Answer:
A's segment profit margin is: $151,000
Explanation:
Calculation of A's segment profit margin
Sales revenue $ 810,000
Less Variable operating expenses ($319,000)
Controllable Contribution $491,000
Less Fixed expenses:
Traceable to A and controllable by A ($230,000)
Traceable to A and controllable by others ($111,000)
Profit Margin $151,000
The ________ process helps candidates learn about the organization and if employees perceive a conflict between their values and those of the organization, they can remove themselves from the applicant pool. selection institutionalization performance evaluation training orientation
Answer:
Selection
Explanation:
Selection process is method by which the right candidates are chosen for the appropriate job for them.
During this process there is matching of organisational requirements with the skills of the candidates.
The company and the candidate are both looking for a good fit.
At this stage the client learns about the company and its culture. If they see their values conflict with that of the company they can choose to remove themselves from the applicant pool.
Benjamin is late for an appointment with a client because he is stuck in
traffic. When he meets with the client, he apologizes and promises to be more
careful next time. This action demonstrates
A. honesty
B. respect for diversity
O C. punctuality
O D. accountability
Answer:
b
respect for diversity
Which of the following statements about Six Sigma programs is false?
A. Six Sigma programs need to be overseen by personnel who have completed Six Sigma master black belt" training and executed by personnel who have earned Six Sigma "green belts" and Six Sigma "black belts."
B. Six Sigma programs utilize advanced statistical methods to enable an activity or process to be performed with 99.9997 percent accuracy (equivalent to 3.4 defects/errors per million terations).
C. There are two important types of Six Sigma programsâ"one is forA existing processes falling below specification and needingA incremental improvement and the other is for developing new processes or products at Six Sigma quality levels.
D. There is evidence that Six Sigma techniques stifle innovation and creativity, particularly as concerns such creative processes as R&D and new product development which very often involve outside-the-box brainstorming and trial-and-error experimentation.
E. When performance of an activity or process reaches "Six Sigma quality," there are not more than ten defects/errors per million iterations.
Answer:
E. When performance of an activity or process reaches "Six Sigma quality," there are not more than ten defects/errors per million iterations
Explanation:
Six sigma is a quality management practice aimed at improving processes, products, and services by identifying and removing defects. Process streamlining and elimination of defects in business and manufacturing is the aim of Six Sigma.
The allowable defects in when a process reaches Sigma Six quality is 3.4 defects per 1 million iterations.
So the statement - When performance of an activity or process reaches "Six Sigma quality," there are not more than ten defects/errors per million iterations.
Is false
The alternative to viewing management as a process is to focus on? A.people B.strategy C.resources
Answer:
C.resources
Explanation:
Given that Management is a term often used in a general sense or business-related situation to describe the process of gathering, monitoring and governing all forms of resources; which is a combination of any of the human resources, capital resources, technical resources, and material resources involved in the production of goods and services, or achieving a particular goal.
Hence, the alternative to viewing management as a process is to focus on RESOURCES.
Demand is created through meeting customer buying criteria, credit terms, awareness (promotion) and accessibility (distribution). According to the Thrift segment's customers, which of these products was the most competitive at the end of last year?
a. Cake
b. Cedar
c. Dell
d. Adam
Answer: cake
Explanation:
Demand is created through meeting customer buying criteria, credit terms, awareness (promotion) and accessibility (distribution).
According to the Thrift segment's customers, the product that was the most competitive at the end of last year is Cake.
Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees
Answer:
33.4%
Explanation:
This information was obtained from the Small Business and Entrepreneurship Council and was calculated based on information obtained during 2016. There are approximately 5.6 million small business in the US (that have 500 or less employees), and firms with 100 or less employees represent 98.2% of them = 5.5 million businesses.
This information does not consider businesses that do not have any employees at all, e.g. independent contractors that are self employed but do not employ anyone else.
This number includes all types of businesses, ranging from partnerships, corporations, sole proprietorships and limited liability companies (e.g. 96.4% of corporations have less than 100 employees).
Small businesses account for almost half of the work force, 46.8%.
BULL Company has budgeted the following unit sales: 2017 2016 Quarter Units Quarter Units 1 105,000 1 90,000 2 60,000 3 75,000 4 120,000 The finished goods inventory on hand on December 31, 2015 was 21,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's anticipated sales. Instructions Prepare a production budget for 2016.
Answer:
357,000
Explanation:
Preparation of a production budget for 2016
BULL COMPANY Production Budget For
2016
Quarter
1 2 3 4
Expected unit sale
105,000 60,000 75,000 120,000
Desired ending finished goods units
12,000 15,000 24,000 18,000
Total required units
117,000 75,000 99,000 138,000
Less: Beginning finished goods units
21,000 12,000 15,000 24,000
Required production units
96,000 63,000 84,000 114,000
Total =357,000
(96,000 + 63,000 + 84,000 +114,000)
Calculation for Desired ending finished goods units
20%×60,000 units =12,000
20%×75,000 units =15,000
20%×120,000 units =24,000
20%×90,000 units =18,000
Total required units=Expected unit sales+Desired ending finished goods units
Calculation for Beginning finished goods units
December 31, 2015 =21,000 units
20%×60,000 units =12,000
20%×75,000 units =15,000
20%×120,000 units =24,000
Required production units=Total required units-Beginning finished goods units
If a lender is to repossess or bring about the sale of a property if the borrower defaults on the mortgage loan, the lender is said to have a ___ in the real estate.
Answer:
Secured interest.
Explanation:
If a lender is to repossess or bring about the sale of a property if the borrower defaults on the mortgage loan, the lender is said to have a secured interest in the real estate.
A secured interest can be defined as a legal right granted by a borrower to a lender (creditor) over a collateral (the borrower's property) which permits or allow the lender to have a right to possess the property as soon as the lender defaults in making payment. The payment which is expected to be made by the borrower of a mortgage loan is considered a secured obligation because it is a lien or an enforceable legal claim.
Describe the core marketing function within an organization
Answer:
Corporate, Strategic and Product management function
Explanation
In corporate function, it serves the role of global marketing sector in setting, enforcing the brand standards and definition of the global infrastructure meant for public relations.
In strategic function, it serves the role of setting the growth strategies, assessment of competitive landscapes, collaboration with the engineering and the management towards the performance of gap analysis
In product management function, it serves the role of building and also driving the launching of those plans meant for products and service provisions, redefining of raw positions and messaging towards the crisp value positions.
The allocation of the cost of a tangible fixed asset is referred to as_____, whereas the allocation of the cost of an intangible asset is referred to as______.
Answer:
Depreciation
Amortisation
Explanation:
Depreciation is a method used in expensing the cost of a tangible fixed asset e.g. machinery, building
Amortisation is a method used in expensing the cost of an intangible asset e.g. patent
Different methods of depreciation and amortisation :
Straight line
double declining
Units of activity
sum of the years
Depreciation is the allocation of cost of a tangible fixed asset while Amortization is the allocation of cost of an intabgible asset.
A tangible fixed asset are asset which are in physical form and are used to facilitate the day-to-day operation of the firm.
Therefore, the allocation of cost of a tangible fixed asset is called Depreciation.An intangible asset refers to asset that are not physical in nature. Asset such as patents, trademarks, copyrights are example of a company's intangible assets.
Therefore, the allocation of cost of an intangible asset is called amortization.Read more about this here
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The percent of investment that the project costs can be referred to as all of the following, except:_________.
a) required return
b) appropriate discount rate
c) cost of money
d) free cash flow
Answer:
The percent of investment that the project costs can be referred to as all of the following, except:_________.
a) required return
The percentage of investment that the project costs can be referred to as appropriate discount rate, cost of money and free cash flow except for required return. The correct option is a.
What is free cash flow?Free cash flow or free cash flow to a firm is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets which are called capital expenditures.
It is that portion of cash flow that can be extracted from a company and distributed to creditors and securities holders without causing issues in its operations. It is an indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities, as well as potential lenders and investors.
Depending on the audience and available data free cash flow can be calculated in various ways. A common measure is to take the earnings before interest and taxes, add depreciation and amortization, and then subtract taxes, changes in working capital and capital expenditure.
Free cash flow is different from net income.
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An investor owns 25% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $1,000,000. During the year, the investee reported net income of $400,000 and paid dividends of $100,000. In addition, the investor sold inventory to the investee, realizing a gross profit of $120,000 on the sale. At the end of the year, 30% of the inventory remained unsold by the investee.
A. Provide the equity method journal entries required for the year.
B. What is the balance of the equity investment at the end of the year?
C. Assume the inventories are all sold in the following year, that the investee reports $450,000 of net income. How much equity income will the investor report for the following year?
Answer:
A. Journal Entries:
Debit Investment in Investee $100,000
Credit Net Income $100,000
To record the investor's share in net income of investee.
Debit Net Income from Investee $25,000
Credit Investment in Investee $25,000
To record the dividends received.
Debit Net Income from Investee $9,000
Credit Investment in Investee $9,000
To record the unrealized gain on the unsold inventory.
B. Balance of the equity investment at the end of the year:
= $1,066,000
C. Equity income for the following year if all inventories are sold:
= $112,500
Explanation:
a) Investment in investee:
Beginning balance $1,000,000
Net income share 100,000
Dividends received (25,000)
Unrealized gain (9,000)
Ending balance $1,066,000
Equity Income for the following year when all inventories are sold = 25% of $450,000 = $112,500
Which of the following is the most authoritative source of tax law?
A. Income Tax Regulations.
B. Internal Revenue Code.
C. Letter Rulings.
Answer:
B. Internal Revenue Code.
Explanation:
The federal tax laws of the U.S. are jotted under Title 26 in the U.S. Code. The Internal Revenue Code has been headed under Title 26. The laws have been divided and organized separately. The income tax, gifts, and excise taxes are arranged by dividing them into subtitles. Internal Revenue Service has been assigned the task of looking into the implementation of the laws.
Ben Collins plans to buy a house for $188,000. If the real estate in his area is expected to increase in value by 3 percent each year, what will its approximate value be seven years from now?
Answer:
The value after seven years from now is $231,216.29
Explanation:
The computation of the expected value would be seven years from now is shown below:
Here we use the future value formula i.e. shown below:
Future value = Present value × (1 + interest rate)^number of years
= $188,000 × (1 + 0.03)^7
= $188,000 × (1.03)^7
= $231,216.29
Hence, the value after seven years from now is $231,216.29
Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,900 units of the part that are needed every year.Per Unit Direct materials $ 1.80Direct labor $ 2.80Variable overhead $ 5.60Supervisor's salary $ 6.10Depreciation of special equipment $ 7.20Allocated general overhead $ 4.30An outside supplier has offered to make the part and sell it to the company for $22.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,900 of these allocated general overhead costs would be avoided.Required:a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.b. Which alternative should the company choose?Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.
Answer:
a)
Production costs for part U67:
Direct materials $1.80 x 14,900 units = $26,820
Direct labor $2.80 x 14,900 units = $41,720
Variable overhead $5.60 x 14,900 units = $83,440
Supervisor's salary $6.10 x 14,900 units = $90,890
Depreciation of special equipment $7.20 x 14,900 units = $107,280
Allocated general overhead $4.30 x 14,900 units = $64,070
total production costs = $414,220
cost of purchasing the units from outside supplier:
14,900 units x $22 purchase price = $327,800
unavoidable fixed costs = $107,280 + ($64,070 - $20,900) = $150,450
total costs associated to purchasing units = $478,250
Financial disadvantage of purchasing the part from outside supplier instead of producing it = $414,220 - $478,250 = ($64,030)
b)
the company should continue to produce part U67 since the relevant costs associated to purchasing it from an outside vendor would result in a financial disadvantage for the company.
The firm should make the part of U67 in the company instead of buying it from outside supplier as the cost of buying from outside is high. This will lead to financial disadvantage to the company.
What do you mean by 'Make or Buy Decision?
The decision to make or buy is the act of choosing between producing a product indoors or buying it from an external supplier. Decision-making or purchase decisions, such as exports, are about comparing the costs and benefits of in-house production compared to buying elsewhere.
Calculation of financial impact of buying the part of U67 from outside supplier instead of making it in the company:
Cost of making inside the company are as follows:
[tex]\rm\,Production costs for part U67:\\\\\rm\,Direct \; Materials \$1.80 \times 14,900 \;units = \$26,820\\\\Direct \; Labor \; \$2.80 \times 14,900 \; units = \$41,720\\\\Variable \; overhead \; \$5.60 \times 14,900 units = \$83,440\\\\Supervisor's \; salary \; \$6.10 x 14,900 \; units = \$90,890\\\\Depreciation \; of \;special \;Equipment \; \$7.20 \times 14,900 \;units =\$107,280[/tex]
[tex]\rm\,Allocated \; general \; overhead \; \$4.30 \times 14,900 \; units = \$64,070\\\\Total \;Production \;Costs = \$414,220[/tex]
Cost of buying the part of U67 from outside supplier:
[tex]\rm\,Cost = 14,900 \;units \times \,\$22 \,Purchase \;price \\\\Cost = \$327,800\\\\Unavoidable \; fixed \;costs = \$107,280 + (\$64,070 - \$20,900) \\\\Unavoidable \; fixed \;costs = \$150,450\\\\Total \;costs \; associated \; to \; purchasing \;units = \$478,250 (\$327,800+\$150,450)[/tex]
Financial disadvantage of purchasing the part from outside supplier instead of producing it = [tex](\$414,220 - \$478,250) = (\$64,030)[/tex]
b) The firm should make the product inside the company, as buying it from outside results in financial disadvantage to the company.
Hence, it can be seen that the relevant cost of buying from outside will result in loss for the company. therefore, it should make the product.
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When output is 100 units, the firm's total fixed cost is $50. What will this firm's total fixed cost be if output doubles to 200 units?
Answer:total fixed cost =$50
Explanation:
Total Fixed cost id the cost of production that remains constant irrrespective to changes in the production of output produced by a company usually in the short run.
When output is 100.the firm's Total fixed cost = $50
When output doubles to 200 units, the firm's Total fixed cost still remains the same at $50
At every level of output, fixed cost of a firm remains constant.
Which of the following is not an essential part of the accounting records?
A. The journal.
B. The ledger.
C. The chart of accounts.
D. The work sheet.
Answer:
D. The worksheet
Explanation:
Accounting records are documents used to analyze and prepare financial statements. Accounting records are also documents which can be used to assess the performance of a company and also serves as source of records for audit purposes.
The followings are essential parts of accounting records; balance sheet, statement of cash flow, the ledgers , the journals, income statements etc.
The income statements for Federer Sports Apparel for 2019 and 2018 are presented below Required Prepare a horizontal analysis for 2019 using 2018 as the base year. (Decreases should be indicated with a minus sign. Round your percentage answers to 1 decimal place.)
FEDERER SPORTS APPAR
Income Statement
For the Years Ended December 31
Increase Decrease Year
2019 2018
Amount % Net sales 18,800,000 15,500,000
goods 13,200,000 7,000,000
Gross prof 5,600,000 8,500,000
1,600,000 1,200,000
1,000,000 1,000,000 0
Loss (litigation 1,500,000 300,000
Cost of sold Operating expenses Depreciation expense Inventory 200,000
Answer:
FEDERER SPORTS APPAREL
Income Statement For the Years Ended December 31
Years Increase /(Decrease)
2019 2018 Amount %
Net sales 18,800,000 15,500,000 3,300,000 21.29%
Cost of goods sold 13,200,000 7,000,000 6,200,000 88.57%
Gross profit 5,600,000 8,500,000 (2,900,000) -34.12%
Operating expenses 1,600,000 1,200,000 400,000 33.33%
Depreciation expense 1,000,000 1,000,000 0 0
Inventory write-down 200,000 0 200,000 100%
Loss (litigation) 1,500,000 300,000 1,200,000 400%
Net Income $1,300,000 $6,000,000
Explanation:
a) Federer Sports Apparel can use horizontal analysis as an analysis technique for analyzing the financial statement changes over a period of time. It is a useful tool for Federer to evaluate its trend situations, using the financial statements of two years with the earlier year serving as the base year (or independent variable).
Which structure would be most appropriate for developing a new, highly innovative product that has strict time constraints
Answer: strong matrix
Explanation:
The strong matrix is a structure that would be most appropriate for developing a new, highly innovative product that has strict time constraints
In a strong matrix, it should be noted that the project manager has a wider control and also, the functional departments simply act as the subordinate with regards to the project.
Direct manufacturing labor and direct materials variances, missing data. (CMA, heavily adapted) Oyster Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $248 per board. This includes 35 pounds of direct materials, at the budgeted price of $3 per pound, and 11 hours of direct manufacturing labor, at the budgeted rate of $13 per hour. Following are additional data for the month of July:
Units completed 5,600 units,
Direct material purchases 230,000 pounds,
Cost of direct material purchases $759,000,
Actual direct manufacturing labor-hours 43,000 hours,
Actual direct manufacturing labor cost $623,500,
Direct materials efficiency variance $ 1,200 F,
There were no beginning inventories.
1. Compute direct manufacturing labor variances for July,
2. Compute the actual pounds of direct materials used in production in July,
3. Calculate the actual price per pound of direct materials purchased,
4. Calculate the direct materials price variance.
Answer:
Instructions are below.
Explanation:
To calculate the direct labor rate and efficiency variance, we need to use the following formulas:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Standard quantity= 5,600*11= 61,600
Direct labor time (efficiency) variance= (61,600 - 43,000)*13
Direct labor time (efficiency) variance= $241,800 favorable
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Actual rate= 623,500/43,000= $14.5
Direct labor rate variance= (13 - 14.5)*43,000
Direct labor rate variance= $64,500 unfavorable
Total variance= 241,800 - 64,500= $177,300 favorable
Now, we need to calculate the actual pounds used in production:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
1,200= (5,600*35 - actual quantity)*3
400= 196,000 - actual quantity
actual quantity= 195,600
Actual price= 759,000/230,000= $3.3 per pound
Finally, the direct material price variance:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (3 - 3.3)*759,000
Direct material price variance= $227,700 unfavorable
Calculate total product costs. Determine the formula, then calculate the total product costs.
Answer:
$135
Explanation:
Computation of the Total product costs
Total product costs
Direct labor (Assembly-line workers' wages)=$11
Direct material $69
[Chipset $61+ Exterior case for phone $8]
Manufacturing overhead (Depreciation on plant and equipment)= $55
Total Product costs=$135
Therefore the Total product costs will be $135
The manager of a $600,000 aggressive stock portfolio wishes to hedge with OEX 600 Put contracts. The portfolio has a beta of 2. To hedge, the manager will buy:_______
Answer: 20 contracts
Explanation:
It should be noted that each OEX 600 Put contract will cover:
= 100 × 600
= $60,000 of stock
Therefore, to hedge $600,000 portfolio, ($600,000/$60,000) = 10 contracts will be needed.
Since the portfolio has a beta of 2, this means that:
=2 x 10 contracts
= 20 contracts will be needed.
_____ has NOT been as successful because employees do not have control over the design of the work process.
Answer: Quality assurance
Explanation:
The options to the question are:
A. Continuous quality improvement
B. Total quality management
C. Quality assurance
D. Quality control
E. Quality management viewpoint
Quality assurance is simply maintaining a desired level of quality regarding a product or a service by paying attention to every production.
This has not been really successful because the employees do not have control over the design of the work process.
The financial statements for Lexington Service Company include the following items
Cash $52,500 $49,000
Short-term Investments 33,000 20,000
Net Accounts Receivable 52,000 51,000
Merchandise Inventory 160,000 46,000
Total Assets 534,000 553,000
Accounts Payable 129,500 126,000
Salaries Payable 25,000 14,000
Long-term Note Payable 58,000 55,000
Compute the current ratio for 2016. (Round answer to two decimal places.)
A) 1.19
B) 0.84
C) 3.95
D) 6.66
Fisher Depot just paid an annual dividend of $2.48 per share. Dividends are expected to grow by 7% per year. The required rate of return is 12%.1) What is the best estimate of the current stock price?
2) What is the best estimate of the stock price in 5 years?
3) What is the best estimate of the stock price in 20 years?
Answer and Explanation:
The computation is shown below:
Last years Dividend, D0 = $2.48
Growth Rate, g = 7%
Required Return, r = 12%
Now
D1 = D0 × (1 + g)
= $2.48 × 1.07
= $2.6536
Now
1 The Current Price is
P0 = D1 ÷ (r - g)
= $2.6536 ÷ (12% - 7%)
= $53.072
2. For the stock price in 5 years is
P5 = P0 × (1 + g)^5
= $53.072 × 1.07^5
= $74.436
3. For the stock price in 20 years is
P20 = P0 × (1 + g)^520
= $53.072 × 1.07^20
= $205.37
What unmet needs of the consumer contributed to the success of Urban Decay?
Customer needs are unmet when the most important of them are not discussed by the current solutions. Customers frequently fail to mention these critical requirements. Then it's critical to understand both the customers' "articulated" and "unarticulated" needs.
How do you respond to unmet needs?Care in their homes provided by a professional caregiver or a family member is one way to respond to people with unmet needs who are single or living alone. People with unmet needs who are not stable financially would profit from moving into low-cost assisted living facilities or nursing homes.
Before making difficult decisions about total rewards offerings, use Mercer's Unmet Needs Analysis to listen to your employees and learn about their unmet needs. Mercer's Unmet Needs Analysis can assist you in the following ways: Define the appropriate problems. Create appropriate solutions. Invest in the appropriate areas.
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under the citizen approach of tax jurisdiction, if company A, incorporated in country X, was based in country Y and earned dividends in country Z, the
Answer: c. Country X
Explanation:
Under the Citizenship approach to tax jurisdiction, income accrued will be taxed in the country the company is incorporated in as it is viewed as a "company citizen" of that country.
As such, the dividends in the question will be taxed in Country X which is where Company A was incorporated.
weighted average cost of capital of 11.5 percent. The firm has a before-tax cost of debt of 7.8 percent and a cost of equity of 13.95 percent. The corporate tax rate is 34%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital
Answer:
38.57%
Explanation:
The computation of debt to equity ratio is shown below:
But before that we need to find out the debt which is
Let us assume the debt be X
Weighted Average cost of capital is
= [Before tax cost of Debt × (1 - tax rate) × X] + [Cost of equity × (1 - X)]
11.5% = [7.8% * (1 - 0.34) * X] + [13.95% * (1 - X)]
11.5% = 5.148% X + 13.95% - 13.95% X
8.802% X = 2.45%
X = 27.83%.
Now
Debt to equity is
= 27.83% ÷ (1 - 0.2783)
= 38.57%
Arden Company reported the following costs and expenses for the most recent month: Direct materials $ 79,000 Direct labor $ 41,000 Manufacturing overhead $ 19,000 Selling expenses $ 22,000 Administrative expenses $ 34,000 Required: 1. What is the total amount of product costs
The question is incomplete. Here is the complete question.
Arden Company reported the following costs and expenses for the most recent month: Direct materials $ 79,000 Direct labor $ 41,000 Manufacturing overhead $ 19,000 Selling expenses $ 22,000 Administrative expenses $ 34,000 Required:
1) What is the total amount of product costs?
2) What is the total amount of period costs?
3) What is the total amount of conversion costs?
4) What is the total amount of prime costs?
Answer:
(1) product cost = $139,000
(2) period cost = $56,000
(3) conversion cost = $60,000
(4) prime cost = $120,000
Explanation:
(1) The total product costs can be calculated as follows.
= Direct material + direct labor + manufacturing overhead
= $79,000 + $41,000 + $19,000
= $139,000
(2) The period cost can be calculated as follows
= selling expenses + administrative expenses
= $22,000 + $34,000
= $56,000
(3) The conversion cost can be calculated as follows
= direct labor + manufacturing overhead
= $41,000 + $19,000
= $60,000
(D) The prime cost can be calculated as follows
= Direct material + direct labor
= $79,000 + $41,000
= $120,000
The following financial information was obtained from the year ended 2018 income statements for Cash Automotive and Pennington Automotive:_______.
Cash Pennington
Net income $26,070 $74,188
Income tax expense 9,270 27,080
Interest expense 300 2,900
Requirements:
1. Compute the times-interest-earned ratio for each company Round to two decimals.
2. Which company was better able to cover its interest expense?
Answer:
1. Cash Automotive = 118.80 times and Pennington Automotive = 347.23 times
2. Pennington Automotive is better able to cover its interest expense. Because it can cover its interest more times than Cash Automotive.
Explanation:
The Times Interest Earned Ratio (TIE), measures how well a Company cover its interest obligations,
Times Interest Earned Ratio (TIE) = Earnings Before Interest and Tax (EBIT) ÷ Interest
Cash Automotive
Times Interest Earned Ratio (TIE) = ($26,070 + $9,270 + $300) ÷ $300
= 118.80 times
Pennington Automotive
Times Interest Earned Ratio (TIE) = ($74,188 + $27,080 + $2,900) ÷ $300
= 347.23 times