Answer:
Siewert Inc.
Journal Entry:
Memo: This is note that the stock has been split 2-for-1 and the number of common shares increased to 240 (120 x 2) million.
No journal entry is required for a split of 2-for-1 shares. What is required is a memo that indicates that the shares have been split.
The par value is now $0.50 ($1/2)
Explanation:
When the directors of Siewert Inc. declare a stock split, it does not require any journal entry. Instead, a memo is required to describe the declaration and the new number of shares that are now authorized if this has increased, and outstanding. The 2-for-1 split means that stockholders who held 1 share before will now be entitled to 2 shares. This doubling of the number of shares will affect the par value of the shares, causing it to divide by 2. For example, Siewert Inc.'s par value of common shares was $1 before the declaration of the split. After the split, the par value will change to $0.50 or half. This split will also affect the market price of the shares as investors are likely to reduce the current market price to about half of its prevailing price.
In what way did Henry Ford’s use of the assembly-line method of production represent an advance in technology in automobile manufacturing?
Answer: a. It allowed workers to specialize on specific tasks and become more productive.
Explanation:
The Assembly line method of production that Henry Ford initiated at his plant was a technological game changer as it enabled workers to assemble cars faster and this mass produce Ford cars at a cheaper rate for the masses.
The Assembly line worked by putting workers at various stages of the assembly line where they would focus on installing only one or a few parts into the prospective vehicle. This way they were able to focus on that specific task, become more adept at it and thus become more productive.
Marigold Corp. issues $220,000, 20-year, 8% bonds at 104. Prepare the journal entry to record the sale of these bonds on June 1, 2020
Answer:
Selling Price of Bonds = Value of bonds * Issue price / Face price
Selling Price of Bonds = $220,000 * 104/100
Selling Price of Bonds = $228,800
Journal Entry
Date Account Title and Explanation Debit Credit
1 June Cash $228,800
Bond payable $220,000
Premium on bond payable $8,800
(To record issuance of bond)
Working
Premium On Bonds Payable = Selling Price of Bonds - Value of Bonds
= $228,800 - $220,000
= $8,800
A project will reduce costs by $37,000 but increase depreciation by $17,300. What is the operating cash flow if the tax rate is 40 percent?
Answer:
The operating cash flow is $29,120.
Explanation:
Operating cash flow (OCF) can be described as the amount of cash that is generated by a firm from its regular operating activities during a specified period of time.
Operating cash flow (OCF) can be calculated using the following formula:
OCF = ATCS + DTS .......................... (1)
Where;
OCF = Operating cash flow = ?
ATCS = After Tax Cost Savings = Reduce costs * (1-tax rate) = $37,000 * (1 - 40%) = $22,200
DTS = Depreciation Tax Shield = Depreciation * Tax rate = $17,300 * 40% = $6,920
Substituting the values into equation (1), we have:
OCF = $22,200 + $6,920 = $29,120
Therefore, the operating cash flow is $29,120.
Which of the following is not an example of a counterproductive cultural trait that adversely impacts a company's work climate, performance, and strategy execution initiatives?
a) Heavily politicized decision-making
b) The presence of incompatible, clashing subcultures
c) Strictly enforced policies and conservative financial management practices
d) Hostility to change
e) Unethical and greed-driven behaviors
Answer:
I think D is not an example for a company's work climate, performance, and strategy execution initiatives.
Strictly enforced policies and conservative financial management practices out of the following are not an example of counterproductive cultural trait that adversely impacts a company's work climate, performance, and strategy execution initiatives. The correct option is C.
How do you deal with counterproductive work behavior?Encourage them to improve the work they already generate or present them with new tasks to work on. Be confident. Fight against unproductive workplace activities assertively without losing your temper. Establish and uphold your authority that a productive workplace is essential to the success of your facility.
A wide range of factors, such as environmental causes, a lack of training, employee personality and life changes, and external circumstances, might be the motivating drivers behind unproductive work behavior. To recognize and categorize CWB in the workforce, typologies are utilized.
Thus, the ideal selection is option C.
Learn more about counterproductive work here:
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A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:
Answer:
$32.50
Explanation:
Calculation for the company's book value per common share
Using this formula
Book value per common share =[Stockholders' equity -Preferred shares*Preferred stock Stock price per share/ Shares of common stock outstanding,
Let plug in the formula
Book value per common share= [$680,000 - (500 x $60)]/20,000
Book value per common share=$680,000-$30,000/20,0000
Book value per common share= $650,000/20,000
Book value per common share=$32.50
Therefore the company's book value per common share will be $32.50
Planet Company had operating income of $12,000, average operating assets of $125,000, and sales of $45,000. What is Planet's return on investment (ROI)
Answer:
36.36%
Explanation:
Return on investment is given as;
Profit / Cost of goods sold × 100%
Given that profit is $12,000 and sales is $45,000 ;
Cost of goods sold
= $45,000 - $12,000
= $33,000
Therefore, return on investment is
= 12,000 / 33,000 × 100%
= 36.36%
Bramble Corp. recorded operating data for its shoe division for the year. Sales$1300000 Contribution margin360000 Controllable fixed costs180000 Average total operating assets720000 How much is controllable margin for the year
Answer:
controllable margin for the year is $180,000.
Explanation:
The Controllable Margin is the Profit that is controllable by the divisional manager.
Calculation of Controllable Margin :
Contribution Margin $360,000
Less Controllable fixed costs ($180,000)
Division Controllable Margin $180,000
The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity? B) 6.92 percent D) 7.22 percent A) 6.97 percent C) 6.88 percent E) 7.43 percent
Answer:
The answer is D. 7.22 percent
Explanation:
Interest payments are being made semiannually, this means it is being paid twice in a year
N(Number of periods) = 16 periods ( 8 years x 2)
I/Y(Yield to maturity) = ?
PV(present value or market price) = $987
PMT( coupon payment) = $35 ( [7 percent÷ 2] x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 16; PV = -987 ; PMT = 35; FV= $1,000; CPT I/Y= 3.61
3.61 percent is the Yield-to-maturity for semiannual
Therefore, the Yield-to-maturity of the bond annually is 7.22 percent (3.61 percent x 2)
The expected average rate of return for a proposed investment of $625,000 in a fixed asset with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $250,000 for the 5 years, is which of the following?
a.16%
b.50%
c.40%
d.18%
Answer:
C. 40%
Explanation:
on its advertisement, a company claims that it has funds in its possession that are in fact not available for payment of losses or claims. the company is guilty of
Answer:
Misrepresentation.
Explanation:
In this scenario, on its advertisement, a company claims that it has funds in its possession that are in fact not available for payment of losses or claims. The company is guilty of misrepresentation.
Misrepresentation can be defined as an untrue or misleading statement of fact made by a party to an individual or group of people to deceitfully lure or induce them to go into a contract. A company stating in its advert that it has funds in its possession but in the true sense or actual fact do not have the funds for payment of losses or claims; such a company is engaging in a fraudulent act and is liable to prosecution in any court of competent jurisdiction.
You're about to buy a new car for $10,000. The dealer offers you a one-year loan where you pay $860.66 every month for the next 12 months. Since you pay $860.66 * 12 = $10,328 in total, the dealer claims that the loan's annual interest rate is (10,328-10,000)/10,000 = 3.28%. What is the actual effective annual rate?
Answer:
The actual effective annual rate is 3.33%.
Explanation:
Effective Annual Rate (EAR) refers to an interest rate has been adjusted for compounding over specified period of time.
Effective annual rate can therefore be described as the interest rate that paid to an investor in a year after compounding has been adjusted for.
Effective annual rate can be computed using the following formula:
EAR = [(1 + (i / n))^n] - 1 .............................(1)
Where;
i = Annual interest rate claimed by the dealer = 3.28%, or 0.0328
n = Number of compounding periods or months = 12
Substituting the values into equation (1), we have:
EAR = [(1 + (0.0328 / 12))^12] - 1 = 0.0332976137123635
EAR = 0.0333, or 3.33% approximately.
Therefore, the actual effective annual rate is 3.33%.
you are forming a new company that delivers food to residents across college campuses. the primary focus is
Answer:
your primary focus should be on making sure that your system works
Explanation:
When doing this your primary focus should be on making sure that your system works. Meaning that you need to make sure that you have all of the necessary equipment to get the deliveries out on time and everything worked out so that you can assure customer satisfaction. Otherwise, customers will begin to review your company badly and as dysfunctional, which will destroy your business before it can even get started.
You're evaluating the performance of your pension fund. You invested $100 initially, which grew to $106 after 4 months, and then to $107 after another 6 months.
a. What was your HPR during the first 4 months?b. What was your HPR during the next 5 months?c. What was your total HPR over the 9 months?
Answer:
a) the holding period return (HPR) for the first 4 months = ($106 - $100) / $100 = 6%
b) the holding period return (HPR) for the next 5 months = ($107 - $106) / $106 = 0.94%
c) the holding period return (HPR) for the 9 months period = ($107 - $100) / $100 = 7%
The holding period return measures the total return on an investment over a certain period of time. It does not necessarily calculate annual returns, since the holding period can be more or less than 1 year.
Craig's Car Wash Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC: 10.00%
Year : Cash flows
0 : -$900
1 : $500
2 : $500
3 : $500
Answer:
Discounted payback period= 2 years 1 month
Explanation:
The discounted payback period is the estimated length of time in years it takes the present value of net cash inflow from a project to equate the net cash the initial cost
To work out the discounted payback period, we will compute present value of the cash inflow and then determine how long it will take for the sum to be equal to the initial cost. This is done as follows:
Year Cash flow DF Present value
0 900 × 1 = 900
1 500 × 1.1^(-1) = 454.55
2 500 × 1.1^(-2) = 413.22
2 500 × 1.1^(-3) = 375.66
Total PV for 2 years = 454.55 + 413.22 = 867.77
Balance of cash flow remaining to equal 900 = 900 -867.77 = 32.23
Discounted payback period = 32.23 /375.66 × 12 months
= 2 years 1 month
Discounted payback period= 2 years 1 month
Last year, you purchased a stock at a price of $78.00 a share. Over the course of the year, you received $2.70 per share in dividends and inflation averaged 3.2 percent. Today, you sold your shares for $82.20 a share. What is your approximate real rate of return on this investment?
Answer:
5.65%
Explanation:
Last year a stock of $78.00 was bought
During the period of one year $2.70 was received in dividend and inflation averaged 3.2%
Today the shares was sold for $82.20
The first step is to calculate the nominal return
= ($82.20-$78.00+$2.70)/$78.00
= 6.9/78
= 0.0885×100
= 8.85%
Therefore, the approximate real rate can be calculated as follows
= 8.85%-3.2%
= 5.65%
Hence the approximate real rate of return on this investment is 5.65%
If an investor buys enough stocks, he or she can, through diversification, eliminate all of the unique risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all systemic risk.
A. True
B. False
Answer: True
Explanation:
Buying enough negatively correlated stock can indeed help in diversification of a Portfolio and this on its own is very important as it reduces risk. The type of risk that it reduces however is Unsystematic risk. This is the unique risk inherent in owing stocks.
Systematic risk which is also called undiversifiable risk however cannot be so easily eliminated. This risk is inherent in the Market or the Market segment in question and results from a mix of the Economic, Geo-political and Financial factors in the market. As such, it will not be possible to eliminate all systematic risk.
Jamie has worked for ABC Printing for 5 years. During this period ABC Printing has contributed $25,000 to her non-contributory retirement plan. Assuming ABC uses graded schedule vesting, how much will Jamie be able to roll into an IRA if she left ABC Printing after 5 years?
Answer:
$20,000
Explanation:
Generally a graded vesting schedule lasts 6 years. After the first 2 years, the employee is entitled to 20% of accrued benefits (in this case contributions to her retirement plan). Then, the employee will be vested an additional 20% of the contribution benefits per year until the sixth year when 100% of the benefits are vested.
In this case, Jamie would be able to roll out $25,000 x 80% = $20,000
End of year % vested
2 20%
3 40%
4 60%
5 80%
6 100%
Two mutually exclusive projects have an initial cost of $60,000 each. Project A produces cash inflows of $30,000, $37,000, and $20,000 for Years 1 through 3, respectively. Project B produces cash inflow of $80,000 in Year 2 only. The required rate of return is 10 percent for Project A and 11 percent for Project B. Which project(s) should be accepted and why
Answer:
Project A should be accepted because the NPV is higher. this means that project A is more profitable than project B
Explanation:
Net present value van be used to determine which project should be accepted.
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 project A :
Cash flow in year 0 = $-60,000
Cash flow in year 1 = $30,000
Cash flow in year 2 = $37,000
Cash flow in year 3 = $20,000
I = 10%
NPV = $12,877.54
For project B :
Cash flow in year 0 = $-60,000
Cash flow in year 1 = $0
Cash flow in year 2 = $80,000
Cash flow in year 3 = $0
I = 11%
NPV = $4,929.79
Project A should be accepted because the NPV is higher. this means that project A is more profitable than project B
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
What is the yield to maturity of a bond that pays a 6% coupon rate with semiannual coupon payments, has a par value of $1,000, matures in 15 years, and is currently selling for $803
Answer:
Yield to Maturity = 8.11 %
Explanation:
The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond
The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- annual coupon
F- Face Value
P- Current Price
n- years to maturity
YTM-?, C- 6%× 1000 =60, Face Value - 1,000, P-803, n- 15
YTM = (60 + (1000-803)/15) ÷ ( 1/2× (1000 + 803) )
YTM = 0.0811 × 100 = 8.11 %
Yield to Maturity = 8.11 %
Coffer Co. is analyzing two potential investments.
Project X Project Y
Cost of machine $77,000 $55,000
Net cash flow:
Year 1 28,000 2,000
Year 2 28,000 25,000
Year 3 28,000 25,000
Year 4 0 20,000
If the company is using the payback period method and it requires a payback of three years or less, which project(s) should be selected?
a. Project Y
b. Both X and Y are acceptable projects.
c. Project Y because it has a lower initial investment
d. Project X
e. Neither X nor Y is an acceptable project
Answer:
d. Project X
Explanation:
For Project X
Year Net cash outflow Net cash inflow Balance
0 -$77,000 -$77,000
1 $28,000 -$49,000
2 $28,000 -$21,000
3 $28,000 $7,000
4 0 $7,000
Payback period = 2 + $21,000 ÷ $28,000
= 2 + 0.75
= 2.75 years
For Project Y
Year Net cash outflow Net cash inflow Balance
0 -$55,000 -$55,000
1 $2,000 -$53,000
2 $25,000 -$28000
3 $25,000 -$3,000
4 $20,000 $17,000
Payback period = 3 +3,000 ÷ 20,000
= 3 + 0.15
= 3.15 years
Project X has a lesser than 3 year payback period. So, the correct option is D
Edna is a leading brain surgeon in the United States. She enters into a contract to perform a complicated brain surgery on Ben. However, since Edna is very busy, she wants to assign this contract to a less experienced surgeon, Charles. This would be Charles's first operation of this type. Ben can object to this assignment and prevent it because the contract between Ben and Edna is a(n):
Complete Question:
Edna is a leading brain surgeon in the United States. She enters into a contract to perform a complicated brain surgery on Ben. However, since Edna is very busy, she wants to assign this contract to a less experienced surgeon, Charles. This would be Charles's first operation of this type. Ben can object to this assignment and prevent it because the contract between Ben and Edna is a(n):
Group of answer choices.
A. contract for services to be performed in the future.
B. contract involving personal skill.
C. services contract.
D. employment contract.
Answer:
B. contract involving personal skill.
Explanation:
In this scenario, Edna a leading brain surgeon in the United States enters into a contract to perform a complicated brain surgery on Ben. However, Edna is very busy and wants to assign this contract to a less experienced surgeon, Charles which would be his first operation of this type. Hence, Ben can object to this assignment (brain surgery) and prevent it because the contract between Ben and Edna is a contract involving personal skill.
Apparently, it can be deduced that Edna has competent and professional skills which is the reason why she's the leading brain surgeon in USA. Ben having this information at his disposal chose to go into the contract with Edna, who is an experienced brain surgeon. Therefore, the contract between the two (2) parties is solely based on Edna's personal skill.
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.50. It expects to grow at a constant rate of 2% per year. If investors require a 8% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Answer:
The current price of Hubbard's common stock is $25.50.
Explanation:
This can be calculated using the Gordon growth model (GGM) formula that assumes growth is dividend will be constant as follows:
P = D1/(r - g) ............................ (1)
Where,
P = Current stock price = ?
D1 = Next dividend = D0 * (1 + g) = $1.50 * (1 + 2%) = $1.53
r = required return = 8%, or 0.08
g = growth rate = 2%, or 0.02
Substituting the values into equation (1), we have:
P = $1.53 / (0.08 - 0.02) = $25.50
Therefore, the current price of Hubbard's common stock is $25.50.
The following legal claims exist for Huprey Co. Identify the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements.1. Huprey (defendant) estimates that a pending lawsuit could result in damages of $1,550,000; it is unlikely that the plaintiff will win the case.a. A liability that is recorded.b. An item described in notes to its financial statements.2. Huprey faces a loss on a pending lawsuit that it is unlikely to lose; the amount is reasonably estimable.a. An item described in notes to its financial statements.b. A liability that is recorded.3. Huprey faces a probable loss on a pending lawsuit; the amount is reasonably estimable.a. An item described in notes to its financial statements.b. A liability that is recorded.
Answer:
Huprey Co.
Identifying the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements:
1. Huprey (defendant) estimates that a pending lawsuit could result in damages of $1,550,000; it is unlikely that the plaintiff will win the case.a. A liability that is recorded.
b. An item described in notes to its financial statements.
2. Huprey faces a loss on a pending lawsuit that it is unlikely to lose; the amount is reasonably estimable.
a. An item described in notes to its financial statements. b. A liability that is recorded.
3. Huprey faces a probable loss on a pending lawsuit; the amount is reasonably estimable.a. An item described in notes to its financial statements.
b. A liability that is recorded.
Explanation:
Huprey Co. will recognize and record contingent liabilities in its accounts when it can be reasonably established that the future event will occur and the amount of the liability can be reasonably estimated. The implication is that Huprey Co. must establish two things before a contingent liability is recognized and recorded. One is that the probability or the likelihood or the chance that the event will happen exists and can be estimated. With the probability estimate, it becomes possible for Huprey Co. to also estimate the amount that the happening of the event will cost it.
On July 1, Wildhorse Co. purchases 560 shares of its $5 par value common stock for the treasury at a cash price of $10 per share. On September 1, it sells 370 shares of the treasury stock for cash at $11 per share. Required:Journalize the two treasury stock transactions.
Answer:
Please see the journal entries for the two treasury stock transactions.
Explanation:
• Purchase of treasury stock
Treasury stock Dr $5,600
To Cash account Cr $5,600
(Being the purchase of treasury stock that is recorded)
For recording the above, treasury stock was debited because it increased the treasury while cash credited because it decreased the assets.
• Sale of treasury stock
Cash account Dr $4,070
To Treasury stock Cr $3,700
To paid in capital- treasury stock Cr $370
Explanation
° Purchase of treasury stock
Treasury stock
= 560 shares × $10 per share
= $5,600
° Sales of treasury stock
Cash receipt
= 370 shares × $11 per share
= $4,070
Treasury stock
= 370 shares × $10 per share
= $3,700
Paid in capital treasury stock
= 370 shares × ($11-$10)
= $370
While spring cleaning, Ramon found an entire box of unreported receipts for his sole proprietor business. Ramon wants to amend his return to claim these business deductions. Which form(s) and/or schedule(s) does he need to send to the IRS to amend the return
Answer:
3. Form 1040X, Schedule C, and any other forms or schedules affected by the change in his income.
Explanation:
This question is missing the possible answers:
Form 1040X. Form 1040X and a copy of his original return. Form 1040X, Schedule C, and any other forms or schedules affected by the change in his income. Form 1040X, Schedule C, and a copy of each receipt left off the original returnThe IRS requests that any change or amendment to a tax return must include a copy of all the tax forms and/or schedules that were presented with the original filing that is being amended. If the amendment affects more than 1 filing, you must include all the forms and schedules that were filed before and are being affected by the amendment.
When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.
A. True
B. False
Presented below is the partial bond discount amortization schedule for Cullumber Corp. Cullumber uses the effective-interest method of amortization.
Interest Periods Interest to Be Paid Interest Expense to Be Recorded Discount Amortization Unamortized Discount Bond Carrying Value
Issue date $31,273 $778,727
1 $36,450 $38,936 $2,486 28,787 781,213
2 36,450 39,061 2,611 26,176 783,824
Required:
Prepare the journal entry to record the payment of interest and the discount amortization at the end of period 1
Answer:
Journal entry is given below
Explanation:
To record the payment of interest and the discount amortization at the end of period 1 we should debit the Interest expense and credit cash and discount
DATA
Interest expense in year 1 = $38,936
Interest to be paid = $36,450
Discount amortization = $2,486
Entry DEBIT CREDIT
Bond interest expense $38,936
Cash $36,450
Discount on bonds $2,486
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Eleanor spends all of her money on paperback novels and mandarins. In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a mandarin is 0.33 paperback novels in 2012. Eleanor's wage is 3 paperback novels per hour in 2012. The price of a mandarin is $3.00 in 2012. Which of the following give the real value of a variable? Check all that apply. The price of a paperback novel is $9.00 in 2012. Eleanor's wage is $27.00 per hour in 2012. The price of a paperback novel is 3 mandarins in 2012. Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is . Between 2012 and 2017, the nominal value of Eleanor's wage , and the real value of her wage . Monetary neutrality is the proposition that a change in the money supply nominal variables and real variables.
Answer:
In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply.
The price of a mandarin is $3.00 in 2012.Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.
Which of the following give the real value of a variable? Check all that apply.
The price of a paperback novel is 3 mandarins in 2012.Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.
Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is still 3 mandarins.
Between 2012 and 2017, the nominal value of Eleanor's wage doubled, and the real value of her wage remained constant.
Monetary neutrality is the proposition that a change in the money supply affects nominal variables and does not affect real variables.
Nature's Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in a chef's salad selling for $7. Daily fixed costs are $1,710, and variable costs are $4 per meal. With a capacity of 950 meals per day, the restaurant serves an average of 900 meals each day.Requried:a. Determine the current average cost per meal.b. A busload of 30 Girl Scouts stops on its way home from the San Bernardino National Forest. The leader offers to bring them in if the scouts can all be served a meal for a total of $150. The owner refuses, saying he would lose $0.60 per meal if he accepted this offer. How do you think the owner arrived at the $0.60 figure? Comment on the owner's reasoning.c. A local businessman on a break overhears the conversation with the leader and offers the owner a one-year contract to feed 300 of the businessman's employees one meal each day at a special price of $4.50 per meal. Should the restaurant owner accept this offer? Why or why not?
Answer:
Nature's Garden
a. Determination of the current average cost per meal:
Variable cost per meal = $3,800 ($4 x 950) based on full capacity
Fixed costs per day = $1,710
Total costs = $5,510
Average cost per meal = $5,510/950 = $5.80
b. Girl Scouts' offer of $150 for 30 girls:
Offered price per person = $5 ($150/30)
Projecting a loss of $0.60 per meal, this gives a total loss of $18 ($0.60 x 30)
Projected revenue from the offer = $150 + $18 = $168
Projected revenue per meal = $168/30 = $5.60
Actual revenue to be received per meal = $5.00
Loss of $0.60
The owner arrived at the $0.60 loss because his total costs per meal was $5.60.
c. Since the variable cost per meal is $4, the restaurant owner could accept the offer if the additional 300 meals will not increase his daily fixed costs due to lack of capacity. If the fixed costs increase with this addition, then it may not be reasonable to accept the offer. Based on this offer, the contribution to defraying fixed costs, given present capacity, is only $0.50 ($4.50 - $4) per meal.
Explanation:
Selling price of chef's salad = $7
Daily fixed costs = $1,710
Variable costs per meal = $4
Meals capacity per day = 950
Average meals = 900
Nature's Garden has a fixed cost of $1,710 based on current capacity of 950 meals per day. The fixed cost may increase with increasing capacity. This fact must be borne in mind when making decisions.
Beck Kubiak wishes to purchase new appliances for her home. The total cost for the appliances is $2,900. To finance the purchase, Becky must pay 20% down, with the balance being financed with a 24-month installment loan with an APR of 8.5%. Determine Becky's total finance charge and her monthly payment
Answer:
total finance charge = $203.08
her monthly payment = $105.13
Explanation:
The Loan amount = Cost of Appliance - Down Payment
= $2,900 - ($2,900 × 20%)
= $2,320
Change the APR to nominal compounding,
Using a Financial Calculator, this will be :
8.50 % Shift EFF%
12 Shift P/YR
Shift NOM % = 8.19%
Then calculate the monthly payment as follows :
Pv = $2,320
n = 24
p/yr = 12
r = 8.19%
Fv = $0
PMT = ?
Using a Financial Calculator, monthly payment, PMT is $105.13
Total Finance Charge will then be obtained from the amortization schedule from the First Period to the 24th Period and this will be : $203.08.
