Answer:
Forecasted sales
Explanation:
In the production process amount of inventory purchased for producing goods must be carefully calculated.
This avoids waste incurred from buying excess of materials needed for operation. Also when there is shortage of materials time and resources are wasted getting more materials.
So when calculating material requirements for finished products it is important that we consider sales forecasts.
Materials purchased based on this will just adequately meet the demand for product.
This reduce cost of storage of excess materials.
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows:
Sales $188,000,000
Cost of goods sold (100,000,000)
Gross profit $88,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 12,000,000
Total expenses (28,000,000)
Operating income $60,000,000
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold 70% 30%
Selling expenses 75% 25%
Administrative expenses 50% 50%
Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs.
Required:
1. Determine the total variable costs and the total fixed costs for the current year.
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
3. Compute the break-even sales (units) for the current year.
4. Compute the break-even sales (units) under the proposed program for the following year.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,000,000 of operating income that was earned in the current year.
6. Determine the maximum operating income possible with the expanded plant.
7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?
8. Based on the data given, would you recommend accepting the proposal?
A. In favor of the proposal because of the reduction in break-even point.
B. In favor of the proposal because of the possibility of increasing income from operations.
C. In favor of the proposal because of the increase in break-even point.
D. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
E. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.
Answer:
1. Variable Fixed
Cost of goods sold 70,000,000 30,000,000
Selling Expenses 12,000,000 4,000,000
Administrative Exp. 6,000,000 6,000,000
Total 88,000,000 40,000,000
Note:
Cost of goods sold 70% 30% on 10,000,000 for variable and Fixed respectively
Selling expenses 75% 25% on $16,000,000 for variable and Fixed respectively
Administrative expenses 50% 50% on $12,000,000 for variable and Fixed respectively
2. Unit Variable cost = Total variable cost / Units produced
Total Variable cost 88,000,000
Unit produced 1,000,000
Unit variable cost 88
Unit Contribution margin = Selling Price - Variable cost per unit
Selling Price $188
- Variable cost per unit $88
Unit Contribution margin $100
3. Break even Point (Units) = Fixed cost / Contribution margin per unit
Fixed cost 40,000,000
Contribution margin per Unit 100
Break even Point (Units) 400,000
4. Break even point (units) = Fixed cost / Contribution margin per unit
Fixed cost 40,000,000
Increased Fixed cost 5,000,000
Total New fixed cost 45,000,000
Contribution margin per unit 100
Break even point (units) 450,000
5. Determined sales units = (New fixed cost + Desired Income) / Contribution margin
New Fixed Cost 45,000,000
Desired Income 60,000,000
105,000,000
Contribution margin 100
per unit
Determined sales units 1,050,000
6. Maximum Income from operation = Total New sales - Total New variable cost - Total Fixed cost
Sales 188,000,000
Increased sales 11,280,000
Total New sales 199,289,000
Variable cost 88,000,000
New Variable cost 5,280,000
Total New Variable cost 93,280,000
Total New Fixed cost 45,000,000
Maximum Income from 61,000,000
operation
Number of units = Increase in sales / Price per unit
New variable cost = Number of units * Unit variable cost
Increased sales 11,280,000
Price per unit 188
Number of units 60,000
Unit variable cost x 88.00
New Variable cost 5,280,000
7. Net income = Sales - Variable cost - New fixed cost
Sales 188,000,000
Less: Variable cost 88,000,000
Less: New fixed cost 45,000,000
Net Income 55,000,000
8. Option b. In favour of the proposal because of the possibility of increasing income from operation.
1. The total variable costs are $88,000,000.
Total fixed costs for the current year are $40,000,000.
2.a. The unit variable cost is $88 ($88,000,000/1,000,000)
b. The unit contribution margin is $100 ($188 - $88).
3. The break-even sales (units) for the current year = 400,000 units ($40,000,000/$100).
4. The break-even sales (units) for the proposed program = 450,000 units ($45,000,000/$100).
5. Sales units to realize $60,000,000 of operating income = 1,050,000 units ($45,000,000 + $60,000,000)/$100
6. The maximum operating income with the expanded plant is $61,000,000 ($199,280,000 - $93,280,000 - $45,000,000).
7. Operating income at current sales level = $49,720,000 (188,000,000 - $93,280,000 - $45,000,000).
8. I would recommend the acceptance of the proposal, B. In favor of the proposal because of the possibility of increasing income from operations.
Data and Calculations:
Sales unit at full capacity = 1,000,000 units
Selling price per unit= $188
Sales = $188,000,000
Cost of goods sold = $100,000,000
Variable cost of goods sold = $70,000,000 ($100,000,000 x 70%)
Fixed cost of goods sold = $30,000,000 ($100,000,000 x 30%)
Gross profit = $88,000,000
Expenses:
Selling expenses = $16,000,000
Variable cost of goods sold = $12,000,000 ($16,000,000 x 75%)
Fixed cost of goods sold = $4,000,000 ($16,000,000 x 25%)
Administrative expenses = 12,000,000
Variable cost of goods sold = $6,000,000 ($12,000,000 x 50%)
Fixed cost of goods sold = $6,000,000 ($12,000,000 x 50%)
Variable Fixed
Cost of goods sold 70% 30%
Selling expenses 75% 25%
Administrative expenses 50% 50%
Cost of goods sold $70,000,000 $30,000,000
Selling expenses 12,000,000 4,000,000
Administrative expenses 6,000,000 6,000,000
Total costs $88,000,000 $40,000,000
Selling price per unit = $188
Variable cost per unit 88
Contribution margin $100
Contribution ratio = 53.2% ($100/$188 x 100)
Fixed costs = $45,000,000 ($40,000,000 + $5,000,000)
Sales Revenue = $199,280,000 ($188,000,000 + $11,280,000)
Additional sales units = 60,000 ($11,280,000/$188)
Total sales units = 1,060,000 (1,000,000 + 60,000)
Learn more: https://brainly.com/question/18155783
If United Airlines acted as a "price leader" and all other airlines simply charged the same prices
that United Airlines charged, then could this action be illegal because it is a form of "silent collusion?"
A. There is no such term in microeconomics known as "tacit" or "silent collusion."
B. Matching the prices of the price leader firm is a good example of a competitive market.
C. The U.S. Anti-Trust Department has always considered this business behavior as suspicious
and it does consider this pricing strategy to be illegal.
D. The famous 1982 anti-monopoly IBM court case said that this pricing strategy within an
industry is legal as long as the firms fill out quarterly reports to keep the U.S. Anti-Trust
Answer:
D
Explanation:
The airline industry is an example of an oligopoly
An Oligopoly is when there are few large firms operating in an industry. While, a monopoly is when there is only one firm operating in an industry.
Oligopolies are characterised by :
price setting firms
product differentiation
profit maximisation
high barriers to entry or exit of firms
downward sloping demand curve
the action taken by the other airlines is known as tacit collusion.
Tacit collusion is when other companies adopt the price of the price leader
Tacit collusion is not illegal while the explicit collision is illegal.
Dextra Computing sells merchandise for $9,000 cash on September 30 (cost of merchandise is $7,200). Dextra collects 7% sales tax. Record the entry for the $9,000 sale and its sales tax. Also record the entry that shows Dextra sending the sales tax on this sale to the government on October 15.
View transaction list
Journal entry worksheet
Record the cash sales and 9% sales tax.
Note: Enter debits before credits.
Date General Journal Debit Credit
Sep 30
Record entry Clear entry View general journal
Answer:
Sept 30
DR Cash ........................... $9,630
CR Sales ..........................................$9,000
CR Sales Tax Payable...................$630
(To record Sales and Sales taxes)
Working
Cash = 9,000 + (9,000 * 7%)
= $9,630
Sales tax = 9,630 - 9,000
= $630
Sept 30
DR Cost of Goods Sold .....................$7,200
CR Merchandise Inventory ...................................$7,200
(To record cost of goods sold)
Oct 15
DR Sales Tax Payable...........................$630
CR Cash...............................................................$630
(To record remittance of Sales Tax)
Ms. Ray is age 46 and single. Her employer made a $2,730 contribution to her qualified profit-sharing plan account, and she made the maximum contribution to her traditional IRA. Compute her IRA deduction if:
a. Ms. Ray's $50,000 salary is her only income item.
b. Ms. Ray's S64,250 salary is her only income item.
c. Ms. Ray's $64,250 salary and S 7,970 dividend income are her only income items.
Answer:
B
Explanation:
Recently, the Google team announced its fleet of driverless cars had completed over 1 million miles of "autonomous driving." The Google driverless car is at which stage of the new-product development process?
Answer:
Product Development (stage five)
Explanation:
Sometimes companies make moves towards introducing new products in the market space. To do this there are different stages that must be passed in the new-product development process. The product development stage is the stage where a prototype version of the product is produced. This version of the product would have the required features of the end product and the effect the product is expected to produce. After this stage, the product undergoes market testing. For products that took in a lot of investment, more intense test marketing should be done in order to ascertain what would really translate to higher sales for the product.
When the Google team announced that its fleet of driverless cars had completed over 1 million miles of 'autonomous driving', it means that they had produced the prototype of the product and it has undergone testing. The next stage would entail testing the product in the market and then commercialization.
How can you assist the ProServices team in serving Pro customers in your
department? Select all that apply.
A. Pull orders for Pro customers in advance and have them ready to pick-up
B. Call Pro customers to maintain relationships and proactively seek out business
C. Monitor inventory levels to make sure key Pro items are in-stock
D. Price match other retailers to give Pro the best price
E. Identify pro customers and introduce them to the ProServices team
Answer:
ProServices Team and Pro CustomersAssisting the ProServices Team in serving Pro customers in my department. Here I have assumed that my department manages and coordinates the relationship with Pro customers:
A. Pull orders for Pro customers in advance and have them ready to pick-up
B. Call Pro customers to maintain relationships and proactively seek out business
C. Monitor inventory levels to make sure key Pro items are in-stock
D. Price match other retailers to give Pro the best price
E. Identify pro customers and introduce them to the ProServices team.
Explanation:
“Pro” customers are a group of independent contractors, repair remodelers, specialty tradesmen, property management, and facility maintenance professionals who are afflicted to an organization offering ProServices. They are not the end customers. Between my organization and the customers, they are middlemen and women who are organized by my ProServices organization to offer specialty services to the general public in a professional manner that guarantees customer satisfaction and payment to the professionals for services rendered. In doing this, the ProService organization charges the Pro customers a fixed fee, which is deducted from the payments made by the end-customers.
To be responsible in financial planning you must set goals. To reach these goals you must create a plan. What is a specific financial goal that you have
Answer and Explanation:
As we know that planning is the most important part of everyone life. Without planning, no one could able to accomplish its goals and objectives.
There are various steps to study about yourself and based on this you can do the planning and reach your goals which are shown below:
1. The most important part of your life find that and always do practical thinking
2. How much time it takes to reach your goals
3. Now use the SMART strategy which gives you the way to accomplish it
4. Make a roadmap so that you get to know how the things could be happen
5. How much money is required to execute it
6. And at last check your progress
These above steps helps you to develop a financial plan
The risk-free rate is 6% and the expected rate of return on the market portfolio is 13%. a. Calculate the required rate of return on a security with a beta of 1.25.
Answer:
The required rate of return is r = 0.1475 or 14.75%
Explanation:
The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.
The equation is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is the return on marketr = 0.06 + 1.25 * (0.13 - 0.06)
r = 0.1475 or 14.75%
Conversion costs are:_______.
A. The direct labor costs associated with processing a product.
B. The combined costs of converting raw materials to finished goods.
C. The overhead costs associated with processing a product.
D. All the costs that go into the manufacturing of a product (DM, DL and OH).
Answer:
B. The combined costs of converting raw materials to finished goods.
Explanation:
Conversion Costs are the combined costs of converting raw materials to finished goods.
These include the costs of direct labor and manufacturing overheads such as water and electricity.
Prepare journal entries to record the following four separate issuances of stock. A corporation issued 7,000 shares of $20 par value common stock for $168,000 cash. A corporation issued 3,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $34,000. The stock has a $1 per share stated value. A corporation issued 3,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $34,000. The stock has no stated value. A corporation issued 1,750 shares of $25 par value preferred stock for $77,750 cash.
Answer: Please see explanation column for answer
Explanation:
1. For shares issued in excess of par value common stock
Amount Debit Credit
Cash $168,000
Common stock at $20 ( 7000 x 20) $140,000
Paid in excess of par value common stock
(168,000 - 140,000) $28,000
2. For shares issued to Promoters at stated value
Amount Debit Credit
Organisational expenses $34,000
Common stock at $1 ( 3,500x 1) $3,500
Paid in capital in excess of stated value
common stock(34,000 - 3,500) $30, 500
3. For shares issued to Promoters at no stated value
Amount Debit Credit
Organisational expenses $34,000
Common stock at $1 no par value $34,000
4.For shares issued in excess of par value preferred stock
Amount Debit Credit
Cash $77,750
preferred stock at $25(1,750 x 25) $43,750
Paid in capital in excess of par value
Preferred stock(77,750 -43,750) $34,000
22. On January 1, 2021, Princess Corporation leased equipment to King Company. The lease term is eight years. The first payment of $675,000 was made on January 1, 2021. The equipment cost Princess Corporation $3,600,000. The present value of the lease payments is $3,961,183. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, how much interest revenue will Princess record in 2022 on this lease
Answer:
$293,980.13
Explanation:
Calculation of how much of the interest revenue Princess will record in 2022 on the lease
First Step is to find the interest for year 2021
Present Value January 1, 2021 $3,961,183
Less Payment January 1, 2021 (675,000)
=$3,286,183
Hence,
2021 Interest =$3,286,183× 10%
2021 Interest = $328,618.3
Second Step
Second Payment $675,000
Less Interest (328,618.3)
Reduced balance $346,381.7
Third Step is to find the how much interest revenue will Princess record in 2022 on the lease
2021 $3,286,183
Less Reduced balance (346,381.7)
January 1 2022 Liability = $2,939,801.3× 10%
2022 Interest Revenue =$293,980.13
Therefore the amount of interest revenue that Princess will record in 2022 on the lease will be $293,980.13
Potential GDP of an economy is $12 billion. Real (Actual) GDP is $20 Billion. Marginal propensity to consume is 0.75. What level of Government spending is required to achieve Full employment
Answer:
Government spending required = $2 billion
Explanation:
The required amount of GDP to achieve the full employment GDP =
Potential GDP - Actual
that is 20 - 12 = $8 billion.
But note that a government spending of less than $8 billion would be required to achieve an increase of 8 billion in real GDP. This is so because of expenditure multiplier effect.
The expenditure multiplier is the amount by which the aggregate output would increase with an increase in any of the expenditure components.
It is calculated as follows;
Multiplier = 1/(1-MPC)
For this question ,
Expenditure multiplier = 1/(1-0.75) = 4
This implies that $1 change in any of the aggregate expenditure would lead a $4 worth of change in GDP.
Government spending required is determined as
Desired change in real GDP/expenditure multiplier
= $8 billion/4 = $2 billion
Government spending required = $2 billion
You manufacture wine goblets. In mid- June you receive an order for 10,000 goblets from Japan. Payment of ¥400,000 is due in mid- December. You expect the yen to rise from its present rate of $1=¥107 to $1 to ¥120 by December 2020. You can borrow yen at 6% a year. What should you do?
Answer:
I will borrow yen at 6% a year.
Explanation:
a) Data and Calculations:
Payment for 10,000 = ¥400,000
Spot rate = $1 = ¥107
Forward rate = $1 to ¥120
Borrow ¥400,000, the interest cost = ¥24,000 = $224.30/2 (¥24,000/107) = $112.15 for six months
Value of ¥400,000 borrowed in dollars = $3,738.32 (¥400,000/107)
Loan Repayment of ¥400,000 in dollars = $3,333,33 (¥400,000/120)
Gain from forward contract = $404.99
Interest cost for borrowing = 112.15
Overall debt hedging gain = $292.84
By borrowing yen at 6% per annum, you will make an overall gain of $292.84. This is not comparable to the foreign exchange loss of $404.99 that you will incur without borrowing yen. Taking advantage of the the debt hedging, the supplier is able to save foreign exchange loss.
Danny owns two companies where he has recently made changes. The margin of safety ratio for Company X is 42% and the margin of safety ratio for Company Y is 25%. What does this imply about the two companies?
Answer: Company X could lose more business before it will begin experiencing financial difficulties when it is being compared to company Y
Explanation:
Margin of safety ratio simply helps to understand the extent to which there'll be drop in sales before a company will begins to make a loss.
Since the margin of safety ratio for Company X is 42% and the margin of safety ratio for Company Y is 25%, it means that Company X could lose more business before it begins experiencing financial difficulties when it is compared to company Y.
A company has a net cash inflow from operating activities of $793,000, a net cash outflow of $58,000 from investing activities and a net cash inflow of $100,800 from financing activities. The company paid $128,000 in interest, $188,500 in income taxes, and $204,000 in cash dividends. Which of the following statements about the statement of cash flows is not correct?a. The statement of cash flows will show a net increase in cash and cash equivalents of $838, 500. b. If the direct method is used, the $125,000 of interest paid and the $187,000 of income taxes paid will be reported in the cash flows from operating activities. c. The cash dividends of $201,000 paid will be reported as a cash outflow in the cash flow from investing activities section. d. Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
Answer:
Incorrect Statement about the Statement of Cash Flows:
c. The cash dividends of $201,000 paid will be reported as a cash outflow in the cash flow from investing activities section.
Explanation:
Cash dividends of $201,000 will be reported as a cash outflow in the financing activities section and not the investing activities section.
Statement of Cash Flows is broadly divided into three, the operating, investing, and financing activities sections. The operating activities section show the cash flows from the normal business of the enterprise. The investing activities section shows the acquisition and disposal of investments made by the company in cash. While, the financing section shows the inflow and outflow of cash resulting from the funding of the business by stockholders and noncurrent creditors.
Rent expense of $3,000 is allocated to Department A and Department B based on square footage. Department A has 5,000 square feet and Department B has 2,500 square feet.
The dollar amount of rent expense allocated to Department B is:_______
Answer:
$1,000
Explanation:
Calculation for the Dollar amount of rent expense allocated to department B
Using this formula
Expense allocated to Department B= Rent expense allocated to Department A and B* Department B square feet/Department A and Department B Square foot
Let plug in the formula
Expense allocated to department B =$3,000*2,500/5,000+2,500
Expense allocated to department B= $3,000 * 2,500 / 7,500
Expense allocated to department B =$7,500,000/7,500
Expense allocated to department B= $1,000
Therefore the Dollar amount of rent expense allocated to department B will be $1,000
RLW-II Enterprises estimated that indirect manufacturing costs for the year would be $60 million and that 12,000 machine hours would be used
Answer: $3,150,000
Explanation:
Total cost of production will be the total sum of the material costs, labor costs and indirect costs.
Indirect Costs
It was estimated that 12,000 machine hours would be used at a cost of $60 million.
Indirect cost per machine hour is;
= 60,000,000/12,000
= $5,000 per hour
With 200 machine hours, indirect cost is;
= 200 * 5,000
= $1,000,000
Total cost of production = 1,250,000 + 900,000 + 1,000,000
= $3,150,000
Yan Yan Corp. has a $5,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 21 years to maturity. The yield to maturity on this bond is 4.1 percent.
What is the price of the bond?
Answer:
Price of the bond = $4,122.36
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Yan Yan Corp. be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 4.6% × 5,000 × 1/2 = 115
Semi-annual yield = 4.1%/2 = 2.05 % per six months
Total period to maturity (in months) = (2 × 21) = 41 periods
PV of interest =
115 × (1- (1+0.0205)^(-21)/0.0205)=1,946.47
Step 2
PV of Redemption Value
= 5000 × (1.0205^(-41) = 2,175.89
Step 3:Price of the bond
Total present Value = 1,946.47 + 2,175.89 = 4,122.36
Price of the bond = $4,122.36
Sheridan Company issues 3600 shares of its $10 par value common stock having a fair value of $20 per share and 5600 shares of its $10 par value preferred stock having a fair value of $20 per share for a lump sum of $205400. What amount of the proceeds should be allocated to the preferred stock
Answer:
$125,026
Explanation:
Common Shares 3,600
Fair value $20
Total market value of common stock $72,000
Preferred shares 5,600
Fair value $20
Total market value of preferred stock $112,000
Lump Sum amount $205,400
Amount of proceeds should be allocated to the preferred stock = 205,400 * (112,000 / (72,000 + 112,000) ) = $125,026
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $750,000. The net cash flows estimated for the two proposals are as follows:
Net Cash Flow Year Processing Mill Electric Shovel
1 $310,000 $330,000
2 260,000 325,000
3 260,000 325,000
4 260,000 320,000
5 180,000
6 130,000
7 120,000
8 120,000
The estimated residual value of the processing mill at the end of Year 4 is $280,000.
Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162
Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%. Use the present value table appearing above. If required, round to the nearest dollar.
Processing mill electric shovel
Present value of net cash flow total $_____ $_____
Less amount to be invested $_____ $_____
Net present value $_____ $_____
Answer:
Year NCF Processing Mill NCF Processing Mill NCF Electric Shovel
0 -$750,000 -$750,000 -$750,000
1 $310,000 $310,000 $330,000
2 $260,000 $260,000 $325,000
3 $260,000 $260,000 $325,000
4 $260,000 $540,000 $320,000
5 $180,000
6 $130,000
7 $120,000
8 $120,000
discount rate = 15%
NPV Processing Mill (8 years) = -$750,000 + ($310,000 x .87) + ($260,000 x .756) + ($260,000 x .658) + ($260,000 x .572) + ($180,000 x .497) + ($130,000 x .432) + ($120,000 x .376) + ($120,000 x .327) = -$750,000 + $267,700 + $196,560 + $171,080 + $148,720 + $89,460 + $56,160 + $45,120 + $39,240 = -$750,000 + $1,014,040 = $264,040 HIGHEST NPV, SO THIS PROJECT SHOULD BE SELECTED
NPV Processing Mill (4 years) = -$750,000 + ($310,000 x .87) + ($260,000 x .756) + ($260,000 x .658) + ($540,000 x .572) = -$750,000 + $267,700 + $196,560 + $171,080 + $308,880 = -$750,000 + $944,220 = $194,220
NPV Electric Shovel (4 years) = -$750,000 + ($330,000 x .87) + ($325,000 x .756) + ($325,000 x .658) + ($320,000 x .572) = -$750,000 + $287,100 + $245,700 + $213,850 + $183,040 = -$750,000 + $929,690 = $179,690
All of the following are considered process innovation EXCEPT A. organizational innovation. B. nonneutral technical progress. C. neutral technical progress. D. labor saving technical progress.
Answer:
B. nonneutral technical progress.
Explanation:
The balance sheet of Cattleman's Steakhouse shows assets of $86,000 and liabilities of $14,400. The fair value of the assets is $89,400 and the fair value of its liabilities is $14,400. Longhorn paid Cattleman's $82,920 to acquire all of its assets and liabilities. Longhorn should record goodwill on this purchase of:
Answer:
The goodwill is $7,320
Explanation:
It is given that fair value of assets is $89,400 and fair value of liabilities is $14,400
Fair value difference = Fair value of assets - Fair value of liabilities
Fair value difference = $89,400 - $14,400
Fair value difference = $75,000
Hence, the fair value difference is $75,000
It is given that acquisition price is $82,920 and calculated fair value difference is $75,600. Calculation of goodwill is given below
Goodwill = Acquisition price - Fair value difference
Goodwill = $82,920 - $75,600
Goodwill = $7,320
Hence, the goodwill is $7,320.
Companies Heidee and Leaudy are virtually identical in that they are both profitable, and they have the same total assets (TA), Sales (S), return on assets (ROA), and profit margin (PM). However, Company Heidee has the higher debt ratio. Which of the following statements is CORRECT?a. Company Heidee has a lower operating income (EBIT) than Company LDb. Company Heidee has a lower total assets turnover than Company Leaudy.c. Company Heidee has a lower equity multiplier than Company Leaudy.d. Company Heidee has a higher fixed assets turnover than Company Leaudy.e. Company Heidee has a higher ROE than Company Leaudy.
Answer:
Correct Answer:
e. Company Heidee has a higher ROE than Company Leaudy.
Explanation:
Return on Equity, (ROE) is a ratio that provides investors with insight into how efficiently a company and more specifically, its management team is handling the money that shareholders have contributed to it. That is, it measures the profitability of a corporation in relation to stockholders' equity.
Company Heidee has the higher debt ratio shows that the ROE is very high. This shows that the investors money in Company Heidee is well managed in the business.
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
Year Plant Expansion Retail Store Expansion
1 $ 450,000 $ 500,000
2 450,000 400,000
3 340,000 350,000
4 280,000 250,000
5 180,000 200,000
Total $1,700,000 $1,700,000
Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.
Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162
Required:
1a. Compute the cash payback period for each project.
Cash Payback Period
Plant Expansion < >1 year2 years3 years4 years5 years
Retail Store Expansion < >1 year2 years3 years4 years5 years
1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.
Plant Expansion Retail Store Expansion
Present value of net cash flow total $ $
Less amount to be invested $ $
Net present value $ $
2. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
Answer:
the cash payback period for both projects is 2 years
NPV for plant expansion = $304,707.24
NPV for Retail Store Expansion = $309,744.41
retail store expansion has the greater NPV
Explanation:
Here is the full question for question 2
. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
has the higher net present value
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Please check the attached image for a calculation of how the payback period was calculated.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
for Plant Expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 450,000
Cash flow in year 2 = 450,000
Cash flow in year 3 = 340,000
Cash flow in year 4 = 280,000
Cash flow in year 5 = 180,000
I = 15%
NPV = $304,707.24
For retail store expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 500,000
Cash flow in year 2 = 400,000
Cash flow in year 3 = 350,000
Cash flow in year 4 = 250,000
Cash flow in year 5 = 200,000
I = 15%
NPV = $309,744.41
retail store expansion has the greater NPV
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,500 units. His cost to carry one unit is $80 per year per unit, and he has estimated that each order costs $22 to place.
Using the EOQ model, how many should Ray order each time?
Answer:
28.72 units
Explanation:
Calculation of how many should Ray order each time using EOQ model
Using this formula
EOQ= √2DS/H
Where,
D=Annual demand 1,500 units
S=Order costs $22
H=Holding Costs $80 per unit
Let plug in the formula
EOQ=√2*1,500*$22/$80
EOQ=√66,000/$80
EOQ=√825
EOQ=28.72 units
Therefore Using the EOQ model, Ray should order 28.72 units each time.
Nemesis, Inc., has 215,000 shares of stock outstanding. Each share is worth $81, so the company's market value of equity is $17,415,000. Suppose the firm issues 48,000 new shares at the following prices: $81, $75, and $69. What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share? (Leave no cells blank; if there is no effect select "No change" from the dropdown and enter "O". Round your answers to 2 decimal places, e.g., 32.16.)
Price Ex-Rights Amount $ Effect per share
per share
per share
No change
Price drops by
Price drops by
Answer:
$81, $75, and $69
a. Market value of existing shares = 215000 * $81 = $17415000
Value of New shares issued = 48000 * $81 = $3888000
$21,303,000
Price after issue of new shares = 21,303,000 / (215000 + 48000)
= 21,303,000 / 263,000
= $81
Conclusion: No changes ($0 per share
b. Market value of existing shares = 215000 * $81 = $17415000
Value of New shares issued = 48000 * $75 = $3600000
$21015000
Price after issue of new shares = 21015000 / (215000 + 48000)
= 21,015,000 / 263,000
= $79.90
Conclusion: There is a decrease in amount (81 - 79.90) = $1.10 per share
c. Market value of existing shares = 215000 * $81 = $17415000
Value of New shares issued = 48000 * $69 = $3312000
$20,727,000
Price after issue of new shares = 20,727,000 / (215000 + 48000)
= 20,727,000 / 263,000
= $78.81
Conclusion: There is a decrease in amount (81 - 78.81) = $2.19 Per share
ABC issued callable bonds on January 1, 2018. ABC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $194,758 6/30/2018 $7,000 $7,790 $790 195,548 12/31/2018 7,000 7,822 822 196,370 6/30/2019 7,000 7,855 855 197,225 12/31/2019 7,000 7,889 889 198,114 6/30/2020 7,000 7,925 925 199,039 12/31/2020 7,000 7,961 961 200,000 ABC buys back the bonds for $196,000 immediately after the interest payment on 12/31/2018 and retires them. What gain or loss, if any, would ABC record on this date (use a minus sign in front of the number if it is a loss)?
Answer:
Gain $370
Explanation:
Calculation for the gain or loss, if ABC record on this date 12/31/2018
Based on the information given on the amortization schedule, on this date 12/31/2018 the Carrying value was $196,370 while we were still told that ABC buys back the bonds for $196,000 on 12/31/2018
Now let calculate for the gain or loss using this formula
Gain/Loss = Carrying value- Stock bond
Let plug in the formula
Gain/Loss =$196,370-$196,000
Gain/Loss=$370
Therefore if ABC record on this date 12/31/2018, ABC will have a gain of $370
A bond par value is $1,000 and the coupon rate is 5.1 percent. The bond price was $946.02 at the beginning of the year and $979.58 at the end of the year. The inflation rate for the year was 2.6 percent. What was the bond's real return for the year
Answer:
the bond's real return for the year is 6.18 %.
Explanation:
First find the nominal return of the bond then the real return as follows :
PV = - $946.02
Pmt = $1,000 × 5.10% = $51
P/yr = 1
FV = $979.58
n = 1
r = ?
Using a Financial Calculator, the nominal return of the bond, r is 8.9385 %.
Real Return = ( 1 + nominal return) / (1 + inflation rate) -1
= (1 + 0.089395) / (1 + 0.026) - 1
= 0.0618 or 6.18 %
A company issues 9% bonds with a par value of $110,000 at par on January 1. The market rate on the date of issuance was 8%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:
Answer: $4950
Explanation:
From the question, we are informed that a company issues 9% bonds with a par value of $110,000 at par on January 1 and that the market rate on the date of issuance was 8% and also that the bonds pay interest semiannually on January 1 and July 1.
There is no discount on the bonds payable because they are issues at par. Therefore, the cash paid on July 1 to the bond holders will be:
= $110,000 x 9% x 6/12
= $110,000 x 9/100 x 6/12
= $110,000 x 0.09 x 0.5
= $4,950
Charger Company's most recent balance sheet reports total assets of $28,413,000, total liabilities of $16,113,000 and total equity of $12,300,000. The debt to equity ratio for the period is (rounded to two decimals):
Answer:
Debt to equity ratio is 1.31
Explanation:
Given the above inflation, the formula for debt to equity ratio is
= Total debt / Total equity
= $16,113,000 / $12,300,000
= 1.31
Therefore, debt to equity ratio is 1.31
