Answer:
current yield 8.2089552%
YTM = 8.05%
effective annual yield = 4.92%
Explanation:
(A)
current yield = C/P
coupon payment / market price
8.8/107.2 = 0.082089552 = 8.2089552%
(B)
[tex]P = \frac{C}{2} \times\frac{1-(1+YTM/2)^{-2t} }{YTM/2} + \frac{CP}{(1+YTM/2)^{2t}}[/tex]
First par being the present value of the coupon payment and second the redeem of the face value at the end of the bond.
market price 107.2
face value 100
time = 19
rate 8.8%
C = annual coupon payment 100 x 8.8% = 8.8
You solve this using a financial calculation and get the semiannual rate
YTM/2 = 0.040268160
then multiply by 2 to get the annual YTM
0.040268160 x 2 =
YTM = 0.08053632 = 8.05%
(C)
Effective Annual Yield
[tex](1+HPR)^{365/time} -1 = EAY[/tex]
where:
Holding period return:
[tex]\frac{Net \: Return}{Investment} = HPR[/tex]
In this case:
coupon payment + redem - investment = net return
8.8 * 19 + 100 - 107.2 = 160
160/107.2 = 1.492537313
Then
[tex](1+HPR)^{365/time} -1 = EAY[/tex]
[tex](1+1.142537313)^{\frac{365}{19\times365}} -1 = EAY[/tex]
EAY = 0.049242509 = 4.9242509%
The properties of a bond, such as the coupon rate, maturity date and face value, are used to calculate the current yield, the yield to maturity (YTM), and the effective annual yield of a bond. The yield represents the return an investor will receive by holding the bond.
Explanation:A bond has several parts. It is an 'I owe you' note that an investor receives in exchange for capital or money which the borrower has to pay back at maturity. The specifics of a bond are usually given by the coupon rate or interest rate, its maturity date, and its face value, which is the amount the borrower agrees to pay the investor at maturity.
The current yield on a bond is calculated by the annual income (the interest payment) divided by the current market price. For the bond from Workman Software, the annual interest income is 8.8% of its face value and is currently sold for 107.2% of par. The yield to maturity or YTM represents the total returns expected on a bond if it is held until maturity. This considers both the coupon payments received semiannually and the face value received at the end of maturity. Finally, the effective annual yield takes into account the compounding of interest in a given year.
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Suds's Bottling Company does bottling, labeling, and distribution work for several local microbreweries. The demand rate for Wortman's beer is 600 cases (24 bottles each) per week. Suds's bottling production rate is 2 comma 300 cases per week, and the setup cost is $700. The value of inventory is $11.50 per case, and the annual holding cost is 30 percent of the inventory value. Suds's Bottling Company operates 52 weeks per year. What is the economic production lot size?
Answer:
The economic production lot size will be 3,558 cases
Explanation:
We should use the economic order quantity formula
[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]
How to Remember:
Demand per year and order cost goes in the dividend.
Holding cost goes in the divisor.
D= annual demand = 600 x 52 = 31,200
S= setup cost = 700
H = Annua holding cost is 30% of invenotry value:
11.50 x 30% = 3.45
[tex]Q_{opt} = \sqrt{\frac{2\times31,200\times700}{3.45}}[/tex]
EOQ =3558
Final answer:
The question involves calculating the economic production lot size for Suds's Bottling Company for Wortman's beer using the EPQ formula, considering various given costs and rates, such as demand rate, production rate, setup cost, value of inventory, and holding cost rate.
Explanation:
The question asks for the calculation of the economic production lot size for Wortman's beer, being produced and distributed by Suds's Bottling Company. To find this, we use the Economic Production Quantity (EPQ) formula, which is designed to determine the most efficient quantity to order that minimizes the total holding costs and setup costs during production. Given that the demand rate is 600 cases per week, the production rate is 2,300 cases per week, the setup cost is $700, the value of inventory is $11.50 per case, and the annual holding cost rate is 30% of the inventory value, we can proceed with the calculation. The EPQ formula is: EPQ = sqrt((2DS/H) * (P/(P-D))), where D = demand rate (600 cases/week), S = setup cost ($700), H = holding cost per unit per year ($11.50 * 30%), and P = production rate (2,300 cases/week). Plugging in these numbers, we calculate the economic production lot size Suds's should aim for to minimize costs while meeting demand efficiently.
Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Allocation Basis Salaries $ 34,000 Number of employees Depreciation 22,000 Cost of goods sold Advertising 42,000 Net sales Item Drilling Grinding Total Number of employees 600 1,400 2,000 Net sales $ 328,000 $ 492,000 $ 820,000 Cost of goods sold $ 83,600 $ 136,400 $ 220,000 The amount of the total office expenses that should be allocated to Drilling for the current period is:
Answer:
The total amount of expenses that should be allocated towards drilling is $35,360.
Explanation:
We have been given three categories of office expenses -
SALARY = $34,000
DEPRECIATION = $22,000
ADVERTISING = $42,000
and we have to calculate the expenses allocated to drilling departments, so we will allocate from each of the three given expenses the proportion of expenses which belong to drilling department.
SALARY = $34,000 X Number of employees in drilling / total number of
employees
= $34,000 x 600 / 2000
= $10,200
DEPRECIATION = $22,000 X Cost of goods sold for drilling / total cost of
goods sold
= $22,000 x $83,600 / $220,000
= $8,360
ADVERTISING = $42,000 X Net sales from drilling / total net sales
= $42,000 x 328,000 / $820,000
= $ 16,800
TOTAL DRILLING EXPENSES = $10,200 + $8360 + $16,800
= $35,360
The total office expenses allocated to the Drilling department for the current period is $35,360, calculated by distributing the expenses of salaries, depreciation, and advertising across the departments according to the given allocation bases.
To determine the amount of the total office expenses that should be allocated to the Drilling department, we need to distribute each category of office expenses based on the specified allocation bases provided: salaries on the number of employees, depreciation on the cost of goods sold, and advertising on net sales. The calculation for each category of expense is as follows:
Salaries:
$34,000 * (Drilling employees / Total employees) = $34,000 * (600 / 2000) = $10,200
Depreciation: $22,000 * (Drilling COGS / Total COGS) = $22,000 * ($83,600 / $220,000) = $8,360
Advertising: $42,000 * (Drilling Net Sales / Total Net Sales) = $42,000 * ($328,000 / $820,000) = $16,800
Addition of all three allocated expenses provides the total expense allocation for the Drilling department:
Total allocated to Drilling = Salary allocation + Depreciation allocation + Advertising allocation = $10,200 + $8,360 + $16,800 = $35,360.
Bank A has checkable deposits of $10 million and total reserves of $1 million. The required reserve ratio is 9 percent. The bank has excess reserves of
Answer:
The bank has excess reserves of $100,000.
Explanation:
The deposits here are $10 million.
The required reserve ratio is 9%.
The required reserve will be,
=reserve ratio*total deposits
=9/100*$10,000,000
=$900,000
Here, the required reserve is $900,000.
So, the excess reserve will be,
=total reserve - required reserve
=$(1,000,000-900,000)
=$100,000
A jewelry supply house incurred $300,000 in factory overhead cost, of which $50,000 was identified as the cost of sanders for polishing tool bits. It also incurred rent of $75,000 for the building in which the tool bits and other products were manufactured. 20% of the building space is used to manufacture tool bits. It paid $100,000 in sales commission for tool bits. Under activity-based costing, the jeweler will identify ________ as product cost for tool bits.
Answer:
The correct answer is $165,000
Explanation:
Firstly the activity based costing is one of the most popular method of costing that is mainly used by manufacturing companies because of its accuracy , as it produces true cost data and properly classify's the cost incurred by the corporation in its process of manufacturing goods. Here cost would be identified and assigned to the overhead activities of the company and then those costs would be assigned to those goods.
Here for calculating the product cost for the tool bits we will see which cost are directly related to the tool bits.
So product cost for tool bits = cost of sanders for polishing tool bits
+
sales commission paid for tool bits
+
building space used for manufacturing the
tool bits
= $50,000 + $100,000 + 20% of $75,000
= $150,000 + 20/100 x $75,000
= $150,000 + $15,000
= $165,000
Mellie Computer Devices Inc. is considering the introduction of a new printer. The company’s accountant had prepared an analysis computing the target cost per unit but misplaced his working papers. From memory he remembers the estimated unit sales price was $200 and the target unit cost was $195. Sales were projected at 100,000 units with a required $5,000,000 investment. Compute the required minimum rate of return.
Answer:
The required minimun return on investment was 10%
Explanation:
the rate of return formula:
return / investment = rate of return
return: contribution er unit x total units
sales - cost = contribution
200- 195 = 5 contribution
5 contribution x 100,000 units = 500,000 return
500,000/5,000,000 = 0.1 = 10%
Capital structure decisions include all of the following EXCEPT: Deciding how to pay for long term projects. Deciding the mix of debt and equity for the firm. Deciding the total amount of debt the firm should take on. Deciding what assets to purchase.
Answer: the one that is not a capital structure decision is deciding what assets to purchase.
Explanation: The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings.
Your question asks which of the statements does not occur when making a capital structure decision.
Answer: Deciding what assets to purchaseThe reason why "Deciding what assets to purchase" is the correct answer because this is something that someone can't make an decision on when making capital structure decisions.
Capital structure is a way a business/company/corporation finances their assets with debt, equity, or securities that they have.
The capital structure would be depended on their liabilities.
All in all Capital structure is the financial calculations of a business/company's debt, equity, and securities. They can't make a decision on what assets to purchase, due to the fact that they're financing what they already have, without any decision on what assets they should get.
I hope this helps!Best regards,MasterInvestorSchager Company purchased a computer system on January 1, 2012, at a cost of $40,000. The estimated useful life is 10 years, and the estimated residual value is $5,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year?
Answer:
The depreciation expense for the second year would be $6400
Explanation:
Double declining balance method is that method of depreciation where depreciation on the asset continues until the value of the asset comes down to its salvage value.
Firstly we will here find the depreciation rate here , where we can use the formula -
straight line declining depreciation rate x 2,
where straight line declining depreciation rate = 100% / estimated useful life
so, (100% / estimated useful life of asset) x 2
= (100% / 10) x 2
= 10% x 2
= 20% ( double declining depreciation rate )
DEPRECIATION EXPENSE FOR FIRST YEAR =
$40,000 X 20% = $8000
DEPRECIATION EXPENSE FOR SECOND YEAR =
$40,000 - $8000 X 20%
= $32,000 X 20%
= $6400
ABC began a defined benefit pension plan for its employees on Jan 1, 2018. The following data are provided for 2018 as of Dec 31, 2018: Projected benefit obligation is $634 Accumulated benefit obligation is $418.44 Plan assets at fair value is $821 Pension expense is $192.48 Employer's cash contribution (end of year) is $361 What amount should ABC report as a net pension liability (asset) at Dec 31, 2018. (Enter net pension liability as a positive amount)
Answer: $187 ⇒ Amount should ABC report as a net pension liability (asset) at Dec 31, 2018
Explanation:
Given that,
Data for 2018 as of Dec 31, 2018 are as follows:
Projected benefit obligation = $634
Accumulated benefit obligation = $418.44
Plan assets at fair value = $821
Pension expense = $192.48
Employer's cash contribution (end of year) = $361
The amount should company report as a net pension liability at Dec 31, 2018 as follows:
Net Pension Liability = Projected benefit obligation - Plan assets at fair value
= $634 - $821
= $187 ⇒ Amount should ABC report as a net pension liability (asset) at Dec 31, 2018
First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a deposit of $12,000 in each bank, how much more money would you earn from your Second City Bank account at the end of 9 years?
hey there!:
First city bank = $64,000 deposited for 9 years at 7% with simple interest then after 9 years I will have a total of $104,320
Second city bank = $64,000 deposited for 9 years at 7% with compound interest then after 9 years I will have a total of $117,661.39.
Therefore we will make $13,341.39 more through the second city bank.
Hope this helps!
If you made a deposit of $12,000 in each bank, you would earn $1,561.87 more from your Second City Bank account at the end of 9 years.
Explanation:If you made a deposit of $12,000 in each bank, the simple interest earned from the First City Bank account at the end of 9 years would be $7,560 (7% of $12,000 for 9 years). On the other hand, the compound interest earned from the Second City Bank account at the end of 9 years would be $9,121.87 (compounded annually). Therefore, the difference in the amount of money earned from the Second City Bank account would be $9,121.87 - $7,560, which is $1,561.87.
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Suppose that the US Federal Reserve Board was able to confirm that the US economy is in the brink of a recession, operating at a GDP level (Y1) that is well below its full-employment capacity (YF). Your tasks are: a. Name one monetary policy, and specify the policy tool to use, that the Fed could make to help boost the economy. b. Using the AD-AS theory, show and EXPLAIN the expected short run and long run effect of this policy on the US economy.
Answer:
a.) To combat recession the federal reserve board can adopt expansionary monetary policy. The fed can reduce the cash reserve ratio.
b.) The aggregate output and price is going to increase in short run. In the long run though economy will be operating at equilibrium level.
Explanation:
With the decline in the cash reserve ratio the total reserves with the banks will increase. This will boost credit credit creation. As the money supply in the economy increases the aggregate demand will increase. This will further lead to increase in price and output level.
In the medium term, the aggregate supply will also increase though not as much as demand, so there will be excess of demand. The price level will rise further.
In the long run though output will always be at the equilibrium level.
Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $189,000 of raw materials on credit; issued materials to production of $214,000 of which $11,000 were indirect. Minstrel incurred a factory payroll of $158,000, of which $21,000 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. If Minstrel incurred total overhead costs of $194,800 during the month, compute the amount of under- or overapplied overhead:
Answer:
10,700 overapplied
Explanation:
we are asked for overhead so any data that don't help with that is irrelevant
The applied MOH is done by this rate:
MOH = 150% Labor
So we need to calculate the direct labor:
Payroll - indirect labor = direct labor
158,000 - 21,000 = 137,000
Now we calculate the applied MOH
Applied MOH 137,000 * 150% = 205,500
Now we compare the Applied overhead with the actual overhead.
205,500-194,800=10,700
because applied is greater than actual the MHO is overapplied
Final answer:
Minstrel Manufacturing has overapplied overhead of $10,700 for the month. This was determined by applying their predetermined overhead rate to the direct labor cost and comparing it to actual overhead costs incurred.
Explanation:
To calculate the amount of under- or overapplied overhead for Minstrel Manufacturing, we must first determine the amount of overhead that was applied to production using the predetermined overhead rate and then compare it to the actual overhead costs incurred. The predetermined overhead rate is 150% of direct labor cost. We calculate the applied overhead as follows:
First, we need to determine the direct labor cost, which is the total factory payroll minus the indirect labor. That is $158,000 - $21,000 = $137,000.
Next, we apply the predetermined overhead rate: $137,000 (Direct Labor) x 150% = $205,500.
Now, compare the applied overhead with the actual overhead costs of $194,800:
Applied Overhead: $205,500
Actual Overhead: $194,800
Under- or Overapplied Overhead: Actual Overhead - Applied Overhead = $194,800 - $205,500 = - $10,700
Since the result is negative, Minstrel Manufacturing has overapplied overhead of $10,700 for the month.
Zero Corp's total common equity at the end of last year was $405,000 and its net income was $70,000. What was its ROE?a. 14.82%b. 15.60%c. 16.42%d. 17.28%e. 18.15%
Answer:
D. 17.28%
Explanation:
In Return on Equity ROE is a financial ratio that it is recommended to be calculated as the earnings of the current period divided by the average of the equity (equity at the end of period + equity at the beginning and divide it by 2) In this case we only have end of period and we will use it as denominator so.
ROE = 70.000/405.000
ROE = 17.28%
Information for Kent Corp. for the year 2018: Reconciliation of pretax accounting income and taxable income: Pretax accounting income $ 180,400 Permanent differences (15,700 ) 164,700 Temporary difference-depreciation (13,100 ) Taxable income $ 151,600 Cumulative future taxable amounts all from depreciation temporary differences: As of December 31, 2017 $ 13,600 As of December 31, 2018 $ 26,700 The enacted tax rate was 28% for 2017 and thereafter. What should be the balance in Kent's deferred tax liability account as of December 31, 2018?
Answer:
There should be $3668 as balance in the Kent's deferred tax liability account .
Explanation:
A deferred income tax liability is that type of liability which a firm records in its balance sheet because the income which firm has recorded in its book is more than the actual tax which a firm has to pay.
For calculating the deferred tax liability here we will multiply the given tax rate to the cumulative taxable amounts which all are from depreciation temporary differences and take their difference as deferred tax liability.
DEFERRED TAX LIABILITY =
$26,700 X 28% - $13,600 x 28%
= $7476 - $3808
= $ 3668
A major drawback of using historical results for judging current performance is that _____. A. past results may be incorrect B. results may refer to a different manager C. inefficiences may be concealed in the past performance D. all of these answers are correct
Answer:
C. inefficiences may be concealed in the past performance.
Explanation:
A major drawback of using historical results for judging current performance is that inefficiences may be concealed in the past performance.
Final answer:
The major drawback of using historical results to judge current performance is that past results may be incorrect or misleading, they could refer to different management, and past inefficiencies may be concealed, making it unreliable to predict future performance.
Explanation:
A major drawback of using historical results for judging current performance is that all of these answers are correct. Specifically, past results may be incorrect due to many factors, including but not limited to the accumulation of errors, changes in data collection methods, or revisions to accounting standards. Additionally, results may refer to a different manager who had a distinct style or strategy, which would make comparisons to current performance potentially misleading or irrelevant. Concealment of inefficiencies is also a concern as past performance figures may not always reflect underlying weaknesses that could impact future results.
Inefficiencies may have been hidden due to various reasons such as creative accounting practices, changes in the business environment, or a failure to consider all relevant variables at the time. When using historical performance, it's essential to look critically at the results and contextualize them within the current situation.
This concept also extends to other areas such as investments where past performance is not indicative of future results. Therefore, it is important to use additional quantitative and qualitative measures when evaluating current performance.
Ian loaned his friend $30,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 8% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 8% on his investment.
Answer:
C = 9057.624134
Explanation:
This will be done by calculate the quota of French Loan System, because the cuota must be the same for the four years.
[tex]C = V* \frac{(1+r)^{time} * r}{(1+r)^{time} - 1}[/tex]
Where:
V = the principal of the loan
C= quota
[tex]C = 30,000* \frac{(1+0.08)^{4} * 0.08}{(1+0.08)^{4} - 1}[/tex]
C = 9057.624134
C = $9057.62
In order to achieve cost economies, Tull and Ward Company bases production plants for labor-intensive products in low-wage countries such as Mexico and locates production plants that require skilled workers in high-skill countries like Japan. This illustrates the: A. International model B. Multinational model C. Global model D. Transnational model
Answer:
D. Transnational model
Explanation:
Companies that have headquarters in their country of origin and work in other countries through the installation of subsidiaries, are classified as transnational companies.
For developing countries, the installation of these companies in their territory is a positive factor, as it generates new jobs, in addition to promoting industrialization in the region. In turn, the transnationals use as criteria to set up their branches, places with potential market consumer, infrastructure, raw material, energy and cheap labor. Moreover, when work requires high performance, firms open branches or offices in countries where the workforce is most qualified.
At the end of 2016, Sunland Company has accounts receivable of $653,700 and an allowance for doubtful accounts of $24,200. On January 24, 2017, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,245. (a) Prepare the journal entry to record the write-off. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount (b) What is the cash realizable value of the accounts receivable before the write-off and after the write-off? Before Write-Off After Write-Off Cash realizable value $Enter a dollar amount $Enter a dollar amount
Answer:
Bad debt expense $4,245
Allowance for doubtful Accounts $4,245
Cash realizable before write off is ( $653,700 - $24,200) $629,500
Cash realizable after write off is ( $653,700 - $24,200) $629,500
**our realizable amount does not changed after specific write off because we automatically subtract the entire allowance from the accounts receivable. When we write off the actual account we remove it from our allowance.
Explanation:
The journal entry to record the write-off of the $4245 from Madonna Inc. would be a debit to the Allowance for Doubtful Accounts and a credit to Accounts Receivable, both for $4245. The cash realizable value of the accounts receivable stays the same before and after the write-off, which is $629,500.
Explanation:For part (a), the journal entry to record the write-off of the $4,245 would be:Debit: Allowance for Doubtful Accounts $4,245 Credit: Accounts Receivable $4,245This entry reduces the account receivable due to it being uncollectible, and it also reduces the allowance for doubtful accounts. For part (b), the cash realizable value of the accounts receivable is essentially the net amount that is expected to be received. It is the total Accounts Receivable minus the Allowance for Doubtful accounts. Before the write-off, the cash realizable value would be $653,700 (Accounts Receivable) - $24,200 (Allowance for Doubtful accounts) = $629,500. After the write-off, both Accounts Receivable and the Allowance for Doubtful Accounts decrease by $4,245, thus the cash realizable value would still be $629,500.
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On January 1, Puckett Company paid $1.71 million for 57,000 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 distributed a dividend of $3 per share during the year and reported net income of $590,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31?
Answer:
Total 1,775,000
Explanation:
1.71m for 57,000 shares -->40% investment
$3 dividends per share
net income of 590,000
1.,710,000
+ 40% of net income 590,000 = 236,000
- 57,000 x $3 dividends per share = -171,000
The dividends under the equity method mean it is moving cash from one box (Harrison) to the main company (Puckett) so they decrease the Harrison valuation and increase cash, giving no effect on the assets of Puckett.
Total 1,775,000
As of December 31, 2018, Warner Corporation reported the following: Dividends payable $ 32,000 Treasury stock 570,000 Paid-in capital—share repurchase 32,000 Other paid-in capital accounts 5,200,000 Retained earnings 4,200,000 During 2019, half of the treasury stock was resold for $250,000; net income was $570,000; cash dividends declared were $1,380,000; and stock dividends declared were $620,000. What was shareholders' equity as of December 31, 2018?
Answer: $9,182,000
Explanation: This question can be done as follows :-
Total shareholders equity = paid in capitals + other paid in capitals + retained earnings - treasury stock
Putting the values into equation we get :-
Total shareholders = $32,000 + $5,200,000 + $4,200,000 - $250,000
equity
= $9,182,000
Ethan has $240,000 to invest today at an annual interest rate of 4%. Approximately how many years will it take before the investment grows to $486,000?
Answer:
17.98972134
18 years
Explanation:
Using the compound interest formula we can solve for time
[tex]Principal * (1+ r)^{time} = Amount[/tex]
We post our know values
[tex]240,000* (1+ 0.04)^{time} = 486,000[/tex]
And solve for the unknow
[tex](1.04)^{time} =486,000/240,000\\(1.04)^{time} = 2.025[/tex]
Now we have to use log properties to solve for time
[tex]log_{1.04}2.025 = time[/tex]
[tex]\frac{\log 2.025}{\log 1.04} =17.98972134[/tex]
It will take 18 years
Indigo Construction Inc. agrees to construct a boat dock at the Smooth Sailing Marina for $43,700. In addition, under the terms of the contract, Smooth Sailing will pay Indigo a performance bonus of up to $12,000 based on the timing of completion. The performance bonus will be paid fully if construction is completed by the agreed-upon date. The performance bonus decreases by $2,400 per week for every week beyond the agreed-upon completion date. Indigo has constructed a number of boat docks under similar agreements. Indigo’s management estimates, that it has a 60% probability of completing the project on time, a 20% probability of completing the project one week late, and a 20% probability of completing the project two weeks late. Management does not believe the project will be more than two weeks late. Determine the transaction price that Indigo should compute for this agreement. Transaction Price $
Answer: The transaction price that Indigo should compute for this agreement = $54,260
Explanation:
First , we'll evaluate Variable consideration using expected value method.
The probability of time completion is 60%
The consideration (performance bonus) = 12,000;
∴ Expected consideration = 60% of 12000 = $7,200
Probability of completing the project one week late = 20%
The consideration = 9600
∵ The performance bonus reduces by 2400 for delay of a week;
∴ Expected consideration = 20% of 9600 = $1920
Similarly, for a delay of 2 weeks,
Expected consideration = $1,440
So, the total expected consideration comes to 10,560/-
Transaction price = contract cost + Variable consideration
=43700+(12000 × 0.6+ 9600 × 0.2 + 7200 × 0.2)
=$54,260
The transaction price that Indigo Construction Inc. should compute is $54,260. This is calculated by using a probability-weighted approach to determine the expected performance bonus and adding it to the fixed contract price.
To calculate the transaction price that Indigo Construction Inc. should compute for the contract with Smooth Sailing Marina, we need to apply a probability-weighted approach regarding the potential performance bonus. We have three scenarios based on the probabilities given:
Completing on time: 60% probability of earning the full $12,000 bonus.Completing one week late: 20% probability of earning a $9,600 bonus ($12,000 - $2,400).Completing two weeks late: 20% probability of earning a $7,200 bonus ($12,000 - $4,800).The expected performance bonus can be calculated by multiplying each bonus amount by its respective probability and summing up the results:
Expected bonus = (0.60 * $12,000) + (0.20 * $9,600) + (0.20 * $7,200)
Expected bonus = $7,200 + $1,920 + $1,440
Expected bonus = $10,560
We then add the fixed contract amount to the expected bonus to determine the overall transaction price:
Transaction Price = $43,700 + $10,560
Transaction Price = $54,260
Therefore, the transaction price that Indigo should compute for this agreement is $54,260.
Outsourcing decision:-Walker, Inc. currently manufactures 4,000 motors for its electric scooters annually. Direct material costs are $44,000 and direct labor total $16,000 annually. Overhead totals $18 per unit of which $5 is variable. Eighty percent of the fixed overhead is unavoidable. Swingly, Inc. has contacted Walker with an offer to sell the motors for $24 each. Should Walker continue making motors or buy from Swingly?
Answer:
Walker shall continue to make such motors as there will be savings of $5,600
Explanation:
Variable cost per unit
Direct material = $44,000/4,000 = $11
Direct labor cost = $16,000/4,000 = $4
Variable overhead = $5
Total variable overhead = $20
Total Fixed cost = ($18 - $5) [tex]\times[/tex] 4,000 units = $52,000
Total cost of manufacturing = $52,000 + $20[tex]\times[/tex] 4,000
= $52,000 + $80,000 = $132,000
In case of buying
Fixed cost = $52,000 [tex]\times[/tex] 80% = $41,600
Variable cost = $24 [tex]\times[/tex] 4,000 = $96,000
Total cost in case of buying = $137,600
Since the cost of buying motors is expensive than manufacturing, Motors shall be manufactured by Walker Inc.
In that case it saves = $137,600 - $132,000 = $5,600
The farmer produces 119 bushels of wheat at a total cost of $3 per bushel. He sells all of the wheat to Firm F for $5 per bushel. Firm F produces 51 pounds of flour from the wheat at a total cost of $6 per pound (including the amount paid to the farmer for the wheat). Firm F sells 45 pounds of flour to consumers for $10 per pound. There are no other firms in this simple economy. In total, how much profit do the farmer and Firm F earn? Enter a whole number with no dollar sign.
The farmer earns a profit of $238 and Firm F earns a profit of $144, resulting in a total profit of $382.
Explanation:To calculate the profit earned by the farmer and Firm F, we need to calculate their costs and revenues separately. The farmer produces 119 bushels of wheat at a cost of $3 per bushel, resulting in a total cost of 119*3 = $357. The revenue earned by the farmer is 119*5 = $595.
On the other hand, Firm F produces 51 pounds of flour at a cost of $6 per pound, resulting in a total cost of 51*6 = $306 (including the amount paid to the farmer for the wheat). The revenue earned by Firm F is 45*10 = $450.
To calculate the profit, we subtract the total cost from the revenue for both the farmer and Firm F. The profit earned by the farmer is 595 - 357 = $238, and the profit earned by Firm F is 450 - 306 = $144. Therefore, the total profit earned by the farmer and Firm F is 238 + 144 = $382.
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The farmer earns a profit of $238, and Firm F earns a profit of $144, leading to a total profit of $382 for both the farmer and Firm F combined.
The farmer sells 119 bushels of wheat at $5 per bushel after producing it at a total cost of $3 per bushel.
The total revenue for the farmer is 119 bushels * $5 = $595 and the total cost is 119 bushels * $3 = $357.
Therefore, the farmer's profit is $595 - $357 = $238.
Firm F produces 51 pounds of flour from the wheat at a total cost of $6 per pound, which includes the cost of wheat from the farmer.
Firm F's total cost is 51 pounds * $6 = $306.
It sells 45 pounds of flour at $10 per pound, earning 45 pounds * $10 = $450.
Hence, Firm F's profit is $450 - $306 = $144.
The total profit earned by the farmer and Firm F is the sum of their individual profits, which is $238 (farmer's profit) + $144 (Firm F's profit) = $382.
Which of the following is an example of how the Principle of Beneficence can be applied to a study employing human subjects?
A. Providing detailed information about the study and obtaining the subject's consent to participate.
B. Determining that the study has a maximization of benefits and a minimization of risks.
C. Ensuring that the selection of subjects includes people from all segments of the population.
D. Ensuring that persons with diminished autonomy are protected.
Answer:
Determining that the study has a maximization of benefits and a minimization of risks.-B.
Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $3,500 of direct materials and used $5,000 of direct labor. The job was not finished by the end of the month, but needed an additional $4,000 of direct materials and additional direct labor of $8,500 to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job A3B?
Answer:
18,500 WIP balance at September 30th
Explanation:
Job A3B
3,500 direct materials
5,000 direct labor
10,000 Overhead (200% of labor = 5000 x 200%)
18,500 WIP balance at September 30th
The cost added during October will be part of October calculation, on September we should work with September values.
At the end of September, the Work in Process account balance relative to Job A3B is $18,500, which includes direct materials of $3,500, direct labor of $5,000, and applied overhead of $10,000.
The balance in the Work in Process account at the end of September relative to Job A3B can be calculated by adding the direct materials, direct labor, and applied overhead for the job up to that point. The direct materials requisitioned in September were $3,500 and the direct labor used was $5,000. Overhead is applied at 200% of the direct labor cost, which would be 200% of $5,000 resulting in $10,000 of overhead. Therefore, the total cost recorded in the Work in Process account at the end of September would be the sum of these amounts.
Direct Materials: $3,500
Direct Labor: $5,000
Applied Overhead (200% of direct labor): $10,000
Total Work in Process at end of September: $18,500
P7-9: Common stock value: Constant growth McCracken Roofing Inc. common stock paid a dividend of $1.20 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return would result in a price per share of $28?
Answer:
a) rate of return = 0.095 = 9.5%
b) rate of return = 0.147143 = 14.7143%
Explanation:
a) using the constant growth model:
[tex]P = \frac{D0 (1+g)}{ke - g)}[/tex]
[tex]28=\frac{1.2(1.05)}{ke-0.05} \\[/tex]
therefore[tex]ke =\frac{1.2(1.05)}{28} +0.05[/tex]
[tex]ke = 0.095 =9.5%[/tex]
b) using the working from above, we showed that
[tex]ke=\frac{Do(1+g)}{P0} + g[/tex]
given g= 10%, P0=28 and D0=1.2
[tex]ke = \frac{1.20(1+0.1)}{28} + 0.1 = 0.147142857 = 14.7143%[/tex]
Final answer:
The required rate of return for McCracken Roofing Inc.'s stock with a dividend growth rate of 5% for a price of $28 is approximately 14.29%. With a growth rate of 10%, it's the same since the stock price is held constant at $28.
Explanation:
The student's questions relate to calculating the required rate of return for a stock given its dividend payout and growth rate to result in a specific stock price. The method for this calculation involves using the Gordon Growth Model, which connects the current dividend payment, the growth rate of dividends, and the required rate of return to derive the stock price.
Part a:
The first part of the question asks what required rate of return would result in a price per share of $28 when the stock paid a dividend of $1.20 last year with a growth rate of 5%.
We use the formula:
Price = Dividend per share / (Required rate of return - Growth rate)
Rearranging for the required rate of return gives us:
Required rate of return = (Dividend per share / Price) + Growth rate
With the given numbers:
Required rate of return = ($1.20 / $28) + 0.05
Required rate of return = 0.092857 + 0.05
Required rate of return = 0.142857 or 14.2857%
Part b:
The second part changes the growth rate to 10%. Using the same method:
Required rate of return = ($1.20 / $28) + 0.10
Required rate of return = 0.142857 or 14.2857%
Note: In practice, required rates of return would also consider the risk premium, which accounts for the uncertainty and risk associated with future dividend payments.
The following information is available for the year ended December 31: Beginning raw materials inventory $21,500 Raw materials purchases 74,000 Ending raw materials inventory 23,000 Office supplies expense 2,400 The amount of raw materials used in production for the year is: $74,900. $72,500. $95,500. $76,400. $70,100.
Answer:
used in production = 72,500
Explanation:
we use the Inventory identity to solve for used into production
[tex]$$Beginning Inventory + Purchase = Ending Inventory + Used[/tex]
21,500 + 74,000 = 23,000 + used
21,500 + 74,000 - 23,000 = used
used in production = 72,500
The supplies are irrelevant for this calculation
Answer:
b. $72,500
Explanation:
Beginning raw materials inventory $21,500
Raw materials purchases $74,000
The amount of raw materials used in production $72,500 (21500+74000-23000)
Ending raw materials inventory $23,000
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. The face value of the T-bill is $10,000. What price would you expect a 6-month maturity Treasury bill to sell for? (Round your answer to 2 decimal places.)
The expected price for the 6-month maturity Treasury bill would be approximately $9,901.47.
The price of a Treasury bill (T-bill) can be calculated using the formula for the present value of future cash flows. In this case, the T-bill will mature in 6 months and pay a face value of $10,000.
The price of a T-bill is calculated by using the present value formula:
[tex]P = FV/ (1+r)^n[/tex]
Where:
P is the price of the T-bill
F is the face value of the T-bill ($10,000 in this case)
r is the interest rate per period (2% or 0.02 in this case, since it's given as a percentage)
n is the number of periods until maturity (0.5 years or 0.5 periods in this case, since the T-bill matures in 6 months)
Plugging in the values:
[tex]PV = 10,000/(1+0.02)^{0.5}[/tex]
= 9,901.47.
Therefore, the expected price for the 6-month maturity Treasury bill would be approximately $9,901.47.
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Final answer:
The price of a 6-month maturity Treasury bill can be calculated using the formula Price = Face Value / (1 + (Discount Rate * Time)). In this case, the T-bill with 6 months remaining sells for $9,803.92.
Explanation:
A Treasury bill (T-bill) is a short-term debt security issued by the US government. Its price is determined by the discount rate, which is the difference between the face value of the bill and the price at which it is sold. To calculate the price of a T-bill, you can use the formula:
Price = Face Value / (1 + (Discount Rate * Time)),
where the time is the number of periods until maturity.
In this case, the T-bill has 6 months remaining until maturity and offers a return of 2% per 6 months. To determine the price, we plug in the values:
Price = $10,000 / (1 + (0.02 * 1)),
Calculating, we get:
Price = $10,000 / (1.02).
Rounding to 2 decimal places, the expected price of the T-bill is $9,803.92.
Job 593 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $2,472 Direct labor-hours 74 labor-hours Direct labor wage rate $ 19 per labor-hour Machine-hours 134 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $20 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be:
Answer:
Total Cost Job 593 6557
Explanation:
Job 593
[tex]cost = materials + labor + overhead[/tex]
DM 2,471
DL 1,406 ( 74 labor hours x $19 labor rate)
FO 2,680 (134 machine hours x 20 FO rate)
Total Cost 6557
Remember, for Direct Labor and machien hours, you needto multiply the amount of hour applied in the job by the rate.
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 17.9 percent compounded monthly. Assume you transfer the $6,900 balance from your existing credit card and make no subsequent payments. How much interest will you owe at the end of the first year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
FV $6,955.86
Explanation:
.5% per year compounded monthly during six month
then
19% per year compounded monthly during six month
[tex]Principal \: (1 + rate/n)^{time*n}\: (1 + rate/n)^{time*n} } = FV[/tex]
We have to use the 0.5 rate for the first six month, and then the 19% ate for the following six month
[tex]Principal \: (1 + 0.005/12)^{(6/12)*12}\: (1 + .19/12)^{(6/12)*12} } = FV[/tex]
FV 6,955.859156
FV $6,955.86
A credit card balance of $6,900 at the offered interest rates would result in approximately $1,076 interest owed at the end of the year.
Explanation:The subject of this question is financial mathematics, specifically interest calculation. Given the information in the question, we can calculate the interest charged on a credit card balance of $6,900, first at the introductory interest rate and then at the regular rate.
For the first six months, the interest rate is 0.5% per year, compounded monthly. We need to first convert this annual rate to a monthly rate by dividing by 12, giving us approximately 0.04167% per month. This means that every month, the balance will grow by that rate.
To calculate the interest accrued over these six months, we can use the formula for compound interest which is Principal * (1 + Interest Rate) to the power of Time given in months. This gives us a new balance of approximately $6,931
For the next six months, the interest rate increases to 17.9% per year, compounded monthly, which is approximately 1.49% per month. Again, we use the compound interest formula, but this time with the new balance as the principal. This gives us a final balance of approximately $7,976
The total interest owed at the end of the year is the final balance minus the initial balance, which is $7,976 - $6,900 = $1,076
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