Answer:
$5.81
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 =do(1 + g) = next dividend to be paid
r = cost of equity
g = growth rate
(do x 1.06) / (0.14 - 0.06) = 77
(d0 x 1.06) / 0.08 = 77
Multiply both sides by 0.08
d0 x 1.06 = 6.16
divide both sides by 1.06
d0 = 5.81
Henry Ford is known for the introduction of the assembly line and the Model T. As his manufacturing effort expanded, however, he also adopted an attitude that came to be known as Fordism. What was one of the central tenets in his system?
Answer:
Fordism, a specific stage of economic development in the 20th century. Fordism is a term widely used to describe (1) the system of mass production that was pioneered in the early 20th century by the Ford Motor Company or (2) the typical postwar mode of economic growth and its associated political and social order in advanced capitalism.
Explanation:
Good luck
Anchor Company purchased a manufacturing machine with a list price of $91,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and transportation costs amounted to $3,400. Anchor paid $4,800 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $6,200 for the first year of operations. What is the cost of the machine
Answer:
$103,580
Explanation:
The Cost of Machine according to IAS 16 include Purchase costs less trade discounts and rebates plus any direct costs incurred to put the asset in the location and condition intended for use by management.
Calculation of the Cost of Machine
Purchase Price $91,000
Cash discount $91,000 x 2% ($1,820)
Transport Cost $3,400
Installation and testing costs $4,800
Insurance costs $6,200
Total Cost $103,580
Therefore,
the cost of the machine is $103,580
Adjustment for Accrued Expense
Joos Realty Co. pays weekly salaries of $17,250 on Friday for a five-day workweek ending on that day. Journalize the necessary adjusting entry assuming that the accounting period ends on Tuesday.
If an amount box does not require an entry, leave it blank. fill in the blank 2 fill in the blank 3 fill in the blank 5 fill in the blank 6
Answer and Explanation:
The adjusting entry is shown below:
Salary expense Dr ($17,250 ÷ 5 days × 2 days) $6,900
To Salary payable $6,900
(Being salary expense is recorded)
here salary expense is debited as it increased the expense and credited the salary payable as it also increased the liabilities
the primary reason business owners make investments and take risks in a private enterprise system is to
a. make a profit
b. satisfy customer needs
C. develop new products
d. meet government requirements
Answer:
I don't do business but I think it would be to a
The primary reason as to why the business owners make investments and take risks in a private enterprise system is to make a profit. Therefore, the option A holds true.
What is the significance of profit-making?A profit making activity can be referred to or considered as an activity that is conducted by an individual or an organization, where the primary motive of such activity is to ensure profits by using the factors of production as such.
Apart from a non-profit organization, all the other businesses and enterprises conduct business activities in the regular course of conduct, because business is a profit-making activity throughout the period of its existence.
Therefore, the option A holds true and states regarding the significance of a profit-making activity.
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During 2018, Raines Umbrella Corp. had sales of $763,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $462,000, $103,000, and $148,500, respectively. In addition, the company had an interest expense of $73,800 and a tax rate of 22 percent. (Ignore any tax loss carryforward provisions and assume interest expense is fully tax deductible.)
a. What is the company’s net income/loss for 2018? (Do not round intermediate calculations. Enter your answer as a positive value.)
b. What is the company's operating cash flow? (Do not round intermediate calculations.)
Answer and Explanation:
The computation is shown below;
a. The net income or loss for the year 2018 is
Sales $763,000
Less: COGS $462,000
Less: A&S expenses $103,000
Less: Depreciation $148,500
EBIT $49,500
Less: Interest $73,800
Taxable income -$24,300
Less: Taxes(22%) $0
Net income(loss) -$24,300
Net loss = $24,300
b. The operating cash flow is
OCF = EBIT + Depreciation - Taxes
= $49,500 + $148,500 - $0
= $198,000
The East Asian financial crisis of the 1990s: Showed how trade partners are unreliable Made countries stop investing in China since India was experiencing an economic boom and was opening up. Forced countries in the region to import more and export less. Was not caused by financial contagion Was associated with moral hazard and fixed exchange rates
Answer:
The East Asian Financial Crisis of the 1990s:
Was associated with moral hazard and fixed exchange rates.
Explanation:
The countries which suffered adverse distress from the financial crisis were Indonesia, South Korea, and Thailand. The financial meltdown followed the collapse of the hot money bubble, whereby high interest rates and fixed foreign exchange rates were pegged to the U.S. dollars by these mostly exporting countries. The practice largely favored these Asian exporters until the bubble burst, starting from July of 1997. And the consequences and lessons now remain Economics and History topics.
On January 1, 2019, Metco Inc. reported 268,000 shares of $5 par value common stock as being issued and outstanding. On March 24, 2019, Metco Inc. purchased for its treasury 3,000 shares of its common stock at a price of $38.00 per share. On August 19, 2019, 610 of these treasury shares were sold for $46.50 per share. Metco's directors declared cash dividends of $0.40 per share during the second quarter and again during the fourth quarter, payable on June 30, 2019, and December 31, 2019, respectively. A 2% stock dividend was issued at the end of the year. There were no other transactions affecting common stock during the year. Calculate the number of shares of stock issued in the stock dividend.
Answer:
The number of shares of stock issued in the stock dividend is 5,312.20 shares.
Explanation:
This can be determined as follows:
Number of shares before stock dividend = Number of shares reported on January 1, 2019 - Number of shares purchased for its treasury on March 24, 2019 + Number of treasury shares were sold on August 19, 2019 = 268,000 - 3,000 + 610 = 265,610
Number of dividend shares = Number of shares before stock dividend * Rate of stock dividend issued = 265,610 * 2% = 5,312.20
Therefore, the number of shares of stock issued in the stock dividend is 5,312.20 shares.
This morning, you purchased a seventeen-year, 6.45% annual coupon bond with face value of $1,000 at a price of $1,030.04. Just after purchasing the bond, the yield to maturity of the bond falls to 5.50 percent and stays at that level throughout your investment period. If you sell your bond after holding it for seven years, what will be your realized rate of return
Answer:
6.73%
Explanation:
the price of the bond in seven years is:
PV = $1,000 / (1 + 5.50%)¹⁰ = $585.43
PV of coupon payments = $64.50 x 7.538 (PVIFA, 5.5%, 10 years) = $486.20
market price = $1,071.63
using an excel spreadsheet of financial calculator, the annual rate of return:
year 0 = -1030.04
year 1 = 64.5
year 2 = 64.5
year 3 = 64.5
year 4 = 64.5
year 5 = 64.5
year 6 = 64.5
year 7 = 1136.13
IRR = 6.73%
Both __________ and __________ affect the awareness and motivation of a firm to undertake actions and responses. a. first-mover advantages; corporate size b. market commonality; resource similarity c. management capabilities; competitive analysis d. speed of management decisions; management actions
Answer:
b. market commonality; resource similarity
Explanation:
The two things that can impact the awareness and the motivation so that the firm could take the actions and responses is that the market commodity where the company deals with and the similarity of the resources. These two things would be required that can impact the awareness and the motivation level of the firm
hence, the option b is correct
Assume the following for the town of Boone: The town has a total population of 60,000 people, of which 2,000 are under 16 years of age or are institutionalized; 4,000 are full-time students who are not employed and are not seeking work; and 50,000 are employed. The rest of the people are out of work but have been actively seeking work within the past four weeks. What is Boone's unemployment rate?
Answer:
Unemployment rate= 7.4%
Explanation:
First, we need to calculate the labor force. The labor force is the sum of employed people and unemployed people over 16 actively looking for work.
Labor force= 60,000 - 2,000 - 4,000= 54,000
Now, we can calculate the unemployment rate, using the following formula:
unemployment rate= (unemployed people / labor force)*100
unemployment rate= (4,000/54,000)*100
unemployment rate= 7.4%
A data mining routine has been applied to a transaction dataset and has classified 88 records as fraudulent (30 correctly so) and 952 as non-fraudulent (920 correctly so). Construct the classification matrix and calculate the error rate, sensitivity, and specificity.
Answer:
1. Classification Matrix:
Actual Class 1 0
1 30 58
0 32 920
2.Overall error rate (err) 8.65%
Accuracy% 91.35%
Explanation:
To Construct the classification matrix and to calculate the error rate
1.CONSTRUCTION OF THE CLASSIFICATION MATRIX
Classification Matrix:
Classification Confusion Matrix
Predicted Class
Actual Class 1 0
1 30 58
(88-30=58)
0 32 920
(952-920)
Calculation for the error rate
Using this formula
Overall error rate (err) = Sum of Misclassification transactions/Total transaction
Let plug in the formula
Overall error rate (err) =[(88-30)+(952-920)]/(952+88)
Overall error rate (err) = (58+32)/1040
Overall error rate (err) =0.08653*100
Overall error rate (err) = 8.65 %
Accuracy% = 1-err
Accuracy%=100%-8.65%
Accuracy%= 91.35%
Matching Definitions with Information Releases Made by Public Companies Following are the titles of various information releases. Match each definition with the related release by entering the appropriate letter in the space provided.
Definitions Information Release
Report of special events (e.g., auditor changes, mergers) (1) Form 10-Q
filed by public companies with the SEC.
Brief unaudited report for quarter normally containing (2) Quarterly report
summary income statement and balance sheet.
Quarterly report filed by public companies with the SEC (3) Press release
that contains additional unaudited financial information.
Written public news announcement that is normally (4) Annual report
distributed to major news services.
Annual report filed by public companies with the SEC (5) Form 10-K
that contains additional detailed financial information.
Report containing the four basic financial statements for (6) Form 8-K
the year, related notes, and often statements by
management and auditors.
Answer:
1. Form 10-Q ⇒ Quarterly report filed by public companies with the SEC that contains additional unaudited financial information.
2. Quarterly report. ⇒ Brief unaudited report for quarter normally containing! summary income statement and balance sheet.
3. Press release ⇒ Written public news announcement that is normally distributed to major news services.
4. Annual report ⇒ Report containing the four basic financial statements to the year, related notes, and often statements by management and auditors.
5. Form 10-K ⇒ Annual report filed by public companies with the SEC that contains additional detailed financial information.
6. Form 8-K ⇒ Report of special events (e.g., auditor changes, mergers) filed by public companies with the SEC.
Data on the level of support for corporate sustainability (measured on a quantitative scale ranging from 0 to 160 points) for each of 992 senior managers at CPA firms are saved in CORSUS.txt
a) Construct a histogram for the data and use it to evaluate the validity of the normality assumption.
b) Obtain the mean and standard deviation for the data and use these statistics to evaluate the validity of the normality assumption.
c) Obtain the interquartile rage for the data and use these statistics to evaluate the validity of the normality assumption
Answer:
A) attached below
B) mean value = 67.755, std = 26.871
C) IQR( interquartile range ) = 37
Explanation:
A) Construct a histogram for the data and use it to evaluate the validity of normality assumption
Using Minitab to construct the Histogram from the shape of the Histogram we can see that the Normality assumption is valid because the shape is fairly symmetric
screenshot of Histogram is attached below
B) Obtain the mean and standard deviation for the data and use these statistics to evaluate the validity of the normality assumption.
still using Minitab to determine the std and mean values
mean value = 67.755, std = 26.871
Next : find the percentage of the observation that lie within 1,2 and 3 std from the mean
For one(1) std from the mean the interval = ( 40.884, 94.626 )
percentage of observation = 665 / 992 = 67.04
For two(2) std from the mean; The interval = ( 14.013 , 121.497 )
percentage of observation = 946 / 992 = 95.36%
For three(3) std from the mean ; The interval = ( -12.858, 148.368 )
percentage of observations = 991 / 992 = 99.90%
The percentages from the above calculations indicates the validity of the normality assumption
C) Obtain the interquartile rage for the data and use these statistics to evaluate the validity of the normality assumption
using MINITAB
since the data are assumed Normal; Ratio = [tex]\frac{IQR}{S} = 1.3[/tex]
std (s) = 26.871, IQR( interquartile range ) = 37
Next check if IQR / S will be = 1.3
= 37 / 26.871 = 1.377 ( This validates the normality assumption )
Windsor Company reports the following financial information before adjustments. Dr. Cr. Accounts Receivable $145,600 Allowance for Doubtful Accounts $3,350 Sales Revenue (all on credit) 834,000 Sales Returns and Allowances 53,540 Prepare the journal entry to record bad debt expense assuming Windsor Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Acc
Answer:
See below
Explanation:
1.
Bad debts ($145,600 × 4/100) = $5,824 - $3,350 = $4,000 Dr
...................To Allowance for doubtful account $4,000 Cr
(To record the estimation of 4% of bad debts on gross account receivable after adjusting the credit balance)
2.
Bad debts ($145,600 × 4/100) = $5,824 + $3,350 = $9,174 Dr
..............To Allowance for doubtful accounts $9,184 Cr
(To record 4% of account receivable but allowance for doubtful account).
Chen Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Chen then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis.
Fixed cost per unit $5.20
Variable cost per unit $10.81
Selling price per unit $34.55
Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division. (Round answer to 2 decimal places.)
Minimum transfer price $ per unit
Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division. (Round answer to 2 decimal places.)
Answer:
See below
Explanation:
1. If the small motor division has excess capacity,
Minimum transfer price = Variable cost + Opportunity cost
Variable cost per unit = $10.81
Add:
Opportunity cost per unit = $0.00 (Because the company has sufficient excess capacity)
Minimum transfer price = $10.81
2. If the small motor division has excess capacity,
Minimum transfer price = Variable cost + Opportunity cost
Variable cost per unit = $10.81
Add:
Opportunity cost per unit = $23.74 (As the company has no excess capacity, contribution lost is the opportunity cost)
Minimum transfer price = $34.55
N.B
Contribution lost = Selling price per unit - Variable cost per unit
= $34,55 - $10.8 = $23.74
Roberta transfers property with a tax basis of $495 and a fair market value of $546 to a corporation in exchange for stock with a fair market value of $356 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $190 on the property transferred. What is the amount realized by Roberta in the exchange
Answer: $546
Explanation:
The amount realized by Roberta in the exchange will be gotten through the addition of the fair value of the stock that was acquired to the liability that's assumed by the corporation. This will be:
Fair value of stock acquired = $356
Add: Liability assumed by corporation = $190
Amount realised = $356 + $190 = $546
Indicate the correct statement about the effect of the Reynolds number on the character of the flow over an object. If the Reynolds number is low enough, then the effect of viscosity is so:___.
a. high that there is a region near the plate where the fluid is stationary.
b. increases, then the size of the region around the object that is affected by viscosity increases.
c. is high enough, then the effect of viscosity is negligible and the fluid flows over the plate without sticking to the surface.
d. increases, then the extent of the region around the object that is affected by viscosity decreases.
Answer: d. increases, then the extent of the region around the object that is affected by viscosity decreases.
Explanation:
Viscosity simply refers to the measure of the resistance of a fluid to a flow. The Reynolds number helps in the prediction of flow patterns.
If the Reynolds number increases, then the extent of the region around the object that is affected by viscosity decreases.
Below are amounts found in the income statements of three companies. Company Sales Revenue Cost of Goods Sold Operating Expenses Non-operating Expenses Income Tax Expense Henry $38,000 $ 13,300 $ 5,300 $2,300 $2,300 Grace 41,000 27,880 13,400 7,300 0 James 46,000 27,600 3,300 0 3,300 2-a. For each company, calculate the gross profit ratio.
Answer and Explanation:
The computation of the gross profit ratio for each company is shown below:
As we know that
Gross profit ratio is
= Gross profit ÷ sales revenue
= (Sales revenue - cost of goods sold) ÷ sales revenue
For henry
= ($38,000 - $13,000) ÷ ($38,000)
= 66%
For grace
= ($41,000 - $27,880) ÷ ($41,000)
= 32%
For James
= ($46,000 - $27,600) ÷ ($46,000)
= 40%
If you will become a manager or part of the management how will you implement the effective organizing strategies?
Answer:
A well-developed strategy is easier to implement than one that has not received sufficient thought. Create strategies that can be effectively implemented by specifying clear objectives and projecting measurable milestones. Align these strategic steps with your company's overall mission.
Explanation:
At the beginning of October, Bowser Co.’s inventory consists of 58 units with a cost per unit of $42. The following transactions occur during the month of October
October 4 Purchase 122 units of inventory on account from Waluigi Co. for $50 per unit, terms 2/10, n/30.
October 5 Pay cash for freight charges related to the October 4 purchase, $749.
October 9 Return 15 defective units from the October 4 purchase and receive credit.
October 12 Pay Waluigi Co. in full.
October 15 Sell 152 units of inventory to customers on account, $12,160. [Hint: The cost of units sold from the October 4 purchase includes $50 unit cost plus $7 per unit for freight less $1 per unit for the purchase discount, or $56 per unit.]
October 19 Receive full payment from customers related to the sale on October 15.
October 20 Purchase 92 units of inventory from Waluigi Co. for $62 per unit, terms 3/10, n/30.
October 22 Sell 92 units of inventory to customers for cash, $7,360. (Note: For calculating the cost of inventory sold, ignore the possible purchase discount on October 20.)
Required:
Assuming that Bowser Co, uses a FIFO perpetual inventory system to maintain its inventory records, record the transactions.
Answer:
Bowser Co.
Journal Entries:
Oct. 4:
Debit Inventory $6,100
Credit Accounts Payable (Waluigi Co.) $6,100
To record the purchase of goods, terms 2/10, n/30.
Oct. 5:
Debit Freight-in Expense $749
Credit Cash $749
To record the payment of freight for Oct. 4 purchase.
Oct. 9:
Debit Accounts Payable (Waluigi Co.) $750
Credit Inventory $750
To record the goods returned on account.
Oct. 12:
Debit Accounts Payable (Waluigi Co.) $5,350
Credit Cash $5,243
Credit Cash Discounts $107
To record the payment on account.
Oct. 15:
Debit Accounts Receivable $12,160
Credit Sales Revenue $12,160
To record the sale of goods on account.
Oct. 15:
Debit Cost of goods sold $8,512
Credit Inventory $7,600
Credit Freight-in $912
To record the cost of goods sold.
Oct. 19:
Debit Cash $12,160
Credit Accounts Receivable $12,160
To record the receipt of cash on account.
Oct. 20:
Debit Inventory $5,704
Credit Accounts Payable (Waluigi Co.) $5,704
To record the purchase of goods on account.
Oct. 22:
Debit Cash $7,360
Credit Sales Revenue $7,360
To record cash sales.
Oct. 22:
Debit Cost of goods sold $5,626
Credit Inventory $5,626
To record the cost of goods sold.
Explanation:
a) Data and Analysis:
Oct. 4: Inventory $6,100 Accounts Payable (Waluigi Co.) $6,100, terms 2/10, n/30.
Oct. 5: Freight-in Expense $749 Cash $749
Oct. 9: Accounts Payable (Waluigi Co.) $750 Inventory $750
Oct. 12: Accounts Payable (Waluigi Co.) $5,350 Cash $5,243 Cash Discounts $107
Oct. 15: Accounts Receivable $12,160 Sales Revenue $12,160
Oct. 15: Cost of goods sold $8,512 Inventory $7,600 Freight-in $912
Oct. 19: Cash $12,160 Accounts Receivable $12,160
Oct. 20: Inventory $5,704 Accounts Payable (Waluigi Co.) $5,704
Oct. 22: Cash $7,360 Sales Revenue $7,360
Oct. 22: Cost of goods sold $5,626 Inventory $5,626 ($56 * 13 + $62 * 79)
King Company issued bonds with a face amount of $1,600,000 in 2015. As of January 1, 2020, the balance in Discount on Bonds Payable is $4,800. At that time, King redeemed the bonds at 102. Assuming that no interest is payable, make the entry to record the redemption. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Answer:
Dr Bonds payable 1,600,000
Dr Loss on redemption of bonds 36,800
Cr Cash 1,632,000
Cr Discount on bonds payable 4,800
Explanation:
Loss/gain on redemption of bonds = carrying value - cash paid = ($1,600,000 - $4,800) - $1,632,000 = $1,595,200 - $1,632,000 = -$36,800 loss
A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 378,000 debit Allowance for uncollectible accounts 530 credit Net Sales 830,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared
Answer:
$1,738
Explanation:
Calculation to determine What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared
Using this formula
Bad Debts Expense=[(Accounts receivable*Estimated uncollectible net credit sales)-Allowance for uncollectible accounts]
Let plug in the formula
Bad Debts Expense=[($378,000*0.6%)-$530]
Bad Debts Expense=$2,268-$530
Bad Debts Expense=$1,738
Therefore the amount that should be debited to Bad Debts Expense when the year-end adjusting entry is prepared is $1,738
AP* Price discrimination occurs when differences in a product's price reflect differences in marginal costs differences in a product's price reflect differences in marginal costs a products's average cost is greater than its average revenue a products's average cost is greater than its average revenue differences in a product's price do not reflect differences in costs of production differences in a product's price do not reflect differences in costs of production a product's average cost is less than its average revenue a product's average cost is less than its average revenue the supply of the product is elastic
Answer:
differences in a product's price do not reflect differences in costs of production.
Explanation:
Price can be defined as the amount of money that is required to be paid by a buyer (customer) to a seller (producer) in order to acquire goods and services.
In sales and marketing, pricing of products is considered to be an essential element of a business firm's marketing mix because place, promotion and product largely depends on it.
One of the importance associated with the pricing of products is that, it improves the image of a business firm.
Price discrimination refers to the situation in which a business firm sells an identical product to different consumers at different selling price based on reasons that are not in any way associated or related with its manufacturing cost.
This ultimately implies that, price discrimination occurs when differences in a product's price do not reflect differences in costs of production.
g You have been hired to value a new 25-year callable, convertible bond with a par value of $1,000. The bond has a coupon rate of 6 percent, payable annually. The conversion price is $180 and the stock currently sells for $42.10. The stock price is expected to grow at 10 percent per year. The bond is callable at $1,200; but based on prior experience, it won't be called unless the conversion value is $1,300. The required return on this bond is 8 percent. What value would you assign to this bond
Answer:
The value that would be assigned to this bond is $1,209.36.
Explanation:
From the question, we have:
n = Number of years = 25
FV = Future value = $1,000
PMT = Coupon payment = Coupon rate * FV = 6% * $1000 = $60
r = required return rate = 8%, or 0.08
CP = Conversion price = $180
P = Current selling price = $42.10
t = number of years the bond will be called = ?
PV = [(PMT / r) * (1 - (1 / (1 + r)^n))] + (FV / (1 + r)^n) = [(60 / 0.08) * (1 - (1 / (1 + 0.08)^25))] + (1000 / (1 + 0.08)^25) = $786.50
Therefore, we have:
PV = Current value of the bond = $786.50
CR = Conversion ratio = FV/CP = 1000 / 180
CV = Conversion value = P * CR = $42.10 * (100 / 180) = $23.39
CCP = Current conversion price = CV = $23.39
CPB = Conversion price at which Bond will be called = $1,300
Therefore. we have:
CCP * CR^t = CPB ................... (1)
Substitute relevant values into equation (1) and solve for t, we have:
$23.39 * (1000 / 180)^t = $1,300
23.39 * 5.56^t = 1,300
5.56^t = 1,300 / 23.39
t = ln(1,300 / 23.39) / ln(5.56)
t = 2.34 years
Therefore, we have:
Value assigned to the bond = PV = [(PMT / r) * (1 - (1 / (1 + r)^t))] + (CPB / (1 + r)^t) = [(60 / 0.08) * (1 - (1 / (1 + 0.08)^2.34))] + (1300 / (1 + 0.08)^2.34) = $1,209.36
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected:
Quarter Machine Hours Power cost
1 20000 26000
2 25000 38000
3 30000 42500
4 22000 37000
5 21000 34000
6 18000 29000
7 24000 36000
8 28000 40000
1. Prepare a scattergraph by plotting power costs against machine hours. Does the scattergraph show a near relationship between machine hours and power cost?
2. Using the high and low points (i.e., the high-low method), compute a power cost formula.
3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination.
Answer:
Explanation:
1-a See the attached photo for the a scattergraph.
1-b. Yes, the scattergraph show a near relationship between machine hours and power cost.
2. The power cost formula using the high and low points is as follows:
Total power cost = -7000 + (1.65 * Machine hours)
3-a. The power cost formula using the method of least squares is as follows:
Total power cost = 6454 + (1.21 * Machine hours)
3-b. R² = Coefficient of determination = 0.8969, or 89.69%
Explanation
1-a. Prepare a scattergraph by plotting power costs against machine hours.
Note: See the attached photo for the a scattergraph by plotting power costs against machine hours.
1-b. Does the scattergraph show a near relationship between machine hours and power cost?
Note that Scattergraph is interpreted by looking by looking for trends in the data as there is movement from left to right.
From the attached a scattergraph, it can be observed that there is an uphill pattern as there is a movement from left to right. This indicates that there a near positive relationship between power costs against machine hours.
Therefore, the scattergraph show a near relationship between machine hours and power cost.
2. Using the high and low points (i.e., the high-low method), compute a power cost formula.
2-a. Calculation of variable cost elements
Variable cost per machine hour = (Highest Power Costs - Lowest Power Costs) / (Highest machine hours – Lowest machine hours) = (42500 - 26000) / (30000 - 20000) = 1.65 per hour
2-b. Calculation of fixed cost elements
Total power cost = Total Fixed Cost + Total Variable Cost ................. (1)
Where;
Total Variable Cost = Variable cost per machine hour * Machine hours ……….. (2)
Substitute equation (2) into equation (1), we have:
Total power cost = Total Fixed Cost + (Variable cost per machine hour * Machine hours) ……………………. (3)
Using highest machine hours and substitute relevant values into equation (3), we have:
42500 = Total Fixed Cost + (1.65 * 3000)
42500 = Total Fixed Cost + 49,500
Total Fixed Cost = 42500 - 49,500
Total Fixed Cost = -7000
2-c Computation of a power cost formula
Substituting Variable cost per machine hour = 1.65 and Total Fixed Cost = -7000 into equation (3), we can compute the power cost formula as follows:
Total power cost = -7000 + (1.65 * Machine hours) ………………. (4)
Equation is the power cost formula.
3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination.
Note: See the attached excel file for the calculations of Total of Machine Hours (x), Power cost (y), xy, x^2, and y^2.
Since Σ = Total of or summation of, we can therefore obtain the following from the attached excel file:
Σx = 190,800
Σy = 282,500
Σxy = 6,878,400,000
Σx² = 4,666,540,000
Σy² = 10,188,250,000
N = Number of quarters = 8
3-a. Use the method of least squares to compute a power cost formula
Step 1: Calculation of variable cost per rental return
To calculate the variable power cost per machine hour, the following formula is used:
Variable power cost per machine hour = (NΣxy − ΣxΣy) /((NΣx²) − (Σx)²) ……………… (5)
= (Σxy – (1/8)ΣxΣy) /((Σx²) – (1/8)(Σx)²)
=(6,878,400,000 – ((1/8) * 190,800 * 282,500)) / (4,666,540,000 – ((1/8) * 190,800²))
Substituting the relevant values into equation (5), we have:
Variable cost per rental return = ((8 * 6,878,400,000) - (190,800 * 282,500)) /((8 * 4,666,540,000) - 190,800²)
Variable power cost per machine hour = 1.21
Step 2: Calculation of quarterly fixed power cost
This can be calculated using the following formula:
Fixed Cost per quarter = {Σy - (Variable power cost per machine hour * Σx) / N ....... (6)
Substituting the relevant values into equation (6), we have:
Fixed Cost per quarter = (282,500 - (1.21 * 190,800)) / 8
Fixed Cost per quarter = 6,454
Step 3: Computation of the power cost formula
Substituting Variable cost per machine hour = 1.21 and Total Fixed Cost = 6,454 into equation (3) in part 2 above, we can compute the power cost formula as follows:
Total power cost = 6454 + (1.21 * Machine hours) ………………. (4)
Equation (4) is the power cost formula.
3-b. Evaluate the coefficient of determination.
This can be evaluated using the following formula:
R² = Coefficient of determination = (NΣxy – ΣxΣy) / ((NΣx² - (Σx)²) * (NΣy² - (Σy)²))^0.5 ……….. (5)
Substituting the relevant values into equation (5) we have:
R² = ((8 * 6,878,400,000) – (190,800 * 282,500)) / (((8 * 4,666,540,000) – 190.800²) * ((8 * 10,188,250,000) – 282,500²))^0.5
R² = 0.8969, or 89.69%
McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that, if a product cannot earn a margin on sales of at least 20 percent, it will be dropped.
The margin is computed as product gross profit divided by reported product cost.
Manufacturing overhead for year 1 totaled $800,000. Overhead is allocated to products based on direct labor cost.
Data for year 1 show the following:
Chairs Desks
Sales revenue $1,150,000 $2,105,000
Direct materials 584,000 800,000
Direct labor 160,000 340,000
a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.
Profit Margin (%)
Chairs
Desks
a-2. Which of the two products should be dropped?
b. Regardless of your answer in requirement a, the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $650,000. The revenue and costs for desks are expected to be the same as last year.
What is the estimated margin for desks in year 2?
Gross Profit Margin:
Gross Profit margin is given as the gross profit divided by the sales of the company multiplied by 100. It is calculated to compare the results of the company from the past year and also from other companies in the industry.
Answer:
a-1. Profit Margin:
Chairs = 15%
Desks = 25%
a-2. Chair should be dropped.
b. The estimated margin for desks in year 2 is 18%.
Explanation:
a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.
McNulty, Inc.
Calculation of the profit margin for both chairs and desks for year 1.
Details Chairs ($) Desks ($)
Sales revenue (A) 1,150,000 2,105,000
Direct materials (B) 584,000 800,000
Direct labor (C) 160,000 340,000
Manufacturing overhead (D) 256,000 544,000
Product cost (E = B+C+D) 1,000,000 1,684,000
Gross profit (F = A-E) 150,000 421,000
Profit Margin (G = F/E) 15% 25%
Expected margin 20% 20%
Workings:
Chairs Manufacturing overhead = ($160,000 / ($160,000 + $340,000)) * $800,000 = $256,000
Desks Manufacturing overhead = ($340,000 / ($160,000 + $340,000)) * $800,000 = $544,000
a-2. Which of the two products should be dropped?
Chair should be dropped. This is because its estimated profit margin of 15% is less than the expected margin of 20%.
b. Regardless of your answer in requirement a, the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $650,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2?
The estimated margin for desks in year 2 can be calculated as follows:
McNulty, Inc.
Estimation of margin for desks in year 2
Details Desks ($)
Sales revenue (A) 2,105,000
Direct materials (B) 800,000
Direct labor (C) 340,000
Manufacturing overhead (D) 650,000
Product cost (E = B+C+D) 1,790,000
Gross profit (F = A-E) 315,000
Profit Margin (G = F/E) 18%
Expected margin 20%
Therefore, the estimated margin for desks in year 2 is 18%.
Dream, Inc., has debt outstanding with a face value of $6 million. The value of the firm if it were entirely financed by equity would be $18.25 million. The company also has 440,000 shares of stock outstanding that sell at a price of $32 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Answer:
$955,000
Explanation:
According to the Modigliani and Miller theory, we can calculate the value of the levered firm which is denoted by;
VI = Vu + tB
VI = 18.25million + 0.35(6million)
VI = 20.35 million
We can also calculate the total market value of the firm Vt by adding the debt (B) with the total equity (SV)
Vt = B + SV
Vt = 5 million + 440,000(32)
Vt = 5 million + 14.80 million
Vt = 19.80 million
Then the decrease in the value of the company due to bankruptcy is
Vb = VI - Vt
Vb = 20.35 million - 19.80 million
VB = $955,000
Bramble, Inc. has 11200 shares of 3%, $100 par value, noncumulative preferred stock and 224000 shares of $1 par value common stock outstanding at December 31, 2020. There were no dividends declared in 2019. The board of directors declares and pays a $65700 dividend in 2020. What is the amount of dividends received by the common stockholders in 2020?
Answer:
See
Explanation:
Total dividends = 65,700
Common stock outstanding = 224,000 shares
Preferred dividend
= Number of shares × Par value 3%
= 11,200 × 100 × 3%
= $33,600
Dividends received by common stockholders
= (65,700 × 2) - (33,600 × 3)
= 131,400 - 100,800
= 30,600
A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last press added 50 books to total output. In order to maximize the number of books published with a budget of $28,000, the publishing house
Answer:
The publishing house is not using cost minimizing combination of printers and printing press.
Explanation:
The publishing house go towards more of printers and less of printing press because the cost of printing price is almost three times higher than the cots of printers. Also the output of printing press is lower and the output of printers is almost double. The publishing house should use such a combination of both the available resources which maximizes its revenue.
International trade theory attempts to explain why nations trade and to help predict the direction, composition, and volume of goods that will be traded A variety of different theories have been proposed over the past several centuries to help explain the existence of trade between nations and to help predict whether trade will occur, what products or services will be traded, the direction of this trade, and the volume of this trade. Understanding the differences between these theories helps managers and policy makers to understand whether and how to pursue trade opportunities internationally
Drag each of the general characteristics listed to the international trade theory that it is most associated with:
International Trade Theory
General Characteristics
Government stimulates trade by means of protectionism
Mercantilism Factors that can drive competitive advantage for one economy over another
Absolute Advantage Trade influenced by relative income levels
Comparative Advantage Trade materials that are abundant
Trade most efficiently produced goods
Differences in Resource Endowments
Overlapping Demand
Trade goods and services at a lower opportunity cost than others
Diamond Model of National Competitive Advantage
Answer:
International Trade Theory - General Characteristics:
1. Absolute Advantage Trade influenced by relative income levels
2. Comparative Advantage Trade materials that are abundant Trade most efficiently produced goods.
Explanation:
The international trade theory is a part of economics that deals oh aspects of international trade that include exports and imports. Was described by adam smith as welfare economics. As the countries having an absolute advantage and comparative advantages in the products they sold in the global markets. According to the Ricardian model the factors endowments were related to land, capital, and labor.