Answer:
See journal entries below.
Explanation:
The copy right is known as an intangible asset that is purchased to a business hence debited to factor in its purchase value while the bank is credited for the payment for the purchase.
Although the copyright is amortized for 12 years, the copyright protection expires after 12 years - which is the legal year irrespective of its plan to market and sell the painting for 19 years.
• Entries to record to record the purchase of copyrights on January 1, 2017.
Date
January 1,2017
Copyright Dr $510,000
Bank Cr $510,000
(Being purchase of 12 years painting copyrights)
• Annual amortization on December 31, 2017
December 31, 2017
Amortization Dr $42,500
Copyright Cr $42,500
(Being annual amortization cost on 12 years painting copyright)
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%
= $6.75
Now placing these values to the above formula
So, the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{90,000}\times \text{\$50}}{\text{\$6.75}}}[/tex]
= 365.15 units
We simply applied the above formula so that the EOQ could come
The risk-free rate of return is 3.2 percent and the market risk premium is 4.6 percent. What is the expected rate of return on a stock with a beta of 2.12
Answer:
12.95%
Explanation:
The risk free rate of return is 3.2%
The market risk premium is 4.6%
The beta is 2.12
Therefore, the expected rate of return on a stock can be calculated as follows
= 3.2% + (2.12×4.6%)
= 3.2% + 9.752
= 12.95%
Hence the expected rate of return on a stock is 12.95%
A food manufacturer reports the following for two of its divisions for a recent year.
($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
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:
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.
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
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.
Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule. When computing the cost per unit, round to two decimal places.
Toys produced 40,000 80,000 120,000
Total costs:
Total variable costs $720,000 d. $ j. $
Total fixed costs 600,000 e. k.
Total costs $1,320,000 f. $ l. $
Cost per Unit
Variable cost per unit a. $ g. $ m. $
Fixed cost per unit b. h. n.
Total cost per unit c. $ i. $ o. $
Answer:
Toys produced 40,000 80,000 120,000
Total costs:
Total variable costs $720,000 $1,440,000 $2,160,000
Total fixed costs $600,000 $600,000 $600,000
Total costs $1,320,000 $2,040,000 $2,760,000
Cost per Unit
Variable cost $18 $18 $18
Fixed cost $15 $7.50 $5
Total cost $33 $25.50 $23
Fixed costs do not change with total output, they are the same regardless so the number of units produced. Variable costs change proportionally to any change in total output. If total output increases, variable costs will increase.
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.
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.
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.
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:
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
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
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.
In Macroland autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Planned aggregate expenditure equals:________a.1,000. b.1,160. c.1,280. d.1,440.
Answer:
b) $1,160
Explanation:
From the above information,
I=Investment = 50
G=Government expenditure = 150
X=Net export = 20
a=autonomous consumption = 100
b=Marginal propensity to consume = 0.75
Y=Equilibrium GDP
C = consumption ;
C = 100 + 0.75Y (Y income - 40 taxes)
Planned aggregate expenditure (PAE)
PAE = C + l +G +X
Substituting for C in the above equation,
PAE = 100 + 0.75 (Y - 40) + 50 + 150+ 20
= 100 + 0.75Y -30 + 50 + 150 + 20
= 290 + 0.75Y
Since short run exists when Y = PAE
Therefore,
Y = 290 + 0.75Y
Collect like terms
Y - 0.75Y = 290
0.25Y =290
Y = 290/0.25
Y = 1,160
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.
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.
Busch Company has these obligations at December 31. For each obligation, indicate whether it should be classified as a current liability, long-term liability, or both. (a) A note payable for $100,000 due in 2 years. select a balance sheet section (b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. select a balance sheet section (c) Interest payable of $15,000 on the mortgage. select a balance sheet section (d) Accounts payable of $60,000. select a balance sheet section
Answer:
Busch Company
Indication of whether the obligation be classified as a current liability, long-term liability, or both:
(a) A note payable for $100,000 due in 2 years. Long-term Liability
(b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. Both.
Every year, $20,000 would be classified as Current Liability while the remaining balance is long-term liabilities.
(c) Interest payable of $15,000 on the mortgage. Both
If the interest payable is to be settled at the end of the mortgage, then it is classified as only long-term.
(d) Accounts payable of $60,000. Current Liability
Explanation:
Busch's current liabilities are financial obligations that are due for settlement within the next accounting period of 12 months or less.
The long-term liabilities of Busch Company are those financial obligations that are not due for settlement within the next accounting period.
For some long-term liabilities, Busch may settle some part within 12 months. That part that can be settled within the accounting period are classified as current while the other parts are non-current.
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.
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
George Bailey purchased equipment from M. Potter for $450,000, paying $35,000 cash as a down payment and financing the remainder. The correct journal entry to record this event is:
Answer:
Equipment $450,000 (debit)
Cash $35,000 (credit)
Suppliers Loan $415,000 (credit)
Explanation:
George Bailey must recognize the Asset of Equipment, de-recognize the Assets of Cash and recognize the Suppliers Loan as above.
Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $21,200, direct labor $12,720, and manufacturing overhead $16,960. As of January 1, Job 49 had been completed at a cost of $95,400 and was part of finished goods inventory. There was a $15,900 balance in the Raw Materials Inventory account.
During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $129,320 and $167,480, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $95,400 on account.
2. Incurred factory labor costs of $74,200. Of this amount $16,960 related to employer payroll taxes.
3. Incurred manufacturing overhead costs as follows:
Indirect materials $18,020
Indirect labor $21,200
Depreciation expense on equipment $12,720
Various other manufacturing overhead costs on account $16,960.
4. Assigned direct materials and direct labor to jobs as follows.
Job No. Direct Materials Direct Labor
50 $10,600 $5,300
51 41,340 26,500
52 31,800 21,200
Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $ 882,000, direct labor costs of $735,000, and direct labor hours of 21,000 for the year.
Answer:
Predetermined manufacturing overhead rate= $1.2 per direct labor dollar
Explanation:
Giving the following information:
Company estimates total manufacturing overhead costs of $882,000 and, direct labor costs of $735,000
To calculate the predetermined overhead rate, we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 882,000/735,000
Predetermined manufacturing overhead rate= $1.2 per direct labor dollar
Messing Company has their own credit card and makes a credit sale on February 1 to one of its customers for $5,000. Prepare the February 1 journal entry for Messing Company by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Answer:
February 1
DR Accounts Receivable.......................................$5,000
CR Sales........................................................................................$5,000
(To record sales on credit)
The credit card was that of Messing company itself.
All-Mart Discount Stores Corporation contracts to buy ten acres from Suburban Enterprises, Inc., as a site for a new store. The contract calls for a "warranty deed." According to a survey that All-Mart commissions, one corner of an adjacent, enclosed parking lot is on part of the property that Suburban is attempting to convey. Can All-Mart avoid the contract? If so, on what basis? If not, why not?
Answer:
All-Mart can avoid the contract since it didn't meet their specification for the siting of their new store which they planned for. The warranty deed which they called for was to ensure that, all land purchased has guarantee that it would not become an issue for them in the future.
Since one part is an enclosed parking lot which is a public property that Suburban is trying to sell to them, the best would be to avoid it.
Explanation:
A sole proprietor owned an office building with a cost of $300,000 and accumulated depreciation of $40,000, using modified accelerated cost recovery system (MACRS) straight-line depreciation. In the current year, she sold the building for $320,000. What is the unrecaptured Section 1250 gain from this sale, if any
Answer:
The Correct Answer:
$40,000
Explanation:
IRC Section 1250 requires that excess depreciation (actual depreciation in excess of straight-line depreciation) be recaptured as ordinary income. Since the property has sold for more than the adjusted basis ($300,000 − $40,000 = $260,000 adjusted basis), the initial gains are recaptured based on the original purchase price of $300,000.
This makes the first $40,000 of the profit subject to the unrecaptured Section 1250 gain while the remaining $20,000 is considered regular long-term capital gains.
You purchased a share of stock for $120. One year later you received $1.82 as a dividend and sold the share for $136. What was your holding-period return
Answer:
Holding period return =14.85 %
Explanation:
The return on stock is the sum of the dividends earned and capital gains made during the holding period of the investment.
Dividend is the proportion of the profit made by a company which is paid to shareholders.
Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.
Therefore, we can can compute the return on the investment as follows:
Holding period return = (Dividend + capital gain)/Begin Price of stock × 100
Dividend = $1.82
Capital gains= 136 - 120 = 16
Total dollar return on Investment = 1.82 + 16= $ 17.82
= 17.82/120 × 100 = 14.85 %
Holding period return =14.85 %
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
= $497854.0773
What are the benefits and risks associated with social networks? Support your answers with relevant examples
Answer:
Explanation:
There are many benefits as well as risks to social networks. The greatest benefit is that they allow us to connect with individuals from anywhere in the world, at any distance, and in a seconds notice. This is incredibly powerful and opens the door for many opportunities in all types of markets. Social networks also come with risks, since everyone is on it people tend to share all of their information which can cause problems for that individual if it falls into the wrong hands. For example, an individual connects with a family member who lives in Brasil and has casual conversations with that family member every other day. A hacker may be able to access that information and extract all the valuable information needed to steal that individual's identity.
Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable. Using the information below, a) calculate the activity-based costs and profits for each contract (this requires more than one step) and b) calculate the profit for each job using absorption costing, absorbing overheads using molding hours: Enter all answers in number format without commas, decimals, or dollar signs. Customer AAA BBB Component Type A999 B999 Contract Value ($) $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.
