Answer and Explanation:
The journal entries are shown below:
On Aug. 1
Merchandise Inventory $75,000
To Accounts Payable $75,000
(Being the purchase of merchandise inventory is recorded)
For recording this we debited the merchandise inventory as it increased the assets and credited the account payable as it also increased the liabilities
On Sept. 1
Accounts Payable $75,000
To Notes Payable $75,000
(Being the issued of note payable on the account is recorded)
For recording this we debited the account payable as it decreased the liabilities and credited the note payable as it increased the liabilities
On Nov. 30
Notes Payable $75,000
Interest Expense $1,125 ($75,000 × 6% × 90 days ÷ 360 days)
To Cash $76,125
(Being cash paid is recorded)
For recording this we debited the note payable and interest expense as it decreased the liabilities and increased the expense and credited the cash as it decreased the assets
Two partners, Small and Big, form a partnership in which Small invested $40,000 and Big invested $60,000 for a total capital of $100,000. But Small devotes more time to the business and earns more from the firm. They have agreed to share the profits as follows:
1. The first $20,000 is allocated on the partner's capital balances.
2. The next $30,000 is allocated based on service: Small gets $20,000, and Big gets $10,000.
3. Any remaining profits are allocated equally.
4. The partnership's net income is $100,000.
Requried:
a. What is Small's portion of the net income?
b. What is Big's portion of the net income? Make the entry for this allocation.
c. What would be the right parts to the journal entry for this question?
Answer:
a. What is Small's portion of the net income?
$53,000b. What is Big's portion of the net income? Make the entry for this allocation.
Big's portion = $47,000Dr Income Summary 47,000 Cr Big, capital 47,000c. What would be the right parts to the journal entry for this question?
Debit Income summary and credit capital accountsExplanation:
partnership's net income $100,000
first $20,000
Small $8,000Big $12,000next $30,000
Small $20,000Big $10,000Remaining $50,000
Small $25,000Big $25,000total Small = $53,000
total Big = $47,000
the government believes that the equilibrium price is too low and tries to help almond growers by settinga price floor at Pf. What are represents the portion of consumer surplus that have been transsferred to produce surplus as a result of the price floor.
Answer: D) B
Explanation:
The Producer Surplus refers to the area below the Price Floor but above the Supply Curve and left of the new Quantity supplied. It comprises of areas B and E.
Before the Price Floor was introduced, area A, B and C were the Consumer Surplus as they were above the price but below the Demand Curve.
After the Price Floor was introduced however, area B has become a Producer Surplus.
Companies increasingly strive to achieve the ______ performance when formulating their corporate strategy.
Answer:
triple bottom line
Explanation:
Companies increasingly strive to achieve the triple bottom line performance when formulating their corporate strategy. The triple bottom line (TBL) is a framework used in business that focuses on equally on social/environmental concerns as well as profits, thus creating three equal points of interest (bottom lines) which are profit, people, and the environment. This leads to a successful and balanced company.
Kramer Manufacturing produces blenders. Its total fixed costs are $30,000. Its variable costs are $55.00 per blender. As production of blenders increases (within the relevant range), fixed costs will
Answer:
As the production of blenders increases, unitary fixed costs decreases.
Explanation:
Its total fixed costs are $30,000. Its variable costs are $55.00 per blender.
On unitary bases, variable costs remain constant. On the contrary, fixed costs vary at a unitary level. Now, the same amount of costs is divided by a larger number of units.
As the production of blenders increases, unitary fixed costs decreases.
Gelb Company currently manufactures 41,000 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $83,000 per year, and allocated fixed costs are $78,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 41,000 units and buying 41,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier
Answer and Explanation:
1. The computation of total incremental is shown below:-
Incremental Costs to Make
Relevant Amount Relevant Fixed Total Relevant
Per Unit Costs Costs
Variable Cost
Per Unit $4.05 $166,050
(41,000 × $4.05)
Fixed manufacturing
cost $83,000 $83,000
Total incremental
cost to make $249,050
Incremental Costs to Buy
Purchase Price Relevant Fixed Total Relevant
Per Unit Costs Costs
Purchase Price
Per Unit $143,500
($3.50 × 41,000)
Total Incremental Cost to Buy $143,500
2. The company should buy from the outside supplier as its a lower and the total incremental cost is $143,500
In your opinion which causes of work stress, or organizational stressors, are likely to be among the most common experienced by air traffic controllers? Explain your reasoning.
Answer:
There are four types of organizational stressors: task demands, physical demands, role demands, and interpersonal demands.
For air traffic controllers, task demands are probably the most common organizational stressor that they experience.
Among the task demands, we have the need of quick decisions, critical decisions, and the fact that some information may be incomplete.
The job of an air traffic controller is complex, difficult, requires taking quick, and specially, critical decisions all the time. A bad decision by a traffic controller can be very problematic, and even prove fatal, because of the delicate nature of the job. For all these reasons, air traffic controllers are likely to be subjected to this specific organizational stressor.
If the real money demand is greater than the real money supply, interest rates must rise to reach equilibrium in the money market as institutions sell bonds to obtain more money.1. True2. False
Answer:
2. False
Explanation:
The market for money is like the market for any other good: if demand is higher than supply, then, the price of money (the interest rate), will have to be lowered, so that money becomes cheaper and more abundant, and supply and demand become equal and reach equilibrium.
In this case, the centrla bank needs to lower the interest rates by buying bonds. When the central bank buys bonds, it prints more money that is put in the market, effectively increasing the supply of money, and lowering the interest rate in the meantime.
what is the difference between buy or sell
Answer:
I hope this helps you
Explanation:
Buying also called purchasing isobtain in exchange for payment.
Selling is the act of giving or handing over something in exchange for money
MARK ME AS BRAINLIEST
Answer:
Buy is when you get a thing in exchange of money and sell is when you get money in exchange of a thing. In selling you gain money and in buying you lose money.
Explanation:
In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future. This illustrates
Answer:
The moral hazard problem
Explanation:
Moral hazard problem is defined as a situation where a party gets involved in a risky venture knowing that another party will incur the cost of failure.
For example if a borrower knows that he can take borrowed funds and default easily, he will tend to not pay back because the lender will bear the loss.
During the the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail."
This created fiscal irresponsibility in banks that knew if they are at risk of failing they will be bailed out by the government.
A company has net income of $7.10 million. Stockholders' equity at the beginning of the year is $35.05 million and, at the end of the year, it is $43.15 million. The only change to stockholders' equity came from net income. The return on equity ratio is approximately:
Answer:
Return on equity ratio 18.16%
Explanation:
Calculation for the return on equity ratio
This first step is to find the Average stock holder equity.
Using this formula
Average stock holder equity =Beginning stock holder equity + ending stock holder /2
Let plug in the formula
Average stock holder equity=$35.02+$43.15/2
Average stock holder equity =$78.17/2
Average stock holder equity =$39.085
Second step is to calculate for the return on equity ratio
Using this formula
Return on equity ratio=NET INCOME/STOCKHOLDERS EQUITY
let plug in the formula
Return on equity ratio=$7.10/$39.085
Return on equity ratio=0.18165 ×100
Return on equity ratio=18.16%
Therefore The return on equity ratio is approximately 18.16%
At the level of output at which a single-price monopolist maximizes profit, price is Group of answer choices
Answer:
Greater than marginal cost.
Explanation:
A monopoly is a market structure which is typically characterized by a single-seller who sells a unique product in the market by dominance. It is also known as oligopoly, wherein the seller has no competitor because he is solely responsible for the sale of unique products without close substitutes. Any individual that deals with the sales of unique products in a monopolistic market is generally referred to as a monopolist.
Also, a single-price monopolist is an individual or seller that sells each unit of its products to all its customer at the same price. Hence, a single-price monopolist doesn't engage in price discrimination among its customers (buyers).
At the level of output at which a single-price monopolist maximizes profit, price is greater than marginal cost because the marginal revenue would be below the demand curve.
However, if the marginal cost is greater than the price, the monopolist will not make any profit.
In a nutshell, profit maximization for the single-price monopolist occurs at the point where marginal cost is equal to marginal revenue (MC = MR) on the graph of price (P) against quantity (Q) of goods.
Characteristics of competitive markets The model of competitive markets relies on these three core assumptions:
1. There must be many buyers and sellersâa few players can't dominate the market.
2. Firms must produce an identical productâbuyers must regard all sellers' products as equivalent
. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers.
While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.
Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive?
The government has granted the U.S. Postal Service the exclusive right to deliver mail.
There are hundreds of high school students in need of algebra private teachers services in Dallas. Dozens of companies offer private teaching services, and the parents who seek out private teachers view the quality of the at the different companies to be largely the same.
There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match their needs.
A few major airlines account for the vast majority of air travel. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.
Answer:
The correct answers are:
First Scenario: It is not a perfect competitive market
Second Scenario: It is a perfect competitive market
Third Scenario: It is not a perfect competitive market
Foruth Scenario: It is not a perfect competitive market
Explanation:
First Scenario: The fact that the government has interfere with the market and make it impossible for other companies to operate in there then that market refers to a monopoly where the only seller is the U.S. Postal Service and therefore there can not be another companies selling in the market and that is why it is not a perfect competitive market.
Second Scenario: The fact that there are a lot of buyers and sellers and that the product is perceived as the same and therefore that this one is homogeneous to every consumer makes this market a perfect competitive one.
Third Scenario: The fact that the colleges vary on many variables such as location, size and educational quality makes it impossible to be a competitive market because there is not a homogenoues product but instead the buyers can choose among those colleges due to their differences and needs.
Fourth Scenario: The fact that there are only a few airlines and not many makes it impossible for the market to a be a perfect competitive one and therefore that this market is actually an oligopoly preferently because the buyers will choose mostly by price.
Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $12 each and used a budgeted selling price of $12 per unit. Actual Budgeted Units sold 48,000 units 34,000 units Variable costs $170,000 $156,000 Fixed costs $42,000 $57,000 What is the static−budget variance of operating income?
Answer:
Static−budget variance of operating income is $169,000F
Explanation:
Actual Budgetet
Sales $576,000 $408,000 $168,000
Variable cost $170,000 $156,000 $14,000
Contribution margin $406,000 $252,000 $154,000
Less: Fixed cost $42,000 $57,000 -$15,000
Net Income / (Loss) $364,000 $195,000 $169,000 Favourable
Workings
Sales: Actual 48,000 units * $12= 576,000
Budgeted 34,000 units * $12= 408,000
When longer-term employees' salaries are lower than those of workers entering the firm today, ______ has occurred.
Answer: Salary compression
Explanation:
Salary compression is a situation that occurs when there is a negligible differences in pay between the workers in an organization despite the experience and skills level.
It usually occurs when the pay of the current employees that are working with a company does not keep up with the rise in market pay rate thereby giving rise to a situation whereby new employees are employed at a identical pay or better pay to those that have been at the organization.
21. Find the present values of these ordinary annuities. Discounting occurs once a year. a. $400 per year for 10 years at 10%. b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Rework parts a-c assuming they are annuities due.
Answer:
a.
PV = $2457.826842 rounded off to $2457.83
b.
PV = $865.8953341 rounded off to $865.90
c.
PV = $400
d.
PV = $2703.609527 rounded off to $2703.61
PV = $909.1901008 rounded off to $909.19
PV = $400
Explanation:
An annuity is a series of cash flows that are constant, that occur after equal interval of time and that are for a defined period of time.
An ordinary annuity is the one whose cash flows occur at the end of the period. While an annuity due is the one whose cash flows occur at the start of the period. The formula for the present value of both the ordinary and the due annuity are attached.
a.
PV = 400 * [(1 - (1+0.1)^-10) / 0.1]
PV = $2457.826842 rounded off to $2457.83
b.
PV = 200 * [(1 - (1+0.05)^-5) / 0.05]
PV = $865.8953341 rounded off to $865.90
c.
PV = 400 * [(1 - (1+0.0)^-5) / 0.0]
PV = $400
d.
PV = 400 * [(1 - (1+0.1)^-10) / 0.1] * (1+0.1)
PV = $2703.609527 rounded off to $2703.61
PV = 200 * [(1 - (1+0.05)^-5) / 0.05] * (1+0.05)
PV = $909.1901008 rounded off to $909.19
PV = 400 * [(1 - (1+0.1)^-10) / 0.1]
PV = $400
can target costing be applied to the banking industry in Ghana
Answer:
The banking industry in Ghana can introduce target costing. However, its application is much more difficult due to the nature of banking services.
Introducing target costing in the banking industry in Ghana will eliminate non-value adding activities that increase the cost of banking in Ghana. It will enable Ghanaian customers to be charged competitive prices for the banking services that are rendered to them, with no more room for process wastages. The quality of services will increase coupled with lowered costs. The service processes will be improved as they will be more focused on the customers, and less on the staff, as it currently obtains in Ghana.
However, the nature of banking services makes introduction of target costing somehow difficult. These characteristics of banking services include: a) the production and consumption of banking services are coincidental, as the services are consumed when they are being produced; b) banking services are not storable like goods; c) banking services are not comparable, one unit to another; d) banking services are not tangible; e) ownership of banking services is not transferable; and f) there is not market price for banking services, except the price limits imposed by regulatory bodies.
Explanation:
Target costing in the banking industry in Ghana will take the form of first determining the market price for services that are acceptable to customers, establishing a target profit, and then designing banking services in such a manner that the costs do not exceed the target costs. The target cost will be the variance between the market price of a banking service and the target profit.
On May 10, Monty Corp. issues 1,900 shares of $4 par value common stock for cash at $13 per share. Journalize the issuance of the stock. (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.)
Answer:
May 10, 2020, 1,900 shares issued at $13
Dr Cash 24,700
Cr Common stock 7,600
Cr Additional paid in capital 17,100
The common stock account increases using the pay value as reference. For example, if the common stock account = $200,000 and the par value of the stocks = $4, then we know that the company has 50,000 common stocks outstanding.
If investors pay any amount over the stocks' par value, that amount must be reported as additional paid in capital, in this case for common stock.
Mary makes monthly deposits of $450 at the end of each month over 25 consecutive years to support her retirement. If the account earns an interest rate of 7.5%, which amount comes closest to the value of the deposits at the end?
a. $120,938
b. $343,343
c. $382,667
d. $394,767
e. $367,100
Answer:
d. $394,767
Explanation:
For computing the amount of deposit at the end we need to apply the future value formula i.e to be shown in the attachment
Given that,
Present value = $0
Rate of interest = 7.5% ÷ 12 months = 0.625%
NPER = 25 years × 12 months = 300 months
PMT = $450
The formula is shown below:
= -FV(Rate;NPER;PMT;PV;type)
So, after applying the above formula, the future value is $394,767
Suppose the entire banking system has $50 million in excess reserves and a required reserve ratio of 10 percent. The deposit-creation potential of the banking system is:
Answer: $500 million
Explanation:
The required reserve ratio is the fraction of the total deposit that a bank recieves which is mandated by the central bank to be kept and should not be given out.
If the entire banking system has $50 million in excess reserves and a required reserve ratio of 10 percent. The deposit-creation potential of the banking system will be:
= $50million/10%
= $50million/0.1
= $500 million
Currently, a U.S. trader notes that in the 6-month forward market, the Japanese yen is selling at a premium (that is, you receive more dollars per yen in the forward market than you do in the spot market), while the British pound is selling at a discount. Which of the following statements is correct?
a) If interest rate parity holds among the three countries, the United States should have the highest 6-month interest rates and Britain should have the lowest rates.
b) If interest rate parity holds among the three countries, the United States should have the highest 6-month interest rates and Japan should have the lowest rates.
c) If interest rate parity holds among the three countries, Japan should have the highest 6-month interest rates and Britain should have the lowest rates.
d) If interest rate parity holds, 6-month interest rates should be the same in the U.S., Britain, and Japan.
e) If interest rate parity holds among the three countries, Britain should have the highest 6-month interest rates and Japan should have the lowest rates.
Answer:
Hence correct answer is option e) If interest rate parity holds among the three countries, Britain should have the highest 6-month interest rates and Japan should have the lowest rates.
Explanation:
Determine the uniform annual value for the cash flow below at an interest rate of 11% per year.
Year 0 1 2 3 4 5 6 7 8 9
Cash Flow, 0 $ 30,000 30,000 30,000 30,000 45,000 45,000 45,000 45,000 45,000
a. $38,474
b. $37,744
c. $36,595
d. $39,595
Answer:
$36,595
Explanation:
The computation of the uniform annual value is shown below:;
Before that we need to find out the present worth which is
= $30,000 × (P/A , 11%, 4) + $45,000 × (P/A , 11%, 4) × (P/F , 11%, 4)
= $30,000 × (3.1025) + $45,000 × (3.69590) (0.65873)
= $202,630.51
Now the annual worth is
= Present value × (A/P, 11%,9)
= $202,630.51 × 0.18060
= $36,595
Worldwide Logistics provides the following information: Operating income $ 1 comma 550 comma 000 Net sales $ 14 comma 000 comma 000 Average total assets $ 2 comma 000 comma 000 Management's target rate of return 30% What is the company's residual income?
Answer:
The company's residual income is $950,000.
Explanation:
Residual Income is calculated as Operating Income less Cost of Investment.
Calculation of Residual Income :
Operating income $1,550,000
Less Cost of Investment ($2,000,000 × 30%) ($600,000)
Residual Income $950,000
Conclusion :
The company's residual income is $950,000.
Another bank is also offering favorable terms, so Rahul decides to take a loan of $12,000 from this bank. He signs the loan contract at 5% compounded daily for 12 months. Based on a 365-day year, what is the total amount that Rahul owes the bank at the end of the loan's term
Answer:
$12,615.21
Explanation:
we need to determine the future value of the loan:
future value = present value x (1 + interest rate)ⁿ
present value = $12,000n = 365 days (compounded daily)interest rate = 5% / 365 days = 0.05/365 = 0.000136986future value = $12,000 x (1 + 0.000136986)³⁶⁵ = $12,000 x 1.051267496 = $12,615.21
Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,400 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today
Answer:
$3,315.13
Explanation:
To determine the amount of inheritance Marshall should invest today, we have to calculate the present value of $5,400.
PV = FV (1 + r)^-n
FV = Future value = $5,400
P = Present value
R = interest rate 5%
N = number of years 10
$5400(1.05^-10) = $3,315.13
I hope my answer helps you
The Internal Rate of Return (IRR) represents which of the following: Multiple Choice The discount rate that must be lower than the required rate of return. The discount rate that makes the net present value equal to zero. The discount rate that makes the net present value positive. The discount rate that makes the net present value negative. The discount rate that is affected by the cash flows external to the project.
Answer:
The discount rate that makes the net present value equal to zero.
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
It is the discount rate that makes the net present value equal to zero.
I hope my answer helps you
The gift from Rebecca Smith (see previous question) earned $50,000 this year. The city council decides that these resources should be used to construct new sand volleyball courts for public use. Which fund should be used to account for the construction of the courts
Answer: a. Capital Projects Fund
Explanation:
This is a fund that is used by the Government in it's accounting records to record the various transactions related to embarking on a capital project.
It includes how the funds were sourced and how they will be disbursed.
Once the project is finished this fund is usually terminated.
Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books:
1. Andrea invested $13,500 cash in the business.
2. Andrea contributed $20,000 of photography equipment to the business.
3. The company paid $2,100 cash for an insurance policy covering the next 24 months.
4. The company received $5,700 cash for services provided during January.
5. The company purchased $6,200 of office equipment on credit.
6. The company provided $2,750 of services to customers on account.
7. The company paid cash of $1,500 for monthly rent.
8. The company paid $3,100 on the office equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance in the A. Apple, Capital account reported on the Statement of Owner's Equity at the end of the month would be:__________.
a. $31,400.
b. $39,200.
c. $31,150.
d. $40,175.
e. $30,875.
Answer:
2356
Explanation:
3546478967654322 321
Charlie’s Furniture Store has been in business for several years. The firm's owners have described the store as a "high-price, high-service" operation that provides lots of assistance to its customers. Margin has averaged a relatively high 34% per year for several years, but turnover has been a relatively low 0.4 based on average total assets of $800,000. A discount furniture Store is about to open in the area served by Charlie's, and management is considering lowering prices to compete effectively.Required:a. Calculate current sales and ROI for Charlie’s Furniture Store. (Round your "ROI" to 1 decimal place.)b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie’s currently earns. (Do not round intermediate calculations.)c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to practically double my sales volume to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required? (Do not round intermediate calculations.)d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI.
Answer:
a. Calculate current sales and ROI for Charlie’s Furniture Store.
asset turnover formula = net sales / average assets
0.4 = net sales / $800,000
net sales = $320,000
ROI = net income / investment
net income = $320,000 x 34% = $108,800
ROI = $108,800 / $800,000 = 13.6%
b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie’s currently earns.
net income = net sales x 20% (new margin)
net sales = $108,800 / 20% = $544,000
c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to practically double my sales volume to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required?
sales increase = ($544,000 - $320,000) / $320,000 = 70% increase
d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI.
An extensive market research and a "successful" marketing campaign are generally expensive. Even if the marketing campaign is really successful in increasing sales, costs would also increase. So the equation may or may not change, depending if the contribution margin of the additional units sold will be able to cover the expenses of a complex marketing campaign. If you spend $100 to earn $100 more, your situation hasn't changed at all. Which means that net income may or may not increase, therefore, the profit margin, ROI and asset turnover may not change.
What are the kinds of purchases for which you’ll "spare no expense"? What kinds of purchases do you want to buy spending as little as possible? What are the major differences between these two categories that drive your attitude regarding price?
Answer:
"Spare no Expense" Purchases
When purchasing long-term items (assets) which cannot be consumed within a short-term period, one tends to "spare no expense." These purchases are dictated by their quality and not price. For example, in constructing a building an individual or an entity does not consider the price as a deciding factor. Instead, the entity goes for the best quality at whatever price. In such a situation, it can be described as "sparing no expense" because it can spend as possible as is needed to ensure that the quality of the construction was of the highest standard. A wealthy man does not spare any expense to receive medical treatment. Vacationists spare no expense to go on vacation
These purchases or items come with high prices and they last longer than a year.
On the other hand, one does not want to spend much resources on goods that are not durable. So, the person involved tend to spend as little as possible. No one wants to buy expensive food items. But, the same person can pay for an exorbitant car. No one wants to expend much resources on inner wears, but the same person can spend thousand for the outer wears, to put up appearances.
Ostentatious goods that convey image attract higher prices much more than private goods that others co not care whether you use them or not. This accords with our human natural way of believing in appearances.
The major factors that differentiate between these two categories that drive our attitude regarding price include:
a) Scarcity, b) Longevity, c) Quality, d) Price, e) Durability, f) Ostentation
Explanation:
The expression "spare no expense" means to spend as much financial resources as needed in order to make something happen or bring about an outcome.
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $345,000 investment for new machinery with a five-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
Project Y Project Z
Sales $ 360,000 $ 288,000
Expenses
Direct materials 50,400 36,000
Direct labor 72,000 43,200
Overhead including depreciation 129,600 129,600
Selling and administrative expenses 26,000 26,000
Total expenses 278,000 234,800
Pretax income 82,000 53,200
Income taxes (38%) 31,160 20,216
Net income $ 50,840 $ 32,984
Compute each projectâs annual expected net cash flows.
Project Y Project Z
Determine each projectâs payback period.
Payback Period
Choose Numerator: / Choose Denominator: = Payback Period
/ = Payback period
Project Y =
Project Z =
Compute each projectâs accounting rate of return.
Accounting Rate of Return
Choose Numerator: / Choose Denominator: = Accounting Rate of Return
/ = Accounting rate of return
Project Y
Project Z
Determine each projectâs net present value using 6% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)
Project Y
Chart values are based on:
n =
i =
Select Chart Amount x PV Factor = Present Value
=
Net present value
Project Z
Chart values are based on:
n =
i =
Select Chart Amount x PV Factor = Present Value
=
Net present value
Answer:
Project Y Project Z
(6 years) (5 years)
investment: -$345,000 -$345,000
cash flows:
net income after taxes $50,840 $32,984
+ depreciation expense $57,500 $69,000
net cash flow per year = $108,340 $101,984
payback period:
investment / NCF = 3.18 years 3.38 years
accounting rate or return:
net income / investment = 14.74% 9.56%
net present value:
NCFs discounted at 6% = $187,743 $84,594
Project Y lasts for 6 years, while project Z lasts for only 5 years, that is the reason why there NPVs are so different.