Answer and Explanation:
The computation and journal entries are shown below:
1.. The total compensation cost is
= 15 million × $3 per share
= $45 million
2.
On Jan 1
Deferred compensation expense $45 million
To Common Stock $15 million
To Additional paid in capital $30 million
(Being expense is recorded)
3.
On Dec 31
Compensation expense ($45 ÷ 3) $15 million
To Deferred compensation expense $15 million
(Being expense is recorded)
Company XYZ forecasts expanding markets, see many opportunities for growth, and adopts a growth strategy. It has invested heavily into a highly efficient production process. Administratively, it has tight control over costs and lots of rules and regulations to promote efficiency. According to the adaptation model of strategy, company XYZ:_________
a. is a strategie failure
b. as prospector
c. as defender
d. as an analyzer
Answer:
c
Explanation:
The adaption model was developed by Miles and Snow (1978)
Businesses are classified as :
ReactorsDefenders AnalysersprospectorsCompany XYZ can be classified as a defender. this is because they have taken steps to increase control internally. It also has a lot of rules which might stifle adaption
A contract is made between two parties. The terms of the contract are complete and unambiguous. A dispute arises between the Parties. Party A wants to pull out of the contract without penalty. Party B argues that Party A’s proposed action is prohibited by the express terms of the contract. Party A argues that the Parties verbally agreed to ignore that provision of the contract that would impose a penalty on Party A. Which Party will prevail and why?
Answer: Party B
Explanation:
Even though verbal agreements are enforceable by law, written agreements take precedent because they are more explicit than verbal agreements.
The written agreement will therefore be followed in this case and according to this agreement, A will be punished for the proposed action.
If A had tangible proof that a subsequent agreement was reached that would void them of said punishment, they should present it. If they do not, B would prevail.
During this year, Weaver sold some equipment for $19 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $39 of its own stock. This year Weaver did not retire any bonds.
Using the information from Part 1, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts.)
Weaver Company
Statement of Cash Flows
For This Year Ended December 31
Operating activities:
Investing activities:
Financing activities:
Beginning cash and cash equivalents
Ending cash and cash equivalent
Answer:
Operating activities:
None
Investing Activities:
Loss on disposal (31 - 10 -19) $3
Financing Activities:
Gain on Long term investment (13 - 7) $6
Cash dividend paid $39
Explanation:
Weaver had incurred transactions which involved exchange of cash so they are reported in the statement of cash flows. These transactions are classified as either operating activity, investing activity or financing activity depending on the nature of transaction.
A local bookstand believes that the demand for the Olympic edition of a sports magazine is normally distributed with a mean of 1,200 and a standard deviation of 200. Each copy of the magazine costs the bookstand $1.50 per copy, and the bookstand will sell the issue for $5.00. Following the Olympic Games, there will be no demand for the magazine, and all leftover copies will be recycled because they will have no salvage value. What is the optimal number of copies of the Olympic edition that the bookstand should order?
Answer:
1,304 copies
Explanation:
Overage cost (Co) means like cost of over ordering
Co = Cost price - Salvage value
Co = $1.50 - $0 (No salvage value)
Co = $1.50
Underage cost (Cu) means like cost of under ordering
Cu = Selling price - Cost price
Cu = $5.00 - $1.50
Cu = $3.50
Service level = Cu / (Cu + Co)
Service level = $3.50 / ($3.50 + $1.50)
Service level = $3.50 / $5.00
Service level = 0.7
Z-value = NORMSINV (Service level), Using Ms Excel
Z-value = NORMSINV (0.7)
Z-value = 0.52
Optimal Order Quantity (Q) = Mean Demand + (Z-value*Standard deviation)
Optimal Order Quantity Q = 1,200 + (0.52*200)
Optimal Order Quantity Q = 1,200 + 104
Optimal Order Quantity Q = 1,304 copies
Hampton Company reports the following information for its recent calendar year. Income Statement Data Selected Year-End Balance Sheet Data Sales $ 160,000 Accounts receivable increase $ 10,000 Expenses: Inventory decrease 16,000 Cost of goods sold 100,000 Salaries payable increase 1,000 Salaries expense 24,000 Depreciation expense 12,000 Net income $ 24,000 Required: Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
$43,000
Explanation:
Preparation of the operating activities section of the statement of cash flows using the indirect method.
Cash flows from operating activities
Net income$24,000
Less Accounts receivable increase (10,000)
Inventory Decrease 16,000
Salaries payable increase 1,000
Depreciation expense 12,000
Net cash provided by operating activities
$43,000
Therefore the operating activities section of the statement of cash flows using the indirect method will be $43,000
OK, WHO EVER IS IMPOSTER YOU BETTER TELL US NOW >:[
A) It's TOTALLY ME!!!
B) It's not me.
C) It's SOOOO not me :/
D) It's not me because *gives a whole big paragraph*
E) *silence*
F) I don't know :|
Bell Inc. took a physical inventory at the end of the year and determined that $840,000 of goods were on hand. In Addition, the following items were not included in the physical count. Bell, Inc. determined that $96,000 of goods Be Purchased where in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count).The company sold $40,000 worth of inventory f.o.b. shipping point. What amount should Be Reported as inventory at the end of the year
Answer:
Explanation:
r
Pulau Penang Island Resort. Theresa Nunn is planning a 30-day vacation on Pulau Penang, Malaysia, one year from now. The presentcharge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,045/day. The Malaysian ringgitpresently trades at RM3.1350/$. She figures out the dollar cost today for a 30-day stay would be$10,000. The hotel informed her that any increase in its room charges will be limited to any increase inthe Malaysian cost of living. Malaysian inflation is expected to be 2.75% per annum, while U.S. inflationis expected to be only 1.25%.
a. How many dollars might Theresa expect to need one year hence to pay for her 30-day vacation?
b. By what percent will the dollar cost have gone up? Why?
Answer:
A) $10124.83
B) 1.0125%
Explanation:
1) We are told that the present charge for a luxury suite is RM 1,045/day.
This means that the charge after one year will also include inflation charge.
Thus;
Charge after 1 year = 1045 × (1 + 2.75%)
= 1045 × 1.0275 = RM 1,073.7375 per day
For 30 days, charge is;
1073.7375 × 30 = RM 32212.125
Spot exchange rate in 1 year = spot rate × (1 + RM inflation rate)/(1 + US inflation rate)
Spot exchange rate in 1 year = 3.135 × (1 + 2.75%)/(1 + 1.25%) = 3.135 × 1.0275/1.0125 = 3.1815
Cost needed one year to pay for 30 day vacation = 32212.125/3.1815 = $10124.83
B) percent by which the dollar cost will have gone up = (10124.83/10000) × 100% = 1.0125%
I need help with this question please
Refer to the table above. Which of the following scenarios is consistent with this statement? "The rate of inflation was 23.75 percent for 2011." A. The price of a hot dog was $2.44 rather than $3.30 in 2010, with other prices in the table remaining fixed. B. The price of a hot dog was $4.22 rather than $3.63 in 2011, with other prices in the table remaining fixed. C. The price of a hamburger was $3.80 rather than $5.50 in 2010, with other prices in the table remaining fixed. D. The price of a hamburger was $6.60 rather than $5.61 in 2011, with other prices in the table remaining fixed
Answer:
C. The price of a hamburger was $3.80 rather than $5.50 in 2010, with other prices in the table remaining fixed.
Explanation:
The given table shows the inflation rates and price movement over the years. The hamburger had inflation effect and its price increased by almost $1. The price change will create burden on the consumer and they will have to pay for inflation differential.
Refer to Exhibit 4.3, which shows the supply curves of baby formula. The development of a more efficient production technology for producing baby formula is likely to cause _____ a. a leftward shift of the supply curve from S2 to S1. b. a movement from point b to point a on the supply curve S1. c. a rightward shift of the supply curve from S1 to S2. d. a movement from point a to point b on the supply curve S1. e. a movement from point c to point d on the supply curve S2.
Answer:
c
Explanation:
The supply curve is upward sloping. This is because their is a positive relationship between price and quantity supplied.
As a result of the new technology which makes production more efficient, there would be an increase in supply. When supply increases, the supply curves shifts to the right.
Only a change in price leads to a movement along the supply curve for a product.
according to the law of supply, the higher the price, the higher the quantity supplied and the lower the price, the lower the quantity supplied.
Chelsea’s goal is to someday have her own restaurant. Taking cooking classes in high school would help prepare Chelsea for her future career.
A.
True
B.
False
Answer:
True
Although operations of restaurant has nothing to do with cooking as Chelsea can hire a chef for her restaurant. But still it would be helpful for her in a sense that she can calculate the right amount of ingredients needed and their respective costs required. Also she can herself be a chef at her restaurant that would save the salary expense of a chef.
Explanation:
Answer:
True
Explanation:
If it is a small restaurant she maybe the cook and the skill of knowing how to cook would be needed
When a buyer's product is not working properly and they have a warranty, what is the first step the buyer should take to resolve the problem?
A:contact the local or state Consumer Affairs Office
B:contact the product manufacturer
C:sue the retailer who sold the product and/or the manufacturer
D:contact the retailer who sold the product
A buyer's product is not working properly and they have a warranty, contacting the retailer who sold the product is the first step the buyer should take to resolve the problem. Thus option D is correct.
What is a product?A product is something that is being sold. A business or an object both qualify as products. Every product has a cost associated with it, and each one has a price. The marketplace, the grade, the promotion, and the group that is being targeted all affect the price that could be charged.
In general, if a customer relied mostly on the store's education, experience, or advice when selecting the goods, they may demand a refund as well as replacement when it is unable to perform its intended function. This was to ensure that the people will not be cheated by the product that is present.
Therefore, option D is the correct option.
Learn more about product, Here:
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Novak Corporation purchased 380 shares of Sherman Inc. common stock for $12,900 (Novak does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Novak's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
Answer:
A. Dr Equity Investments (Trading)$12,900
Cr Cash $12,900
B. Dr Cash $1,235
Cr Dividend Revenue $1,235
C. Dr Fair Value Adjustment (Trading) $1,350
Cr Unrealized Holding Gain or Loss-Income $1,350
Explanation:
A. Preparation of Novak's journal entries to record the purchase of the investment
Dr Equity Investments (Trading)$12,900
Cr Cash $12,900
B. Preparation of Novak's journal entries to record the dividends received
Dr Cash $1,235
($3.25 per share*380)
Cr Dividend Revenue $1,235
C. Preparation of Novak's journal entries to record the fair value adjustment
Dr Fair Value Adjustment (Trading) $1,350
Cr Unrealized Holding Gain or Loss-Income $1,350
[($37.50 per share*380)-$12,900]
Terrace Corporation makes an industrial cleaner in two sequential departments, Compounding and Drying. All material is added at the beginning of the process in the Compounding Department. Conversion costs are added evenly throughout each process. Terrace uses the weighted average method of process costing. In the Compounding Department, beginning work in process was 3,600 pounds (60% processed), 61,200 pounds were started, 57,600 pounds were transferred out, and ending work in process was 60% processed.
Calculate equivalent units for the Compounding Department for August 2016.
Terrace Corporation
Flow of Units and Equivalent Units Calculation, August 2016
Equivalent Units
% WorkConversion % Work done Direct Materials Done Costs
Complete/Transferred
Ending Inventory
Total
Answer:
Terrace Corporation
Equivalent Unit
% D.Material % Conversion
Completed transferred 57,600 100% 57,600 100% 57,600
to drying
Ending Inventory of WIP 7,200 100% 7,200 60% 4,320
Total 64,800 64,800 61,920
Note:
Ending Inventory of Wip = Opening WIP Inventory + Added(Started) - Transferred out = 3,600 + 61,200 - 57,600 = 7,200 pounds
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation
Answer:
The expected rates of return of stocks A and B:
E(RA) = 0.1*((13%) + 0.2*(12%) + 0.3*(14%) + 0.2*(15%)
E(RA) = 13.2%
E(RB) = 0.1*(8%) + 0.2*(7%) + 0.2*(6%) + 0.3*(9%) + 0.2*(8%)
E(RB) = 7.7%
The standard deviation of stocks A and B are:
Var(RA) = [0.1*(10%-13.2%)2^ + 0.2*(13%-13.2%)^2 + 0.2*(12%-13.2%)^2 + 0.3*(14%-13.2%)^2 + 0.2*(15%-13.2%)^2]^1/2
Var(RA) = 1.5%
Var(RB) = [0.1*(8%-7.7%)^2 + 0.2*(7%-7.7%)^2 + 0.2*(6%-7.7%)^2 + 0.3(9%-7.7%)^2 + 0.2*(8%-7.7%)^2]^1/2
Var(RB) = 1.1%
Ephraim Corporation acquired 80 percent of Lilac Corporation for $200,000 cash. Lilac reported net income of $25,000 each year and dividends of $5,000 each year for 20X2, 20X3, and 20X4. On January 1, 20X2, Lilac reported common stock outstanding of $160,000 and retained earnings of $40,000, and the fair value of the noncontrolling interest was $50,000. It held land with a book value of $90,000 and a market value of $100,000, and equipment with a book value of $40,000 and a market value of $48,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of eight years. All depreciable assets held by Lilac at the date of acquisition had a remaining economic life of eight years. Ephraim uses the equity method in accounting for its investment in Lilac.
Based on the preceding information, what balance would Ephraim report as its investment in Lilac at January 1, 20X5?
a. $236,000
b. $248,000
c. $260,000
d. $300,000
Answer:
a. $236,000
Explanation:
Ephraim acquired 80% of Lilac corporation.
The consideration paid was $200,000 in cash
Lilac had income of $25,000 and paid $5,000 of dividend.
Land and equipment had book value different from market value.
market values are considered for the investment
$100,000 - $90,000 + $48,000 + $25,000 - $40,000 = $43,000
$43,000 * 80% = $34,000
Total investment value = $200,000 + $34,000 + dividend NCI
Total Investment Value = $236,000
he Coase theorem will apply only if the amount of compensation that must be made to the damaged party is small. an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality. the courts can be used to determine the amount of compensation that must be made to the damaged party. the number of people involved is small.
Answer:
the number of people involved is small.
Explanation:
Coase theorem was developed in 1960 by a British economist and author named Ronald Coase.
Coase theorem states that when the actions of a party (X) negatively affects or harm another party (Y), then party Y should be able to create an incentive for party X to stop or limit the action creating such harm.
Generally, when transaction cost are low, the two parties are able to bargain and reach a mutual agreement in the presence of an externality such as a pollution.
The Coase theorem will apply only if the number of people involved is small, the cost of negotiation is low and there are well defined property rights.
Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
Total budgeted fixed overhead cost for the year $250,000
Actual fixed overhead cost for the year $254,000
Budgeted direct labor-hours (denominator level of activity) 25,000
Actual direct labor-hours 27,000
Standard direct labor-hours allowed for the actual output 26,000
Required:
a. Compute the fixed portion of the predetermined overhead rate for the year.
b. Compute the fixed overhead budget variance and volume variance.
Answer:
1. Predetermined overhead rate = Total fixed overhead cost year / Budgeted standard direct labor hours
Predetermined overhead rate = $250,000 / 25,000
Predetermined overhead rate = $10.00 per direct labor hour
2. Fixed overhead budget variance = Actual fixed overhead - Budgeted fixed overhead
Fixed overhead budget variance = $254,000 - $250,000
Fixed overhead budget variance = $4,000 (Unfavorable)
Fixed overhead volume variance = Budgeted fixed overhead - [Fixed overhead applied to work in process]
Fixed overhead volume variance = $250,000 - (26,000*$10)
Fixed overhead volume variance = $250,000 - $260,000
Fixed overhead volume variance = $10,000 (Favorable)
Gap, Inc. owns Banana Republic, Old Navy, and Gap brands, all of which are brands of clothing targeting different segments of the clothing and accessories markets. Banana Republic is positioned as upscale, Old Navy is positioned as value, and Gap is positioned as targeting younger consumers. Gap, Inc.'s brands are intended to help the company pursue a(n) ______ strategy.
Answer:
multi-segment
Explanation:
The multi-segmentation strategy used by GAP Inc. consists of segmenting the market in the use of different product lines for different target audiences in order to increase their market share by reaching different audiences for the different product brands of the company.
This is an effective strategy for large companies that want to increase their positioning, perception of value by their consumers, satisfaction and reliability, and this is achieved when the company has an effective marketing and communication strategy, which helps in the perception of the characteristics of the brand. that are aligned to meet the needs of a specific audience.
Standahl Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $40,190 per month plus $2709 per flight plus $10 per passenger. The company expected its activity in August to be 88 flights and 300 passengers, but the actual activity was 91 flights and 303 passengers. The actual cost for plane operating costs in August was $258,690. The plane operating costs in the planning budget for August would be closest to:
Answer:
$281,612
Explanation:
Plane Operating Cost = Fixed cost + (Variable cost per unit1 × q1) + (Variable cost per unit 2 × q2)
Plane Operating Cost = $40,190 + ($2709*88) + ($10 * 303)
Plane Operating Cost = $40,190 + $238,392 + $3,030
Plane Operating Cost = $281,612
So, the plane operating costs in the planning budget for August would be $281,612
Which is NOT a type of warranty in UCC Article 2 for the sales of goods?
warranty of title
warranty of fitness for a particular purpose
warranty of consumerability
warranty of merchantability
I am pretty sure the answer is the 3rd one
Answer:
Warranty of consumerability
Explanation:
edge 2021
Roberto Baldwin As the owner and manager of Fantastic Toys, Roberto Baldwin is fascinated by all the changes occurring and transforming the workplace. Roberto is concerned about the important OB trends that he can understand and take advantage of in developing and positioning his company in the marketplace. If Roberto wants to study deep-level diversity in his organization, he should:_________
A) increases its connectivity with people and organizations in other parts of the world.
B) serves diverse customers within the firm's home country.
C) has a diverse workforce within the firm's home country.
D) has a substantially strong domestic market.
Answer:
A) increases its connectivity with people and organizations in other parts of the world.
Explanation:
deep-level diversity which can be regarded as task-related diversity is
less observable as well as deeper-leveled attributes which could be
attitudes, functional expertise and personality. In the case above, If Roberto wants to study deep-level diversity in his organization, he should increases its connectivity with people and organizations in other parts of the world.
Consider the simple 3-station assembly line illustrated below, where the 2 machines at Station 1 are parallel, i.e., the product only needs to go through one of the 2 machines before proceeding to Station 2. Station 1 Machine A has a capacity of 3 units per hour; Station 1 Machine B has a capacity of 3 units per hour; Station 2 has a capacity of 5 units per hour; Station 3 has a capacity of 10 units per hour What is the bottleneck time of this process
Answer:
The bottleneck time for this process is 20 minutes.
Explanation:
a) Data and Calculations:
Station Capacity per hour Time required per unit
1 A 3 20 minutes (60/3)
1 B 3 20 minutes (60/3)
2 5 12 minutes (60/5)
3 10 6 minutes (60/10)
Total demand for the process = 38 minutes (20+12+6)
b) The bottleneck is the station that requires the longest time for its outputs to be processed. The bottleneck in this process is given by Station One, requiring 20 minutes to meet output requirements through either machine A or machine B. The bottleneck constitutes a constraint on the process capacity to achieve results.
Closing Entries After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Twin Trees Landscaping Co.: Oscar Killingsworth, Capital $503,900 Oscar Killingsworth, Drawing 8,200 Fees Earned 279,100 Wages Expense 221,600 Rent Expense 43,800 Supplies Expense 9,000 Miscellaneous Expense 10,200 Journalize the two entries required to close the accounts. If an amount box does not require an entry, leave it blank.
Answer:
Dr Income summary 284,600
Cr Wages Expense 221,600
Cr Rent Expense 43,800
Cr Supplies Expense 9,000
Cr Miscellaneous Expense 10,200
Dr Fees earned 279,100
Cr Income summary 279,100
Dr Oscar Killingsworth, Capital 5,500
Cr Income summary 5,500
Madison Corporation purchased 40% of Jay Corporation for $300,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $75,000. At year-end, Jay Corporation reported net income of $375,000. The balance in Madison's Equity Method Investments—Jay Corporation account as of December 31 should be:
Answer:
$420,000
Explanation:
Given the above information,
Dividend
= $75,000 × 40%
= $30,000
Share in income
= $375,000 × 40%
= $150,000
Balance in investment account
= Beginning balance + Share in income - Dividend
= $300,000 + $150,000 - $30,000
= $420,000
Therefore, the balance in Madison's equity method investments - Jay Corporation accounts as of December 31 should be $420,000
Howard Co.'s 2016 income from continuing operations before income taxes was $280,000. Howard Co. reported before-tax income on discontinued operations of $50,000. All tax items are subject to a 40% tax rate. In its income statement for 2016, Howard Co. would show which of the following line-item amounts for net income and income tax expense:
a. $213,600 and $117,600 respectively.
b. $356,000 and $318,800 respectively.
c. $117,600 and $213,600 respectively.
d. $232,000 and $269,200 respectively.
Answer:
$198,000 and $112,000 respectively
Explanation:
Income tax expense = Income from continuing operations before income taxes * Tax rate
Income tax expense = $280,000 * 40%
Income tax expense = $112,000
Net income = Income from continuing operations before income taxes - Income tax expense + (Before-tax income on discontinued operations * (1 - 40%)
Net income = ($280,000 - $112,000) + ($50,000 * 0.6)
Net income = $168,000 + $30,000
Net income = $198,000
Florissa's Flowers jointly produces three varieties of flowers in the same garden: tulips, lilies, and daisies. The flowers are all watered via the same irrigation system and all receive the same amount of water; daisies require three times as much as lilies, and the water required for tulips is about halfway between the amounts needed for daisies and lilies. Although the lilies and tulips receive more water than they need due to the joint irrigation process, they are not hurt by the overwatering. The joint production cost of the three varieties of flowers is about $30 per harvest. Every harvest yields 10 tulips, 20 lilies, and 20 daisies
Allocate the joint costs of production to each product using the physical units method.
Joint Product Flowers per Harvest Proportion Joint Costs Allocation
Tulip % $ $
Lily %
Daisy %
Totals $
Which products receive the largest portion of the joint costs?
Answer:
Lily and Daisy
Explanation:
Joint product Flowers per harvest Proportion Joint cost allocation
Tulip 10 20% (10/50) $6 ($30*20%)
Lily 20 40% (20/50) $12 ($30*40%)
Daisy 20 40% (20/50) $12 ($30*40%)
Totals 50 100% $30
As per above results, both Lily and Daisy received the largest proportion of joint cost.
Consider a mutual fund with $219 million in assets at the start of the year and with 12 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $6 million. The stocks included in the fund's portfolio increase in price by 7%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.50%, which are deducted from portfolio assets at year-end.
What is the net asset value at the start and end of the year?
Answer:
$19.43
Explanation:
Net asset value at the end of the year = ($219,000,000 / 12,000,000 shares) * 1.07 * (1 - 0.005)
Net asset value at the end of the year = $18.25 * 1.07 * 0.995
Net asset value at the end of the year = $19.4298625
Net asset value at the end of the year = $19.43
"1. AudioCables, Inc., is currently manufacturing an adapter that has a variable cost of $.50 per unit and a selling price of $1.00 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $6,000. Variable costs would increase to $.60, but sales volume should jump to 50,000 units due to a higher-quality product. Should AudioCables buy the new equipment?"
Answer:
No.
Explanation:
Current profit of AudioCables, Inc without buying new equipment
Current Profit = Current sales volume * Selling price per unit - Fixed cost - Current sales volume * Variable cost per unit
= 30,000 * $1.00 - $14,000 - 30,000 * $0.50
= $30,000 - $14,000 - $15,000
= $1,000
So, the current profit of AudioCables, Inc., without buying new equipment is $1,000
Proposed profit of AudioCables, Inc after buying new equipment
Proposed Profit = Proposed sales volume * Selling price per unit – Fixed cost after buying new equipment - Proposed sales volume * Variable cost per unit after buying new equipment
= 50,000 * $1.00 - $20,000 – 50,000 * $0.60
= $50,000 - $20,000 - $30,000
= $0
So, the proposed profit of AudioCables, Inc., after buying new equipment is $0
Conclusion: As the profit of AudioCables, Inc., will reduce after buying new equipment from $1,000 to $0, therefore AudioCables should not buy the new equipment.