Answer:
the required return is 10.94%
Explanation:
The computation of the required return is shown below:
Po = D1 ÷ (Ke - g)
$49.2 = $2.8 ÷ (Ke-.0525)
Ke-.0525 = $2.8 ÷ $49.2
= 0.0569105691
Ke = 0.0569105691+.0525
= 10.94%
hence, the required return is 10.94%
Answer:
10.94%
Explanation:
(Dividend/price)+growth rate
(2.80/49.20)+0.0525=10.94%
The sticker price for a new car takes into account the compensation made to the salesperson who managed the sale. This compensation is an example of what type of cost?
A): dealer cost
B): shipping cost
C): manufacturing cost
D): sales commission
Answer:
D
Explanation:
cuz its D
This compensation is an example of sales commission cost. Thus, option D is correct.
What is manufacturing cost?The expenses incurred during the creation of a product are known as manufacturing costs. Direct material, direct labor, and manufacturing overhead costs are included in these expenses. Normally, the costs are shown as separate line items in the revenue statement. These expenses are incurred by an entity during the production process.
The materials employed in a product's construction are referred to as direct materials. The amount of the production process's labor costs that is specifically attributed to a unit of production is known as direct labor. The application of manufacturing overhead costs to units of production depends on many alternative allocation schemes, such as the number of direct labor hours or machine hours used.
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Blaze operates a restaurant in Cleveland. He travels to Columbus to investigate acquiring a business. He incurs expenses as follows: $1,500 for travel, $2,000 for legal advice, and $3,500 for a market analysis. Based on the different tax consequences listed below, describe the circumstances that were involved in Blaze's investigation of the business.
Answer: See explanation
Explanation:
Here are the tax consequences listed below:.
1. Blaze deducts the $7000 of expense
2. Blaze cannot deduct any of the $7000 of expense.
3. Blaze deducts $5000 of the expenses and ammortizes the $2000 over a period of 180 months.
1. Blaze deducts the $7000 of expense
The entire expenses of $7000 can be deducted by Blaze because the expenses have been incurred for the investigation of the business acquiring.
2. Blaze cannot deduct any of the $7000 of expense
Blaze cannot be able to deduct any of the $7000 of expense in a case whereby the business that was investigated wasn't a restaurant and in this case, he didn't acquire it.
3. Blaze deducts $5000 of the expenses and ammortizes the $2000 over a period of 180 months.
In this case, the business wasn't a restaurant but he still ended up getting the business.
Wearing a headset or earplugs while driving is legal
A. As long as you keep the volume down
B. For any person operating an authorized emergency vehicle
C. Even if you keep both ears covered
D. Only if your radio is broken
Here are a series of Mondelēz’s publicly announced objectives for enhancing sustainability:
Reducing production waste to landfill sites by 60 percent
Reducing our energy and GHG in manufacturing
Educating employees to reuse water and improve processes
Reducing the impact of our operations
Addressing child labor in the cocoa supply chain
Reducing packaging material
Eliminating 50 million pounds of packaging material
Buying certified commodities
Which of these are best considered strategic plans? Tactical plans? Operational plans? Which ones might qualify as programs? Projects? Policies? Be sure to explain your reasoning for each item.
Answer:
Strategic plans are made by the upper echelon of a company's management. They are long term and done with the intent to achieve company wide missions and visions.
Tactical plans come next and are made by the middle-level managers. They are not as long term as strategic plans and are typically less than a year but more than half a year. They are done to meet the strategic plans.
Operational plans are not very long term and are typically under half a year. They aim to meet strategic plans and are done by low-level management. It is usually detailed as it aimed at a particular goal.
Strategic Plans
Reducing production waste to landfill sites by 60 percent.Reducing the impact of our operations. Addressing child labor in the cocoa supply chain.Tactical Plans
Reducing our energy and GHG in manufacturing.Educating employees to reuse water and improve processes.Reducing packaging material.Operational Plans
Eliminating 50 million pounds of packaging material.Buying certified commodities.Projects are specific and so have specific goals as they aim to achieve a particular mission. They have a defined start and finish.
Programs on the other hand are a group of projects which would produce individual results that when put together, contribute to the larger goal of the program.
Policies are the guidelines that a company institutes in order to meet their goals.
Projects
Reducing production waste to landfill sites by 60 percent.Eliminating 50 million pounds of packaging material.Educating employees to reuse water and improve processes.Policies
Buying certified commodities.Reducing packaging material.Addressing child labor in the cocoa supply chain.Programs
Reducing our energy and GHG in manufacturing.Reducing the impact of our operations.Based on the information given, the strategic plans will be:
Reducing production waste to landfill sites by 60 percent.Reducing the impact of our operations.Addressing child labor in the cocoa supply chain.The tactical plans will be:
Reducing our energy and GHG in manufacturing.Educating employees to reuse water and improve processes.Reducing packaging material.The operational plans will be:
Eliminating 50 million pounds of packaging material.Buying certified commodities.The projects are:
Reducing production waste to landfill sites by 60 percent.Eliminating 50 million pounds of packaging material.Educating employees to reuse water and improve processes.The policies are:
Buying certified commodities.Reducing packaging material.Addressing child labor in the cocoa supply chain.The programs are:
Reducing our energy and GHG in manufacturing.Reducing the impact of our operations.Strategic plans are used for the determination of the vision of the company and the identification of goals.
Tactical plans are important to achieve strategic plans. Operational plans are required for planning strategic objectives.
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Thomlin Company forecasts that total overhead for the current year will be $11,898,000 with 156,000 total machine hours. Year to date, the actual overhead is $7,955,000 and the actual machine hours are 85,000 hours. The predetermined overhead rate based on machine hours is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours. a.$140 per machine hour b.$51 per machine hour c.$76 per machine hour d.$94 per machine hour
Answer:
Predetermined manufacturing overhead rate= $76.27 per machine hour
Explanation:
Giving the following information:
Thomlin Company forecasts that total overhead for the current year will be $11,898,000 with 156,000 total machine hours.
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 11,898,000 / 156,000
Predetermined manufacturing overhead rate= $76.27 per machine hour
During the current month, a company that uses job order costing purchases $52,000 in raw materials for cash. It then uses $22,000 of raw materials indirectly as factory supplies and uses $20,100 of raw materials as direct materials. Prepare journal entries to record these three transactions
Answer:
Account Title Debit Credit
Raw materials inventory $52,000
Cash $52,000
Account Title Debit Credit
Factory Supplies $22,000
Raw materials $22,000
Account Title Debit Credit
Work in Process inventory $20,100
Raw materials $20,100
On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. What was the amount of the credit to depreciation expense on the 2020 consolidation worksheet
Answer:
$750
Explanation:
Calculation for What was the amount of the credit to depreciation expense on the 2020 consolidation worksheet
2020 Credit to depreciation expense=[($60,000/5 years )-($60,000-$25,000/5 years)]/5 years*9/12
2020 Credit to depreciation expense=[($60,000/5 years )-($35,000/5 years)]/5 years*9/12
2020 Credit to depreciation expense=[($12,000-$7,000)/5 years*9/12]
2020 Credit to depreciation expense=$5,000/5 years*9/12
2020 Credit to depreciation expense=$750
Therefore the amount of the credit to depreciation expense on the 2020 consolidation worksheet is $750
Entertainer's Aid plans five annual colossal concerts, each in a different nation's capital. The concerts will raise funds for an endowment which would provide the World Wide Hunger Fund with $3,000,000 per year into perpetuity. The endowment will be given at the end of the fifth year. The rate of interest is expected to be 9 percent in all future periods. How much must Entertainer's Aid deposit each year to accumulate to the required amount
Answer: $5,569,758.43
Explanation:
First you need to find the present value of the Perpetuity at the end of the fifth year.
Present value of Perpetuity = Amount / Interest rate
= 3,000,000 / 9%
= $33,333,333.33
Given an interest rate of 9%, Entertainer's aid should deposit an amount per year that would lead to the endowment having $33,333,333.33 at the end of the fifth year.
Future value of annuity = Annuity * Future value of annuity interest factor, 9%, 5 years
33,333,333.33 = Annuity * 5.9847
Annuity = 33,333,333.33 / 5.9847
= $5,569,758.43
Managers have to consider several contingencies when deciding on the best arrangements for their organizations. One such contingency is the organization's environment, and managers must determine whether a mechanistic or an organic structure will work better under their particular circumstances. This activity is important because the type of organizational structure chosen can be critical to an organization's success. The goal of this exercise is to test your knowledge of the characteristics of these two different organizational structures. Select the most appropriate category (mechanistic or organic structure) for each step of the characteristics of organizations.
1. Few rules and procedures (Click to select)
2. Narrow span of control (Click to select)
3. Specialized tasks (Click to select)
4. Many teams or task forces (Click to select)
5. Many rules and procedures (Click to select)
6. Decentralized hierarchy of authority (Click to select)
7. Flatter structure (Click to select)
8. Informal communication (Click to select)
9. Taller structure (Click to select)
10. Centralized hierarchy of authority (Click to select)
11. Wider span of control (Click to select)
12. Shared tasks (Click to select)
13. Formalized communication (Click to select)
14. Few teams or task forces (Click to select)
15. Best for companies operating in stable environments. (Click to select)
16. Best for companies that need to respond to rapidly changing consumer tastes. (Click to select)
Answer:
Mechanistic structures are more centralized in nature. This makes them rigid as decisions come from the top but because there is little micro-management, the company will rely on clear rules for employees to get things done. Communication is vertical.
Organic structures on the other hand, are more decentralized. Communication is horizontal but goes vertical as well and rules are more flexible.
Mechanistic Structure:
Narrow span of control Specialized tasksMany teams or task forcesMany rules and proceduresTaller structureCentralized hierarchy of authorityFormalized communication Best for companies operating in stable environments.Organic Structures
Few rules and proceduresDecentralized hierarchy of authority.Flatter structure.Informal communication Wider span of controlShared tasks Few teams or task forces Best for companies that need to respond to rapidly changing consumer tastes.so how do you make customers come and buy ur charm bracelets how do u advertise it.
Answer:
You could make advertisements and post them around your town. Ask your friends to spread the word in your school. Make a website. Read on how to start a small buisness.
Explanation: GOOD LUCK
Sage Hill Inc. wishes to lease machinery to Thiensville Company. Thiensville wants the machinery for 4 years, although it has a useful life of 10 years. The machinery has a fair value at the commencement of the lease of $47,000, and Sage Hill expects the machinery to have a residual value at the end of the lease term of $27,000. However, Thiensville does not guarantee any part of the residual value. Thiensville does expect that the residual value will be $45,000 instead of $27,000.
Required:
What would be the amount of the annual rental payments Sage Hill demands of Thiensville, assuming each payment will be made at the end of each year and Sage Hill wishes to earn a rate of return on the lease of 6%?
Answer:
bud im sorry but cay you simplify this sentance
Explanation:
$29198 / [ 1 - ( 1 + 0.06 )-4 / 0.06 ]
= $29198 / 3.46510561283
= $8426 [ Rounded off to zero decimal places ]
bud i tried but i think its wrong im only in 6th
Joan runs a drop-in play center and until recently she was the only business in town where families could find reasonably-priced entertainment for their children. Joan learned that two fast-food restaurants with play areas are being built nearby so she is coming up with ways to convince her customers that her center is preferable. Which of Porter's five competitive forces is Joan specifically worried about
Answer:
The answer is "Threats of substitute products or services "
Explanation:
The threat of substitutes is that other goods can be imported outside a consumer's industry. It happens whenever companies in one sector were expected to fight with firms that manufacture substitute products or services. Another of the five forces that decide the strength of competition in the industry, was its risk of substitutes. When substitute products offer a reasonably close number of benefits at competitive prices, therefore the reasonable structure of the industry threatens.
Here are three things you could do if you do not attend your economics class: go to a free outdoor yoga class with some friends (you value this at $15), go on a hike (you value this at $13), or go in to work (you could earn $20 during the economics class). The opportunity cost of going to your economics class is:
Answer:
C
Explanation:
$25 dollars because this is the highest valued alternative forfeited
The Opportunity Cost of going to economics is $20 (if you go in for work) because that’s the the best alternative
What is Opportunity Cost?In microeconomic theory, the opportunity cost of a particular activity option is the loss of value or benefit that would be incurred by engaging in that activity, relative to engaging in an alternative activity offering a higher return in value or benefit.
What is meant by Economics?Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics is a field which analyzes what's viewed as basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions.
Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the economy as a system where production, consumption, saving, and investment interact, and factors affecting it:
employment of the resources of labour, capital, and land, currency inflation, economic growth, and public policies that have impact on these
elements.
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Vaughn Manufacturing, has 14900 shares of 4%, $100 par value, cumulative preferred stock and 60000 shares of $1 par value common stock outstanding at December 31, 2021. There were no dividends declared in 2019. The board of directors declares and pays a $102000 dividend in 2020 and in 2021. What is the amount of dividends received by the common stockholders in 2021
Answer:
$25,200
Explanation:
The computation of the dividend received by the common stockholder for the year 2021 is shown below:
The Annual preferred dividend is
= 14,900 × $100 × 4%
= $59,600
Dividend due to preferred dividend in 2020
= Arrears of 2019 + Dividend of 2020
= $59,600 + $59,600
= $119,200
But the Dividend Paid in 2020 is $102,000
Arrears of dividend at the end of 2020 (Preferred) is
= $119,200 - $102,000
= $17,200
Now,
Dividend paid to preferred in 2021 = 2021 dividend + Arrears
= $59,600 + $17,200
= $76,800
Now Dividend paid to Common stockholders in 2021 is
= Total dividend - Dividend paid to preferred in 2021
= $102,000 - $76,800
= $25,200
I need help with this question
Answer:
still need help ?
Explanation:
Answer:
true
Explanation:
urphy Inc., which produces a single product, has provided the following data for its most recent month of operation:Number of units produced 14,600Variable costs per unit:Direct materials $ 137Direct labor $ 75Variable manufacturing overhead $ 4Variable selling and administrative expenses $ 11Fixed costs:Fixed manufacturing overhead $ 846,800Fixed selling and administrative expenses $ 233,600The company had no beginning or ending inventories.Required:a. Compute the unit product cost under absorption costing.b. Compute the unit product cost under variable costing.
Answer:
Results are below.
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
Unit cost under absorption costing:
Unitary product cost= 137 + 75 + 4 + (846,800/14,600)
Unitary product cost= $274
Unit cost under variable costing:
Unitary variable product cost= 137 + 75 + 4
Unitary variable product cost= $216
MyPillow uses television advertising and wanted to see whether the TV ads reached more viewers during the daytime spots or the prime-time spots. MyPillow wanted to adjust its TV spots to reach the greatest number of viewers. To get real-time reactions, MyPillow decided to conduct mobile market research because _______. a. most people do not multitask using smartphones b. using a mobile app is difficult and confusing c. most people do not use their desktop computers while watching TV d. fewer respondents are reached than in conducting telephone research
Answer:
c
Explanation:
If MyPillow wants to get real time update, it means it wants to get update as people are watching tv. In order to reach its audience, it would be right to reach them on the medium they use while watching tv. If most people do not use their desktop computers while watching TV , it would not be appropriate to use desktop computers.
But if people watch tv and use their phone, the appropriate means of carrying this research is through mobile.
Swift Co. produces footballs. It incurred the following costs this year: Direct materials $35,000 Direct labor 31,000 Fixed manufacturing overhead 22,000 Variable manufacturing overhead 38,000 Fixed selling and administrative expenses 23,000 Variable selling and administrative expenses 14,000 What are the total product costs for the company under variable costing
Answer:
$104,000
Explanation:
With regards to the above information,
the variable costing method incorporates all variable production cost including the direct material , direct labor and variable overhead.
Given that;
Direct material = $35,000
Direct labor = $31,000
Variable manufacturing overhead = $38,000
Therefore,
Total variable cost
= $31,000 + $35,000 + $38,000
= $104,000
Simone transferred 100 percent of her stock in Purple Company to Plum Corporation in a Type A merger. In exchange, she received stock in Plum with a fair market value of $667,500 plus $667,500 in cash. Simone's tax basis in the Purple stock was $263,000. What amount of gain does Simone recognize in the exchange and what is her basis in the Plum stock she receives
Answer: $667,500 gain recognized and a basis in Plum stock of $263000
Explanation:
The amount of gain that Simone recognize in the exchange and her basis in the Plum stock she receives will be:
Gain realized = $667500 + $667500 - $263000 = $1598000
Cash Received = $667500
The Gain recognized will be the lesser amount between the gain realized and cash received which will be $667500.
Therefore, the answer is $667,500 gain recognized and a basis in Plum stock of $263000
Wilton sells softball equipment. On November 14, they shipped $3500 worth of softball uniforms to Paola Middle School, terms 1/10, n/30. On November 21, they received an order from Douglas High School for $2000 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $400 of defective merchandise. Wilton has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?
Wilton sells softball equipment. On November 14, t
A. $3500
B. $5900
C. $3100
D. $5500
Answer:
$3,100
Explanation:
Net Accounts Receivable = Received order from Douglas high school - Return from Paola middle school
Net Accounts Receivable = $3,500 - $400
Net Accounts Receivable = $3,100
So, the amount that will be recognized as net accounts receivable on the balance sheet as of November 30 is $3,100
Other financial data for the year ended December 31, 2019: Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2021. The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability. During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%. In Lamberts December 31, 2019 balance sheet, the current assets total is
Answer:
$5,055,000
Explanation:
Note: The full question is attached below
Particulars Amount
Cash $875,000
Accounts receivable $2,695,000
Less: Installments not due in 2021 ($600,000) $2,095,000
[$1,200,000 - ($150,000 * 4)]
Inventory $2,085,000
Total of current assets $5,055,000
Assume that JQH’s returns are normally distributed. The expected return for JQH is 10% and standard deviation is 5%. What is the probability of JQH stock providing a return within the range 15% to 20%?Assume that JQH’s returns are normally distributed. The expected return for JQH is 10% and standard deviation is 5%. What is the probability of JQH stock providing a return within the range 15% to 20%?2.5%16%68%13.5%none
Answer:
13.5%
Explanation:
From this question we have the following information
We have mean return = 10
Standard deviation = 5
We use this formula
Z = x - mean/standard deviation
X is between 15 and 20
15< X< 20
= 15-10/5 < Z < 20-10/5
= 1 < z < 2
Using the Statistical table,
P(z < 2) = 0.9772
P(z< 1) = 0.8413
0.9772 - 0.8413 = 0.1359 x 100
= 13.5%
The probability of JQH stock providing a return within the range 15% to 20% = 13.5%
Thank you
A restaurant chain hires two new restaurant managers. One manager is a woman, and one is a man. Both candidates are equally qualified for their positions. The restaurant chain owner wanted to save money and so he offered the job to the woman at a salary $10,000 lower than what he offered the man. This is a violation of The Equal Pay Act of 1963. Which entity, of notified, would enforce the Equal Pay Act of 1963 on behalf of these employees
Answer:
Equal Employment Opportunity Commission
Explanation:
The entity that would be involved in this case is the the EEOC. That is the equal employment opportunity commission. The violation that has occurred here is that both the man and the woman are equally qualified for this job but the owner wants to pay the woman a smaller salary compared to what he wants to pay the man. The EEOC handles such matters of discrimination to employees and workers based on gender, race, religion etc.
Personalities fit into at least one of (blank)
different categories.
A.ten
B.seven
C.three
D.five
Schickel Inc. regularly uses material B39U and currently has in stock 456 liters of the material for which it paid $2618 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.20 per liter. New stocks of the material can be purchased on the open market for $5.80 per liter, but it must be purchased in lots of 1000 liters. You have been asked to determine the relevant cost of 750 liters of the material to be used in a job for a customer. The relevant cost of the 750 liters of material B39U is:
Answer:
the relevant cost of the 750 liters of material B39U is $4,350
Explanation:
The computation of the relevant cost of the 750 liters of material B39U is shown below:
Relevant cost = Purchase price per liter × Liters needed for the job
= $5.80 per liter × 750 liters
= $4,350 .
Hence, the relevant cost of the 750 liters of material B39U is $4,350
A sample of 240 observations is selected from a normal population standard deviation of 24
What is the total cost of a 15-year mortgage if the monthly payment is $1718.70? A. $447,585.60 B.$281.683.80 C. $309, 366.00 D.
$285, 794.12
Answer:
Total Cost = $309,366
Explanation:
Given:
Number of year = 15 year
Monthly payment = $1,718.70
Find:
Total Cost
Computation:
Total Cost = Number of year x 12 months x Monthly payment
Total Cost = 15 x 12 x 1,718.70
Total Cost = $309,366
A state department of health is considering a public awareness campaign to encourage vaccination. It determines that the cost of this campaign would be $760,000 per year for the next 6 years. It estimates that the campaign would reduce rates of illness and communicable disease. At the end of the first year of the campaign, the resulting savings would be $1,000,000; the savings would decrease by $80,000 each of the following 5 years. Assuming a discounting factor of 5%, compute the benefit cost ratio.
Answer:
1.068
Explanation:
The benefit cost ratio is used to determine the profitability of an investor. It is determined by dividing the present value of benefit by the present value of cost
Benefit cost ratio (BC) = present value of benefits / present value of costs
if BC is greater than 1, the project is profitable
If BC is less than 1, the project is not profitable
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Present value of the costs
Cash flow each year from year 1 to 6 = $760,000
I = 5
PV = 3,857,525.97
Present value of benefits
Cash flow in year 1 = $1,000,000
Cash flow in year 2 = $1,000,000 - $80,000 = $920,000
Cash flow in year 3 = $920,000 - $80,000 = 840,000
Cash flow in year 4 = 840,000 - $80,000 = 760,000
Cash flow in year 5 = 760,000 - $80,000 = $680,000
Cash flow in year 6 = $680,000 - $80,000 = $600,000
I = 5%
PV BENEFIT = 4,118,252.57
BC ratio = 4,118,252.57 / 3,857,525.97 = 1.068
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Parker, Inc. has a cash balance of $20,000 on April 1. The company is now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows:
April May June
Cash collections 25000 24000 24000
Cash payments:
Purchases of direct materials 4000 5300 6200
Operating expenses 5300 6000 5300
There are no budgeted capital expenditures during the quarter. Based on the above data, calculate the projected cash balance at the end of April.
a. $41,000
b. $35,000
c. $45,000
d. $25,000
Answer:
$35,700
Explanation:
Projected cash balance at the end of April = Cash Balance at the beginning of the month + Total cash collection in the month - Total cash payments during the month
Projected cash balance at the end of April = $20,000 + $25,000 - ($4,000 + $5,300)
Projected cash balance at the end of April = $35,700.
Naumann Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 190 100 % Variable expenses 38 20 % Contribution margin $ 152 80 % Fixed expenses are $110,000 per month. The company is currently selling 1,000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $56. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected
Answer:
-$8,000
Explanation:
With regards to the above, we need to compute first the variable cost per unit
Variable cost per unit = $38 per unit + $56 per unit = $94
New contribution margin per unit = $190 per unit - $94 per unit = $96
New unit monthly sales
= 1,000 units + 500 units
= 1,500 units
New total contribution margin
= 1,500 units × $96 per unit
= $144,000
The current total contribution margin
= 1,000 units × $152 per unit
= $152,000
Therefore, the change in total contribution margin and in net operating income
= New total contribution margin - Current total contribution margin
= $144,000 - $152,000
= -$8,000