Answer:
$17.5
Explanation:
Direct Labour- 55000
Variable Overhead- 45000
Fixed overhead- 70000
Direct material- 20000
Total = $190,000
Total relevant cost of manufacturing = Direct material + Direct labour + Variable overhead + Avoidable Fixed cost + Opportunity cost
Where Avoidable fixed cost = 10,000 units * 4 = 40.000
0pportunity cost= $15,000
Total relevant cost of manufacturing = 25000 + 55000 + 45000 + 40000 + 15000 = $175,000
Now, Price that CJP would be indifferent to XYZ Offer can be derived by: Total Relevant Cost of Manufacturing / No of unit product
= $175,000 / 10,000 units
=$17.5
Exercise 13-12 Ivanhoe Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, Ivanhoe Company purchased 9,000 premiums at 85 cents each and sold 109,000 boxes of soap powder at $3.10 per box; 48,000 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption. Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2020. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record the premium inventory) (To record the sales) (To record the expense associated with the sale) (To record the premium liability)
Answer: Please see below
Explanation:
1) Journal to record the purchase of 9000 premiums at 85 cents
Year Account Title and explanations Debit Credit
2020 n Inventory of premium $7,650
Cash $7,650
working
Purchase price= Number of units purchased x price per unit
9000 x 0.85= $7,650
2) Journal to record the sale of 109,000 boxes at $3.10
Year Account Title and explanations Debit Credit
2020 Cash $337,900
Sales Revenue $337,900
working
Sale price= Number of units sold x price sold per unit
109,000 boxes x $3.10= $337,900
3) Journal to record the premium expenses
Year Account Title and explanations Debit Credit
2020 Premium Expenses $4,080
Inventory on premium $4080
working
Premium expenses= coupons presented for redemption / number of coupons to redeem premium x price per premium
= 48,000/10 x 0.85 = $4,080
4) Journal to record the premium liability
year Account Title and explanations Debit Credit
2020 Premium Expenses $1,479
Premium liability $1,479
working
Estimated redemption on number of boxes sold = number of boxes sold x probability of redemption= 109,000 x 60 %= $65,400
premium liability of coupons = estimated redemption of premiums - number of coupons already redeemed
= 65,400- 48,000 = 17,400
Cost of premium liabilty = premium liability of coupons /number of coupons per premium x rate per premium
17,400/10 x 0.85 ==$1,479
The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions. Amalgamated is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from Amalgamated to American Fashions are made with terms n/60, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended December 31.
A. Amalgamated sold merchandise to American Fashions at a selling price of $280,000. The merchandise had cost Amalgamated $195,000.
B. Two days later, American Fashions returned goods that had been sold to the company at a price of $29,500 and complained to Amalgamated that some of the remaining merchandise differed from what American Fashions had ordered. Amalgamated agreed to give an allowance of $4,500 to American Fashions. The goods returned by American Fashions had cost Amalgamated $20,270.
C. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed.
For each of the events (a) through (c), indicate the amount and direction of the effect on Amalgamated Textiles in terms of the following items. (Enter any decreases to account balances with a minus sign.) Prepare the journal entries that Amalgamated Textiles would record. TIP: When using a perpetual inventory system, the seller always makes two journal entries when goods are sold. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer and Explanation:
The amount and direction of the effect is presented below:
1 Transaction Sales Sales Sales Net Cost of Gross Revenues returns allowances Sales goods Profit
sold
(a) (b) (a)-(b)
a. $280,000 $280,000 $195,000
$85,000
b. $29,500 $4,500 -$34,000 -$20,270
$13,730
c. No effect No effect No effect No effect No effect No effect
2. Now the journal entries are as follows
a. Accounts receivable $280,000
To Sales revenues $280,000
(Being sales of account is recorded)
For recording this we debited the account receivable as it increased the assets and credited the revenues as it increase the sales
a-2 Cost of goods sold $195,000
To Merchandise Inventory $195,000
(Being cost of goods sold is recorded)
For recording this we debited the cost of goods sold as it increased the expenses and credited the inventory as it decreased the assets b. Sales allowances and returns ($29,500 + $4,500) $34,000
To Accounts receivable $34,000
(Being Sales allownaces and returns is recorded) For recording this we debited the sales return as it increased it and credited the account receivable as it decreased the assets
b-2 Merchandise Inventory $20,270
To Cost of goods sold $20,270
(Being Cost of goods sold on goods returned)
For recording this we debited the merchandise inventory as it increased the assets and credited the cost of goods sold as it decreased the expenses
c Cash ($280,000 - $34,000) $246,000
To Accounts receivable $246,000
(Being Payment in full is recorded)
For recording this we debited the cash as it increased the assets and credoted the account receivable as it decreased the assets
Blue Circle Corporation's comparative balance sheet for current assets and liabilities was as follows:
Dec. 31, Year 2 Dec. 31, Year 1
Accounts receivable $32,400 $26,800
Inventory 45,400 51,000
Accounts payable 29,800 24,600
Dividends payable 17,000 16,000
Adjust net income of $74,900 for changes in operating assets and liabilities to arrive at net cash flow from operating activities. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
Amount Descriptions
Cash paid for dividends
Decrease in accounts payable
Decrease in accounts receivable
Decrease in dividends payable
Decrease in inventory Increase in accounts payable
Increase in accounts receivable
Increase in dividends payable
Increase in inventory
Net cash flow from operating activities
Answer:
$81,100
Explanation:
The computation of the net cash flow from operating activities are as follows
Cash flow from operating activities
Adjusted net income $74,900
Add or less adjustments made
Less: Increased in account receivable -$5,600 ($32,400 - $26,800)
Add: Increase in account payable $5,200 ($29,800 - $24,600)
Add: Increase in dividend payable $1,000 ($17,000 - $16,000)
Add: Decrease in inventory $5,600 ($45,400 - $51,000)
Net cash flow provided by operating activities $81,100
Exercise 10-4 Scrap or rework LO P2 A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be a) sold as is for $2.00 each, or b) reworked for $4.50 each and then sold for the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units
Answer:
Sales as scrap $44,000
Rework $88,000
Explanation:
Sale as Scrap Rework
Sales of scrap units(22,000×$2.00)
44,000
Sales of Rework units (22,000×$8.50) 187,000
Costs to Rework units(22,000×$4.50) 99,000
Incremental income/loss
44,000 88,000
The company should should REWORK because it has incremental income of 88,000(187,000-99,000) which is higher than that of SCRAP $44,000
A corporation has 41,770 shares of $35 par stock outstanding that has a current market value of $292 per share. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately a.$1,168.00 b.$8.75 c.$73.00 d.$257.00
Answer:
c. $73.00 per share
Explanation:
The computation of market value of the stock will fall to approximately is shown below:-
The market value of the stock will fall to approximately = Market value per share ÷ 4-for-1 stock split
= $292 ÷ 4-for-1 stock split
= $73.00 per share
Therefore for computing the market value of the stock will fall to approximately we simply applied the above formula.
Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"
Answer: 2 Acres
Explanation:
All 3 residents of the town have agreed to split the cost of building the park equally. The cost is $24 so equally would be,
= 24/3
= $8
Each of them would have to pay $8.
If the cost per person is $8, how much will each person vote for.
Referring to the table;
Cedric will vote No for all acres because the $8 passes the amount Cedric is willing to pay for any size of Acre.
The majority vote can still be carried if the other 2 vote yes.
Sophia will not vote yes for anything more than 2 acres because Sophia's willingness to pay at $8 is for 2 acres alone.
At 2 acres, Amber's willingness to pay is $18 so Amber will vote yes as well.
Therefore if the majority vote is to be carried then the amount of acres should be 2.
Following are the calculation to the given question:
If the inhabitants decide to split the bill evenly, each owner's share of the cost is [tex]\frac{\$24}{3}=\$8[/tex].Cedric's readiness to pay less than [tex]\$8[/tex] per acre means that he'd never vote in favor of establishing a park.The other two residents should vote in support of establishing the park in order for the majority to vote yes.It will only happen for two acres of land since Sophia would not vote yes beyond that.As a result, the largest size whereby a majority of the voters could vote yes is 2 acres of property.Therefore, the final answer is "2 acres".
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The Donut Stop acquired equipment for $23,000. The company uses straight-line depreciation and estimates a residual value of $3,400 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $2,000 from the original estimate of $3,400.Required:Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.Cost of the equipment:Less: accumulated depreciation (year 1 & 2):Book value, end of year 2:Less: new residual value:New depreciable cost:Remaining service life:Annual depreciation in years 3 to 6
Answer:
$2,400
Explanation:
Cost of equipment = $23,000
Residual value = $3,400
Useful life = 4 year
Formula for Annual Depreciation will be:
Annual depreciation = (Cost price - Residual value)/Useful life
Hence,
= (23,000 - 3,400)/4
= 19,600/4
= $4,900
The Accumulated depreciation for year 1 and year 2 will be
= 4,900 x 2
= $9,800
Cost of equipment 23,000
Less : Accumulated depreciation for year 1 and year 2 (9,800)
Book value, end of year 2 13,200
Less : Residual value (2,000)
New depreciable cost 11,200
Remaining service life 4
Annual depreciation in year 3 to 6 (11,200/4) $2,400
On January 1, Frederic Manufacturing had a beginning balance in WorkminusinminusProcess Inventory of $ 163,000 and a beginning balance in Finished Goods Inventory of $ 23,000. During the year, Frederic incurred manufacturing costs of $ 200,000.
During the year, the following transactions occurred:
Job C- 62 was completed for a total cost of $143,000 and was sold for $158,000.
Job C - 63 was completed for a total cost of $183,000 and was sold for $214,000.
Job C - 64 was completed for a total cost $84,000 but was not sold as of year - end.
The Manufacturing Overhead account had an unadjusted credit balance of $24,000 and was adjusted to zero at year - end. What was the final balance in the Cost of Goods Sold account?
a. $302,000 credit balance
b. $302,000 debit balance
c. $350,000 debit balance
d. $350,000 credit balance
Answer:
$317,000 debit balance
Explanation :
Frederic Manufacturing final balance in the Cost of Goods Sold account:
Cost of Job C 62 158,000
Cost of Job C 63 183,000
Less manufacturing overhead over allocated to production (24,000)
Cost of goods sold 317,000
158,000+183,000
=341,000-24,000
=$317,000
Power Corporation acquired 100 percent ownership of Scrub Company on February 12, 20X9. At the date of acquisition, Scrub Company reported assets and liabilities with book values of $436,000 and $171,000, respectively, common stock outstanding of $80,000, and retained earnings of $185,000. The book values and fair values of Scrub’s assets and liabilities were identical except for land, which had increased in value by $21,000, and inventories, which had decreased by $6,000.
Required:
Prepare the following consolidation entries required to prepare a consolidated balance sheet immediately after the business combination assuming Power acquired its ownership of Scrub for $266,000.
Answer:
Journal Entry at Acquisition Date:
Debits :
Assets $409,000
Goodwill $28,000
Credit :
Liabilities $171,000
Investment in Subsidiary : Scrub Company $266,000
Explanation:
Power Corporation now has control over Scrub Company after acquiring 100% ownership of Scrub Company. Power Corporation is therefore required to consolidated Financial Statements in terms of IFRS 3.
Assets and Liabilities are Consolidated at their Acquisition Date Fair Values Not Book Values.
The Excess of the Purchase Consideration over the Net Assets Identified at Fair Value is called Goodwill.
Journal Entry at Acquisition Date:
Debits :
Assets ($436,000 + $21,000 - $6,000) $409,000
Goodwill (Balancing figure) $28,000
Credit :
Investment in Subsidiary : Scrub Company $266,000
Suppose Ms. Smith sells her 2018 Honda Fit next year. The original cost of the vehicle was $10,000. During the time she has owned the car she has taken $3,000 dollars of deprecation on it. Ms. Williams sells the car for $9,000. What is resul
The question is incomplete. Here is the complete question
Suppose Ms. Smith sells her 2018 Honda Fit next year. The original cost of the
vehicle was $10,000. During the time she has owned the car she has taken $3,000 dollars
of deprecation on it. Ms. Williams sells the car for $9,000. What is result of the transaction?
A. An ordinary loss of $1,000
B. Long-term capital gain of $2,000
C. An ordinary gain of $2,000
D. An ordinary gain of $6,000
Answer:
An ordinary gain of $2,000
Explanation:
Ms. Smith wants to sell her 2018 Honda fit car next year
The original cost of the car is $10,000
She has incurred $3,000 worth of depreciation on it during the period that she has used the car
She sells the car for $9,000
Her transaction rate can be calculated as follows:
Net value of the car= $10,000-$3,000
= $7,000
Amount of gain realized while selling the car= $9,000-$7,000
= $2,000
Hence Ms. Smith has an ordinary gain of $2,000 after selling her car
Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities? a. The firm just won a product liability suit one of its customers had brought against it. b. The firm must make a known future payment, such as paying for a new plant that is under construction. c. The firm has just sold long-term securities and has not yet invested the proceeds in operating assets. d. The firm is going from its peak sales season to its slack season, so its receivables and inventories will experience a seasonal decline. e. The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases.
Answer: e. The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases.
Explanation:
A company increases it's holdings in short term marketable securities when it has money idle that isn't being put towards anything. It would therefore make sense to invest that money in short term securities to make some sort of profits by way of returns.
When a company is going from it's slack season to its peak season, they will have to use the cash that they have to I crease their inventory so as to better prepare for anticipated increased sales. They therefore cannot be using the cash they have to invest in short term securities making option e. the right answer.
Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be
Answer:
300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland
Explanation:
This question has been answered by in two parts
1. Radioland
Each worker can produce either 4 radios or 1 television
The country has a total of 100 workers
Radioland specializes in radio production because it has comparative advantage in this good, therefore Radioland will only produce radios.
Therefore, the total number of radios it will produce per year
= 4 radios per worker * 100 workers
= 400 radios.
If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, Radioland will end up with
= 400 radios - 100 radios (to Teeveeland) + 100 televisions (from Teeveeland)
= 300 radios + 100 televisions in Radioland.
2. Teeveeland
Each worker can produce either 2 radios or 4 televisions
The country has a total of 100 workers
Teeveeland specializes in television production because it has comparative advantage in this good, therefore teeveeland will only produce television.
Therefore, the total number of televisions it will produce per year
= 4 televisions per worker * 100 workers
= 400 televisions.
If Teeveeland trades 100 televisions to Radioland in exchange for 100 radios each year, Teeveeland will end up with
= 400 televisions - 100 televisions (to Radioland) + 100 radios (from Radioland)
= 300 televisions + 100 radios in Teeveeland.
Kilt Company had the following information for the year: Direct materials used $ 119,300 Direct labor incurred (5,750 hours) $ 159,700 Actual manufacturing overhead incurred $ 167,500 Kilt Company used a predetermined overhead rate of $41 per direct labor hour for the year and estimated that direct labor hours would total 5,750 hours. Assume the only inventory balance is an ending Work in Process balance of $17,500. How much overhead was applied during the year?
Answer:17
Explanation:
Is haccp a state code
Answer:
The Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA) require mandatory HACCP programs for juice and meat as an effective approach to food safety and protecting public health. Meat HACCP systems are regulated by the USDA, while seafood and juice are regulated by the FDA.
Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $40,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $10,000. The grill will have no effect on revenues but will save Johnny’s $20,000 in energy expenses. The tax rate is 35%. (LO9-2) a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. If the discount rate is 12%, should the grill be purchased?
Answer: The answer is given below
Explanation:
For the question, the operating cash flows for each year is gotten by adding the depreciation tax rate to the net of the tax improvement in the operating income. The net of the tax improvement in the operating income.
= $20,000 × (1 - tax rate)
= $20,000 × (1 - 35%)
= $20,000 × (1 - 0.35)
= $20,000 × 0.65
= $13,000
a. The operating cash flows in each year has been attached.
b. The total cash flow will be the value of the operating cash flow added to the cash flow that are associated with investments. At year 0, initial investment was $40,000. After selling the grill at year 3, book value will be $2,964. Therefore, the sale price of the net tax will be:
=(Sales price - tax rate) × (sales price - book value)
=($10,000 - [35% × ($10,000 - $2,964)]
= $10,000 - [0.35 × $7036]
= $10,000 - $2,462.6
= $7,537.4
Total cash flow = $15073.4 + $7537.4
= $22,610.8
c. If the discount rate is 12%, this implies that the grill should be bought due to the fact that the net present value (NPV) of the cash flow is $7,191.8 which has a positive value.
The table has also been attached for further explanation.
Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $75,600, $294,000, and $470,400, respectively. They predict annual partnership net income of $498,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $83,600 to Mo, $62,700 to Lu, and $94,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $498,000. Mo, Lu, and Barb withdraw $39,300, $53,300, and $69,300, respectively, at year-end.
Answer:
salary allowances of $83,600 to Mo, $62,700 to Lu, and $94,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.
net income $498,000, total distributions:
Mo = $83,600 + (20% x $257,200) = $135,040Lu = $62,700 + (40% x $257,200) = $165,580Barb = $94,500 + (40% x $257,200) = $197,380First we need to close Income Summary account to each partner's capital account:
December 31, 202x
Dr income summary 498,000
Cr Mo Meek, capital 135,040
Cr Lu Ling, capital 165,580
Cr Barb Beck, capital 197,380
then we close the drawings accounts to the capital accounts of each partner:
December 31, 202x
Dr Mo Meek, capital 39,300
Cr Mo Meek, drawings 39,300
Dr Lu Ling, capital 53,300
Cr Lu Ling, drawings 53,300
Dr Barb Beck, capital 69,300
Cr Barb Beck, drawings 69,300
Blossom Company sells office equipment on July 31, 2022, for $23,730 cash. The office equipment originally cost $79,700 and as of January 1, 2022, had accumulated depreciation of $36,130. Depreciation for the first 7 months of 2022 is $4,970.
Prepare the journal entries to (a) update depreciation to July 31, 2014, and (b) record the sale of the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
a. The entries are:
Debit Depreciation expenses for $4,920;
Credit Accumulated depreciation for $4,920.
b. The entries are:
Debit Cash for $23,730
Debit Accumulated depreciation for $41,100
Debit Loss on disposal of equipment for $14,870
Credit Equipment for $79,700
Explanation:
(a) Prepare the journal entries to update depreciation to July 31, 2022.
Note: the correct date to update to is July 31, 2022 not the wrongly stated July 31, 2014 in the question.
The journal entries will look as as follows:
Date Particulars Dr ($) Cr ($)
July 31 Depreciation expenses 4,920
Accumulated depreciation 4,920
To record the updating of depreciation to July 31, 2022.
(a) Prepare the journal entries to record the sale of the equipment.
To prepare this, we need to first calculate the gain or loss on disposal as follows:
Accumulated depreciation till date = $36,130 + $4,970 = $41,100
Net book value = Equipment cost - Accumulated depreciation till date = $79,700 - $41,100 = $38,600
Gain or loss on disposal = Sales proceed - Net book value = $23,730 - $38,600 = $14,870 loss
The journal entries will be as follows:
Date Particulars Dr ($) Cr ($)
July 31 Cash 23,730
Accumulated depreciation 41,100
Loss on disposal of equipment 14,870
Equipment 79,700
(To record disposal of equipment.)
Sam and Amanda moved from Hawaii to Iowa. Their grocery budget has remained at $100 per month, but the price of their groceries has dramatically gone down due to cost of living! They used to pay $10 for a dozen organic eggs (let Q1 represent the number of dozens of eggs) but now they pay $5. For frozen pizza (Q2) they paid $15 but now they are paying $10. What is Sam and Amanda's new budget constraint?
Answer:
A budget constraint is the amount of goods and service that a person or firm can purchase given their income.
In this case, the budget constraint of Sam and Amanda is determined by their income: that is to say, their monthly grocery budget, which is $100 per month.
Because a dozen organic egg costs $5, and a frozen pizza costs $10, if we suppose that Sam Amanda will spend half their income on each item, their budget constraint will allow them to buy the following amounts:
$50 / $5 = 10 dozen organic eggs
$50 / $10 = 5 frozen pizzas.
Long-Term Solvency Analysis The following information was taken from Station Company's balance sheet: Fixed assets (net) $940,500 Long-term liabilities 209,000 Total liabilities 658,350 Total stockholders' equity 731,500 Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. If required, round your answers to one decimal place. a. Ratio of fixed assets to long-term liabilities b. Ratio of liabilities to stockholders' equity
Answer:
a. Fixed Assets to long liability ratio is 4.5 times
b. Liabilities to stockholders equity is 0.9 times
Explanation:
(a)
Fixed Assets to long liability determines that how much the fixed asset of the company is as compared to long term liabilities.
Fixed Assets to long liability = Fixed Asset / Long Term Liabilities
Fixed Assets to long liability = $940,500 / $209,000 = 4.5 times
(b)
Ratio of Liabilities to stockholders equity determines the ratio of all the liabilities of the company as compared to stockholders equity.
Liabilities to stockholders equity = Liabilities / stockholders equity
Liabilities to stockholders equity = 658,350 / 731,500 = 0.9 times
Xu owns two investments, A and B, that have a combined total value of $40,000. Investment A is expected to pay $28,000 in 3 years from today and has an expected return of 7.1 percent per year. Investment B is expected to pay $36,000 in T years from today and has an expected return of 5.5 percent per year. What is T, the number of years from today that investment B is expected to pay $36,000?
Answer:
The number of years is [tex]T =13 \ years[/tex]
Explanation:
From the question we are told that
The total value of the investment A and B is [tex]k =[/tex]$40, 000
The future value of A is [tex]F_A =[/tex]$28,000
The time period is t = 3
The expected return of A is [tex]e_A =[/tex] 7.1 % = 0.071
The future value of B is [tex]F_B =[/tex]$36,000
The time period for B is T
The expected return of B is [tex]e_B =[/tex]5.5 % = 0.055
The present value of investment A is mathematically represented as
[tex]A = \frac{F_A }{(1 + e_A) ^t}[/tex]
substituting values
[tex]A = \frac{ 28000 }{(1 + 0.071) ^3}[/tex]
[tex]A =[/tex]$ 22792.38
The present value of B is mathematically evaluated as
[tex]B = k - A[/tex]
substituting values
B = 40, 000 - 22792.38
B = $17,208
The future value of B is
[tex]F_B = B * (1 + e_B)^T[/tex]
substituting values
[tex]36,000 =17,208 * (1 + 0.055)^T[/tex]
[tex]2.0921 = (1.055)^T[/tex]
take log of both sides
[tex]log(2.0921) =log (1.055)^T[/tex]
[tex]0.32057 = T log (1.055)[/tex]
=> [tex]T = \frac{0.3206}{0.0232}[/tex]
[tex]T =13 \ years[/tex]
When contemplating a product deletion, a firm studies customer migration patterns to determine: the profit contribution of the product to the firm. whether the product has outgrown its usefulness. whether the product has reached a level of maturity and saturation in the market. whether customers of the product would switch to other substitute products marketed by the same firm.
Answer: whether customers of the product would switch to other substitute products marketed by the same firm.
Explanation:
Customers regular move from one good to another or from one good to it's substitutes in a process called Customer Migration.
There are various reasons for this such as affordability, change in technology, trends and the like.
When a company contemplates ending a product line and decides to study customer migration patterns, they are checking to see what the customer will switch to when the product is deleted. If they make substitutes to the product to be deleted, they will be checking to see if the customers will switch to these substitutes if the product line is ended.
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:
Initial investment (2 limos) $720,000
Useful life 10 years
Salvage value $100,000
Annual net income generated 59,040
LLT's cost of capita 14%
Assume straight line depreciation method is used.
Required:
Help LLT evaluate this project by calculating each of the following:
1. Accounting rate of return.
2. Payback period.
3. Net present value.
4. Without making any calculations, determine whether the IRR is more or less than 15%.
A. Greater than 14%.
B. Less than 14%.
Answer:
1) Accounting rate of return is 8.2%
2) Payback period is 5.95 years
3) Net present value (NPV) is ($88,643.26)
4) Option B
Explanation:
Initial Investment = $720,000 , Useful life = 10 years , Salvage Value = $100,000
Annual Net Income generated = $59,040 , Cost of capital = 14%
Depreciation = ($720,000 - $100,000) ÷ 10 = $62,000
Annual Cash flows = $59,040 + $62,000 = $121,040
1) Accounting rate of return = (Annual Net Income ÷ Average Investment) × 100
= (59,040 ÷ 720,000) × 100
= 8.2%
2. Payback Period = Initial Investment ÷ Annual Cashflows
= 720,000 ÷ 121,040
= 5.95 years.
3. PV of cash flows = 121,040 × PVAF(14% for 10 years)
= 121,040 × 5.2161
= $631,356.74
Less: PV of cash outflow = $720,000
Net present value (NPV) = (88,643.26)
4. If IRR = Discount rate, then NPV = 0
If IRR < Discount Rate, Then NPV is negative
If IRR > Discount Rate, Then NPV is positive
Here NPV is negative, so IRR is less than discount rate i.e.14%
1. The Accounting rate of return is 8.20%.
2.The Payback period of the project is 5.9 years.
3.The NPV of the project is $-88,641.36
4. The IRR of the project is less than 14%
Accounting rate of return = (Annual Net Income ÷ Average Investment) × 100
($59,040 / $720,000) x 100 = 8.20%
In order to determine the payback and net present value, the cash flow of the investment has to be determined.
Cash flow = net income + depreciation
Deprecation = (cost of asset - salvage value) / useful life
($720,000 - $100,000) / 10 = $62,000
Cash flow = $62,000 + 59,040 = $121,040
Payback period = Amount invested / cash flow
$720,000 / $121,040 = 5.9 years
Net present value would be determined using a financial calculator
Cash flow in year 0 = $-720,000
Cash flow in year 1 - 10 = $$121,040
I = 14%
NPV = $-88,641.36
The IRR is less than 14% because the NPV is negative.
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On April 1, 2019, Lester Company received a bank statement that showed a balance of $8,950. Lester showed an $8,000 checking account balance. The bank did not return check No. 115 for $750 or check No. 118 for $370. A $900 deposit made on March 31 was in transit. The bank charged Lester $20 for check printing and $250 for NSF checks. The bank also collected a $1,400 note for Lester. Lester forgot to record a $400 withdrawal at the ATM. Prepare a bank reconciliation.
Answer:
Bank Reconciliation Statement
Balance at Bank as per updated Checking Account $8,730
Add Unpresented Cheques
Check No. 115 $750
Check No. 118 $370 $1,120
Less Lodgements not yet credited ($900)
Balance as per Bank Statement $8,950
Explanation:
The first Step is to update the Bank Balance in the Cash Book as follows :
Debit :
Cash Balance before adjustments $8,000
Credit Transfers $1,400
Totals $9,400
Credit:
Printing Charges $20
Dishonored Cheques $250
Error; Atm Drawings $400
Balance as per updated Cash Book $8,730
Totals $9,400
Then, Prepare a Bank Reconciliation Statement
Bank Reconciliation Statement
Balance at Bank as per updated Checking Account $8,730
Add Unpresented Cheques
Check No. 115 $750
Check No. 118 $370 $1,120
Less Lodgements not yet credited ($900)
Balance as per Bank Statement $8,950
Joe and Rich are both considering investing in a project that costs $25,500 and is expected to produce cash inflows of $15,800 in Year 1 and $15,300 in Year 2. Joe has a required return of 8.5 percent but Rich demands a return of 12.5 percent. Who, if either, should accept this project?
Answer:
Both Joe and Rich should accept the project.
Explanation:
The investment amount for project = $25500
First year cash inflow (C1) = $15800
Second year cash inflow (C2) = $15300
Interest rate for Joe (r1) = 8.5 percent or 0.085
Interest rate for rich (r2) = 12.5 percent or 0.125
Now we have to find the present value of future inflow and then subtract the initial investment amount.
Net present value in the case of Joe:
Net present value = Present value of cash inflows – initial investment
[tex]\text{ Net present value } = \frac{C1}{(1+ r1)^{n}} + \frac{C2}{(1+ r2)^{n}} – 25500 \\= \frac{15800}{(1+ 0.085)^{1}} + \frac{15300}{(1+ 0.085)^{2}} – 25500 \\= 2058.88 \\\text{ Net present value in the case of rich.} \\\text{ Net present value } = \frac{C1}{(1+ r1)^{n}} + \frac{C2}{(1+ r2)^{n}} – 25500 \\= \frac{15800}{(1+ 0.125)^{1}} + \frac{15300}{(1+ 0.125)^{2}} – 25500 \\= 633.33[/tex]
Since the net present value of Joe and Rich is positive so both project should be considered.
g Romans sells the Regular blend for $3.60 per pound and the DeCaf blend for $4.40 per pound. Romans would like to place an order for the Brazilian and Colombian coffee beans that will enable the production of 1000 pounds of Romans Regular coffee and 500 pounds of Romans DeCaf coffee. The production cost is $0.80 per pound for the Regular blend. Because of the extra steps required to produce DeCaf, the production cost for the DeCaf blend is $1.05 per pound. Packaging costs for both products are $0.25 per pound. Formulate a linear programming model that can be used to determine the pounds of Brazilian Natural and Colombian Mild that will maximize the total contribution to profit.
Romans Food Market, located in Saratoga, New York, carries a variety of specialty foods from around the world. Two of the stores leading products use the Romans Food Market name: Romans Regular Coffee and Romans DeCaf Coffee. These coffees are blends of Brazilian Natural and Columbian mild coffee beans, which are purchased from a distributor from New York City. Because Romans purchases large quantities the coffee beans may be purchased om an as need basis for the price of 10% higher than the market price the distributor pays for the beans. The current market price is $0.47 per pound for Brazilian Natural and $0.62 per pound for Columbian Mild The composition of each coffee blend are as follows:
Bean Regular DeCaf Blend
Brazilian Natural 75% 40%
Columbian Mild 25% 60%
Romans sells the Regular blend for $3.60 per pound and the DeCaf blend for $4.40 per pound. Romans would like to place an order for the Brazilian and Colombian coffee beans that will enable the production of 1000 pounds of Romans Regular coffee and 500 pounds of Romans DeCaf coffee. The production cost is $0.80 per pound for the Regular blend. Because of the extra steps required to produce DeCaf, the production cost for the DeCaf blend is $1.05 per pound. Packaging costs for both products are $0.25 per pound. Formulate a linear programming model that can be used to determine the pounds of Brazilian Natural and Colombian Mild that will maximize the total contribution to profit.
Answer:
[tex]\mathbf{Max \ Z = 2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD}[/tex]
Explanation:
From the given information:
The total revenue can be illustrated as :
Total revenue = 3.6 BR + 4.4 BD + 3.6 CR + 4.4 CD
On the other hand; the total cost of the beans is:
= 1.1 (0.47 BR + 0.47 BD + 0.62 CR + 0.62 CD)
= 0.517 BR + 0.517 BD + 0.682 CR + 0.682 CD
Also; The total production cost is :
= 0.8 BR + 1.05 BD + 0.8 CR + 1.05 CD
The total profit = Total revenue - Total Cost of Beans - Total Production Cost
The total profit = [tex]\left[\begin{array}{}3.6 BR + 4.4 BD + 3.6 CR + 4.4 CD\\- (0.517 BR + 0.517 BD + 0.682 CR + 0.682 CD)\\-(0.8 BR + 1.05 BD + 0.8 CR + 1.05 CD)\end{array}\right][/tex]
The total profit = 2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD
Therefore the linear programming model represents the Objective function of the total profit as:
[tex]\mathbf{Max \ Z = 2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD}[/tex]
Bolka Corporation, a merchandising company, reported the following results for October: Sales $ 4,096,400 Cost of goods sold (all variable) $ 2,194,500 Total variable selling expense $ 238,700 Total fixed selling expense $ 144,700 Total variable administrative expense $ 238,700 Total fixed administrative expense $ 282,900 The contribution margin for October is:
The contribution margin for October should be considered as the $1,424,500.
Calculation of the contribution margin:
Contribution margin = Sales - Cost of goods sold + Total variable selling expense + Total variable administrative expense
= $4,096,400- $2,194,500 + $238,700 + $238,700
= $4,096,400 - $2,671,900
= $1,424,500
Therefore for computing the contribution margin we simply applied the above formula and we have not consider the Total fixed administrative expense as its a fixed expenses.
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Aborkian Co. is forecasting sales of 75,000 units of product for November. To make one unit of finished product, seven pounds of raw materials are required. Actual beginning and desired ending inventories of raw materials and finished goods are:
Questions
Aborkian Co. is forecasting sales of 75,000 units of product for November. To make one unit of finished product, seven pounds of raw materials are required. Actual beginning and desired ending inventories of raw materials and finished goods are:
November 1 November 30
(Actual) (Desired)
Raw materials (pounds) 91,400 86,400
Finished goods 8,500 9,600
(a.) Calculate the number of units of product to be produced during November.
(b.) Calculate the number of pounds of raw materials to be purchased during November
Answer:
Number of units to be produced= 76,100 units
Raw materials to be purchased= 527,700 pounds
Explanation:
Units to be produced
Number of units to be produced = sales budget + closing inventory - opening inventory
= 75,000 + 9,600 - 8,500 = 76,100 units
Number of units to be produced= 76,100 units
Raw materials purchase budget
Raw materials to be purchased = Raw materials to be used + closing inventory of raw materials - opening inventory of raw materials
Raw material usage = production units × standard pounds per unit
= 76,100× 7 =532700 pounds
Raw materials to be purchased = 532,700 +86,400 - 91,400=527700
Raw materials to be purchased= 527,700 pounds
Assume Hadley Co has the following purchases of inventory during the first month of operations Number of Units Cost per unit First Purchase 310 3 Second Purchase 220 4.9 Assuming Hadley sells 290 units at $11 each, what is the value of her ending inventory if she uses weighted average
Answer:
Ending inventory cost= $948
Explanation:
Giving the following information:
First Purchase= 310 units for $3 each
Second Purchase= 220 units for $4.9 each
Units sold= 290
First, we need to calculate the weighted average cost:
Weighted average cost= (3 + 4.9)/2= $3.95
Ending inventory (units)= 240 units
Now, ending inventory cost:
Ending inventory cost= 240*3.95= $948
A company that uses the perpetual inventory system sold goods to a customer for cash for $3,000. The cost of the goods sold was $1,000. Which of the following journal entries correctly records this transaction?
A. Cost of Goods Sold $3,000
Sales Revenue $3,000
B. Merchandise Inventory $3,000
Sales Revenue $3,000
C. Accounts Receivable $3,000
Cash $3,000
D. Cash $3,000
Sales Revenue $3,000
Cost of Goods Sold $1,000
Merchandise Inventory $1,000
Answer:
D.
Cash $3,000
Sales Revenue $3,000
Cost of Goods Sold $1,000
Merchandise Inventory $1,000
Explanation:
Perpetual Inventory system calculates the cost of inventory after every sale. Thus on the date of sale we must always recognize two things : 1. The Revenue incurred and 2. The cost of goods sold.
The Journal Entries for the question you have provided will be :
Cash $3,000 (debit)
Cost of Goods Sold $1,000 (debit)
Sales Revenue $3,000 (credit)
Merchandise Inventory $1,000 (credit)
Assets totaled $24,750 and liabilities totaled $8,550 at the beginning of the year. During the year, assets decreased by $3,550 and liabilities increased by $2,850. What is the amount of the change in stockholders' equity during the year?
Answer:
Amount of the change in stockholders' equity during the year is $6,400 (Decrease)
Explanation:
Assets = $24,750
Liabilities = $8,550
Equity = Assets - Liability
Equity at Beginning : $24,750 -$8,550 = $16,200
Equity at End : ($24,750 - $3,550) - ($8,550+$2,850)
= $21,200 - $11,400
= $9,800
Change in Stock holder's Equity : $16,200 -$9,800
= $6,400(Decrease)