Answer: a. Offer the product for free early on, and increase the price later
Explanation:
When a product is said to have a network effect, what it means is that the product gets more value as more people use it. For example Whtsapp which is only such an effective means of communication because more and more people are getting it. If people did not get it, it would not be such a good medium and would be valued less.
If a company wants to price such a product, they should charge at lower rates first which would entice more people to use the product thereby giving the product more value. As the product value increases, the price can then increase to reflect this increased value.
Deming, the proponent of total quality management, argued that management has the responsibility to train employees in new skills.
A. True
B. False
Answer:
Its TRUE
Explanation:
Management should train employees in new skill, where Deming argued that management has the responsibility to train employees in new skills to keep pace with changes in the workplace. In addition, he believed that achieving better quality requires the commitment of everyone in the company.
Activity-Based Costing: Selling and Administrative Expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of $20 per sales order, and the customer return activity has an activity rate of $100 per return. Jungle Junior sold 2,500 swing sets, which consisted of 750 orders and 80 returns.
Required:
a. Determine the total sales order processing and customer return activity cost for swing sets.
b. Determine the per-unit sales order processing and customer return activity cost for swing sets. Round your answer to the nearest cent.
Answer: 1}ToTAL Activity cost =$23,000
2a) Sales order Processing Activity per unit sale=$6.00
2b)customer return activity per unit sale=$3.20
Explanation:
a. total sales order processing and customer return activity cost for swing sets
Sales order Processing Activity =Number of orders x rate per sales order
=750 x 20 = $15,000
customer return activity = Number of returns x rate per return
= 80 x 100= $8,000
ToTAL Activity cost = Sales order Processing Activity +customer return activity= $15,000 + $8000 = $23,000
b)per-unit sales order processing and customer return activity cost for swing sets
Cost of Sale order processing = $15,000
Number of swing set sold = 2,500
Therefore Sales order Processing Activity per unit sale = Cost of Sale order processing/ Number of swing set sold = $15,000/ 2,500= $6.00
customer return activity cost = $8,000
Number of swing set sold = 2,500
Therefore customer return activity per unit sale= customer return activity cost / Number of swing set sold = $8,000/ 2,500= $3.20
ToTAL Activity cost per unit sale = Sales order Processing Activity cost per unit +customer return activity cost per unit = $6.00 + $3.20 = $9.20
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $400 per ton. The U.S. is a price-taker in the tomatoes market.
If trade in tomatoes is allowed, the United States:______
a) will experience increases in both consumer surplus and producer surplus.
b) may become either an importer or an exporter of tomatoes, but this cannot be determined.
c) will become an exporter of tomatoes.
d) will become an importer of tomatoes.
Answer:
d) will become an importer of tomatoes.
Explanation:
Consumer surplus would increase because the price at which they buy tomatoes would reduce while producer surplus would reduce because the price of tomatoes would reduce as a result of international trade.
Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.Because the price of tomatoes in the US is greater than the price of tomatoes in the world, when the US begins international trade, it would import tomatoes because it is inefficient in the production of tomatoes.
Producer surplus is the difference between the price of a good and the least price the seller is willing to sell the product
An investor in the United States bought a one year Brazilian security valued at $195,000 Brazilian reals. The U.S. dollar equivalent was 100,000. The Brazilian security earned 16.00% during the year, but the Brazilian real depreciated 5 cents against the us dollar during the time period ($0.51 to $0.46)
Required:
a. After the transfer of funds back to the united states, what was the investors return on her $100,000?
b. Determine the total ending value of the Brazilian investment in Brazilian reals and then translate this Brazilian value to US dollar’s. Then compute the return on the $100,000.
Answer:
S
Explanation:
Sam has contracted with Dave to purchase Dave's racing bike, with payment and delivery of the bicycle to be made 10 days after the contract was made. Three days later Sam hears that Dave is going to sell the bike to Gene in three days at a higher price. If Sam really wants the bike, what should he do? Multiple Choice Immediately seek injunctive relief. Immediately sue for specific performance. Immediately sue for compensatory damages. Immediately sue for consequential damages.
Answer: Immediately seek injunctive relief.
Explanation:
An injunctive relief is an order by the court stopping an action from taking place. From the question, we are told that Sam has contracted with Dave to buy Dave's racing bike, with payment and delivery of the bicycle to be made 10 days after the contract was made.
We are further told that three days later Sam hears that Dave is going to sell the bike to Gene in three days at a higher price. If Sam really wants the bike, he should seek injunctive relief. By doing so, the court will stop Dave from selling the bike to Gene.
Gabriel, Harris and Ida are members of Jeweled Watches, LLC. What are their options with respect to the management of their firm?
Answer:
They could be a Member-managed Limited Liability Company or a Manager-managed Limited Liability Company.
Explanation:
A Limited Liability Company is usually run by two or more partners. In managing this type of company, the members might choose to manage the company themselves. This is known as a member-managed Limited Liability Company. In such cases, if any member makes a decision in behalf of the business, with his signature appended to it, such a decision is considered legally binding on all other members of the company. Every member also has a say in the company's decision-making.
If they choose to be a manager-managed Limited Liability Company, they can appoint one or more non-members to manage the company for them. They do not interfere with how the manager chooses to run the company. They can still make important decisions but this is quite limited. However, they can choose to remove the manager/managers as they will.
An investment offers a total return of 12.0 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 6.0 percent. What does Janice believe the inflation rate will be over the next year?
Answer:
inflation rate= 0.06= 6%
Explanation:
Giving the following information:
Interest rate= 12%
Real rate of return= 6%
The inflation rate is counterproductive to the interest rate. The inflation rate reduces the purchasing price, therefore it decreases the interest rate effect on nominal money.
Real interest rate= interest rate - inflation rate
0.06 = 0.12 - inflation rate
inflation rate= 0.12 - 0.06
inflation rate= 0.06= 6%
The risk-free rate of return is 3.2 percent and the market risk premium is 4.6 percent. What is the expected rate of return on a stock with a beta of 2.12
Answer:
12.95%
Explanation:
The risk free rate of return is 3.2%
The market risk premium is 4.6%
The beta is 2.12
Therefore, the expected rate of return on a stock can be calculated as follows
= 3.2% + (2.12×4.6%)
= 3.2% + 9.752
= 12.95%
Hence the expected rate of return on a stock is 12.95%
Which one of the following are tools that company managers can use to promote operating excellence in performing value chain activities?
a. Benchmarking, cost effciency optimization, and value chain performance optimazation programs
b. Six signma programs, value chain performance optimazation programs, and best practice innovation programs
c. Total quality management, cost optimization, and value chain efficient programs
d. Business process reengineering, best practice standardization programs, and six sigma
e. adoption of best practices, TQM, and business process reengineering
Answer:
e. adoption of best practices, TQM, and business process reengineering
Explanation:
To promote operational excellence in the execution of value chain activities, the most appropriate tools to be implemented in an organization are the adoption of best practices, TQM and business process reengineering.
Total quality management refers to the continuous improvement of all operational processes, in order to reduce costs, failures, and waste, leading to the implementation, control and review of all organizational processes, including the adoption of advanced technology, adequate training for employees, etc.
Business process reengineering would also help the organization reevaluate its value chain and implement improvements that would increase the performance and functionality of each essential step in the value chain.
Therefore, these integrated tools would ensure continuous optimization at all stages of the value chain, which would mean for the company the effectiveness of the channels and activities for the company to produce the right product, in the right quantity, in the right place and at the right time.
At an output level of 53,000 units, you calculate that the degree of operating leverage is 3.21. If output rises to 57,000 units, what will the percentage change in operating cash flow be? Suppose fixed costs are $175,000. What is the operating cash flow at 46,000 units? The degree of operating leverage? that the degree of operating
Answer:
If output rises to 57,000 units, what will the percentage change in operating cash flow be?
24.23%What is the operating cash flow at 46,000 units?
$45,613.84The degree of operating leverage (at 46,000 units)?
4.84Explanation:
degree of operating leverage = [quantity x (price - variable costs)] / {[quantity x (price - variable costs)] - fixed costs}
degree of operating leverage x {[quantity x (price - variable costs)] - fixed costs} = [quantity x (price - variable costs)]
3.21 x {[53000 x (contribution margin)] - fixed costs} = [53000 x (contribution margin)]
(3.21 x 53000 x contribution margin) - (3.21 x 175000) = 53000 x contribution margin
let C = contribution margin
170130C - 561750 = 53000C
117130C = 561750
C = 561750 / 117130 = 4.795953
operating cash flow (at 53,000) = (53,000 x $4.795953) - $175,000 = $79,185.52
operating cash flow (at 57,000) = (57,000 x $4.795953) - $175,000 = $98,369.32
% change = ($98,369.32 - $79,185.52) / $79,185.52 = 24.23%
operating cash flow (at 46,000) = (46,000 x $4.795953) - $175,000 = $45,613.84
% change in operating cash flows = ($45,613.84 - $79,185.52) / $79,185.52 = -43.4%
% change in sales = (46,000 - 53,000) / 53,000 = -13.21
degree of operating leverage = $220,613.84 / $45,613.74 = 4.84
Refer to the following lease amortization schedule. The five payments are made annually starting with the inception of the lease. A $2,000 bargin purchase option is exercisable at the end of the five-year lease. The asset has an expected economic life of eight years.
Lease Payment Cash Payment Effective Interest Decrease in Balance Balance
34,600
1 8,000 ?? ?? 26,600
2 8,000 2,660 5,340 21,260
3 8,000 2,126 5,874 15,386
4 8,000 1,539 6,461 8,925
5 8,000 ?? ?? ??
6 2,000 182 1,818 0
What is the effective annual inerest rate?
A. 9%
B. 10%
C. 11%
D. 20%
Answer:
B. 10%
Explanation:
The computation of the effective annual interest rate is shown below:-
Effective annual interest rate = Lease payment third effective interest ÷ Lease payment second balance × 100
= $2,126 ÷ $21,260 × 100
= 10%
Therefore for computing the effective annual interest rate we simply applied the above formula.
Hence the correct option is B.
HighLife Corporation has the following information: Average demand = 30 units per day Average lead time = 40 days Item unit cost = $45 for orders of less than 400 units Item unit cost = $40 for orders of 400 units or more Ordering cost = $50 Inventory carrying cost = 15 percent The business year is 300 days. Standard deviation of demand during lead time = 90 Desired service level = 95 percent What is the EOQ if HighLife pays $45/unit? Due to possible differences in rounding, choose the closest answer.\
Answer:
365.15 units
Explanation:
The computation of the economic order quantity is shown below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is
= 30 units × 300 days
= 90,000 units
ordering cost is $50
Carrying cost is
= $45 × 15%
= $6.75
Now placing these values to the above formula
So, the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{90,000}\times \text{\$50}}{\text{\$6.75}}}[/tex]
= 365.15 units
We simply applied the above formula so that the EOQ could come
Prepare journal entries to record the following four separate issuances of stock. A corporation issued 9,000 shares of $10 par value common stock for $108,000 cash. A corporation issued 4,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $49,500. The stock has a $1 per share stated value. A corporation issued 4,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $49,500. The stock has no stated value. A corporation issued 2,250 shares of $25 par value preferred stock for $105,750 cash.
Answer: Please see answer in explanation column
Explanation:
1. Being issued in excess of par value
Account titles & Explanations Debit Credit
Cash $108,000
Common stock(9,000 x 10) $90,000
paid in capital in excess of par value
Common Stock(108,000 - 90,000) $18,000
2.Being issued to promoters at stated value
Account titles & Explanations Debit Credit
Organisational expense $49,500
common stock (4500 x 1 ) $4,500
paid in capital in excess of stated value
Common stock (49,500 -4,500) $45,000
3 Being issued to promoters at no stated value
Account titles & Explanations Debit Credit
organisational expense $49,500
Common stock of no par value $49,500
4 Being issued of preferred shared in excess of par value
Account titles & Explanations Debit Credit
Cash $105,750
Preferred Stock(2,250 X $25) $56,250
paid in capital in excess of par value
of preferred stock ( $105,750- $56,250) $49,500
Discount-Mart issues $18 million in bonds on January 1, 2021. The bonds have a eight-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 16,180,939 06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795 12/31/2021 900,000 975,108 75,108 16,326,903 06/30/2022 900,000 979,614 79,614 16,406,517 12/31/2022 900,000 984,391 84,391 16,490,908 What is the carrying value of the bonds as of December 31, 2022
Answer:
Discount-Mart
The carrying value of the bonds as of December 31, 2022 is:
$16,490,908
Explanation:
a) Data and Calculations:
Bonds issued = $18 million
Date of issue = Jan. 1, 2021
Bond term = 8 years
Interest payable on June 30 and December 31 each year.
b) Partial bond amortization schedule for the bonds:
Date Cash Paid Interest Expense Increase in Carrying Value
Carrying Value
01/01/2021 $ 16,180,939
06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795
12/31/2021 900,000 975,108 75,108 16,326,903
06/30/2022 900,000 979,614 79,614 16,406,517
12/31/2022 900,000 984,391 84,391 16,490,908
b) The carrying value of the bond is the net amount between the par value of $18 million and the unamortized premium or discount. It is this value that is reported on the balance sheet.
the fair value of Blossom is estimated to be $820,800. The carrying value of Blossom’s net identifiable assets, including the goodwill, at year-end is $855,000. Prepare Cullumber’s journal entry, if necessary, to record impairment of goodwill.
Answer:
Cullumber Company
Journal Entry:
Debit Loss on Goodwill Impairment $34,200
Credit Goodwill $34,200
To record the loss on goodwill impairment.
Explanation:
a) Data and Calculation:
Fair value = $820,800
Carrying value of net identifiable assets, including goodwill = $855,000
Goodwill impairment = $34,200 ($855,000 - $820,800)
b) Cullumber, which acquired Blossom is expected to check for the impairment of goodwill yearly. The impairment occurs when the carrying value of the net identifiable assets of Blossom is more than the fair value of Blossom. Generally Accepted Accounting Standards require the annual review of the fair value of goodwill to check for its impairment. By the above entry, the goodwill will be reduced by $34,200 and a loss debited in Cullumber's accounts.
If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to
Answer:
The answer is: The bond price is expected to Increase over time, reaching par value at maturity
Explanation:
If an investor purchased a bond when the bond current yield-to-maturity is higher than the bond's price, the bond is said to be bought at discount (its price is less than the face value at maturity). With this, the bond price will be expected to Increase over time, reaching par value at maturity.
And when the opposite happens i.e coupon rate higher than the current yield-to-maturity, the bond is said to be bought at premium.
Your first baby was born yesterday and is healthy and strong. To guard against your premature death, you want to purchase a life insurance policy that will replace $58,000 of your annual income until your child is 20 years old. How much life insurance should you purchase, if you assume a 3% inflation rate
Answer:
assuming the interest rate is = 15% the life insurance should you should purchase = $497854.0773
Explanation:
Given that :
Annual income receipt = $58000
Assumption:
If we assume that the inflation rate π = 3% = 0.03
Also , let assume that the interest rate is = 15% = 0.15 since it is not given too
Then the effective interest rate = [tex]\dfrac{ (i-\pi)}{(1+\pi)}[/tex]
the effective interest rate = [tex]\dfrac{ (0.15-0.03)}{(1+0.03)}[/tex]
the effective interest rate = [tex]\dfrac{ (0.12)}{(1.03)}[/tex]
the effective interest rate = 0.1165
the effective interest rate = 11.65%
Since n = [tex]\infty[/tex]
The Principal amount of how much life insurance should you purchase is;
= Annual income receipt/the effective interest rate
= $58000/ 0.1165
= $497854.0773
3. There a number of market entry strategies that businesses use in entering into markets outside their countries. a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses. b) What are the respective advantages and disadvantages of both strategies?
Answer:
a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses.
Franchising consists in the licensing of aspects of production and intellectual property to a another party: the franchise.
A Joint Venture is a business union between two or more parties, in which they split profit as well as costs and responsabilities.
b) What are the respective advantages and disadvantages of both strategies?
Franchising can be a quicker way to expand into foreign markets. The flexibility of the method, and the lower capital requirements are the reason why. This can be seen in the success that American fast-food brands have had using this method to expand in global markets.
A Joint-Venture can be more difficult to use for market expansion, however, it can be more profitable, because the profit will not be split among as many parties as in franchising, and more importantly, the firm maintains a higher control of the operation.
Match each term to the correct defintion.
Terms:
a. Benchmarking
b. Efficiency variance
c. Cost variance
d. Standard cost
Definitions:
1. Measures whether the quantity of materials or labor used to make the actual number of outputs is within the standard allowed for the number of outputs.
2. Uses standards based on best practice.
3. Measures how well the business keeps unit costs of materials and labor inputs within standards.
4. A price, cost, or quantity that is expected under normal conditions.
Answer:
A = 2
B = 1
C = 3
D = 4
Explanation:
TB MC Qu. 7-77 Corbel Corporation has two divisions: Division A and ... Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $47,700 for Division A. Division B had a contribution margin ratio of 35% and its sales were $231,000. Net operating income for the company was $27,200 and traceable fixed expenses were $59,700. Corbel Corporation's common fixed expenses were:
Answer:
Corbel Corporation's common fixed cost is $41,650
Explanation:
Division A contribution margin $47,700
Division B contribution Margin $80,850 $128,550
($231,000 * 35%)
Less: Traceable fixed cost $59,700
Operating Income $27,200 ($86,900)
Common fixed cost $41,650
A one-month summary of manufacturing costs for Rapid Routers Company follows.
Direct materials $40,000
Direct labour 20,000
Material handling costs 1,500
Product inspection and rework 2,000
Materials purchasing and inspection 500
Routine maintenance and equipment servicing 1,200
Repair of equipment 300
Required:
Classify each cost as value-added or non-value-added
Answer:
Cost Classification
Direct materials Value added
Direct labor Value added
Material handling costs Non-value added
Product inspection and rework Non-value added
Materials purchasing and inspection Value added
Routine maintenance and equipment Non-value added
servicing
Repair of equipment Non-value added
A food manufacturer reports the following for two of its divisions for a recent year.
($millions) Beverage Division Cheese Division
Invested assets, beginning $ 2,662 $ 4,455
Invested assets, ending 2,593 4,400
Sales 2,681 3,925
Operating income 349 634
1. Compute return on investment.
2. Compute profit margin.
3. Compute investment turnover for the year.A food manufacturer reports the following for two of its divisions for a recent year.
Answer and Explanation:
1. Return on investment is
= Operating Income ÷ Average invested Assets
here, average invested assets is
= (Invested assets, beginning + Invested assets, ending) ÷ 2
For Beverage Division
= $349 ÷ (($2,662 + $2,593) ÷ 2)
= $349 ÷ $2,628
= 13.28%
For Cheese Division
= $634 ÷ (($4,455 + $4,400) ÷ 2)
= $634 ÷ $4,428
= 14.32%
2. Profit margin = (Operating income ÷ sales) × 100
For Beverage Division
= ($349 ÷ $2,681) × 100
= 13.02%
For Cheese Division
= ($634 ÷ $3,925) × 100
= 16.15%
3. Investment turnover = Sales ÷ Average Operating Assets
For Beverage Division
= $2,681 ÷ (($2,662 + $2,593) ÷ 2)
= $2,681 ÷ $2,628
= 1.02 times
For Cheese Division, it would be
= $3,925 ÷ (($4,455 + $4,400) ÷ 2)
= $3,925 ÷ $4,428
= 0.89 times
What are the benefits and risks associated with social networks? Support your answers with relevant examples
Answer:
Explanation:
There are many benefits as well as risks to social networks. The greatest benefit is that they allow us to connect with individuals from anywhere in the world, at any distance, and in a seconds notice. This is incredibly powerful and opens the door for many opportunities in all types of markets. Social networks also come with risks, since everyone is on it people tend to share all of their information which can cause problems for that individual if it falls into the wrong hands. For example, an individual connects with a family member who lives in Brasil and has casual conversations with that family member every other day. A hacker may be able to access that information and extract all the valuable information needed to steal that individual's identity.
Lead time for one of your fastest-moving products is 24 days. Demand during this period averages 110 units per day. a) What would be an appropriate reorder point? nothing units (enter your response as a whole number). b) How does your answer change if demand during lead time doubles? nothing units (enter your response as a whole number). c) How does your answer change if demand during lead time drops in half? nothing units (enter your response as a whole number).
Answer:
a.) reorder point = 2,640 units
b.) reorder point = 5,280 units (reorder point doubles)
c.) reorder point = 1,320 units (reorder point drops in half)
Explanation:
Reorder point is the inventory level (point) at which action is taken (order placed) to replenish the stocked item. It is calculated as follows:
Reorder point = (Lead time × average daily sales) + safety stock
Lead time = 24 days
average daily sales = 110 units
safety stock = 0 (not given)
a.) reorder point = (Lead time × average daily sales) + safety stock
reorder point = (24 × 110) + 0 = 2,640 units
b.) if demand during lead time doubles:
lead time = 24 days
average daily sales = (110 × 2) = 220
∴ reorder point = 220 × 24 = 5,280 units
Therefore the reorder point doubles
c.) if demand during lead time drops in half:
lead time = 24 days
average daily demand = (110 ÷ 2) = 55 units
∴ reorder point = 24 × 55 = 1,320 units
Therefore the reorder point drops in half.
Company ABC is required to pay their customers $20,000 after 3 years. Based on an annual effective interest rate of 4%, Andy, the company’s actuary, uses full immunization strategy to construct a portfolio of assets using a 2-year zero-coupon bond and a 4-year zero-coupon bond. Calculate the par amount for the 2-year zero-coupon bond assuming full immunization is met.
Answer:
Par amount = $9,615.39
Explanation:
The condition that must hold in order to meet full immunization are as follows:
Condition 1: PV(assets) = PV(liabilities)
Condition 2: MD(assets) = MD(liabilities) or P'assets = P'liabilities
Condition 3: There is one asset cash inflow before the liability cash outflow, and there is also one asset cash inflow after the liability cash outflow.
Where PV denotes Present Value and MD denotes Macaulay Duration.
PV(liabilities) = Amount required to pay / (1 + i)^n ............ (1)
Where;
Amount required to pay = $20,000
i = interest rate = 4%
n = number of years after = 3 years
Substituting the values into equation (1), we have:
PV(liabilities) = $20,000 / (1 + 4%)^3 = 17,779.93
Let;
A = Weight of two-year-zero-coupon bond in the portfolio
n = Macaulay Duration of n-year-zero-coupon bond
Therefore, we can construct a portfolio of assets using a 2-year zero-coupon bond and a 4-year zero-coupon bond as follows:
A(2) + (1 – A)(4) = 3
2A + 4 – 4A = 3
2A – 4A = 3 – 4
-2A = - 1
A = -1/-2
A = 0.5
We can now calculate the par amount as follows:
Par amount = PV(liabilities) * A * (1 + i)^t .............. (2)
Where t = 2 as the duration of the bond
Substituting the values into equation (2), we have:
Par amount = 17,779.93 * 0.5 * (1 + 4%)^2
Par amount = 17,779.93 * 0.5 * 1.04^2
Par amount = 17,779.93 * 0.5 * 1.0816
Par amount = $9,615.39
Therefore, the par amount for the 2-year zero-coupon bond assuming full immunization is met is $9,615.39.
Terrance needs to comminicate with managers in several different locations regarding a sensitive complex topic. Therefore he should choose the communication medium highest in information richness which would be a:______
a. Voice mail message.
b. Group email.
c. Videoconference.
d. Recorded presentation.
Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable. Using the information below, a) calculate the activity-based costs and profits for each contract (this requires more than one step) and b) calculate the profit for each job using absorption costing, absorbing overheads using molding hours: Enter all answers in number format without commas, decimals, or dollar signs. Customer AAA BBB Component Type A999 B999 Contract Value ($) $27,000 $100,000 Contract Quantity 1,000 unit 2,000 unit Material cost/unit $15 $20 Molding time/batch 5 hours 7.5 hours Batch size 100 units 50 unitsAnnual Budgeted overheads as follows:Activity Cost Driver Cost driver CostMolding Molding hours 2,000 $150,000Inspection Batches 150 $75,000Production Mgmt Contracts 20 $125,000 Required:Calculate the activity-based costs and profits for each contract.
Answer:
The contract A yields a loss under ABC but Contract B yields a profit.
ABC Profit contract A $ (3000) contract B $ 11250
Under absorption costing both contract yield profits.
Absorption Profit contract A $ 3250 contract B $7500
Management should make decisions using ABC and reject Contract A and accept Contract B.
Explanation:
Customer AAA BBB
Component Type A999 B999
Contract Value ($) $27,000 $100,000
Contract Quantity 1,000 unit 2,000 unit
Material cost/unit $15 $20
Molding time/batch 5 hours 7.5 hours
Batch size 100 units 50 units
Activity Based Rate= Cost per Unit of Cost Driver
Activity Cost driver Cost Rate
Molding 2,000 $150,000 $150,000 / 2,000 = 75
Inspection 150 $75,000 $75,000/150 = 500
Production 20 $125,000 $125,000/20= 6250
Total $ 350,000
Cost Drivers Consumed
Activity A999 B999
Molding time/batch 5 hours* 10 7.5 hours *40
50 300
Batch size 1,000 unit/ 100 units 2,000 unit/50 units
= 10 =40
ABC Profits for Each Contract
A999 B999
Selling Price $27,000 $100,000
Materials 15*1000 20 * 2000
= 15000 = 40,000
Molding 50 hours *75 300* 75
3750 22500
Inspection 10 batches *500 40 batches *500
$ 5000 $ 20000
Management Contracts $ 6250 $ 6250
Total $ 30,000 $ 88,750
Profit $ (3000) $ 11250
Overhead Rate Absorption Costing
Total Overheads= ( 150,000 + 125,000+ 75000) = $ 350000
Annual Molding Hours = 2000
Rate= $ 350,000/2000=$ 175 per molding hour
Absorption Costing
Profit For each Contract
A999 B999
Selling Price $27,000 $100,000
Materials 15*1000 20 * 2000
= 15000 = 40,000
Overheads 50 hours *175 300 Hours *175
= 8750 = 52,500
Total Cost 23750 92500
Profit 3250 7500
The contract A yields a loss under ABC but Contract B yields a profit.
Under absorption costing both contract yield profits.
Management should make decisions using ABC and reject Contract A and accept Contract B.
The simple rate of return is also called all of the following except ________. annual rate of return unadjusted rate of return accounting rate of return
Answer: annual rate of return
Explanation:
The simple rate of return is also called the unadjusted rate of return or the accounting rate of return.
The simple rate of return is calculated when the incremental net operating income for the year is taken and then divided by the initial investment.
It should be noted that it's not called the annual rate of return.
The Whistling Straits Corporation needs to raise $74 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $45 per share and the company's underwriters charge a spread of 6 percent. If the SEC filing fee and associated administrative expenses of the offering are $825,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)
Answer:
1,768,913 new stocks
Explanation:
the company needs to raise amount needed to finance expansion plus SEC's filing and administrative fees = $74,000,000 + $825,000 = $74,825,000
net amount received per stock issued = stock price x (1 - underwriting fee) = $45 x (1 - 6%) = $42.30 per stock
the company needs to issue = $74,825,000 / $42.30 per stock = 1,768,912.53 = 1,768,913 new stocks
Evaluate the Ritz-Carlton business model and associate key quality characteristics in the operations of a hotel set-up process.
Answer:
Ritz Carlton is luxury hotel chain of America. The company has 101 luxury hotel in more than 30 countries of the world. The success of Ritz Carlton is mainly because they keep the comfort of their guests as their highest priority. Their mission statement clearly states that comfort and genuine care of their guests is utmost important to them.
Explanation:
Their business model focuses entirely on their customers. Ritz Carlton has created its leading brand by providing great ambiance to the visitors and its guest. One can dream of staying at such luxury hotel. They are famous for their hospitality of their guests. The hotel management believes on total quality management. It has set highest standard for themselves and strive to meet them by providing better and better service to its guests.
