assets = $1,930 million
Current Liabilities - $249million
Long-term Debts - $1,010 million
Total Liabilities = $1,259 million
b) Equity = Total Assets ($1,930 million) minus Total Liabilities ($1,259 million) = $671 million
c) Net Income during 2019, if Newble paid dividends of $145 million:
2019 Equity plus Dividends paid minus 2018 Equity = Net Income
($671 + $145 - $479) million = $337 million
d) Depreciation charge for 2019 if Newble purchased $345 million in fixed assets:
2018 fixed assets plus new acquisition minus 2019 fixed assets =
$(1,290 + 345 - 1,465) million = $170 million
e) Change in net working capital between 2018 and 2019:
Net working capital = Current Assets minus Current Liabilities
2018 net working capital = $319 - $255 = $64 million
2019 net working capital = $465 - $249 = $216 million
Therefore, the change in net working capital is $216 - $64 = $152 million.
f) Debt paid off during the year:
2018 debt plus new issue minus 2019 debt balance equals debt paid off.
$(875 + 218 - 1,010) millions = $83 million
Explanation:
a) Equity is the difference between total assets and total liabilities. In accounting equation, assets = liabilities + equity.
b) Dividends is a distribution from retained earnings (equity). It decreases the retained net income, which increases the equity.
c) Depreciation also decreases the assets. To find the charge for the period, we add compare the new assets balance with the old, taking into consideration new acquisitions.
d) Net working capital is the difference between current assets and current liabilities.
e) Debts paid off during the year can be obtained by comparing old debt balance with the new and additional debt issued during the period.
The shareholders' equity in 2018 and 2019 was $479 million and $671 million, respectively. The net income for 2019 was $337 million. The company spent $170 million in depreciation charges and had a net working capital change of $69 million. The company repaid $83 million in long-term debt.
Explanation:The balance sheet is essentially a snapshot of a company's financial position at a specific point in time. It is composed of assets, liabilities, and shareholders' equity, and it always balances, meaning that the total assets are always equal to the total liabilities and shareholders' equity combined.
To calculate the shareholders' equity, you simply subtract the total liabilities from the total assets. Therefore, for 2018:
Shareholders' Equity = Total Assets - Total Liabilities = $1,609 ($319 + $1,290) - $1,130 ($255 + $875) = $479 million
Following the same formula for 2019 gives:
Shareholders' Equity = Total Assets - Total Liabilities = $1,930 ($465 + $1,465) - $1,259 ($249 + $1,010) = $671 million
Net Income can be calculated by adding dividends to the change in shareholders' equity, which leads to:
Net Income = Dividends + Change in Shareholders' Equity = $145 + $192 ($671 - $479) = $337 million
The Depreciation Charge can be calculated by subtracting the net increase in fixed assets ($1,465 - $1,290 = $175 million) from the gross purchase of fixed assets. So:
Depreciation Charge = Gross Purchase of Fixed Assets - Net Increase in Fixed Assets = $345 - $175 = $170 million
Change in net Working Capital can be computed as:
Change in Net Working Capital = Current Assets 2019 - Current Assets 2018 - (Current Liabilities 2019 - Current Liabilities 2018) = $69 million
If Newble issued $218 million of new Long-term Debt, to find the repaid debt we must subtract the net change in debt between 2019 and 2018 from it:
Repayment of Long-term Debt = New Long-term Debt Issued - Change in Long-term Debt = $218 - $135 ($1,010 - $875) = $83 million
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"Southern Foods just paid an annual dividend of $3.10 a share. Management estimates the dividend will increase by 4 percent for one year then 8 percent for two years then 2% forever. The required rate of return is 12 percent. What is the value of this stock today"
Answer:
THE VALUE OF THE STOCK TODAY IS $35.63
Explanation:
The dividend discount model bases the value of the stock on the present value of the expected future dividends from the stock. Using the three stage growth model of DDM, we can calculate the price of this stock today. The price/value of this stock today is,
P0 = 3.1 * (1+0.04) / (1+0.12) + 3.1 * (1+0.04) * (1+0.08) / (1+0.12)^2 +
3.1 * (1+0.04) * (1+0.08)^2 / (1+0.12)^3 +
[ (3.1 * (1+0.04) * (1+0.08)^2 * (1+0.02) / (0.12 - 0.02)) / (1+0.12)^3 ]
P0 = $35.63
During 2019, Bold Fashion, Inc., recorded credit sales of $710,000. Based on prior experience, the company estimates a 2 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. On May 12, 2019, an account receivable of $2,600 from the prior period was determined to be uncollectible and was written off. b. Record the bad debt expense for 2019 using the Percentage of Credit Sales method.
Answer:
a. On May 12, 2019, an account receivable of $2,600 from the prior period was determined to be uncollectible and was written off.
Debit Allowance for doubtful debt $2,600
Credit Accounts receivable $2,600
Being entries to write off accounts receivable previously provided for.
If the account had not been provided for before,
Debit Bad debt expense $2,600
Credit Accounts receivable $2,600
b. Bad debt expense for 2019 using the Percentage of Credit Sales method
Debit Bad debt expense $14,200
Credit Allowance for Doubtful Debts $14,200
Being entries to record debts that may be uncollectible
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Bad debt at 2 % of credit sales
= 2% * $710,000
= 2/100 * $710,000
= $14,200
The Oxford Heating Company has been very successful in the past four years. Over these years, it paid common stock dividend of $4 in the first year, $4.20 in the second year, $4.41 in the third year, and its most recent dividend was $4.63. The company wishes to continue this dividend growth indefinitely. The expected growth rate in dividends is closest to
Answer:
The correct answer is 5%.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the growth rate by using following formula:
Growth rate = (Dividend of 3rd year ÷ Dividend of 1st year)^1/2 -1
By putting the value in the formula, we get
Growth rate = ($4.41 ÷ $4 )^1/2 - 1
= ( $0.41)^1/2 -1
= 0.05 or 5%
The expected growth rate in dividends for the Oxford Heating Company can be calculated using the compound annual growth rate (CAGR) formula. Over three periods, the dividends grew from $4.00 to $4.63, which equates to a CAGR of approximately 5%.
Explanation:The student is asking for assistance in calculating the expected growth rate of dividends for the Oxford Heating Company which has shown a pattern of increasing dividend payments over four years. To find this growth rate, we can use the formula for the compound annual growth rate (CAGR), which is:
CAGR = (EV / BV)^(1/n) - 1
where EV is the ending value, BV is the beginning value, and n is the number of periods.
Using the given dividends:
Year 1: $4.00Year 2: $4.20Year 3: $4.41Year 4: $4.63we have EV = $4.63, BV = $4.00, and n = 3 (as we are looking at the growth over three periods - from Year 1 to Year 4).
Applying the values to the CAGR formula gives us the expected growth rate of approximately 5%.
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The following table reports real income per person for several different economies in the years 1960 and 2010. It also gives each economy's average annual growth rate during this period. For example, real income per person in the Central African Republic was $1,010 in 1960, and it actually declined to $628 by 2010, The Central African Republic's average annual growth rate during this period was -0.95%, and it was the poorest economy in the table in the year 2010.
The real income-per-person figures are denominated in U.S. dollars with a base year of 2005. The following exercises will help you to understand the different growth experiences of these economies.
Economy Real Income per Person in 1960 (Dollars) Real Income per Person in 2010 (Dollars) Annual Growth Rate (Percent)
Australia 13,817 37,338 2.01
Finland 8,837 31,601 2.58
Thailand 772 8,467 4.91
Ireland 7,807 41,558 3.40
Pakistan 717 2,477 2.51
Central African Republic 1,010 628 -0.95
Indicate which economy satisfies each of the following statements.
Statment Australoa Cental African Republic Finland Ireland Pakistan Thailand
This economy experienced the fastest rate of growth in real income per person from 1960 to 2010
This economy had the highest level of real income per person in the year 2010
Consider the following list of four countries. Which economy began with a level of real income per person in 1960 that was below that of Finland and grew fast enough to catch up with and surpass Finland's real income per person by 2010
a. Australia
b. Central African Republic
c. Ireland
d. Pakistan
Answer:
Thailand
Ireland
c
Explanation:
Thailand has the highest annual growth rate so it is fastest economy to grow in rela income per person form 1960 to 2010 that is 4.91%
Irleand has the highest real income per person in year 2010 that is $41,558
Ireland, Pakistan and Thailand had lower real income per person than Finland in 1960 but only Ireland had higher real income per person than Finland in 2010.
Boland Company sells a product that is priced at $20 per unit. The per unit contribution margin is equal to 25 percent of the sales price. If fixed costs amount to $55,000 and the company has a desired profit of $20,000, the number of units that must be sold to earn the desired profit is:______
Answer:
The number of units needed to be sold to earn a desired profit is 15000 units.
Explanation:
The desired profit is the profit that a firm wants to earn. The umber of units needed to earn a desired profit can be calculated using the break even approach.
Under break even the number of units required to break even are calculated by dividing the total fixed costs by the contribution margin per unit.
To calculate the number of units needed to earn desired profit, we need to add the desired profit figure to the fixed cost and divide the total by contribution margin per unit.
The contribution margin per unit is = 20 * 0.25 = $5 per unit
The units needed to earn desired profit = (55000 + 20000) / 5
Units needed to earn desired profit = 15000 units
Assume that in recent years both expected inflation and the market risk premium (rM − rRF) have declined. Assume also that all stocks have positive betas. Which of the following would be most likely to have occurred as a result of these changes? a. The required returns on all stocks have fallen by the same amount. b. The average required return on the market, rM, has remained constant, but the required returns have fallen for stocks that have betas greater than 1.0. c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas. d. Required returns have increased for stocks with betas greater than 1.0 but have declined for stocks with betas less than 1.0. e. The required returns on all stocks have fallen, but the decline has been greater for stocks with lower betas.
Answer: c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.
Explanation:
The Capital Asset Pricing Model formula can be applied to this question.
The formula is,
Er = rF + b( rM - rF)
Where
Er is the required return
rF is the risk free rate
b is beta
rM - rF is the market premium.
Now looking at that formula, you can tell that if market premium falls, the required return would fall as well.
However, for stocks with larger betas, they would drop more spectacularly because they would be coming from higher values to lower.
Take a stock with beta 4 vs one with beta 5 for instance.
Assume that Market premium went from 6% to 3% and a risk free rate of 3%.
Beta 5 stock
When market premium is 6,
= 3% + 5 (6%)
= 33%
When market premium is 3,
= 3% + 5(3%)
= 18%
Beta 4 stock
When market premium is 6
= 3% + 4 (6%)
= 27%
When market premium is 3
= 3% + 4 (3%)
= 15%
Notice how the stock with beta 5 fell by 15% while the stock with beta 4 fell by 12%.