Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $40,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $10,000. The grill will have no effect on revenues but will save Johnny’s $20,000 in energy expenses. The tax rate is 35%. (LO9-2) a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. If the discount rate is 12%, should the grill be purchased?
Answers
Answer: The answer is given below
Explanation:
For the question, the operating cash flows for each year is gotten by adding the depreciation tax rate to the net of the tax improvement in the operating income. The net of the tax improvement in the operating income.
= $20,000 × (1 - tax rate)
= $20,000 × (1 - 35%)
= $20,000 × (1 - 0.35)
= $20,000 × 0.65
= $13,000
a. The operating cash flows in each year has been attached.
b. The total cash flow will be the value of the operating cash flow added to the cash flow that are associated with investments. At year 0, initial investment was $40,000. After selling the grill at year 3, book value will be $2,964. Therefore, the sale price of the net tax will be:
=(Sales price - tax rate) × (sales price - book value)
=($10,000 - [35% × ($10,000 - $2,964)]
= $10,000 - [0.35 × $7036]
= $10,000 - $2,462.6
= $7,537.4
Total cash flow = $15073.4 + $7537.4
= $22,610.8
c. If the discount rate is 12%, this implies that the grill should be bought due to the fact that the net present value (NPV) of the cash flow is $7,191.8 which has a positive value.
The table has also been attached for further explanation.
Related Questions
An engineering firm measures its output in standard service hours (SSH) per unit, which is a function of the skill levels of its engineers (skill levels range from an engineering intern to an engineering scientist). The variable cost is $60 per SSH and the fixed cost is $2,000,000 per year. The firm charges $100 for each service per hour. Assume the maximum hours the firm operates (that is the output) is 170,000 per year. a) Compute the break-even point in SSH.b) At what percentage does the break-even occur as compared to the maximum hours the firm operates? c) What is the percentage reduction in the break-even point if the fixed cost can be reduced by 20%? d) Does the break-even point increase or decrease if the charges per service are increased by 10%? e) What is your recommendation? Should the firm reduce the fixed cost or increase the price?
Answers
Answer:
Instructions are below.
Explanation:
Giving the following information:
The variable cost is $60 per SSH and the fixed cost is $2,000,000 per year. The firm charges $100 for each service per hour. Assume the maximum hours the firm operates (that is the output) is 170,000 per year.
1) To calculate the break-even point, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 2,000,000/ (100 - 60)
Break-even point in units= 50,000 hours
2) %of hours= (50,000/170,000)*100= 29.41%
3) Fixed costs= $1,800,000
Break-even point in units= 1,800,000/40
Break-even point in units= 45,000 hours
The number of units required to cover for fixed costs diminished by 10%.
4) Selling price= $110
Break-even point in units= 2,000,000/(110 - 60)
Break-even point in units= 40,000 hours
The number of units required to cover for fixed costs diminished by 20%.
5) In generals terms, it is easier to increase the selling price compared to decreasing fixed costs. In this case, the best option is to increase the selling price. The effect on income and the break-even analysis is higher than decreasing fixed costs.
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $31,000 bill from her accountant for consulting services related to her small business. Reese can pay the $31,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent next year, and that she can earn an after-tax rate of return of 6 percent on her investments.a. What is the after-tax cost if she pays the $31,000 bill in December?b. What is the after-tax cost if she pays the $31,000 bill in January?
Answers
Answer:
a) The after-tax cost if she pays the bill in December is $21,700
b) The after-tax cost if she pays the bill in January is $19,306.80
Explanation:
a) If she pays the $31,000 bill in December
Present value tax savings = amount × marginal tax rate
= $31,000 × 30%
= $9,300
After-tax cost = Pre-tax cost - present value tax
= $31,000 - $9,300
= $ 21,700
b) If she pays the $31,000 bill in January
Present value tax savings = amount × marginal tax rate
= $31,000 × 40%
= $12,400
Calculation of discount factor = Present value = [tex]\frac{FutureValue}{(1+r)^{n} }[/tex]
= [tex]\frac{1}{(1+0.06)^{1} }[/tex]
= 0.943
Present value tax savings = amount × discount factor
= $ 12,400 × 0.943
= $11,693.20
After-tax cost = Pre-tax cost - present value tax
= $31,000 - $11,693.20
= $ 19,306.80
You have recently been hired as the vice president for human resource in an advertising agency. One problem that has been brought to your attention is the fact that the creative departments at the agency have dysfunctionally high levels of conflict. You have spoken with members of each of these departments, and in each one it seems that a few members of the department are creating all the problems. All these individuals are valued contributors how have many creative ad campaigns to their credit. The high levels of conflict are creating problems in the departments, and negative moods and emotions are much more prevalent than positive feelings. What are you going to do to both retain valued employees and alleviate the excessive conflict and negative feelings in these departments?
Answers
Explanation:
There are two problems that need to be solved in the scenario above: the increase in team conflicts and the retention of valuable employees who are the cause of conflicts. In these two situations, as recently hired as vice president of human resources for an advertising agency, the ideal would be to try to understand how the people management process that occurred before his arrival at the company was carried out, and from there, find strategies for resolve the two main types of conflicts that occur at the advertising agency.
Some solutions arise from the principle of revising the HR policy and establishing a more direct and facilitated communication with employees, in order to increase the employees' perception of a management focused on the employee's well-being and open to feedbacks.
Another solution for reducing conflicts in teams is the assessment and analysis of the profile of each member individually and in a group, in order to monitor the individual and collective performance of each and define assignments according to their skills, generating greater integration between teams and appreciation of each employee, which increases engagement and motivation at work, reducing conflicts and turnover.
Suppose that there are three beachfront parcels of land available for sale in Asilomar and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $595,000. The following table states each person's willingness and ability to purchase a parcel.
Willingness and Ability to Purchase Dollars
Bob 620,000
Cho 570,000
Eric 540,000
Ginny 530,000
Sean 750,000
Yvette 660,000
Which of these people will buy one of the three beachfront parcels?
a. Bob
b. Cho
c. Eric
d. Gianny
e. Sean
f. Yvette
Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront is sold, another essentially identical beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $582,500. This fourth parcel _____ be sold, because _____ will purchase it from the seller for at least the minimum price.
Answers
Answer:
When the minimum price is 582,500, the forth parcel WILL not be sold because the willingness to pay is LESS and no one will purchase it from the seller for atleast the minimum price.
Explanation:
Bob 620,000
Sean 750,000
Yvette 660,000
The people that will buy one of the three beachfront parcels are Bob, Sean and Yvette because they are the ones willing and has the ability to purchase the beachfront parcel of land available for sale in Asilomar.
Cho, Eric and Gianny may as well have the desire to own the beachfront land in Asilomar, but they do not have the ability to pay the selling price.
Therefore when the minimum price is 582,500, the forth parcel WILL not be sold because the willingness to pay is LESS and no one will purchase it from the seller for atleast the minimum price.
Initially, you produce 100 boxes of jelly beans per time period. Then a new customer calls and places an additional order for jelly beans, requiring you to increase your output to 101 boxes. She offers you $1.75 for the additional box. Should you produce it?
Answers
Answer:
You should produce as long as the marginal cost per additional box is lower than the marginal revenue obtained by the additional box.
In other words, if the marginal cost of producing the 101th box is lower than $1.75, then, you should continue to produce, because revenue will be higher than cost, and a profit will be made as a result.
On September 30 the bank statement of Fine Company showed a balance of $7,800. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records:
A. Deposits in transit amounted to $3,150
B. Outstanding checks amounted to $6,200
C. A $550 check was incorrectly drawn on Fine's account
D. NSF checks returned by the bank were $750
E. The bank service charge was $29
F. Credit memo for $75 for the collection of one of the company's account receivable
What is the true cash balance?
A) $5,346
B) $5,300
C) $4,596
D) $7,096
Answers
Answer:
B) $5,300
Explanation:
The computation of cash balance is shown below:-
True cash balance = Unadjusted bank balance + Deposit in transit + Error in check - Outstanding checks
= $7,800 + $3,150 + $550 - $6,200
= $11,500 - $6,200
= $5,300
Therefore for computing the true cash balance we simply applied the above formula and not considered all other amount as they are not relevant.
On January 1, Wei company begins the accounting period with a $42,000 credit balance in Allowance for Doubtful Accounts.
A. On February 1, the company determined that $9,200 in customer accounts was uncollectible; specifically, $2,100 for Oakley Co. and $7,100 for Brookes Co. Prepare the journal entry to write off those two accounts.
B. On June 5, the company unexpectedly received a $2,100 payment on a customer account, Oakley Company, that had previously been written off in part a. Prepare the entries to reinstate the account and record the cash received.
Answers
Answer:
Wei company General Journal
Feb 01
Dr Allowance for doubtful accounts $9,200
Cr Accounts receivable—Oakley Co. $2,100
Cr Accounts receivable—Brookes Co. $7,100
June 05
Dr Accounts receivable—Oakley Co. $2,100
Cr Allowance for doubtful accounts $2,100
June 05
Dr Cash $2,100
Cr Accounts receivable—Oakley Co. $2,100
Explanation:
Feb 01
(To record write off accounts receivables)
June 05
(To record reinstatement accounts receivable)
June 05
(To record receipt from accounts receivable)
Suppose that you would like to put money in an account today to make sure your younger sibling has enough money in 10 years to buy a car. If you would like to give your sibling $20,000 in 10 years, and you know you can get 5% interest per year from a savings account during that time, how much should you put in the account now
Answers
Answer:
The amount to be deposited today = $12,278.26
Explanation:
The amount to be deposited in the account is the present value of the 20,000 future value discounted at 5%.
The formula is given below
PV = FV × (1+r)^(-n)
PV - Present Value, r- interest rate, n- number of years
PV = 20,000 × 1.05^(-10)
The amount to be deposited today = $12,278.26
Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the i nventory shrinkage for Madison Company for the year ended October 31.
Answers
Answer:
Madison Company's Journal entry
Dec. 31
Dr Cost of Merchandise Sold 93,400
($875,300-$781,900)
Cr Merchandise Inventory 93,400
Explanation:
If the perpetual inventory records $875,300 of merchandise while the physical inventory indicates $781,900 which means we have to deduct $781,900 from $875,300 which made us to arrived at $93,400 as Debited Cost of Merchandise Sold and as Credited Merchandise Inventory .
Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 4.2% rate of inflation in the future. The real risk-free rate is 2.5%, and the market risk premium is 4.5%. Mudd has a beta of 2.1, and its realized rate of return has averaged 13.5% over the past 5 years. Round your answer to two decimal places. %
Answers
Answer:
16.15%
Explanation:
Required rate of return is the rat that a investor expect for investment in a specific stock. It also account for the risk associated with that stock.
As per given data
Inflation rate = 4.2%
Real Risk free rate = 2.5%
Risk free rate = 4.2% + 2.5% = 6.7%
Market Risk Premium = 4.5%
Beta = 2.1
To calculate the required rte of return we will use the CAPM formula as below
Required rate of return = Risk free rate + Beta ( Market Risk Premium )
Required rate of return = 6.7% + 2.1 ( 4.5% )
Required rate of return = 16.15%
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $20,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 30 percent this year and will be 33 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments.a. What is the after-tax income if Hank sends his client the bill in December?After- tax income ?b. What is the after-tax income if Hank sends his client the bill in January? (Do not round intermediate calculations. Round "PV Factor" to 3 decimal places. Round your answer to 2 decimal places.)after-tax income ?c. Should Hank send his client the bill in December or January?DecemberJanuaryd. What is the after-tax income if Hank expects his marginal tax rate to be 25 percent next year and sends his client the bill in January? (Round "PV Factor" to 3 decimal places. Round your answer to 2 decimal places.)
Answers
Answer: a. $14,000
b. $14,106
c. January
2. $15,535
Explanation:
a. If Hank sends the bill in December.
Tax rate is 30% this year.
Amount is $20,000
After Tax Income = 20,000 * (1 - tax)
= 20,000 ( 1 - 30%)
= $14,000
b. If Hank pays Next year
Tax rate is 33%
After tax return rate of 12%
Amount is 20,000
Tax = 20,000 * 33%
= $6,600.
Because this is next year, the present value of the tax needs to be computed for better comparison.
With an after tax return of 12%, the PV will be,
= 6,600 * PV factor ( 12%, 1 period)
= 6,600 * 0.893
= $5,894
The income therefore will be,
= $20,000 - 5,894
= $14,106
c. Hank should pay in January as he would make more income.
2. Tax rate is 25% next year and income is to be received next year.
Tax = 20,000 * 25%
= $5,000
PV of $5,000 = 5,000 * PV Factor (12%, 1 period)
= 5,000 * 0.893
= $4,465
After tax income = 20,000 - 4,465
= $15,535
Corporation is a rapidly growing biotech company that has a required rate of return of 14%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete. The building contractor offered New Pharm a choice of three payment plans, as follows:
Plan I: Payment of $ 325,000 at the time of signing the contract and $ 4,825,000 upon completion of the building. The end of the second year is the completion date.
Plan II: Payment of $ 1,675,000 at the time of signing the contract and $ 1,675,000 at the end of each of the 2 succeeding years.
Plan III: Payment of $ 425,000 at the time of signing the contract and $ 1,650,000 at the end of each of the 3 succeeding years.
Required
1. Using the net present value method, calculate the comparative cost of each of the three payment plans being considered by New Tech.
2. Which payment plan should New Tech choose? Explain.
3. Discuss the financial factors, other than the cost of the plan, and the non-financial factors that should be considered in selecting an appropriate payment plan.
Answers
Answer:
NPV = $4,037,680.83
NPV = $4,433,156.36
NPV = $4,255,692.85
The first payment plan would be chosen because it has the lowest NPV. If chosen, the lowest amount would be paid.
Expected inflation: if inflation is expected to rise higher than expected in subsequent years , payment plans that differ payment to later year might be more suitable . Inflation causes the value of money to fall so if payment is made in later years , less money would be paid.
Conversely, if inflation is expected to fall, payment plan that makes payments in earlier years would be more suitable.
Also, the effect of payment on other projects should be considered. For example, if the company has other projects they want to undertake now but do not have enough capital required to start, the company might want to choose a payment plan that differs payment especially if the other project doesn't have a flexible payment plan.
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Plan 1
Cash flow in year 0 = $ 325,000
Cash flow in year 1 = 0
Cash flow in year 2 = $ 4,825,000
I = 14%
NPV = $4,037,680.83
Plan 2
Cash flow each year from year 0 to 2 = $1,675,000
I = 14%
NPV = $4,433,156.36
Plan 3 :
Cash flow in year 0 = $ 425,000
Cash flow each year from 1 to 3 = $ 1,650,000
I = 14%
NPV = $4,255,692.85
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions): Sales $25,700 Food and packaging $8,982 Payroll 6,500 Occupancy (rent, depreciation, etc.) 5,748 General, selling, and administrative expenses 3,700 $24,930 Income from operations $770 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is McDonald's contribution margin
Answers
Answer:
a. $9,338
b. 0.363
Explanation:
a. Contribution Margin = Sales - Variable Cost
Where Sales = $25,700
Variable Cost = Food & Packaging + Payroll + 40% x General, Selling and Administrative expenses
V.C. = 8,982 + 6,500 + 40% * 3,700
V.C = 8,982 + 6,500 + 1,480
= $16,362
Therefore, Contribution Margin = Sales - Variable Cost
= $25,700 - $16,362
=$9,338
b. McDonald's contribution margin ratio = Contribution Margin / Sales
= $9,338 / $25,700
= 0.363
Sheffield Corp. has 285,000 shares of $8 par value common stock outstanding. It declares a 13% stock dividend on December 1 when the market price per share is $16. The dividend shares are issued on December 31. Prepare the entries for the declaration and distribution of the stock dividend. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answers
Answer:
285,000 common stock outstanding with a $8 par value
it declares 13% stock dividend
market price at $16
since the stock dividend is considered small (less than 20%), we use the market price to record it
December 1, 202x stock dividends are declared (37,050 stocks)
Dr Retained earnings 592,800
Cr Common stock dividends distributable 296,400
Cr Additional paid in capital 296,400
December 31, 202x, distribution of stock dividends
Dr Common stock dividends distributable 296,400
Cr Common stock 296,400
Recording purchases, purchases returns, and purchases allowances LO P1
Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method
Apr. 2 Purchased $3,3ee of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated .April 2, and FOB shipping point.
3 Paid $240 cash for shipping charges on the April 2 purchase.
4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $800.
17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned
merchandise.
18 Purchased $5,90e of merchandise from Frist Corp. with credit terms of 1/1e, n/30, invoice dated April 18,
and FOB destination.
21 After negotiations, received from Frist a $400 allowance toward the $5,90e owed on the April 18
purchase.
28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.
Journal entry worksheet
1 2 3 4 5 6
Purchased $3,300 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point.
Note:
Date General Journal Debit Credit
Apr 02
Answers
Answer:
Journal entries
1.
Dr Merchandise inventory 3,300
Cr Account payable 3,300
(To record purchase)
2.
Dr Merchandise inventory 240
Cr Cash 240
(To record shipping charges)
3.
Dr Account payable 800
Cr Merchandise inventory 800
(To record the amount of purchase return)
4.
Dr Account payable 2,500
Cr Bank 2,450
Cr Merchandise inventory 50
(To record amount paid)
5.
Dr Merchandise inventory 5,900
Cr Account payable 5,900
(To record purchase)
6.
Dr Account payable 400
Merchandise inventory 400
(To record allowance)
7.
Dr Account payable 5,500
Cr Cash 5,445
Cr Merchandise inventory 55
(To record amount paid)
Explanation :
1. To record purchase
2.To record shipping charges
3.To record the amount of purchase return
4. Calculation for Bank and Merchandise inventory
Bank(2,500*98%) 2,450
Merchandise inventory (2500-2,450) 50
To record amount paid
5.To record purchase
6.To record allowance
7. Calculation for Account payable, Cash and Merchandise inventory
Account payable (5,900-400) 5,500
Cash (5,500*99%) 5,445
Merchandise inventory (5,500-5,445) 55
To record amount paid
Categories the following into Market economy and Non-market economy.
1. Prices are set by government agencies.
2. The invisible hand guides resources to their highest valued uses
3. Buyers and sellers are motivated by government directives.
4. Prices are set by supply and demand
5. Buyers and sellers are motivated by a sense of communal well- being.
6. Buyers and sellers are motivated by self-interest.
Answers
Answer:
Market economy:
2. The invisible hand guides resources to their highest valued uses
4. Prices are sey by supply and demand
6. Buyers and sellers are motivated by self-interest
Non-market economy:
1. Prices are set by government agencies
3. Buyers and sellers are motivated by government directives
5. Buyers and sellers are motivated by a sense of communal well-being
Explanation:
On the one hand, the concept of market economy refers to a type of economy system that basically indicates that the market will find the equilibrium and work properly without the help of the government and therefore it establishes that the economy does not need from the figure of the government and that this last one must worry only about the other issues that do not include the economy.
On the other hand, a non-market economy like its name indicates, it refers to the type of system that do consider that the presence of the government is very important for the correct system of the economy and all of its factors regarding the market. Therefore that this type of system approves the planning of the economy from the government without discussions.
Rhys Hoskins is the president of RH Corporation (RHC). RHC has provided the following partial listing of costs incurred during August: Marketing salaries $ 45,300 Utilities, factory $ 11,400 Administrative travel $ 102,300 Sales commissions $ 54,800 Indirect materials $ 39,500 Direct materials $ 166,400 Advertising $ 147,800 Depreciation of production equipment $ 47,000 Direct labor $ 91,700 Required: a. What is the total amount of manufacturing cost listed above?
Answers
Answer:
$306,000
Explanation:
To determine manufacturing costs, consider only those cost that can be directly traced to the product manufactured and plant related costs.
Total Manufacturing Cost Calculation :
Factory Utilities $11,400
Indirect Materials $39,500
Direct Materials $166,400
Equipment Depreciation $47,000
Direct labor $91,700
Total Manufacturing Cost $306,000
On January 1, 2017, Best Shipping Transportation Company purchased a used aircraft at a cost of $ 48 comma 700 comma 000. Best Shipping expects the plane to remain useful for five years (7 comma 300 comma 000 miles) and to have a residual value of $ 4 comma 700 comma 000. Best Shipping expects to fly the plane 925 comma 000 miles the first year, 1 comma 200 comma 000 miles each year during the second, third, and fourth years, and 2 comma 775 comma 000 miles the last year. Requirements Compute Best Shipping's depreciation for the first two years on the plane a. Straight-line method Using the straight-line method, depreciation is $ for 2017 and $ for 2018. b. Units-of-production method (Round the depreciation per unit of output to two decimal places to compute your final answers.) Using the units-of-production method, depreciation is $ for 2017 and $ for 2018. c. Double-declining balance method Using the double-declining-balance method, depreciation is $ for 2017 and $ for 2018.
Answers
Answer and Explanation:
The computation of the depreciation expense for the first year and the second year is shown below:
a) Straight-line method:
= (Original cost - residual value) ÷ (useful life)
= ($48,700,000 - $4,700,000) ÷ (5 years)
= ($44,000,000) ÷ (5 years)
= $8,800,000
In this method, the depreciation is the same for all the remaining useful life
So for the 2017 and 2018 the depreciation of $8,800,000 is separately charged
(b) Units-of-production method:
= (Original cost - residual value) ÷ (estimated production)
= ($48,700,000 - $4,700,000) ÷ ($7,300,000 miles)
= ($44,000,000) ÷ ($7,300,000 miles)
= $6.02 per miles
Now for the 2017, it would be
= Miles in first year × depreciation per miles
= 925,000 miles × $6.02
= $5,568,500
And for the 2018, it is
= Miles in second year × depreciation per miles
= 1,200,000 miles × $6.02
= $7,224,000
(b) Double-declining balance method:
First we have to find the depreciation rate which is shown below:
= One ÷ useful life
= 1 ÷ 5
= 20%
Now the rate is double So, 40%
In year 2017, the original cost is $48,700,000, so the depreciation is $19,480,000 after applying the 40% depreciation rate
And, in year 2018, the ($48,700,000 - $19,480,000) × 40% = $11,688,000
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below:
Sales $ 660,000
Variable expense $ 285,000
Fixed manufacturing expenses $ 244,000
Fixed selling and administrative expense $ 192,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $195,500 of the fixed manufacturing expenses and $110,500 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required:
According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value.)
Answers
Answer:
net operating income earned by product N28X is $ 69,000.
Explanation:
Only the avoidable costs will be accounted for in determining net income earned by N28X for its decision.
Sales $ 660,000
Less Variable expense ($ 285,000 )
Contribution $ 375,000
Fixed manufacturing expenses ($195,500 )
Fixed selling and administrative expense ($110,500)
Net Income / (loss) $ 69,000
Therefore, net operating income earned by product N28X is $ 69,000.
Sunshine Foods manufactures pumpkin scones. For January 2017, it budgeted to purchase and use 14,750 pounds of pumpkin at $0.92 a pound. Actual purchases and usage for January 2017 were 16,000 pounds at $0.85 a pound. Sunshine budgeted for 59,000 pumpkin scones. Actual output was 59,200 pumpkin scones.1. Compute the flexible-budget variance.2. Compute the price and efficiency variances.3. Comment on the results for requirements 1 and 2 and provide a possible explanation for them
Answers
Answer:
The explanation of the given scenario is described in the explanation section below.
Explanation:
The given values are:
Selling Price, SP = $0.92
AP = $0.85
(1)...
To compute the flexible budget variance,
= [tex]Actual \results - Standard \ results[/tex]
= [tex]( 16000\times 0.85 ) - (\frac{59200\times 14750}{59000\times 0.92} )[/tex]
= [tex]13600 - 13616[/tex]
= $[tex]16 \ (favorable)[/tex]
(2)...
To compute the price and efficiency variances,
[tex]Price \ variance = ( SP - AP )\times AQ \ purchased[/tex]
⇒ [tex]=( 0.92 - 0.85 )\times 16000[/tex]
⇒ [tex]=1120 \ (favorable)[/tex]
Now,
Efficiency variance = (SQ for actual output - AQ ) × SP
⇒ = [tex]( [\frac{59200\times 14750 }{59000} ] - 16000 )\times 0.92[/tex]
⇒ = [tex]1104 \ (favorable)[/tex]
(3)...
The Price variance is the difference that further tends to mean that the material was bought at such a cheaper rate than assumed, but the efficiency variance does seem to be unfavorable, which tends to mean that the content has been used more than anticipated. Yet another possible explanation for that kind of variance could be lower prices contribute to better customer satisfaction,
However, the overall variance seems to be $16 favorable, and therefore final figures could be said to satisfy the requirements.
nventory records for Dunbar Incorporated revealed the following: Date Transaction Number of Units Unit Cost Apr. 1 Beginning inventory 490 $ 2.44 Apr. 20 Purchase 320 2.73 Dunbar sold 630 units of inventory during the month. Ending inventory assuming FIFO would be: (Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)
Answers
Answer:
Ending inventory assuming FIFO would be $169.4
Explanation:
Under the FIFO system , inventories are priced using the price of the oldest batch in the stock, after which the price of the next oldest batch and this is done in turn. It is based on the principle that the first batch that arrives the store should be issued first.
The 630 units sold would be valued as follows:
$
490 × 2.44= 382.2
140 × 2.73 =1,195.6
630 1,577.8
The value of closing inventory = Value of opening inventory + Cost of purchases - cost of goods sold
= (490× $ 2.44) + ( 320 ×$2.73) - 1577.8 =$169.4
Ending inventory assuming FIFO would be $169.4
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of a meeker is $30. Suppose that the world price for a meeker is $40. Assume that Meekertown is too small to influence the world price for meekers once they enter the international market.
If Meekertown allows free trade, then it will (import/export?) meekers.
Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false.
Statement True False
Meekertownian consumers are worse off under free trade than they were before.
Meekertownian producers were better off without free trade than they are with it.
True or False: When a country is too small to affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.
Answers
Answer:
Export
True
False
True
Explanation:
Free trade is a form of trade policy where there are no restrictions to imports or exports of goods and services.
The price of meekers is $30 in Meekertown and $40 In the world. Because meeker's are cheaper in Meekertown, it means that Meekertown is efficient in the production of meekers. As a result, they would export meekers to the rest of the world. It would be cost efficient for the rest of the world to import from Meekertown.
Consumers in Meekertown are worse of because of the trade because the price of Meekers would rise.
Producers are better off because they would earn more profits from the sale of Meekers at the world price.
Free trade increases total surplus because of efficient production. If a country is inefficient in production, it would import . This would increase consumer surplus and if it is efficient in production, it would export increasing producer surplus.
I hope my answer helps you
Robert Necco and Nelson Packard are economists at Economic Research Associates. ERA asks Necco and Packard for their opinions about the effects of fiscal policy on real GDP for an economy currently experiencing a recession. Necco states that real GDP is likely to increase if both government spending and taxes are increased by the same amount. Packard states that if both government spending and taxes are increased by the same amount, there is no expected net effect on real GDP.
Regarding the statements made by Necco and Packard:
Necco Packard
A) Correct Correct
B) Correct Incorrect
C) Incorrect Incorrect
D) Incorrect Correct
Answers
Answer: B) Correct Incorrect
Explanation:
Whilst it was generally believed at some point that raising taxes and Government Spending by the same amount would have no effect, research has disproven this thought.
This is because it was shown that an increase in Government Spending leads to a larger increase in GDP than an increase in taxes reduces it.
This is because when the Government spends money, the Multiplier effect of Government Spending is always 1 more than that of the Taxes therefore raising taxes and spending by the same amounts still increases the Real GDP because Government Spending will create more income than taxes will take.
Necco is right, Packard is wrong.
Assume that Cane expects to produce and sell 93,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 4,000 additional Betas for a price of $42 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?
Answers
Note that the total cost per unit of Betas is $47.
Answer:
decrease by -$4,375,000
Explanation:
Since Cane expects to produce and sell 93,000 Betas during the current year, additional 4000 units would make the total cost be
93,000 + 4,000 = 97,000 units
97,000 x $87 = $8,439,000
To find the decrease or increase in profit, we multiply the total sales volume by the price willing to be paid by the new customer
97,000 x $42 = $4,074,000 (This value is a great loss of profit). By substracting the total cost by amount paid we see a decrease of $8,439,000-$4,074,000= $4,375,000.
53. To determine how to crash activity times a. normal activity costs and costs under maximum crashing must be known. b. shortest times with crashing must be known. c. realize that new paths may become critical. d. All of the alternatives are true.
Answers
Answer:
D. All of the alternatives are true.
Explanation:
Crash activity time are been used in the in different organisations for different reasons. In the case, above the mentioned conditions in all options are been put to consideration. Because in its determination, one has to analyze thoroughly its critical path method in its first step; here the tasks are been shortened before being tackled. Secondly, you identify the newer critical ways in dealing of the things.
Also, normal activity costs and costs under maximum crashing are been made known. Therefore, all options above appear to be one of the steps in critical ways of determining crash activity time.
Clark Company estimated the net realizable value of its accounts receivable as of December 31, 2019, to be $178,000, based on an aging schedule of accounts receivable. Clark has also provided the following information: The accounts receivable balance on December 31, 2019 was $190,600. Uncollectible accounts receivable written off during 2019 totaled $13,300. The allowance for doubtful accounts balance on January 1, 2019 was $17,600. How much is Clark's 2019 bad debt expense
Answers
Answer: $8,300
Explanation:
Clark Company estimates that the net realizable value of their Accounts Receivable is $178,000. This is while their Accounts Receivable balance on the same date is $190,600.
This would infer that out of $190,600, they only intend on recovering $178,000.
The difference in these figures will be the Allowance for Doubtful Accounts balance at the end of the year because that is the amount that they do not believe they'll receive.
= 190,600 - 178,000
= $12,600
When the year started, the Allowance Balance was $17,600. Uncollectible Amount written off was $13,300. This amount would be written off from this account which would supposedly leave the balance to be,
= 17,600 - 13,300
= $4,300
The balance on the Allowance account is supposed be $12,600 yet the amount written off brings it to $4,300. The bad debts Expense for the year therefore, is the difference between these 2 figures because it is the bad debt expense that was written off from the $12,600 to bring it to $4,300.
= 12,600 - 4,300
= $8,300
Clark's 2019 Bad Debt expense is $8,300
Answer:
2017
Explanation:
When a GEM Manufacturing experienced a slowdown in sales, it laid off the two employees with the poorest attendance. One of the employees sued the company, saying it should have laid off the most recently hired workers. What defense should GRM Manufacturing most likely offer
Answers
Answer:
the layoffs were instances of employment at will
Explanation:
GEM Manufacturing's defense would most likely be that the layoffs were instances of employment at will.
Employment at will is a situation where a worker may be dismissed by an employer for any reason that may not be illegal and at anytime.
The Employers, in this question for example, terminated the relationship because of slowdown in sales. And this action affected the two employees with poorest attendance.
Riverbed Corporation was organized on January 1, 2020. It is authorized to issue 14,500 shares of 8%, $100 par value preferred stock, and 475,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 84,500 shares of common stock for cash at $4 per share.
Mar. 1 Issued 4,050 shares of preferred stock for cash at $110 per share.
Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $88,500. The fair value of the land was $83,500.
May 1 Issued 83,000 shares of common stock for cash at $5.25 per share.
Aug. 1 Issued 12,000 shares of common stock to attorneys in payment of their bill of $40,500 for services performed in helping the company organize.
Sept. 1 Issued 11,500 shares of common stock for cash at $5 per share.
Nov. 1 Issued 2,500 shares of preferred stock for cash at $111 per share
Required:
Journalize the transactions.
Answers
Answer:
Jan. 10
Cash $338,000 (debit)
Common Stock $338,000 (credit)
Mar. 1
Cash $445,500 (debit)
Common Stock $445,500 (credit)
Apr. 1
Land $88,500 (debit)
Common Stock $88,500 (credit)
May 1
Cash $435,750 (debit)
Common Stock $435,750 (credit)
Aug 1
Organizing Costs : attorneys $40,500 (debit)
Common Stock $40,500 (credit)
Sept. 1
Cash $57,500 (debit)
Common Stock $57,500 (credit)
Nov. 1
Cash (debit) $277,500
Share Premium ; Preference Stock (credit) $27,500
Preference Stock (credit) $250,000
Explanation:
The Common Stocks are classified as no-par common stock. This means there is no premium account recognized for this classification of stock. The stocks will be presented at their respective value at date of issuance.
With the Preference Stock, this is different. A par value of $100 has been established. Any payment made in excess of the par value will end up in Share Premium Account.
As a student in the Principles of Management class of Ama Ghana University, you are expected to have experiential knowledge so that you can be able to solve real life business problems after graduation. To achieve this objective, the 2020 class has been divided into ten groups; and each team works in a management capacity with ten management consulting companies in the Greater Accra Region. San Consulting - the firm that your group works with is a project management company that is into Real Estate construction and management consulting. This firm which has twenty years’ experience in this business is the first choice for all individuals and companies that want quality service. You have on the contrary, observed that many of the management practices have not developed precipitously as situations in the business environment warrant. The accountant confirmed this by saying in the last general meeting that a certain percentage of San’s profit margin is being lost because of this situation. She gave the example that the surveying department spent eight labor hours generating data that had been generated two weeks ago by another unit. Due to the fact that the surveying department did not know that the data had already been created, a substantial effort was wasted and this has been a recurrent problem. In addition, the increase in demand of the services of San’s Consulting has placed significant pressures on the five managers whose duties are not clearly defined. For instance, you have observed that any of these managers perform duties in the operations department as well as any other unit within the firm. They are not able to perform all the functions required of them due to the ineffectiveness of the organizational structure. You and the members of your group are expected to write a report to the top-level management team regarding your analysis of the situation in the firm.
Answers
Answer:
Top level management is the most senior executives of the company. To write a report to them about the organizational structure, we mention the summary of the situation and then ask them for their measures.
Explanation:
Ineffectiveness of Organizational Structure
Summary:
The organization structure is not clearly defined, Managers are performing duties in various departments at a time.
Details:
San Consulting is one of the finest consulting firm in the Greater Accra Region. The firm is always a first choice for individuals who want to pursue their career in business. The Organizational structure of San Consulting is not clearly defined. San's profits are falling because management practices are not according to the other competitive organizations. The managers working at San are facing excess workload and pressure for their work. Their job description is not clearly defined and they are forced to work in multiple departments at the same time due to which they are losing focus on their own work.
Conclusion:
The organizational structure needs to be set and every employee should have their defined job role so they are able to complete work with efficiency.
There is a 10% chance you will get in a serious car accident, incurring damage of $1,990. (There is a 90% chance that nothing will happen.) Your utility function is U (I )equals square root of I. What is the fair price of this policy
Answers
Answer:
The answer is $199
Explanation:
Solution
Given that:
There is fair chance of 10% of you involving in an accident.
The damage incurred is =$1990
There is 90% chance that nothing will happen'
Utility function U (1)√1
Now,
We find the fair price of this policy
A fair premium is the amount that enables insurance company to break exactly even. that is to say
economic zero profit = expected costs.
Thus,
EC =p * (The loss of income if the accidents take place) + 1- p (The income loss when accidents foes not take place)
EC = 0.1 ($1990) + 0.9 (0) =
EC = $199 + 0 = $199
Therefore, the fair price of this policy is $199