Answer:
The expected return (in percent) on the portfolio is 11.8 percent.
Explanation:
The expected return on a portfolio refers to the addition of the products of weight in the portfolio and expected return of all the investment in the portfolio.
For this question, the expected return (in percent) on the portfolio can be calculated as follows:
Portfolio value = $10,375
Value of Stock A = $6,124
Value of stock B = Portfolio value - Value of stock A = $10,375 - $6,124 = $4,251
WA = Weight of stock A in the portfolio = Value of stock A / Portfolio value = $6,124 / $10,375 = 0.59, or 59%
WB = Weight of stock B in the portfolio = Value of stock B / Portfolio value = $4,251 / $10,375 = 0.41, or 41%
EA = Expected return of Stock A = 14.5%
EB = Expected return of Stock B = 7.8%
Therefore, we have:
Expected return on the portfolio = (WA * EA) + (WB * EB) = (59% * 14.5%) + (41% * 7.8%) = 11.8 percent
Therefore, the expected return (in percent) on the portfolio is 11.8 percent.
You take out a loan for $4000 at an annual interest rate of 5% (compounded annually). You must pay back the loan in 3 annual installments. How much of the principal is still outstanding after you make the first payment? g
Answer: = $2,731.14
Explanation:
First find the annual payment.
The payment will be constant so is an annuity.
Present Value of an Annuity = Payment * Present Value Interest Factor of an annuity
4,000 = Payment * PVIFA( 3 periods, 5%)
4,000 = Payment * 2.7232
Payment = 4,000 / 2.7232
Payment = $1,468.86
This annual Payment is divided into an interest component and a component going towards principal repayment.
Interest component = 5% * 4,000
= $200
Amount going to principal = 1,468.86 - 200
= $1,268.86
Amount of Principal Outstanding = 4,000 - 1,268.86
= $2,731.14
Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 4.70% per year. What is the real risk-free rate of return, r*
Answer:
2.30%
Explanation:
Data has given as:
Yield for 1 year T-bill = 7.00%
Future inflation rate = 4.7%
In order to find the risk-free rate of return we need to deduct future inflation rate from the yield for the year
Risk-free Rate of return = 1 year T-bill yield - inflation
Risk-free Rate of return = 7.00% - 4.70%
Risk-free Rate of return = 2.30%
When analyzing stages of economic development in the United States, it appears that we have entered the "tertiary stage." This is a stage marked by a shift toward:_______
A) agriculture.B) manufacturing.C) services.D) population increases.
Answer:
C) services.
Explanation:
This is easily explained to be the stepping in to a tertiary stage. As it is explained that economic development analysis stages consists of different phases and levels. This services that is been denoted in this growth in the US plays a key role in financial services, humanity, health and other visible relevant parts which help in the building and aiding of economic growth of a country's economy.
Information technology and educational services in a product offering. These services are seen to boost different parts of an economy especially in developing countries is mostly concentrated in financial services, hospitality, retail, health and human services.
Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on December 31, to record the accrued interest on the note
Answer:
The answer is
Dr: Notes Receivable $4,800
Dr: Interest Receivable $120
Cr: Sales $4,920
Explanation:
The yearly interest rate is 10%
So the interest rate for 90 days(assume 360 days make a year?
90/360 x 10%
2.5% is the interest rate for 90 days.
The interest payment for 90 days will be;
2.5% x $4,800
= $120
The entry will now be:
Dr: Notes Receivable $4,800
Dr: Interest Receivable $120
Cr: Sales $4,920
Targaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 23 percent.1. What is the company's WACC?2. What is the aftertax cost of debt?
Answer:
1. 8.41 %
2.4.62 %
Explanation:
Weighted Average Cost of Capital (WACC) is the cost of capital for all company projects.It shows the risk of the company.
WACC = Ke×(E/V) + Kp×(P/V) + Kd×(D/V)
= 0.10 × 70% + 0.05 × 5% + 0.06 × 77%× 25%
= 8.405 or 8.41 %
After tax cost of debt = Market Interest × ( 1 - tax rate)
= 0.06 × (1 - 0.23)
= 4.62 %
Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)
a) Notes payable (due in three months)
b) Unearned rent
c) Accounts payable
d) Taxes payable
Answer:
a) Notes payable = current liabilities
b) Unearned rent = current liabilities
c) Accounts payable = current liabilities
d) Taxes payable = current liabilities
Explanation:
Current Liabilities are Company`s Obligations that are due for settlement within a period of 12 months.
All the above Accounts are would be classified as current liabilities as settlement in cash or service (when in comes to unearned rent) is due within 12 months.
The nominal interest rate in Fiji is 3%, while the nominal interest rate in the U.S. is 5%. Real interest rates in both countries are 2%. According to purchasing power parity (PPP), the Fijian dollar (F$) may be expected to ________ by ________%.
Answer:
1.98%
Explanation:
The computation is shown below:-
As we know that
PPP equation i.e
Nominal Interest rate = Real interest rate + Inflation rate
Now
The Inflation rate for Fiji is
= 5% - 2%
= 3%
And, the Inflation rate for US is
= 3% - 2%
= 1%
As we can see that the inflation rate for Fiji is more than the inflation rate for US so we should be depreciated the currency by considering the inflation differential which is shown below:
= (1 + 3%) ÷ (1 + 1%) -1
= 1.98%
An entrepreneur decided to leave a job that pays $50,000 a year to start a business. These lost wages would be considered ______________ . g
Answer:
These lost wages would be considered as opportunity cost
Explanation:
The lost wages would be considered as opportunity cost .
Opportunity cost is the value of the next best alternative forgone in favor of a decision. The decision of the entrepreneur to start a business of his own would mean forgoing the wages from his paid employment.
Hence, the lost wages of $50,000 becomes an opportunity cost to the decision.
These lost wages would be considered as opportunity cost
You purchased a share of stock for $50. Two years later you received $2 as dividend and sold the share for $59. What was your holding period return
Answer:
The answer is =22%
Explanation:
Holding period return is the total return from asset or investment portfolio over a period of time. Holding period return is expressed as a percentage.
Its formula is:
[(value at the end of the period- original value) + income or dividend]/ original valuex 100
[2 + (59 - 50)] / 50x 100
(2 + 9 ) / 50x 100
11/50 x 100
=22%
Cost centers are evaluated primarily on the basis of their ability to control costs and:_______.
A) Their return on assets.
B) Residual income.
C) The quantity and quality of the services they provide.
D) Their contribution margin ratio.
Answer:
C.
The quality and quantity of the services they provide
Explanation:
When we talk of cost centers in an organization, we refer to such as departments that does not contribute to the overall profitability of the organization but still cost the organization some amount to operate.
What this means is that although, they give no profit to the organization, they add to the total bill of the organization.
So how do we evaluate them?
Since they are not here for profitability, the measure of how they are relevant to the company is measured on two basis.
They are evaluated on their ability to control costs and also the quality and quantity of the services these centers provide
Work in process inventory increased by $20,000 during the current year. Cost of goods manufactured was $180,000. Total manufacturing costs incurred are a.$189,000 b.$198,000 c.$200,000 d.$160,000
Answer:
The answer is $200,000
Explanation:
Total manufacturing costs incurred =
Increase in Work in process inventory +
Cost of goods manufactured
Where Increment in Work in process inventory equala $20,000
Cost of goods manufactured equals $180,000
$20,000 + $180,000 = $200,000
Total manufacturing costs incurred are therefore equals $200,000
In the Unified Process (UP) methodology, "most of the Requirements activities" occurs during the _____ phases.
Answer:
Inception and Elaboration phases
Explanation:
INCEPTION PHASES can be defined as the phase in which the vision of the end-product is been define as well as the associated business case and as well enables the defining the overall scope of a project.
The ELABOTATION PHASE on the other hand can be seen as the phase which help to refine the definition of a product as well help to develop a more precise plan for its development as well as the deployment.
Therefore In the Unified Process (UP) methodology, "most of the Requirements activities" occurs during the INCEPTION AND ELABORATION phases because unified process is a software development process that enables as well uses the UML language to help represent models or type of the software system to be developed.
Use the following information to determine this company's cash flows from financing activities.
A. Net income was $473,000.
B. Issued common stock for $74,000 cash.
C. Paid cash dividend of $13,000.
D. Paid $125,000 cash to settle a note payable at its $125,000 maturity value.
E. Paid $119,000 cash to acquire its treasury stock.
F. Purchased equipment for $86,000 cash.
Use the above information to determine this company's cash flows from financing activities.
Answer:
The answer is ($183,000)
Explanation:
This section deals with cash flows used to fund(e.g borrowing and repayment of loans) the business
Statement of cash flow(Partial)
Issued common stock for cash----------------------------------------------------------$74,000
Paid cash dividend-------------- ($13,000)
Paid cash to settle a note payable -----------------------------------------------($125,000)
Paid cash to acquire its treasury stock----------------------------------------($119,000)
Net cash flow from financing activities-----------------------------------------($183,000)
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in __________.
Answer:
Long-run equilibrium.
Explanation:
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in long-run equilibrium.
In a perfectly competitive market in long-run equilibrium, a long-run equilibrium avails firms the opportunity to adjust all inputs and all fixed costs are maximized. Also, it's characterized by free entry and exit, as such there isn't a fixed number of firms. This simply means that, since the number of firms in a long-run equilibrium can change, a firm must exit the market as a result of losses i.e when the firm is unable to cover its fixed costs in the long-run while new firms are allowed entry into the market when it anticipates potential profits or gains.
However, the firms always strive to maximize profits by increasing their level of output, such that P = MC. Also, the firms wouldn't be willing to leave or enter into the market because they are not making any profit, such that P=AC.
In a nutshell, in the long run equilibrium P=MR=MC and P=AC.
Where, P represents the price.
Answer:
The correct answer is: long-run equilibrium.
Explanation:
To begin with, the market that is refered in the question is a perfect competitive one, you can tell by the fact that the price equals the marginal revenue(MR) and that equals the marginal costs(MC) and also the price equals the average cost and that combination only happens in the competitive market and therefore that the relationship established happen when that industry is in the long run equilibrium and there is no incentive to leave or join the market.
Which method of business buying is most likely to be used when the products being purchased are standardized based on certain characteristics
Answer:
Description
Explanation:
The description method of business buying is when the seller provides the list of features that the product should have and the seller has to provide a product that fulfills those characteristics. It is used when the product need to have certain features according to the company's needs. Because of this, the answer is that the method of business buying that is most likely to be used when the products being purchased are standardized based on certain characteristics is description.
Landers Flynn Inc. has 1,000 shares of $5 cumulative preferred stock outstanding. Dividends were not paid last year. The corporation also has 5,000 shares of common stock outstanding. Landers Flynn declared a $14,000 cash dividend to be paid in the current year.
Required:
Calculate the amount of dividends received by
1. the preferred stockholders;
2. the common stockholders.
Answer:
The preferred stockholders $10,000
Common stockholders $4,000
Explanation:
The cumulative effect of the preferred stock is that the holders are entitled to arrears of dividends, in other words, they would receive this year last year's dividends in addition to current year's.
annual preferred stock dividends=dividend per share*number of preferred stock.
annual preferred stock dividends=$5*1000=$5000
dividends for 2 years=$5000*2=$10,000
common stock dividends=$14,000-$10,000=$4000
According to your text, a firm can survive and succeed in the long run if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry. When a firm strives to find ways to help its suppliers and customers reduce their costs or to increase the costs of their competitors, they are pursuing an alliance strategy.
A. True
B. False
Answer:
The answer is "False".
Explanation:
False, they are not following the alliance strategy because alliance strategy exhibits the process that works for mutual benefits. Alternatively, it occurs when at least two organizations join hands together for mutual benefit but in the question, a firm finds a way to increase the costs of its competitors. Therefore, this is not the case of alliance strategy.
Assume the money supply is $800, the velocity of money is 8, and the price level is 2. Using the quantity theory of money: a. Determine the level of real output. $ b. Determine the level of nominal output. $ c. Assuming velocity remains constant, what will happen if the money supply rises 20 percent
Answer:
a. Real output = 3200
b. The nominal output = 6400
c. The real output increases with an increase in 20% money supply.
Explanation:
Money supply = $800
Velocity = 8
The price level = 2
The quantity theory is as follows:
Money supply × Velocity = Price level × Real output
800 × 8 = 2 × Real ouput
Real output = 3200
b. the nominal output = Price level × Real output
the nominal output = 2 × 3200 = 6400
c. the rise in money supply = 800 × 20% = 160
new money supply = 800 +160 = 960
Money supply × Velocity = Price level × Real output
960 × 8 = 2 × Real ouput
Real output = 3840
The real output increases with an increase in 20% money supply.
Quantity theory of money = Money supply * Velocity of money = Price level * Real output
Nominal output = Price level * real output
a) Level of real output = Money supply* Velocity of money / Price level
Level of real output = $800*8 / 2
Level of real output = $6400 / 2
Level of real output = $3200
b) Nominal output = Price level * Real output
Nominal output = 2 * $3200
Nominal output = 6400
c) New money supply = $800+ %800*20/100
New money supply = $80 0+ $160
New money supply = $960
Nominal output = Money supply * Velocity of money
Nominal output = $960 * 8
Nominal output = $7680
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On January 1, 2018,MechanicsCredit Union (MCU)issued 8 %,20-yearbonds payable with face value of $ 200 comma 000.These bonds pay interest on June 30 and December 31. The issue price of the bonds is 106.Journalize the following bond transactions:
A. Issuance of the bonds on January 1, 2018.
B. Payment of interest and amortization on June 30, 2018.
C. Payment of interest and amortization on December 31, 2018.
D. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded.
Answer:
A. Issuance of the bonds on January 1, 2018.
Dr Cash 212,000
Cr Bonds payable 200,000
Cr Premium on bonds payable 12,000
B. Payment of interest and amortization on June 30, 2018.
premium on bonds payable = $12,000 / 40 coupons = $300 per coupon
Dr Interest expense 7,700
Dr Premium on bonds payable 300
Cr Cash 8,000
C. Payment of interest and amortization on December 31, 2018.
Dr Interest expense 7,700
Dr Premium on bonds payable 300
Cr Cash 8,000
D. Retirement of the bond at maturity on December 31, 2037, assuming the last interest payment has already been recorded.
Dr Bonds payable 200,000
Cr cash 200,000
On December 31, 2020, Bonita Industries has $5960000 of short-term notes payable due on February 14, 2021. On January 10, 2019, Bonita arranged a line of credit with Beach Bank which allows Bonita to borrow up to $4450000 at one percent above the prime rate for three years. On February 2, 2021, Bonita borrowed $3570000 from Beach Bank and used $1540000 additional cash to liquidate $5080000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2020 balance sheet which is issued on March 5, 2021 is
Answer:
$2,420,000
Explanation:
The computation of the current liabilities reported is shown below:
= Short term note payable due - liquidate value of short term note payable + additional cash used
= $5,960,000 - $5,080,000 + $1,540,000
= $2,420,000
First we take the difference of the short term note payable and then we added the additional cash used so that the amount of current liabilities could come
B2B co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $120,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 48,000 units of the equipment's product each year. The expected annual income related to this equipment follows.
Sales $75,000
Costs Materials, labor, and overhead (except depreciation on new equipment) 40,000
Depreciation on new equipment 10,000
Selling and administrative expenses 7,500
Total costs and expenses 57,500
Pretax income 17,500
Income taxes (40%) 7,000
Net income $10,500
Required:
a. Compute the payback period.
b. Compute the accounting rate of return for this equipment.
Answer:
a. 5.85 years
b. 17.5%
Explanation:
a. For the computation of payback period first we need to find out the annual cash flow which is shown below:-
Annual Cash Inflow = Sales - Material - Selling and Administrative Expenses - Income Tax
= $75,000 - $40,000 - $7,500 - $7,000
= $20,500
Payback period = Initial investment ÷ Annual cash flow
= $120,000 ÷ $20,500
= 5.85 years
b. The computation of the accounting rate of return is shown below:-
accounting rate of return = Net income ÷ Average investment
= $10,500 ÷ ($120,000 ÷ 2)
= $10,500 ÷ $60,000
= 17.5%
a. The payback period would be 5.85 years.
b. The accounting rate of return for the given equipment would be 17.5%.
The payback period is computed when the initial investment is divided by the annual cash flow of the business. Therefore, the annual cash flow would be derived as follows:
[tex]75,000 - $40,000 - $7,500 - $7,000\\=$20,500[/tex]
Here, material expense, selling and administrative expenses, and Income tax is all deducted from the total sales.
Now, the payback period is calculated below:
[tex]\frac{120,000}{20,500} \\=5.85[/tex]
Finally, the accounting rate of return computation would be:
[tex]\frac{10,500}{60,000} \\=0.175*100\\=17.5[/tex]
Here, the net income is divided by average investment, that is:
[tex]\frac{120,000}{2} \\=60,000[/tex]
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"Smokers are more likely to be murdered than nonsmokers." This statement is an example of: Select one: a. the fallacy of unintended consequences:. b. a positive economic statement. c. a normative economic statement. d. a value judgment.
Answer:
positive economic statement
Explanation:
positive economic statement are statements based on facts. they are objective, descriptive and measurable.
The information that smokers are liable to die young is based on extensive research on the effects of smoking on smokers
The stock of Wiley United has a beta of 1. The market risk premium is 11.5 percent and the risk-free rate is 2.3 percent. What is the expected return on this stock in percent
Answer:
9.41%
Explanation:
Wiley United has a beta of 1
The market risk premium 11.5%
= 11.5/100
=0.115
Risk free rate is 2.3%
= 2.3/100
= 0.023
Therefore the expected rate of return can be calculated as follows
Expected rate of return= Risk free rate+beta(market return-risk free rate)
= 0.023+1(0.115-0.023)
= 1.023(0.092)
= 0.0941×100
=9.41%
Hence the expected return on the stock is 9.41%
An analysis in which all the components of an income statement are expressed as a percentage of net sales is called blank___________ .
Answer:
Common Size Income Statement
Explanation:
In a common size income statement, each line item of the Income statement is expressed as a percentage of the sales amount for that period.
This helps in comparing performance of companies in different sectors or industries.
The next dividend payment by Savitz, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. If the stock currently sells for $43 per share, what is the required return?
Answer:
The answer is 12.9%
Explanation:
This question will be solved using the Dividend Discount Model(DDM).
Po = D1/r - g
Po is the current worth of stocks
D1 is the next dividend paid
r is the rate of return
g is the growth rate
$43 = $2.12/ r - 0.08
43r - 3.44 = 2.12
43r = 5.56
r = 5.56/43
=0.129
Expressed as a percentage:
The required return for Savitz, Inc., is therefore 12.9%
No Doubt 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, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box; 44,000 coupons were presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be presented for redemption.
Instructions
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Answer:
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Explanation:
ere presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be prese
A registered representative wishes to give a speech to a group of 35 potential retail clients at a restaurant. The speech is scripted and is a general discussion about investing in securities. Which statement is TRUE?
Answer:
Prior principal approval must be obtained and a copy of the speech must be retained in your firm's Office of Supervisory Jurisdiction
Explanation:
Because the speech is to be givento 35 attendees, it is under the Retail Communication. Every speech should be honest and of good taste; and the speech must be informational, but far from promotional.
It is not required that the speech content has to be pre-filed with the SEC. A copy must be kept a period of f 3 years for inspection by FINRA examiners. The speech script would be kept on file in the firm's supervisory compliance office that is the Office of Supervisory Jurisdiction.
Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below: Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 33,000 6,000 parties Serving a diner Number of diners served $ 138,000 15,000 diners Serving a drink Number of drinks ordered $ 24,000 10,000 drinks The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries. Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depends on the number of diners served or the number of drinks served. Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $240,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $16.
Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations to 2 decimal places and final answers to 3 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
Answer:
Kindly check attached picture
Explanation:
Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations to 2 decimal places and final answers to 3 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
Kindly check attached picture for detailed explanation.
Average cost per dinner is $12.375, $11.95, $19.50 respectively
Average cost based problem:Computation:
1.A.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 4 $36.8
Drinks $2.4 3 $7.2
Total $49.50
1.B.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 2 $18.4
Drinks $2.4 0 0
Total $23.9
1.C.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 1 $9.2
Drinks $2.4 2 $4.8
Total $19.50
2. Average cost per dinner
A = 49.50 / 4 = $12.375 per dinner
B =23.9 / 2 = $11.95 per dinner
C = 19.50 / 1 = $19.50 per dinner
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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,645,000 Variable expenses 623,950 Contribution margin 1,021,050 Fixed expenses 1,123,000 Net operating income (loss) $ (101,950) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 445,000 $ 610,000 $ 590,000 Variable expenses as a percentage of sales 53 % 23 % 42 % Traceable fixed expenses $ 299,000 $ 327,000 $ 203,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $21,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?
Answer:
Windgate Company
1. Segmented Income Statement
Company East Central West
Sales $ 1,645,000 $445,000 $610,000 $590,000
Variable expenses 623,950 235,850 140,300 247,800
Contribution margin 1,021,050 209,150 469,700 342,200
Fixed expenses Traceable 759,000 229,000 327,000 203,000
Fixed expenses: Common 364,000
Net operating income (loss) $ (101,950) ($19,850) $142,700 $139,200
2-a. Division West:
Sales $660,800 (590,000 x 1.12)
Variable expenses 247,800
Contribution 413,000
Fixed Costs 224,000
Net operating income (loss) $ 189,000
Difference = $49,800 ($189,000 - 139,200)
The net operating income would increase by $49,800.
2-b. I would recommend the increased advertising. It brings in more profit than the costs.
Explanation:
a) Data:
Income Statement
Sales $ 1,645,000
Variable expenses 623,950
Contribution margin 1,021,050
Fixed expenses 1,123,000
Net operating income (loss) $ (101,950)
b) Windgate Company's segmented income statement has enabled the tracing of fixed costs to the three divisions and the calculation of net operating income for the three divisions. Thus, revealing that Division East was not profitable. From this information, management can decide to make some changes or altogether dispose of Division East in order to redeem the fortunes of the company.
Promoters of an LLC are Select one: a. are never personally liable on pre-formation debt. b. always liable on pre-formation debt. c. only liable on pre-formation debt until a novation occurs.
Answer:
The answer is C. only liable on pre-formation debt until a novation occurs.
Explanation:
The corporation and the third-party agree to release the promoter from liability and to substitute the corporation in place of the promoter as the party liable on the contract. May be express or implied.