Answer
a) Gordon's Constant Growth model : P0 = D1 / (r-g)
r = 3% =0.03 , g= -7% = -0.07 , D0 = $5.1
D1 = D0*(1+g)
D1 = 5.1*(1-0.07)
D1 = $4.743
P0 = 4.743/(0.03- (-0.07))
P0 = 4.743/0.10
P0 = $47.43
So, Stock M should sell at a price of $47.43 today
b) Price 8 years from now
==> P8 = D9/(r-g)
P8 = D0*(1+g)^9/(r-g)
P8 = 5.1* (1-0.07)^9 / (0.03- (-0.07))
P8 = 5.1*0.52041108298 / (0.03- (-0.07))
P8 = 2.65410
P8 = $26.54
c) Investor may want to buy the stock today for the Dividends. If the dividends paid are high enough, the present value of the dividends is also high and may more than compensate the fall in stock price. This type of stocks work and give cash flows like a project where the initial cashflows are higher and later cashflows are less because of market factors.
Corporation produces shiny discs. A special order has been placed by the customer for 2,200 units of the shiny disc for $27 a unit. While the disc would be modified slightly for the special order, the normal unit product cost for each disc is $20.50:
Direct materials $ 5.80
Direct labor 4.00
Variable manufacturing overhead 2.90
Fixed manufacturing overhead 7.80
Unit product cost $ 20.50
Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs.The customer would like modifications made to each disc that would increase the variable costs by $1.90 per unit and that would require an investment of $16,000 in special equipment that would have no salvage value.This special order would have no effect on Rick Corp.'s other sales. The company has enough spare capacity for producing the special order.What would be the annual financial advantage (disadvantage) for Rick as a result of accepting this special order?a. $40,760b. ($15,700)c. ($2,000)d. $16,200
Answer:
Effect on income= $11,280 increase
Explanation:
Giving the following information:
A special order has been placed by the customer for 2,200 units of the shiny disc for $27 a unit.
Because it is a special order, we will take into account only the differential fixed costs.
First, we need to calculate the total unitary cost and differential fixed costs:
Total unitary variable cost= 5.80 + 4 + 2.9 + 1.9
Total unitary variable cost= $14.6
Total fixed cost= $16,000
Now, we can determine the effect on income:
Effect on income= 2,200*(27 - 14.6) - 16,000
Effect on income= $11,280 increase
Cutting down on costs by earning an Associate’s degree first and then transferring to a four-year college or university can be done by going to what type of higher education institution?
A local community college.
A trade school.
A specialized training program.
Both b and c are correct.
Answer:
[tex]\boxed {\boxed {\sf A. \ Local \ community \ college}}[/tex]
Explanation:
Local community colleges are a great option because they provide a foundation of education. They offer courses that are equivalent to a four-year college/university's, but at much lower costs. This type of education allows you to earn a 2 year Associate's degree.
You can decide your path after, but many people choose to transfer to another four-year college/university. When they transfer, the 2 years at the community college counts as 2 years at the chosen institution, so they enter as a junior.
Trade schools and training programs offer valuable education, but typically not Associate's degrees.
So, the best answer is choice A. Local community college
Answer:
A local community college.
Explanation:
Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2021. On that date, the cost of the inventory on hand was $18,000 and its retail value was $24,000. Information for 2021 and 2022 is as follows: Ending Inventory at Retail Retail Price Index Cost-to-Retail Percentage Date 12/31/2021 $ 39,000 1.30 77 % 12/31/2022 $ 50,000 1.60 80 % Required: 1. What is the cost-to-retail percentage for the inventory on hand at 1/1/2021
Answer: 75%
Explanation:
Cost to retail = Cost price/ Retail price * 100
On 1/1/2021, Cost to Retail is;
= 18,000/24,000 * 100%
= 75%
Adelberg Company has two products: A and B. The annual production and sales of Product A is 1,900 units and of Product B is 1,300 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The total estimated overhead for next period is $101,075. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and Order Size--with estimated overhead costs and expected activity as follows:
Expected Activity
Activity Cost Pools Estimated Overhead Costs $ Product A Product B Total
Activity 1 $31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
Order size 15,476 200 200 400
Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate under the traditional costing system is closest to:________
a. $11.71 per DLH
b. $38.69 per DLH
c. $171.89 per DLH
d. $23.87 per DLH
Answer:
$60.53 per DLH
Explanation:
Calculation for what the predetermined overhead rate under the traditional costing system is closest to:
First step is to calculate the Direct Labor hours each product
Using this formula
Direct Labor hours=Annual production and sales*Direct Labor hour per unit
Direct Labor hours for Product A=1,900 units*0.4 direct labor-hours per unit
Direct Labor hours for Product A=760
Direct Labor hours for Product B=1,300 units*0.7 direct labor-hours per unit
Direct Labor hours for Product A=910
Second step is to calculate the Total Direct Labor hours for Product for Product A and Product B
Product A and B Total Direct Labor hours for Product =760+910
Product A and B Total Direct Labor hours for Product=1,670
Now let calculate the predetermined overhead rate under the traditional costing system using this formula
Predetermined overhead rate =Estimated Overhead/Activity base(Direct Labor Hours)
Let plug in the formula
Predetermined overhead rate=$101,075/1,670
Predetermined overhead rate=$60.53 per DLH
The predetermined overhead rate under the traditional costing system is closest to:$60.53 per DLH
The Intramural Sports Club reports sales revenue of $578,000. Inventory at both the beginning and end of the year totals $110,000. The inventory turnover ratio for the year is 3.9.
What amount of gross profit does the company report in its income statement?
Answer:
$363,500
Explanation:
Gross profit = Revenue - Cost of Goods Sold.
In the case
Revenue = $578,000.
The Cost of Goods Sold: COGS
Inventory turn over = COGS/ Average turnover
Average turnover = Opening stock + closing stock/2
In this case Opening stock + Closing stock = $110,000
Average turnover = $110,000 /2 =$55,000
Therefore:
3.9 = COGS/$55,000
COGS = $55,000 x 3.9
COGS =$214,500
Gross profit = $578,000 - $214,500
Gross profit = $363,500
Management anticipates fixed costs of $74,200 and variable costs equal to 35% of sales. What will pretax income equal if sales are $342,000?
A. $119,700.
B. $148,100.
C. $267,800.
D. $45,500.
E. $183,750.
Answer:
Pretax profit= $148,100
Explanation:
Giving the following information:
Management anticipates fixed costs of $74,200 and variable costs equal to 35% of sales.
Sales= $342,000
To calculate the pretax profit, we need to use the following formula:
Pretax profit= sales*contribution margin rate - fixed costs
Contribution margin rate= 1 - varaible cost rate
Contribution margin rate= 0.65
Pretax profit= 342,000*0.65 - 74,200
Pretax profit= $148,100
Suppose that there are two types of cars, good and bad. The qualities of cars are not observable but are known to the sellers. Risk-neutral buyers and sellers have their own valuation of these two types of cars
Types of Cars Buyers Valuation Seller Valuation
Good (50% probability) 5,000 4,500
Bad ( 50% probability) 3,000 2.500
When a buyer does not observe the quality, what is the highest price she will offer for a used car if she ignores adverse selection?
A. $2,500
B. $3,000
C. $4,000
D. $4,500
Answer:
C. $4,000
Explanation:
If he buyer does not have complete information about the car's quality, he/she will likely offer the expected value for a car = ($3,000 x 50%) + ($5,000 x 50%) = $4,000 car. In this type of scenarios, sellers of lemons (bad cars) are benefited since they are able to get a higher price, but sellers of goods cars are hurt because buyers assume their cars are bad.
Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y Materials costs........ $37,000 $37,000 Processing costs...... $38,000 $53,000 Equipment rental.... $12,000 $26,000 Occupancy costs...... $16,000 $26,000 Are the materials costs and processing costs relevant in the choice between alternatives X and Y
Answer:
Only materials costs are relevant
Explanation:
Here in the given situation, the processing cost is only relevant and considered this represents that it helps to make the decisions.
While on the other hand, the material cost is not relevant but it would be continue for each alternative course of action
Therefore the first option is correct
The same is to be considered
Merger Co. has 10 employees, each of whom earns $2,000 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $128,400 paid to each employee. and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee.
Required:
Prepare the March 31 journal entry to record the March payroll taxes expenses.
Answer: Please see answer in explanation column
Explanation:
Journal To record the employer's payroll taxes Expense on March 31st by Merger Co.
Date Account Titles and Explanations Debit Credit
Mar. 31 Payroll Tax Expenses $2,730
FICA - Social Security Taxes Payable $1,240
FICA - Medicare Taxes Payable $290
Federal Unemployment Taxes Payable $120
State Unemployment Taxes Payable $1,080
Calculation:
FICA - Social Security Taxes Payable= 6.2 % x 2000 x 10 employees
= $1,240
FICA - Medicare Taxes Payable=1.45% x 2000 x 10 employees
=$290
Federal Unemployment Taxes Payable=0.6% x 2000 x 10 employees
=$120
State Unemployment Taxes Payable=5.4% x 2000 x 10 employees
=$1.080
Payroll Tax Expenses= FICA - Social Security Taxes Payable + FICA - Medicare Taxes payable + Federal Unemployment Taxes payable +State Unemployment Taxes= $1,240 + $290 + $120 + $1,080 =$2,730
Which of the following statements is NOT correct on service A. Services are time sensitive and cannot be stored or inventoried for future use. B. Services are acts or deeds that can be touched. C. A service system includes the service delivery process and all of the different elements of the organization required to support it. D. More people now work in the service section than in the agriculture section worldwide.
Answer:
B. Services are acts or deeds that can be touched.
Explanation:
A service can be defined as a collection of intangible goods that are being offered by a service provider to the end user in order to meet their needs or requirements.
Some of the characteristics and features of a service includes;
1. Services are time sensitive and cannot be stored or inventoried for future use.
2. A service system includes the service delivery process and all of the different elements of the organization required to support it.
3. More people now work in the service section than in the agriculture section worldwide
Hence, the statement which is not correct about service is that, services are acts or deeds that can be touched.
Given the same demand and cost conditions, a revenue maximizing hospital will: a. Charge a higher price and produce more medical care than a profit maximizing hospital b. Charge a higher price and produce more medical care than an output maximizing hospital c. Charge a higher price and produce less medical care than an output maximizing hospital d. Charge a higher price and produce less medical care than a profit maximizing hospital
Answer:
c. Charge a higher price and produce less medical care than an output maximizing hospital
Explanation:
A revenue maximising firm's goal is to make the highest possible profit while the goal of an output maximising firm is to produce the highest possible number of output.
So, for a a revenue maximizing hospital, price would be higher but it would produce less medical care due to the law of demand.
The law of demand says the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.
While for the output maximising hospital, it would produce more output and charge a lower price than a revenue maximizing hospital
People work for many different reasons, including to be around others and to make a co
Please select the best answer from the choices provided
T
F
Answer:
True
Explanation:
People work for different and diverse reasons. The most common one is to earn their livelihood. However, there are those with sufficient resources to last a lifetime, but they still work.
Some people indeed go to work to be with others. They find identity and comfort in the workplace. To them, work is not about making money, but working is a way of life. A workplace provides social and emotional support to such people, which is important to them more than monetary compensation.
Jeff sells the New York Times Sunday newspaper at a city corner near several churches. He sells each newspaper for $6.50 after purchasing them for $4.00. Any unsold newspaper can be returned to the New York Times for a $0.75 credit. Jeff expects demand on Sunday to be 75, 100, 125, or 150 newspapers and would like to order one of these four quantities from the New York Times. If the Jeff uses the minimax regret criterion, how many newspapers will he order
Answer:
0
Explanation:
Which of the following statements is true regarding the functions of culture in an organization? A) It hinders the generation of commitment to something larger than individual self-interest among employees. B) It conveys a sense of identity for organization members. C) It reduces the stability of the organizational system. D) It reduces distinctions between one organization and others. E) It does not affect employees' attitudes and behavior.
Answer:
B; It conveys a sense of identity for organization members
The correct option is B. It conveys a sense of identity for organization members that statement is true regarding the functions of culture in an organization.
How does culture influence a member of the organization?The culture shapes the working environment within the company and has an impact on the type of long-term goals that help the company achieve its vision. The rules and procedures that help the organization fulfill its mission on a daily basis are also determined by culture.
Members of the organization get a sense of identity from it. It encourages the development of commitment to goals greater than one's own self-interest. The stability of the social system is improved. It acts as a "sense-making" and control mechanism that directs and molds employees' attitudes and conduct.
Thus, The best choice is B. When a statement about the roles of culture in an organization is true, it gives members of the organization a sense of identity.
Learn more about Culture Influence here:
https://brainly.com/question/14470425
#SPJ6
Lusk Corporation produces and sells 15,800 units of Product X each month.
The selling price of Product X is $28 per unit, and variable expenses are $22 per unit.
A study has been made concerning whether Product X should be discontinued.
The study shows that $72,000 of the $108,000 in fixed expenses charged to Product X would not be avoidable, even if the product was discontinued.
If Product X is discontinued, the company's overall net operating income would:______.
a. decrease by $58,800 per month
b. Increase by $13,200 per month
c. increase by $49,200 per month
d. decrease by $49,200 per month
Answer:
a. decrease by $58,800 per month
Explanation:
The computation is shown below;
Particulars Amount
Contribution from product X $94,800 ($28 - $22) × 15,800 units
Less: Fixed cost -$108,000
Net loss avoided -$13,200
Non-avoidable fixed cost $72,000
The Total cost in case the product fall $58,800
Hence, the correct option is a.
The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $21,000, would be replaced by a new machine. The new machine would be purchased for $420,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $145,000 per year in cash operating costs. The simple rate of return on the investment is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)
Answer: 18.8%
Explanation:
Simple rate of return on investment = Incremental net operating income / investment
Incremental net income = Operating savings - Annual cost
= 145,000 - 420,000/6 years
= $75,000
Net investment = Cost of new machine - salvage value of old
= 420,000 - 21,000
= $399,000
Return on investment = 75,000/399,000
= 18.8%
what are some requirements for Postal Service Mail Carriers?( Check all that apply. )
A.) a valid driver license
B.) a civil service exam
C.) a physical exam
D.) a passport
E.) a vocabulary exam
F.) an experience living in at least two states
G.) an age of at least eighteen years
Answer:
a.b,c,gExplanation:
The requirements to work in United States Postal Service department is: a valid driver license, a civil service exam, a physical exam, and an age of at least eighteen years. Thus, the correct options are a, b, c, and f.
What is United States Postal Service?The United States Postal Service (USPS), often known as the Post Office, U.S. Mail, or Postal Service, is a separate executive branch agency that is in charge of delivering postal service across the United States, including its associated states and insular territories.
The person who is interested to work in United States Postal Service department must have a valid driver's license, cleared the civil service exam and a physical exam, and is at least eighteen years of age.
Therefore, the options that apply to the requirements for Postal Service Mail Carriers are A, B, C, and G.
To learn more about United States Postal Service, click here:
https://brainly.com/question/17235057
#SPJ6
The search for and qualification of potential customers during the personal selling process is referred to as:_____.
Answer:
Prospecting.
Explanation:
This is known to be the first step that is been taken in a bid to get potential customers in a marketing process. Its made by of these marketers is firstly to qualify a recipient as a prospect and is other cases, someone who may have a need for your business products or services, or not. Its goal of is to develop a database of likely customers and then systematically communicate with them in the hopes of converting them from potential customer to current customer.
The Bildge Trust is a simple trust. Crawford is its sole beneficiary. In the current year, the trust earns $11,025 in taxable interest and $27,563 in tax-exempt interest. In addition, the trust recognizes a $1,575 long-term capital gain. The trustee charges a fee of $6,891 for the year.
a. Compute trust accounting income, where the trust agreement allocates fees andcapital gains to corpus.
b. Same as (a), except that fees are allocated to income.
Answer:
b
Explanation:
The following data has been provided for Hisjum631 Corporation for the period below:_______.
Return on investment 22 %
Average operating assets $ 40,000
Minimum required rate of return 16 %
What is the residual income for Hisjum631 for the period (closest to)?
Answer:
$2,400
Explanation:
Calculation for the residual income for Hisjum631 for the period
First step is to calculate the ROI Using this formula
ROI = Net operating income ÷ Average operating assets
Let plug in the formula
0.22 = Net operating income ÷ $40,000
Net operating income = 0.22× $40,000
Net operating income = $8,800
Now let calculate the Residual income using this formula
Residual income = Net operating income − (Average operating assets × Minimum required rate of return)
Let plug in the formula
Residual income= $8,800 − ($40,000 × 0.16)
Residual income= $8,800 − $6,400
Residual income= $2,400
Therefore the residual income for Hisjum631 for the period (closest to) $2,400
Hygdye218 Corporation has two divisions: the Domestic Division and the Foreign Division.The Hygdye218 Corporation's net operating income is $84,300.The Domestic Division's divisional segment margin is $48,200 and the Foreign Division's divisional segment margin is $172,000.
What is the amount of the Hygdye218 Corporation's common fixed expense not traceable to the individual divisions?
A. $132,500
B. $135,900
C. $256,300
D. $220,200
Answer:
B.$135,900
Explanation:
Calculation for What is the amount of the Hygdye218 Corporation's common fixed expense not traceable to the individual divisions
Using this formula
Net operating income = Segment margin - Common fixed expenses
Let plug in the formula
$84,300 = ($48,200 +$172,000) - Common fixed expenses
$84,300= $220,200 - Common fixed expenses
Common fixed expenses = $220,200 - $84,300
Common fixed expenses= $135,900
Therefore the amount of the Hygdye218 Corporation's common fixed expense not traceable to the individual divisions will be $135,900
Olive, the owner of Olive’s Orchard, contracts to sell its harvest to Pure Foods, Inc. Later Olive refuses to perform. Pure Foods files a suit to enforce the contract. Olive and Pure Foods are in a state that does not recognize the doctrine of unconscionability. To defend successfully against enforcement of the contract on similar grounds, Olive might rely on traditional notions of a. materiality. b. mistake. c. value. d. fraud.
Answer:
D)fraud
Explanation:
From the question, we are informed about Olive, the owner of Olive’s Orchard, contracts to sell its harvest to Pure Foods, Inc. Later Olive refuses to perform. Pure Foods files a suit to enforce the contract. Olive and Pure Foods are in a state that does not recognize the doctrine of unconscionability. To defend successfully against enforcement of the contract on similar grounds,. In this case, Olive might rely on traditional notions of a fraud. Fraud can be regarded as an act of deception which is intentional to deprive those that fall for it their legal right. It is activities that gives the perpetrator an unlawful gain or to deny a victim their right. It is carried out by people to get financial or personal gain in an unlawful manner. Some types of fraud that are common are are tax fraud, bankruptcy fraud. as well as credit card fraud,
Suppose that you are an economic-policy advisor. Environmental groups are pressuring you to implement the highest-possible carbon tax while industry groups are pressuring you to implement no carbon tax at all. Both argue that their position makes more sense economically. In fact, the most efficient tax level is: Group of answer choices a tax equal to the social cost. a tax equal to the external cost. the highest possible tax. no tax at all.
Answer: a tax equal to the external cost.
Explanation:
The most efficient taxes are those that will be equal to the external cost of production that a company is imposing on the environment. This means in effect that a company is paying for the pollution it is inflicting on the environment.
Companies polluting less would pay less and those polluting more would pay more. This is the logic of a tax equal to the external cost.
Which item will appear on the credit side of ledger account?
a. Cash recived from a customer.
b. Services performed to a customer.
c. Purchases.
d. Rent Expanses.
I just looked it up and I think that it is a
The item that should appear on the credit side of the ledger account is the service performed to the customer.
The following information should be relevant:
The assets, expenses, and dividend account should always have the debit balance. The liabilities, revenues, and the stockholder equity contain the credit balance.Also, the purchase should have a debit balance.Therefore we can conclude that the item that should appear on the credit side of the ledger account is the service performed to the customer.
Learn more about the ledger here: brainly.com/question/14976010
Why should a notary signing agent learn all about the closing documents in a loan package if they are not allowed to provide advice or counsel?
Answer:In American law, a signing agent or courtesy signer is an agent whose function is to obtain a formal signature of an appearer to a document. In common parlance, most jurisdictions require the appearer to sign before a notary public. From this, the practice of a notary public designating themselves as a signing agent has arisen. There are notaries public who specialize in the notarization of real estate transfer and loan document signings. Signing agents often have certification and training through private organizations, but is not a requirement in law, although it may be a requirement of the lender in the oversight of real estate transaction document signatures.
Explanation:
A notary signing agent learns all about the closing documents in a loan package if they are not allowed to provide advice or counsel :
A marking specialist or kindness endorser is an specialist whose work is to get a formal signature of an showed up to an archive. In common speech, most wards require the showed up to sign some time recently a public accountant public. They will be able to let the borrower know where to put his signature and other beginning lines the borrowers ought to fill. Also, to know when to coordinate the borrower to the credit officer or other designated agents when necessary. It is concluded that the Public accountant Marking Operator isn't permitted to guide the borrowers, but as it were to guarantee they sign the papers appropriately.Learn more :
https://brainly.com/question/16627450?referrer=searchResults
Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $44,300 for Division A. Division B had a contribution margin ratio of 40% and its sales were $232,000. Net operating income for the company was $32,600 and traceable fixed expenses were $55,800. Corbel Corporation's common fixed expenses were:________.
a) $48,700
b) $55,800
c) $104,500
d) $137,100
Answer:
a. $48,700
Explanation:
Contribution margin for Division A = $44,300
Contribution margin for Division B = 40% * Sales Value = 40% * $232,000 = $92,800
Total contribution margin = $44,300 + $92,800 = $137,100
Office Segment Margin =Total contribution margin - Traceable fixed expenses
Office Segment Margin = $137,100 - $55,800
Office Segment Margin = $81,300
Net Operating Income = Office Segment Margin - Common Fixed Expenses
Common Fixed Expenses = Office Segment Margin - Net Operating Income
Common Fixed Expenses = $81,300 - $32,600
Common Fixed Expenses = $48,700
If you have done everything correctly, you might realize that stagflation creates a dilemma for the Fed. Why? Choose one or more: A. If the Fed wants to reduce unemployment, it must be willing to accept more inflation. B. If the Fed wants to reduce inflation, it must be willing to accept higher unemployment. C. If the Fed wants to reduce unemployment, it must be willing to accept less inflation. D. If the Fed wants to reduce inflation, it must be willing to accept lower unemployment.
Answer:
A. If the Fed wants to reduce unemployment, it must be willing to accept more inflation.
B. If the Fed wants to reduce inflation, it must be willing to accept higher unemployment.
Explanation:
Stagflation is a situation in which there is a shift of the supply curve to the left that results in a high inflation due to which there is a high unemployement. Now if the fed wants to reduce the inflation so the demand would decline due to which the unemployment rises
Therefore A and B are correct
And C and D are incorrect
Answer:
The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Explanation:
What are chemical contaminants?
Answer:
chemical contaminants are chemical toxic plants and anmials in water ways.
“EBIT is generally considered to be independent of financial leverage, because EBIT is the result of a firm’s operating effectiveness. However, with an excessive debt levels, EBIT might actually be influenced by financial leverage.”
Comment on the statement above.
Answer:
The answer is below
Explanation:
EBIT is known as an accounting measure to determine the profit level of a firm. It is an acronym of Earnings Before Interest and Taxes.
EBIT is generally considered to be independent of financial leverage because EBIT is the result of a firm’s operating effectiveness.
This is true because, EBIT is based on the firm's level of sales and cost of operation, of which financial leverage has no effects on it.
However, with excessive debt levels, EBIT might be influenced by financial leverage.
This implies that even though the financial leverage of a firm has no direct influence on EBIT, in a situation whereby a firm is operating at huge deficits, every aspect of the film will be concerned. This will include staff, customers, investors, and operational activities, thereby affecting the firm's sales and cost of operation. As a result, this will ultimately affect the firm's EBIT.
3. Hayden Company currently sells widgets for $160 per unit. The variable cost is $60 per unit and total fixed costs equal $240,000 per year. Sales are currently 40,000 units annually, and the income tax rate is 40 percent. Required: a. Calculate the contribution margin per unit.
Answer:
The contribution margin per unit is $100
Explanation:
The computation of the contribution margin per unit is shown below:
The Contribution margin per unit is
= Selling price per unit - variable cost per unit
= $160 - $60
= $100
hence, the contribution margin per unit is $100
We simply applied the above formula so that the correct value could come
And, the same is to be considered