Answer:
b) the ski lift ticket her parents have already purchased for her
Explanation:
Opportunity Cost is always included in decision making. It is said to be the amount or value of the best alternative that is forgone e.g. choosing Dubia over Vegas, the opportunity cost is that which is lost or forgone from not picking Vegas. Firms and individuals do make or take decision about what economic activites or project they want to be involved in. This analysis describes how choices are selected or made and how they could be worked on.
It is the most thoughtful alternative given up as the result of a decision taken or made.
Sandra would like to organize LAB as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 9 percent annual before-tax return on a $710,000 investment. Sandraâs marginal income tax rate is 37 percent, and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes LAB as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. LABâs income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)
Required:
a. How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a C corporation?
b. What is the overall tax rate on BALâs income in the first year if BAL is organized as an LLC or as a C corporation?
Answer:
Sandra
LAB LLC (taxed as a sole proprietorship)
Annual Income = $63,900
Additional self-employment tax (2.9%) = $1,853 (2.9% * $63,900)
Additional Medicare tax (0.9%) = $575
FICA Tax rate (7.65%) = $4,888
After-tax income $56,584
Tax expense = $7,316 ($63,900 - $56,584)
LAB (taxed as a C corporation)
After-tax income = $40,257 ($63,900 - $23,643)
Dividends and capital gains = $8,051.40 (20% excluding the 3.8%)
Income after dividends and capital gains $32,206
Tax expense = $31,694 ($63,900 - 32,206)
b. Overall tax rate on BAL's income:
1. Organized as an LLC
$7,316/$63,900 * 100
= 11.45%
2. Organized as a C Corporation:
$31,694/$63,900 * 100
= 49.6%
Explanation:
a) Data and Calculations:
Expected annual before-tax return = 9%
Investment = $710,000
The annual return = $63,900 ($710,000 * 9%)
Marginal income tax rate = 37%
Income tax expense = $23,643 ($63,900 * 37%)
After-tax income = $40,257 ($63,900 - $23,643)
Dividends and capital gains = $8,051 (20% excluding the 3.8%)
Income after dividends and capital gains $32,206
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates:
Department
Cutting Finishing
Direct labor-hours 6,100 72,000
Machine-hours 59,000 3,200
Total fixed manufacturing overhead cost $390,000 $443,000
Variable manufacturing overhead per machine-hour $3.00 -
Variable manufacturing overhead per direct labor-hour - $4.75
a. Compute the predetermined overhead rate to be used in each department.
b. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following:
Department
Cutting Finishing
Direct labor-hours 4 19
Machine-hours 80 4
Materials requisitioned $770 $360
Direct labor cost $36 $180
Compute the total manufacturing cost assigned to Jobe 203.
c. Would you expect substantially different amounts of overhead cost to be charged to some jobs if the company use a plantwide overhead rate based on direct labor-hours instead of using departmental rates?
Answer:
White Company
a. Predetermined overhead rates:
Departments Cutting Finishing
Total fixed manufacturing overhead cost $390,000 $443,000
Usage 6,100 3,200
Fixed overhead cost per unit $6.61 $6.15
Variable overhead cost per unit $3.00 $4.75
Predetermined overhead rates $9.61 $10.90
b. Job 203:
Department
Cutting Finishing
Direct labor-hours 4 19
Machine-hours 80 4
Materials requisitioned $770 $360
Direct labor cost $36 $180
Total manufacturing cost assigned to Job 203:
Cutting Finishing
Materials requisitioned $770 $360
Direct labor cost $36 $180
Manufacturing overhead $769 $207
Total manufacturing costs $1,575 $747
c. Yes. The amounts of overhead cost assigned to some jobs would be substantially different.
Explanation:
a) Data and Calculations:
Departments Cutting Finishing
Direct labor-hours 6,100 72,000
Machine-hours 59,000 3,200
Total fixed manufacturing overhead cost $390,000 $443,000
Variable manufacturing overhead per m/h $3.00 -
Variable manufacturing overhead per dlh - $4.75
In the Investment marketplace, Investors will likely accept a high-risk investment only if it promises
Select the best answer from the choices provided.
А.
real returns
B.
nominal returns
C. high returns
D. low, constant returns
Answer: C. high returns
Explanation: Risk-return tradeoff is an investing theory which indicates that as higher the risk, the greater the return reward. In order to determine an acceptable risk-return tradeoff, investors need to weigh several aspects, including total risk exposure, the ability to substitute missing capital, and more.
Damian invests $5,000 today in an account earning 6% per year. How much is the investment worth in 4 years
Answer:
$6,312
Explanation:
The amount that the investment will be worth in 4 years is known as the future value. We compound the Present Value using the interest rate to determine the future value.
Note : Here I will use a financial calculator to compute the future value
PV = $5,000
r = 6 %
P/yr = 1
n = 4
Pmt = $0
Fv = ?
Thus, the investment will be worth $6,312 in 4 years.
c. During a conversation with the credit manager, one of Tabor's sales representatives learns that a $1,281 receivable from a bankrupt customer has not been written off but was considered in the determination of the appropriate year-end balance of the Allowance for Bad Debts account balance. What is the effect of write-off on 2019 net income
Answer:
Tabor
The effect of the write-off of the bad debt or uncollectible is a reduction of the 2019 net income by $1,281.
Explanation:
The write-off of the bad debt also reduces the Allowance for Bad Debts account balance and the Accounts Receivable balance in the account of Tabor by $1,281. The purpose is to accurately report Tabor's net income by taking into account all expenses and losses, just as all revenues and incomes must be accounted for. This gives a more accurate picture of Tabor's financial performance during the current financial period.
Sofia worries that if something happens to her husband and he dies, she will lose everything—their home, their cars, etc. Which type of business should Sofia consult to see if there is a plan available to cover her expenses if her husband dies?
A.
stock-held savings institution
B.
web-only financial institution
C.
mutual fund company
D.
life insurance company
Answer:
D
Explanation:
She is worried about losing everything and having life insurance is what everyone does when wanting to keep something after a love one dies.
Answer:
D.
life insurance company
Explanation:
D.
life insurance company
Exotic Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:
Engine parts $760,400
Shop direct labor 555,000
Shop and repair equipment depreciation 57,000
Shop supervisor salaries 158,500
Shop property taxes 28,800
Shop supplies 22,100
Advertising expense 15,200
Administrative office salaries 65,400
Administrative office depreciation expense 8,400
Total costs and expenses $1,670,800
The average shop direct labor rate is $15.00 per hour.
Required:
Determine the predetermined shop overhead rate per direct labor hour.
Answer:
See bekow
Explanation:
Number of direct labor hours = 555,000 / 15 = 37,000
Overhead cost = $57,000 + $158,500 + $28,800 + $22,100