Answer:
Note Receivable $10,900 (debit)
Sales Revenue $10,900 (credit)
Explanation:
Recognize the Asset : Note Receivable and Sales Revenue to the amount of the value of the note of $10,900.
Subsequently, the Interest will accrue on the note capitalized at the rate of 12%.
he 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:
Goodwill Impairment (Debit)
Goodwill (Credit)
Explanation:
In case goodwill is impaired, then the entry to record this impairment will be Goodwill Impairment Debit and Goodwill Credit.
By crediting the Goodwill, the account will be reduced. This shows that the business is currently worth less than is accounted for. The Goodwill account is reduced to identify this difference.
The Impairment loss is an expense and must be reflected in the income statement. Therefore, while we reduce Goodwill amount from balance sheet. We record the expense on the income statement, which would mean that the current year profit amount will be reduced.
What is the present value of a perpetuity that pays you annual, end-of-year payments of $950? Use a nominal rate (monthly compounding) of 7.50%.
Answer:
The present value of the perpetuity is $12,242.27.
Explanation:
A perpetuity is an annuity that provide cash flow for an infinite period .Examples are Non -redeemable Preference Share.
Present Value (perpetuity) = Payments ÷ Required Rate
But, first change the 7.50 % nominal rate to Annual Effective Rate to match the period of Cash flow.
Effective Rate = (1 + r / m)^m - 1
= ( 1 + 0.0750 / 12) ^12 -1
= 7.76%
Therefore, Present Value (perpetuity) = $950 ÷ 7.76%
= $12,242.27
At the certain interest rate, present value (PV) is the current value of a future sum of money or stream of cash flows.
The discount rate determines the present value of the cash flows, and the higher the discount rate, the lower the current value of future cash flows.
The present value of the perpetuity is $12,242.27.
A perpetuity is an annuity that payments out during an indefinite period of time. Non-redeemable Preference Share is an example.
Present Value (perpetuity) = [tex]\frac{\text{Payments}}{\text{Required Rate}}[/tex]
However, to match the Working capital period, change a 7.50 percent nominal rate to a Yearly Effective Tax rate.
[tex]\text{Effective Rate} = (1 + \frac{r}{m} )^m - 1= [1 + \frac{0.0750}{12}]^{12} -1= 7.76\%[/tex]
Therefore, Present Value (perpetuity)= [tex]\frac{\$950}{7.76\%} = $12,242.27[/tex]
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Which is the first step toward initiating efficient and effective international business negotiations:
Answer: Selecting an appropriate negotiation team
Explanation:
The first step toward initiating efficient and effective international business negotiations is selecting an appropriate negotiation team.
When an appropriate negotiation team has been selected to negotiate on behalf of a particular company, negotiation becomes easier and are more feasible and both parties can agree on a particular stance.
Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $ 410,000 $ 560,000 Salary expense 47,000 61,000 Cost of goods sold 143,000 259,000 The West Division occupies 10,250 square feet in the plant. The East Division occupies 6,150 square feet. Rent, which was $ 82,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.
Answer:
$168,750
Explanation:
The data below are extracted from the above question.
West division
Sales (S) = $410,000
Salary expense (E) = $47,000
Cost of goods sold (C) = $143,000
Proportional rent (R) = $82,000 % of square footage
Area of the division = 10,250 square feet.
Total area of both division = 10,250 + 6,150
= 16,400 square feet
Therefore, the operating income (I) for the West Division is given by the amount of sales minus salary expenses , cost of goods sold and rent.
I = S - E - C - R
= $410,000 - $47,000 - $143,000 - (82,000 × 10,250 / 16,400)
= $220,000 - $51,250
= $168,750
The yearly operating income for Fallow's Corporation West Division is $168,750.
Which of the following is not a reason why it is important for parties to memorialize their agreements in writing?
a. A party enhances his/her chances of proving that an obligation was undertaken and makes it harder for the other party to deny making the promise.
b. Signing a writing communicates the seriousness of the occasion to the signer.
c. A person's signature on a written contract provides a basis for the contract to be authenticated.
d. Writings are subject to the danger that a person might fabricate terms.
Answer:
B. singing a writing communicates the seriousness of the occasion to the singer
The reason which is not important for parties to memorialize their agreements in writing is signing a writing communicates the seriousness of the occasion to the signer. Thus, the correct answer is C.
What is an agreement?Agreement refers to consent of individual on a particular opinion. When the both parties agree on a concept they will make it in writing. When this agreement enforceable by law it is considered as contract.
The reason it is important top memorialize the agreements in writing are it will act as proof or evidence when formulated in written to be presented in case of obligation.
An agreement will be duly signed by both the parties which shows its authenticity and reliability and avoid any false interpretation of the deal. When the agreement is in writing the violation of terms and conditions is not possible as it clearly mentions the drawbacks of circumstances if any party failed to fulfill the conditions of the agreement.
Therefore, the option C signing a writing communicates seriousness is the appropriate answer.
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If the price that determined where marginal revenue equaled marginal cost were below the bottom of the average variable cost curve, then the profit-maximizing, monopolistically competitive firm would
Answer: c. shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs.
Explanation:
The profit maximizing, monopolistically competitive firm maximises profit at the point where marginal revenue equals marginal costs.
If this point is below Average variable costs then that means that the company is not making enough to cover its variable costs. Should this be the case then the company should shutdown operations because variable costs are only there when the company is producing. If they shutdown then they will no longer incur them which would be the cheaper option.
They would take losses on the fixed costs but these have already been incurred so it would be better to lose the fixed costs than continue to make losses on variable costs.
Refer to the following lease amortization schedule. The five payments are made annually starting with the inception of the lease. A $2,000 bargin purchase option is exercisable at the end of the five-year lease. The asset has an expected economic life of eight years.
Lease Payment Cash Payment Effective Interest Decrease in Balance Balance
34,600
1 8,000 ?? ?? 26,600
2 8,000 2,660 5,340 21,260
3 8,000 2,126 5,874 15,386
4 8,000 1,539 6,461 8,925
5 8,000 ?? ?? ??
6 2,000 182 1,818 0
What is the effective annual inerest rate?
A. 9%
B. 10%
C. 11%
D. 20%
Answer:
B. 10%
Explanation:
The computation of the effective annual interest rate is shown below:-
Effective annual interest rate = Lease payment third effective interest ÷ Lease payment second balance × 100
= $2,126 ÷ $21,260 × 100
= 10%
Therefore for computing the effective annual interest rate we simply applied the above formula.
Hence the correct option is B.
Absolute Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year 1, Absolute collected the following information from its main production line:Actual quantity purchased 200 unitsActual quantity used 110 unitsUnits standard quantity 100 unitsActual price paid $8 per unitStandard price $10 per unitAbsolute isolates price variances at the time of purchase. What is the materials price variance for Year 1?a. $400 favorableb. $400 unfavorablec. $220 favorabled. $220 unfavorable
Answer:
Direct material price variance= $400 favorable
Explanation:
Giving the following information:
Actual quantity purchased 200 units
Actual price paid $8 per unit
Standard price $10 per unit
To calculate the direct material price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (10 - 8)*200
Direct material price variance= $400 favorable
At an output level of 53,000 units, you calculate that the degree of operating leverage is 3.21. If output rises to 57,000 units, what will the percentage change in operating cash flow be? Suppose fixed costs are $175,000. What is the operating cash flow at 46,000 units? The degree of operating leverage? that the degree of operating
Answer:
If output rises to 57,000 units, what will the percentage change in operating cash flow be?
24.23%What is the operating cash flow at 46,000 units?
$45,613.84The degree of operating leverage (at 46,000 units)?
4.84Explanation:
degree of operating leverage = [quantity x (price - variable costs)] / {[quantity x (price - variable costs)] - fixed costs}
degree of operating leverage x {[quantity x (price - variable costs)] - fixed costs} = [quantity x (price - variable costs)]
3.21 x {[53000 x (contribution margin)] - fixed costs} = [53000 x (contribution margin)]
(3.21 x 53000 x contribution margin) - (3.21 x 175000) = 53000 x contribution margin
let C = contribution margin
170130C - 561750 = 53000C
117130C = 561750
C = 561750 / 117130 = 4.795953
operating cash flow (at 53,000) = (53,000 x $4.795953) - $175,000 = $79,185.52
operating cash flow (at 57,000) = (57,000 x $4.795953) - $175,000 = $98,369.32
% change = ($98,369.32 - $79,185.52) / $79,185.52 = 24.23%
operating cash flow (at 46,000) = (46,000 x $4.795953) - $175,000 = $45,613.84
% change in operating cash flows = ($45,613.84 - $79,185.52) / $79,185.52 = -43.4%
% change in sales = (46,000 - 53,000) / 53,000 = -13.21
degree of operating leverage = $220,613.84 / $45,613.74 = 4.84
Rally Quadcopters plans to sell a standard quadcopter (toy drone) for $45 and a deluxe quadcopter for $65. Rally purchases the standard quadcopter for $35 and the deluxe quadcopter for $45. Management expects to sell two deluxe quadcopters for every three standard quadcopters. The company's monthly fixed expenses are $14,700. How many of each type of quadcopter must Rally sell monthly to breakeven?
To earn $10,500?
First identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach.
Answer:
Rally must sell 1,080 units of Standard and 720 units of Deluxe
Explanation:
Standard Deluxe Total
Sales price per unit $45 $65
Less: Variable cost ($35) ($45)
Contribution Margin per unit $10 $20
Sales Mix units (A) $3 $2 $5
Contribution margin $30 $40 $70
Weighted average Contribution $14
per unit C= B/A
Appointment of fixed cost between standard and deluxe
Total Fixed cost = 14,700
Break even point = Fixed cost / Weighted average Contribution per unit
= 14,700 / 14
= 1,050
Apportionment of Break even point sales between Standard and deluxe in sales mix ratio (3:2)
Standard = 1,050 * 3/5 = 630
Deluxe = 1,050 * 2/3 = 420
Unit to be sold to get desired profit = Fixed cost + Desired profit / Weighted average Contribution per unit
= (14,700 + 10,500) / 14
= 1,800
Apportionment of Units to be sold to get desired profit between Standard and Deluxe in sales mix ratio (3:2)
Standard = 1,800 * 3/5 = 1,080
Deluxe = 1,800 * 2/5 = 720
To reach target operating income, Rally must sell 1,080 units of Standard and 720 units of Deluxe
If a bank that faces a 10% reserve ratio received a deposit of $50,000 and makes a loan to a customer for $5,000, what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?
Answer:
Excess reserve increases by $40,000
Required reserve increases by $5,000
Explanation:
In order to calculate the reserve, we need to multiply the Deposit received by a required reserve ratio.
DATA
Reserve ratio = 10%
Deposit received = $50,000
Loan to customer = $5,000
Solution
Reserve = Deposit x Required reserve ratio
Reserve = $50,000 x 10%
Reserve = $5,000
After providing a $5,000 loan to the customer and keeping $5,000 as a reserve remaining $40,000 would be deposited in the Federal Reserve.
uestion 5
BROOKLYN LTD has developed a new product and is currently considering the marketing and pricing
policy it should employ for this. Specifically, it is considering whether the sales price should be set at Shs.
15,000 per unit or at the higher level of Shs. 24,000 per unit. Sales volume at these two (2) prices is shown
in the following table:
Sales price Shs. 15,000 per Unit
Forecast Sales volume Probability
20,000
0.1
30,000
0,6
40,000
0.3
Sales price Shs. 24,000 per Unit
Forecast Sales volume Probability
8,000
0.1
16,000
0.3
20,000
0.3
24,000
0.3
Answer:
BROOKLYN LTD
The selling price should be set at Shs. 15,000. At this price, there are more sales in unit and value than at the selling price of Shs. 24,000.
Explanation:
a) Data and Calculations:
Shs. 15,000 Probability Expected Sales
Forecasted Sales Volume 20,000 10% 2,000
Forecasted Sales Volume 30,000 60% 18,000
Forecasted Sales Volume 40,000 30% 12,000
Total Expected sales 32,000
Total Sales Value = Shs. 480,000,000 (Shs. 15,000 x 32,000)
Shs. 24,000 Probability Expected Sales
Forecasted Sales Volume 8,000 10% 800
Forecasted Sales Volume 16,000 30% 4,800
Forecasted Sales Volume 20,000 30% 6,000
Forecasted Sales Volume 24,000 30% 7,200
Total Expected sales 18,800
Total Sales Value = Shs. 451,200,000 (Shs. 24,000 x 18,800)
Imagine you want to use conflict in a positive way. You decide to create a sense of competition among your team members. Which of these tactics could create competition?]
Answer:
a. Acknowledge top performers in the company newsletter.
Explanation:
Conflict among group members could be used for improved results by enhancing the dispute in a constructive manner. This can be achieved by recognizing and rewarding the best performers accordingly.
Therefore according to the given situation, for deciding a sense of competition you need to acknowledge the top performance in the newsletter of the company so that the employees gots motivated that results in their coming better job opportunities
Hence, the correct option is a
Despite the theoretical elegance of this hypothesis, empirical studies have come to the opposite conclusion. Despite the favorable effect of international diversification of cash flows, bankruptcy risk was only about the same for MNEs as for domestic firms. However, MNEs faced higher costs for each of the following EXCEPT:
A) agency costs.
B) political risk.
C) asymmetric information.
D) In fact, each of these costs were higher for the MNE than for the domestic firm.
Answer:
D) In fact, each of these costs were higher for the MNE than for the domestic firm.
Explanation:
It has been concluded through empirical studies, that Multinational Enterprises, MNEs encounters various factors leading to lower debt ratios and a higher cost of long-term debt, such as greater agency costs, political risk, asymmetric information, and foreign exchange risk,
Hence, given the question above, the right answer is option D "In fact, each of these costs was higher for the MNE than for the domestic firm."
You purchased 1,000 shares of stock in Natural Chicken Wings, Inc., at a price of $43.37 per share. Since you purchased the stock, you have received dividends of $.95 per share. Today, you sold your stock at a price of $46.62 per share. What was your total percentage return on this investment?
Answer:
9.68%
Explanation:
Percent Return on Investment is calculated as Net Profit / Cost of Investment x 100
Net Profit= $46,620 (1,000 x $46.62 per share) + $950 (1,000 x $.95 per share) - $43,370 (1,000 x $43.37 per share) = $4,200
Cost of Investment= $43,370 (1,000 x $43.37 per share)
Percent Return on Investment= $4,200 / $43,370 x 100 = 9.68%
A disadvantage of bonds is: Group of answer choices Bonds require payment of periodic interest Bonds require payment of principal Bonds can decrease return on equity Bond payments can be burdensome when income and cash flow are low All of the above
Answer:
All of the above.
Explanation:
A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.
The disadvantages of bonds are listed below as;
1. Bonds require payment of periodic interest.
2. Bonds require payment of principal.
3. Bonds can decrease return on equity.
4. Bond payments can be burdensome when income and cash flow are low.
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $400 per ton. The U.S. is a price-taker in the tomatoes market.
If trade in tomatoes is allowed, the United States:______
a) will experience increases in both consumer surplus and producer surplus.
b) may become either an importer or an exporter of tomatoes, but this cannot be determined.
c) will become an exporter of tomatoes.
d) will become an importer of tomatoes.
Answer:
d) will become an importer of tomatoes.
Explanation:
Consumer surplus would increase because the price at which they buy tomatoes would reduce while producer surplus would reduce because the price of tomatoes would reduce as a result of international trade.
Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.Because the price of tomatoes in the US is greater than the price of tomatoes in the world, when the US begins international trade, it would import tomatoes because it is inefficient in the production of tomatoes.
Producer surplus is the difference between the price of a good and the least price the seller is willing to sell the product
Sam has contracted with Dave to purchase Dave's racing bike, with payment and delivery of the bicycle to be made 10 days after the contract was made. Three days later Sam hears that Dave is going to sell the bike to Gene in three days at a higher price. If Sam really wants the bike, what should he do? Multiple Choice Immediately seek injunctive relief. Immediately sue for specific performance. Immediately sue for compensatory damages. Immediately sue for consequential damages.
Answer: Immediately seek injunctive relief.
Explanation:
An injunctive relief is an order by the court stopping an action from taking place. From the question, we are told that Sam has contracted with Dave to buy Dave's racing bike, with payment and delivery of the bicycle to be made 10 days after the contract was made.
We are further told that three days later Sam hears that Dave is going to sell the bike to Gene in three days at a higher price. If Sam really wants the bike, he should seek injunctive relief. By doing so, the court will stop Dave from selling the bike to Gene.
A production department’s beginning inventory cost includes $478,000 of conversion costs. This department incurs an additional $1,047,500 in conversion costs in the month of March. Equivalent units of production for conversion total 770,000 for March.Required:Calculate the cost per equivalent unit of conversion using the weighted-average method.
Answer: $1.98
Explanation:
Equivalent Units of Production are used when the manufacturers have not completely finished their products for the year. This helps them express it in terms of fully manufactured units.
Using the weighted average method, the cost per equivalent unit is;
= [tex]\frac{Beginning inventory cost + Cost of current production}{Equivalent units of production}[/tex]
= [tex]\frac{478,000 + 1,047,500}{770,000}[/tex]
= $1.98
Lead time for one of your fastest-moving products is 24 days. Demand during this period averages 110 units per day. a) What would be an appropriate reorder point? nothing units (enter your response as a whole number). b) How does your answer change if demand during lead time doubles? nothing units (enter your response as a whole number). c) How does your answer change if demand during lead time drops in half? nothing units (enter your response as a whole number).
Answer:
a.) reorder point = 2,640 units
b.) reorder point = 5,280 units (reorder point doubles)
c.) reorder point = 1,320 units (reorder point drops in half)
Explanation:
Reorder point is the inventory level (point) at which action is taken (order placed) to replenish the stocked item. It is calculated as follows:
Reorder point = (Lead time × average daily sales) + safety stock
Lead time = 24 days
average daily sales = 110 units
safety stock = 0 (not given)
a.) reorder point = (Lead time × average daily sales) + safety stock
reorder point = (24 × 110) + 0 = 2,640 units
b.) if demand during lead time doubles:
lead time = 24 days
average daily sales = (110 × 2) = 220
∴ reorder point = 220 × 24 = 5,280 units
Therefore the reorder point doubles
c.) if demand during lead time drops in half:
lead time = 24 days
average daily demand = (110 ÷ 2) = 55 units
∴ reorder point = 24 × 55 = 1,320 units
Therefore the reorder point drops in half.
Ten years ago you put $150000.00 into an interest earning account. Today it's worth $275000. What is the effective annual interest earned on the account
Answer:
the effective annual interest earned on the account is 6.25%.
Explanation:
The effective annual interest earned on the account can be calculated as follows :
PV = - $150,000
N = 10
PMT = $0
P/yr = 1
FV = $275,000
R = ?
Using a Financial calculator, the effective annual interest, R, earned on the account will be : 6.2488 or 6.25%.
The Sprint vs. Verizon ads that compare the features and pricing of the two networks are examples of competitive advertising. True False
Answer:
True
Explanation:
They are trying to win over customers by comparing each others features in a competition
Competitive advertising is demonstrated by the Sprint vs. Verizon adverts, which compare the functionality and pricing of the two networks. So, it is a true statement.
What is competitive advertising?Competitive advertising is the act of showcasing or promoting one's product in comparison to the product of another company.
This form of marketing can be used to target customers who are devoted to the other brand, prompting them to reassess their purchasing patterns.
The three types of competitive advertising are:
ComparativeReminderReinforcementFor more information about competitive advertising, refer below
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One characteristic of weekly newspapers is that they usually serve national consumers rather than local consumers. tend to have a larger male readership than daily newspapers. emphasize local news and advertising. have a significantly lower CPM than daily newspapers. do not charge premium rates.
Answer: emphasize local news and advertising.
Explanation:
One of the main function of the newspaper is to pass message accross to its readership. The newspaper sends information accross to people by informing them about happenings in the local and international scene.
One characteristic of weekly newspapers is that they emphasize local news and advertising. People can advertise on weekly newspapers and gets information across to the local people.
Two investment advisors are comparing performance. Advisor A averaged a 20% return with a portfolio beta of 1.5 and Advisor B averaged a 15% return with a portfolio beta of 1.2. If the T-bill rate was 5% and the market return during the period was 13%, which advisor was the better stock picker?
Answer:
Advisor A
Explanation:
t bill rate = 0.05
market rate = 0.13
the beta of the market is always 1
the rate of return= 0.05 + (0.13 - 0.05) x 1
= 0.13
which is 13%
this is for advisor A.
with a return of 20% and 1.5 beta
0.05 + ( 0.20 - 0.05) x 1.5
= 27.5% for advisor b
when the return is 15% and beta is 1.2
0.05 + (0.15 - 0.05) x 1.2
= 17%
Therefore advisor a is better
United Apparel has the following balances in its stockholders’ equity accounts on December 31, 2018: Treasury Stock, $650,000; Common Stock, $400,000; Preferred Stock, $1,600,000; Retained Earnings, $1,200,000; and Additional Paid-in Capital, $6,800,000. Required: Prepare the stockholders’ equity section of the balance sheet for United Apparel as of December 31, 2018
Answer:
United Apparel Balance sheet as of December 31, 2018
Stockholders’ Equity section
Common Stock Capital ............................................$400,000
Preferred Stock Capital.............................................$1,600,000
Additional Paid-in Capital..........................................$6,800,000
Total Paid-in Capital....................................................$8,800,000
Retained Earnings.......................................................$1,200,000
Less: Treasury Stock...................................................($650,000)
Total Stockholders Equity..........................................$9,350,000
The smartest thing a firm involved in an oligopoly market could do is to cut their prices and capture more of the market share from their competitors.
a) We learned in class that the best move would be to raise prices.
b) We also learned that cutting prices on an elastic demand curve will be a smart way of getting more revenues.
c) Cutting prices is no gaurantee of success. Indeed if the firm does capture more market share and customers, then their costs will go up and it will be harder for them because they will have lower profit margins - if they can earn any profit at all.
d) Both A and C are correct.
Answer:
Correct Answer:
c) Cutting prices is no gaurantee of success. Indeed if the firm does capture more market share and customers, then their costs will go up and it will be harder for them because they will have lower profit margins - if they can earn any profit at all.
Explanation:
An oligopoly market is a market form wherein a market or industry is dominated by a small group of large sellers. A pure monopoly maximizes profits by producing that quantity where marginal revenue = marginal cost. however, it is much more difficult for an oligopoly to determine at what output it can maximize its profit.
On July 1, 20X1, James and Short formed a partnership. James contributed cash. Short, previously a sole proprietor, contributed property other than cash, including realty subject to a mortgage, which the partnership assumed. Short’s capital account on July 1, 20X1, should be recorded at
Answer:
James and Short LLC
Short's capital account on July 1, 20X1 should be recorded at the fair value of contributed property minus the mortgage liability, which the partnership assumed.
Explanation:
The fair value of contributed property is the current market value of the contributed property by Short. It is the market value that will determine how the contributed property can be valued. The market value assumes that the contributed property is being sold in pieces and not as a whole. This is why the value is considered a fair basis for recognizing the capital contribution of Short into the partnership.
Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $350 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $315,000, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $245 per 100 yards of XT rope.
Required:
1. Estimate Product XT's break-even point in terms of (a) sales units and (b) sales dollars.
2. Prepare a CVP chart for Product XT. Use 7,000 units (700,000 yards/100 maximum number of sales units on the horizontal axis of the graph, and $1,400,000 as the maximum dollar amount on the vertical axis.
3. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.
Answer:
1a. 3,000 units
1b. $1,050,000
2. See attachment.
3. contribution margin income statement
Sales ($350 × 7,000 units) $2,450,000
Less Variable Cost ($245 × 7,000 units)) ($1,715,000)
Contribution $735,000
Less Fixed Costs ( $315,000)
Operating Profit $420,000
Explanation:
Break-even point (sales units ) = Fixed Cost ÷ Contribution per unit
= $315,000 ÷ ($350 - $245)
= 3,000
Break-even point (sales dollars) = Fixed Cost ÷ Contribution Margin Ratio
= $315,000 ÷ ($105/$350)
= $1,050,000
The simple rate of return is also called all of the following except ________. annual rate of return unadjusted rate of return accounting rate of return
Answer: annual rate of return
Explanation:
The simple rate of return is also called the unadjusted rate of return or the accounting rate of return.
The simple rate of return is calculated when the incremental net operating income for the year is taken and then divided by the initial investment.
It should be noted that it's not called the annual rate of return.
A firm's total cost function is given by the equation TC=4000+5Q+10Q and marginal cost is given by the equation MC=5+20Q
(A) Write an expression for each of the following cost concepts:
a. Total Fixed Cost
b. Average Fixed Cost
c. Total Variable Cost
d. Average Variable Cost
e. Average Total Cost
(B) Calculate the values of marginal cost and the costs in (a)-(e) above for Q=0,1,2,3.
(C) Determine the quantity that minimizes average total cost. Demonstrate that the predicted relationship between marginal cost and average cost holds.
Following are the calculation to the given question:
[tex]\to TC = 4,000 + 5Q + 10 \ Q2\\\\\to MC = 5 + 20\ Q\\\\[/tex]
For point A)
[tex](a)\ TFC = 4,000\\\\(b)\ AFC = \frac{TFC}{ Q} = \frac{4,000}{ Q}\\\\(c)\ TVC = 5Q + 10\ Q2\\\\(d)\ AVC = \frac{TVC }{Q} = 50 + 10\ Q\\\\(e)\ ATC = \frac{TC }{ Q} = (\frac{4,000}{ Q}) + 50 + 10Q \ \text{Also, ATC = AVC + AFC}\\\\[/tex]
For point B)
TFC remains unchanged at 4,000, regardless of the price of Q.
i)
[tex]\to Q = 0[/tex]
AFC, AVC, and ATC cannot be calculated (division by zero is not possible).
ii)
[tex]Q = 1\\\\AFC =\frac{4,000}{ 1} = 4,000\\\\TVC = (5 \times 1) + (10 \times 1) =5 + 10 = 15\\\\AVC = \frac{TVC}{ Q} = \frac{15}{1} = 15\\\\ATC = 4,000 + 15 = 4,015\\\\MC = 5 + (20 \times 10 = 5 + 20 = 25[/tex]
iii)
[tex]Q = 2\\\\AFC = \frac{4,000}{ 2} = 2,000\\\\TVC = (5 \times 2) + (10 \times 2 \times 2) = 10 + 40 = 50\\\\AVC = \frac{50}{2} = 25\\\\ATC = 2,000 + 25 = 2,025\\\\MC = 5 + (20 \times 2) = 5 + 40 = 45\\\\[/tex]
iv)
[tex]Q = 3\\\\AFC = \frac{4,000}{ 3} = 1,333.33\\\\TVC = (5 \times 3) + (10 \times 3 \times 3) = 15 + 90 = 105\\\\AVC = \frac{105}{3} = 35\\\\ATC = 1,333.33 + 35 = 1,368.33\\\\MC = 5 + (20 \times 3) = 5 + 60 = 65\\\\[/tex]
For point C)
i)
[tex]ATC[/tex] is minimized when [tex]\frac{dATC}{dQ} = 0[/tex]
[tex](- \frac{4,000}{Q2} ) + 10 = 0\\\\\frac{4,000}{Q2} = 10\\\\Q2 = 400\\\\Q = 20\\[/tex]
ii)
Part (B) shows that as MC increases from Q = 0 to Q = 3, ATC decreases, validating the link.
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