Answer with its Explanation:
PART A
Using The Cash Basis:
Net Income = Cash received - Cash paid
Net Income = $25,200 - $12,830 - $2720 = $9650
Using The Cash Basis:
Net Income = Revenue earned during the year - Expense incurred during the year
Net Income = $31,800 - $17,100 = $14,700
The insurance paid is not for the year as it relates to the coming year and must not be included in deducting the expenses.
PART B
Both of the methods provid useful informations provide useful insight of the case.
The cash basis tells about what actually the company possesses, from where the resources had flow inwards and where the company has spent its resources in cash amounts. The cash basis accounting doesn't tells the substance of the transaction because it all tells which expenses are actually been paid and what revenue has been received. The cash basis says that the revenue is the one that we have received and the expenses are the one that are paid in cash.
Accrual basis says that the company must recognize the earning and expenses when they are earned and when they are incurred respectively. The accrual basis tells the substance of the transaction. It tells what sales are related to the year and how much they have incurred in the year.
Identify the impact on the accounting equation of the following transactions. 1. Purchased 36-month insurance policy for cash. 2. Purchased supplies on account. 3. Received utility bill to be paid at later date. 4. Paid utility bill previously accrued.
Each of the transactions mentioned have different impacts on the accounting equation. Purchasing an insurance policy or supplies affects assets and liabilities in a way that keeps the equation balanced. Receiving and paying a utility bill affects liabilities, assets, and equity, also in a way that keeps the equation balanced.
Explanation:The accounting equation is Assets = Liabilities + Equity. So, each of the transactions you mentioned will impact this equation in a specific way:
Purchased 36-month insurance policy for cash: This decreases cash (an asset) and increases prepaid insurance (another asset). So, the overall equation stays balanced. Purchased supplies on account: This increases supplies (an asset) and increases accounts payable (a liability). Again the equation stays balanced. Received utility bill to be paid at a later date: This increases utilities expense (which reduces equity) and increases accounts payable (a liability). As expenses increase equity decreases, but since liability also increases, the equation is in balance. Paid utility bill previously accrued: This reduces cash (an asset) and reduces accounts payable (a liability). So, assets decrease, liabilities decrease, and the equation stays in balance. Learn more about Accounting Equation here:
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Assume Blue Spruce Corp. has the following reported amounts: Sales revenue $724,200, Sales returns and allowances $21,300, Cost of goods sold $468,600, and Operating expenses $156,200. (a) Compute net sales. Net sales $enter Net sales in dollars (b) Compute gross profit. Gross profit $enter Gross profit in dollars (c) Compute income from operations. Income from operations $enter Income from operations in dollars
Answer:
(a) Net sales is $702,900
(b) Gross profit is $234,300
(c) Income from operations is $78,100
Explanation:
Net sales is the result of the total sales less discounts, allowances and sales return.
The gross profit is the net sales less the cost of goods sold while the income from operations is the gross profit less the operating expenses.
Net sales
= $724,200 - $21,300
= $702,900
Gross profit
= $702,900 - $468,600
= $234,300
Income from operations
= $234,300 - $156,200
= $78,100
Net Sales for Blue Spruce Corp. are found to be $702,900, Gross Profit is $234,300, and Income from Operations is $78,100, using standard business accounting calculations.
Explanation:To compute the answers to your questions for Blue Spruce Corp. we first need to understand a few business accounting terms.
Net Sales are calculated as Sales Revenue minus Sales returns and allowances. In this case, $724,200 (Sales Revenue) - $21,300 (Sales Returns and Allowances) = $702,900 (Net Sales).
Gross Profit is calculated as Net Sales minus the Cost of Goods Sold. Using the Net Sales we just computed: $702,900 (Net Sales) - $468,600 (Cost of Goods Sold) = $234,300 (Gross Profit).
Income from Operations is calculated as Gross Profit minus Operating Expenses. So, $234,300 (Gross Profit) - $156,200 (Operating Expenses) = $78,100 (Income from Operations).
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There is a bond that has a quoted price of 94.023 and a par value of $2,000. The coupon rate is 6.51 percent and the bond matures in 13 years. If the bond makes semiannual coupon payments, what is the effective annual interest rate
Answer:
The effective annual rate is gotten to be 7.36%
Explanation:
Given the par value = $2,000
Annual Coupon Rate = 6.51%
Semiannual Coupon Rate = 6.51% / 2 = 3.255%
Semiannual Coupon = 3.255% * $2,000 = $65.10
Current Price = 94.023% * $2,000 = $1,880.46
Time to Maturity = 13 years
Semiannual Period = 26
Let semiannual yield to maturity be s%
$1,880.46 = $65.10 x PVIFA(s%, 26) + $2,000 x PVIF(s%, 26)
Making use of Ms excel and calculating we have;
N = 26
PV = -1880.46
PMT = 65.10
FV = 2000
s = 3.613%
Semiannual yield to maturity = 3.613%
The effective annual rate can be obtained thus;
Effective annual rate = (1 + Semiannual YTM[tex])^{2}[/tex] - 1
= (1 + 0.03613[tex])^{2}[/tex] - 1
= 1.0736 - 1
= 0.0736 or 7.36%
Therefore the effective annual rate is gotten to be 7.36%
To find the effective annual interest rate of a bond, calculate the semiannual interest rate and convert it to annual terms by multiplying by two.
Explanation:To find the effective annual interest rate of a bond, we need to calculate the semiannual interest rate and then convert it to annual terms.
Step 1: Calculate the semiannual coupon payment by multiplying the coupon rate by the par value and dividing by 2, since there are semiannual coupon payments.
Step 2: Calculate the semiannual interest rate by dividing the semiannual coupon payment by the quoted price of the bond.
Step 3: Convert the semiannual interest rate to an annual interest rate by multiplying it by 2.
Based on the given values, the effective annual interest rate is 13.27 percent.
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On July 1, 2008, Sheeley Company pays $8,000 to its insurance company for a 2-year insurance policy.InstructionsPrepare the necessary journal entries for Sheeley on July 1 and December 31.
Answer:
Debit Prepaid insurance $8,000
Credit Cash account $8,000
Being entries to recognize prepaid insurance as at July 1 , 2008
Debit Insurance expense $2,000
Credit Prepaid Insurance $2,000
Being entries to recognize insurance expense as at December 31.
Explanation:
The amount paid by Sheeley Company On July 1, 2008 is a prepayment (an asset) as it is paid in advance. The insurance cover was yet to be enjoyed as at that date.
Entries required to recognize this payment
Debit Prepaid insurance $8,000
Credit Cash account $8,000
Being entries to recognize prepaid insurance as at July 1 , 2008
As at 31 December, the company would have incurred expenses for 6 months out of the 24 months (2 years) paid for.
This amounts to
= 6/24 × $8,000
= $2,000
To recognize this by December 31
Debit Insurance expense $2,000
Credit Prepaid Insurance $2,000
Being entries to recognize insurance expense as at December 31.
Brief Exercise 5-7 Record the adjustment for uncollectible accounts (LO5-3) At the end of the year, Dahir Incorporated’s balance of Allowance for Uncollectible Accounts is $3,000 (debit) before adjustment. The company estimates future uncollectible accounts to be $15,000. What is the adjustment Dahir would record for Allowance for Uncollectible Accounts? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
At the end of period the allowance for uncollectible debts will be: 15000-3000 = $ 12000 because 3000 account receivable is written off.
Explanation:
(Opening) Allowance for uncollectible accounts = 3000 (Dr)
During the year company estimates = $ 15000
Entry : Dr Bad debts expense 15000
Cr Allowance for bad debts 15000
( To record uncollectible accounts)
You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. The sign will cost $ 8 comma 000$8,000 and will be posted for one year. You expect that it will generate additional revenue of $ 1 comma 280$1,280 a month. What is the payback period?
Answer:
The Payback period is
Explanation:
Payback period is the time in which initial investment is recovered from project cash inflows. It shows the time to pack back the initially cost incurred on the project or asset.
Cost to project = $8,000
Additional Revenue = $1,280
Payback period = Cost of project / additional revenue
Payback period = $8,000 / $1,280
Payback period = 6.25 years
Payback period = 6 years 3 months
Consider a process consisting of three resources. Assume there exists unlimited demand for the product, and that all activities are always performed in the following sequence.
Resource 1 has a processing time of 6 minutes per unit.
Resource 2 has a processing time of 3 minutes per unit.
Resource 3 has a processing time of 5 minutes per unit.
All three resources are staffed by one worker and each worker gets paid $11 per hour.
(a) what is the cost of direct labor?
(b) what is the labor content?
(c) How much idle time does the worker at resource 3 have per unit?
(d) What is the average labor utilization?
(e) Assume the demand rate is 20 units per hour. What is the takt time?
(f) Assume the demand rate is 20 units per hour. What is the target manpower?
The cost of direct labor is $3.6 per part. The labor content is 14 minutes. The idle time is 4 min. The average labor utilization is 77.78%.
(a)
The total hourly pay divided by the flow rate represents the cost of direct labor.
The overall flow rate is governed by the bottleneck resource 1 and the flow rate is (1/6) parts per minute \
Total wages per unit of time = $12*3/60 = $12/20 per minute
So, cost of direct labor = (12/20) / (1/6) = $3.6 per part
(b)
Labor Content = The time sum of all process steps = 6+3+5 = 14 minutes
(c)
Idle time of resource 3 = 6 min - 5 min = 1 min
(d)
Idle time of resource 2 = 6 - 3 = 3 min
Total idle time = 3+1 = 4 min
Utilization = (1 - 4/(3*6)) = 77.78%
(e)
Takt time = 60/20 = 3 min
(f)
Target manpower = (6+3+5) / 3 = 4.67 or 5 (assuming each station is staffed by one worker)
The average labor utilization is calculated by dividing the total labor content by the entire idle time.
The total hourly salaries divided by the flow rate per hour is known as the cost of direct labor. It reveals how much money is spent to move one flow unit through a process (such as to treat one patient or provide service to one client), in dollars (or euros).
Even while labor costs appear to make up a small portion of the total costs, at least initially, it is crucial to consider them. However, labor expenses are incorporated into every single supply and material business purchase.
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Final answer:
The cost of direct labor is $33 per hour (3 workers at $11 each), the labor content is 14 minutes per unit, Resource 3 has 1 minute of idle time per unit, average labor utilization is 100%, takt time is 3 minutes per unit, and the target manpower is 3 workers to meet the demand rate of 20 units per hour.
Explanation:
To determine the cost of direct labor, we need to calculate the total working time each resource operates per hour and multiply it by the workers' pay rate.
Resource 1: 6 minutes/unit × 60 minutes/hour = 10 units/hourResource 2: 3 minutes/unit × 20 units/hour (given demand rate) = 60 minutes/hourResource 3: 5 minutes/unit × 20 units/hour (given demand rate) = 100 minutes/houra. The total cost of direct labor is calculated by summing the costs of all resources. However, since the workers are paid per hour, regardless of production speed, the cost is simply $11/hour × 3 workers.
b. The labor content is the sum of the processing times per unit for all three resources: 6 + 3 + 5 = 14 minutes per unit.
c. Resource 3's idle time per unit is the difference between the cycle time of the slowest resource and its own processing time. Since Resource 1 is the slowest, with a cycle time of 6 minutes, Resource 3 has 1 minute of idle time per unit (6 - 5).
d. The average labor utilization is calculated as (total processing time / (total processing time + idle time)) × 100%. With continuous demand and equal payment rate, all workers are utilized at full capacity, so average labor utilization is 100%.
e. The takt time is the pace at which products must be completed to meet customer demand. It is calculated as (60 minutes per hour / 20 units per hour) = 3 minutes per unit.
f. The target manpower is the number of workers needed to meet the demand rate. Since the slowest resource dictates the overall pace and Resource 1 is the slowest, processing 10 units per hour, we need 2 workers at Resource 1 (20 units/hour demand / 10 units/hour capacity) and 1 worker each for Resources 2 and 3. Therefore, the target manpower is a total of 3 workers to meet the demand rate.
A city is trying to estimate the most money it should offer to contractors as an incentive for them to finish a disruptive road project early. The transportation project lengthens transport times by 10 hours per week for 40,000 workers. Assume that all workers are paid $10 per hour in a perfectly competitive labor market. What is the most that the city should pay to the contractors as an incentive for completing the project four weeks early? HTML EditorKeyboard Shortcuts
Answer:
The city should pay at most $16 million to the contractors as an incentive for completing the project four weeks earlier.
Explanation:
Total number of saved work hours = 4 weeks * 40000 workers/week * 10 hours/worker = 1,600,000 work hours
So, Money saved = 1,600,000 work hours * $10/ work-hour
= $16 million
Therefore, the city should pay at most $16 million to the contractors as an incentive for completing the project four weeks earlier.
Answer:
$16,000,000
Explanation:
To answer this question we pull out information relevant to us as follows
What is the number of workers = 40,000workers
How many labour hours per week = 10 hours per week
What is the hourly wage = $10/hour
First, Amount spent per worker in a week =
$10 x 10 hours = $100 per week
Second, Amount to be expended for 4 weeks
= $100 x 4 weeks = $400
Finally, the most that should be paid to the contractor for workers
$400 x 40,000 workers
= $16,000,000
Simple Interest versus Compound Interest [LO1] First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a $6,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of nine years?
Answer:
You would have $1,251 more money in second city bank than the first city bank.
Explanation:
First city bank pays 7% simple interest.
Interest = (PRT)/100
Interest = (6000 * 7 * 9)/100 = 378000/100 = $3,780
Amount in first city bank after 9 years = 6000 + 3780 = $9,780
The second city bank pays 7% interest compounded annually, so we would find the amount after 9 years.
P = $6,000
R = 7% = 7/100 = 0.07
T = 9
A = P(1 + R) ^ {t}\\
A = 6000(1 + 0.07)^ {9}\\
A = 6000(1.07)^{9}\\
A = 6000 * 1.838459212420\\
A = 11030.75527452\\
A = 11031
Amount after 9 years in second city bank = $11,031
Difference between first city bank and second city bank: 11031 - 9780 = 1251.
Final answer:
By comparing a $6,000 deposit over nine years at a 7% interest rate, you would earn $1,250.76 more with compound interest at Second City Bank than with simple interest at First City Bank.
Explanation:
The question asks about the difference in earnings between simple interest and compound interest on a $6,000 deposit over nine years at a 7% interest rate. To solve this, we need to calculate the total amount for both simple and compound interest and then find the difference.
Simple Interest Calculation:
Simple Interest = Principal × Rate × Time
= $6,000 × 0.07 × 9
= $3,780
Total with Simple Interest = Principal + Interest
= $6,000 + $3,780
= $9,780
Compound Interest Calculation:
Compound Interest = Principal × (1 + Rate)^Time
= $6,000 × (1 + 0.07)^9
= $6,000 × 1.83846
= $11,030.76
The difference in earnings between Second City Bank (compound) and First City Bank (simple) is:
$11,030.76 - $9,780 = $1,250.76
Therefore, by choosing the compound interest option at Second City Bank, you would earn an additional $1,250.76 over nine years.
a) Deployment Specialist pays a current (annual) dividend of $1 and is expected to grow at 20% for two years and then at 4% thereafter. If the required return for Deployment Specialist is 8.5%, what is the intrinsic value of its stock
Answer:
Explanation:
we will apply multi stage dividend growth model = Do(1+g)/Ke-g
Do = Dividend just paid
(1+g) = Dividend for next year
Ke = Return
g = Growth in dividend
Year Year Year
0 1 2
20% 20%
Dividend 1 1.2 1.44
infinity value @4% 44.8 8*
Present value @8.5% 1 1.11111 39.64334
Value of stock=1+1.111111111+ 39.64334= 41.75445
*Do(1+g)/Ke-g
1.44(1+4%) / 8.5%-4%
2.016 / 4.5%
Value= 44.88
"E3-26A Record manufacturing overhead (Learning Objectives 5 & 6) Refer to the data in Exercise 3-25A. Smith’s accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually $364,000, not the $480,000 that had originally been reported. The unadjusted Cost of Goods Sold balance at year-end was $610,000."
a. Prepare the journal entry (entries) to record manufacturing overhead costs incurred.
b. Prepare the journal entry to record the manufacturing overhead allocated to jobs in production.
c. Use a T-account to determine whether manufacturing overhead is underallocated or overallocated, and by how much.
d. Record the entry to close out the underallocated or overallocated manufacturing overhead.
Final answer:
The detailed answer provides the journal entries for manufacturing overhead costs, allocation to jobs, T-account analysis, and closing out overallocated manufacturing overhead.
Explanation:
a. Journal entry for manufacturing overhead costs incurred:
Debit Manufacturing Overhead $364,000
Credit Accumulated Depreciation $364,000
b. Journal entry for manufacturing overhead allocated to jobs:
Debit Work in Process Inventory $116,000
Credit Manufacturing Overhead $116,000
c. T-account analysis: Since the actual depreciation was less than reported, manufacturing overhead is overallocated by $116,000.
d. Entry to close out overallocated manufacturing overhead: Debit Cost of Goods Sold $116,000, Credit Manufacturing Overhead $116,000
An economy has full-employment output of 5000. Government purchases are 1000. Desired consumption and desired investment are given by
Cd = 3000 - 2000r + 0.10Y
Id = 1000 - 4000r
where Y is output and r is the expected real interest rate. The real interest rate that clears the goods market is equal toA. 25.00%.B. 8.33%.C. 2.50%.D. 1.25%.
Answer:
Option (B) is correct.
Explanation:
Given that,
Full-employment output = 5,000
Government purchases = 1,000
Desired consumption: Cd = 3000 - 2,000r + 0.10Y
Desired investment: Id = 1000 - 4,000r
Y = Cd + Id + Gd
Y = (3000 - 2000r + 0.10Y) + (1,000 - 4,000r) + 1,000
Y - 0.10Y = 5,000 - 6,000r
0.90Y = 5,000 - 6,000r
At full employment output level of 5,000,
0.90(5,000) = 5,000 - 6,000r
4,500 = 5,000 - 6,000r
6,000r = 500
r = 0.0833 or 8.33%
Therefore, the real interest rate that clears the goods market is equal to 8.33%.
Final answer:
After setting up the equilibrium condition and plugging in the given functions for desired consumption and investment, along with the given full-employment output and government purchases, we solve for the real interest rate, which is found to be 8.33%.
Explanation:
To find the real interest rate that clears the goods market, we need to solve for r in the following equilibrium condition where the sum of government purchases (G), desired consumption (Cd), and desired investment (Id) equals the full-employment output (Y):
Y = G + Cd + Id
Substituting the given values and expressions, we have:
5000 = 1000 + (3000 - 2000r + 0.10×5000) + (1000 - 4000r)
Simplifying this, we get:
5000 = 1000 + 3000 - 2000r + 500 + 1000 - 4000r
5000 = 5500 - 6000r
Rearranging for r gives us:
6000r = 5500 - 5000
6000r = 500
r = ⅖
r = 0.0833 or 8.33%
Rob's wife, Marie, has a wage income of $250,000. They jointly sold stocks in 2019 and generated a long-term capital gain of $13,000. Rob and Marie have no dependents and in 2019, they take the standard deduction of $24,400. The income threshold for QBI limitations starts at $315,000 for married filing jointly taxpayers.
a. What is Rob and Marie's taxable income before the QBI deduction?
b. What is Rob and Marie's QBI?
What is Rob and Marie's QBI deduction?
Answer:
Explanation:
According to IR Many individuals, including owners of businesses operated through sole proprietorships, partnerships, S corporations, trusts and estates may be eligible for a qualified business income deduction, also called the section 199A deduction. Some trusts and estates may also claim the deduction directly.
The deduction allows them to deduct up to 20 percent of their qualified business income (QBI), plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned by a C corporation or by providing services as an employee isn't eligible for the deduction.
1. QBI component. This component of the deduction equals 20 percent of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate. Depending on the taxpayer's taxable income, the QBI Component is subject to limitations including:
a. The type of trade or business,
b. The amount of W-2 wages paid by the qualified trade or business, and
c. The unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business.
These limitations do not apply to taxpayers with taxable income at or below a certain threshold. For 2018, the threshold amount is $315,000 for a married couple filing a joint return, and $157,500 for all other taxpayers.
STEPS ARE:
1. Original QBID = 154K*20% = 30,800
2. Wage/Cap. Investment limitation: a) wage limitation = 58K*50%= 29,000
b) wage/capital limit. = wage(58K*25%) +capital(300K*2.5%) =14,500+7,500=22K
We take the larger of them => 29K
3) Since original QBID is greater than wage limitation, we must use reduction ratio. In this case:
408K (taxable income) - 315K(threshold)/100,000 = 0.93
4) Now we subtract the wage limitation from original QBID (30,800 - 29,000) * 0.93= 1,674.
5) Finally, subtract that from original QBID 30,800-1,674=29,126.
29,126 their final QBID
Vaughn Manufacturing has estimated that total depreciation expense for the year ending December 31, 2021 will amount to $591000, and that 2021 year-end bonuses to employees will total $1240000. In Vaughn's interim income statement for the six months ended June 30, 2021, what is the total amount of expense relating to these two items that should be reported?
Answer:
$915,000
Explanation:
Because half of the depreciation expense, and the expense on bonuses has already been reported by June 30,2021 (the half of the year), only hafl of the total money spent on the two items will have to be reported for the interim income statement ended on December 31, 2021:
$591,000 / 2 = $295,500
$1,240,000 / 2 = $620,000
Now, we simply add up these two figures:
$295,500 + $620,000 = $915,000
Billings Company has the following information available for September 2017.
Unit selling price of video game consoles $444
Unit variable costs $311
Total fixed costs $59,850
Units sold 666
a.)Compute the unit contribution margin.
b.)Prepare a CVP income statement that shows both total and per unit amounts.
c.)Compute Billing's break even points in units.
d.)Prepare a CVP income statement for the break even point that shows both total and per unit amounts.
Answer:
Part a
Contribution Margin = 29.95% (2 d.p)
Part b
Billing Company
CVP Income for as at September 2017
Total Per Unit
$ $
Sales 295704 444
Less Variable Costs (138084) (311)
Contribution 157620 133
Fixed Costs (59850) 89.86
Net Income 97770 43.14
Part c
Billing`s break even point is 450 units
Part d
Billing Company
CVP Income for as at September 2017 - Break Even Point
Total Per Unit
$ $
Sales 199800 444
Less Variable Costs (139950) (311)
Contribution 59850 133
Fixed Costs (59850) 133
Net Income 0 0
Explanation:
Part a
Contribution Margin = Contribution/Sales × 100
Therefore contribution margin is ($444-$311)/$444 * 100 = 29.95% (2 d.p)
Part b
Sales - Variable Cost = Contribution
Net Income = Contribution - Total Fixed Costs
Part c
Break Even Point is when Billings neither makers a profit or loss.
Break Even Point ( Units) = Total Fixed Cost/Contribution per unit
Therefore Break Even Point (Units) = $59850/$133 = 450 units
Part d
The total and unit CVP should neither reflect a profit or loss at a capacity of 450 units as this is the break even point. In this case profit = nill
Final answer:
The Billings Company's unit contribution margin is $133, with a CVP income statement showing a total operating income of $28,728. The break-even point is approximately 450 units. A break-even CVP income statement illustrates the company's financials at this level of sales, indicating what is needed to cover costs without generating either profit or loss.
Explanation:
Answers to the Billings Company Case
a.) To compute the unit contribution margin, subtract the unit variable cost from the unit selling price. The unit contribution margin = $444 (unit selling price) - $311 (unit variable cost) = $133.
b.) To prepare a CVP income statement that shows both total and per unit amounts for the given units sold (666), first calculate the total contribution margin (666 unit × $133 per unit = $88,578). Then, subtract the total fixed costs ($59,850) from the total contribution margin to get the operating income: $88,578 - $59,850 = $28,728. Per unit, the operating income would be $28,728 / 666 units = $43.14.
c.) The break-even point in units is calculated by dividing the total fixed costs by the unit contribution margin. Break-even point = $59,850 / $133 = approximately 450 units.
d.) For the break-even CVP income statement, at 450 units, total variable costs are 450 × $311 = $139,950, and total sales are 450 × $444 = $199,800. However, since we're calculating for the break-even point, the sales will exactly match the sum of the total variable costs and total fixed costs, leading to an operating income of $0. Per unit amounts at break-even would reflect the calculation divided by the break-even unit sales (450).
The goal of the biological (ergonomic) approach to job design is: a. to make the work simple so that anyone can be trained quickly and easily to perform it. b. to minimize physical strain on the worker by structuring the physical work environment around the way the human body works. c. to focus on increasing the meaningfulness of jobs. d. to design jobs in a way that ensures they do not exceed people's mental capabilities and limitations.
Answer:
To minimise physical strain on the worker by structuring the physical work environment around the way the human body works.
Explanation:
Ergonomics is very essential because when carrying out a job and your body is made uncomfortable by an bad posture, extreme temperature, or repeated movement your musculoskeletal system tends to be affected.
Ergonomics improves productivity in a workplace. Designing a workspace that promotes good posture, less repetitive motions, easier heights and reaches is very necessary. More efficiency means more productivity which is important for the growth of the company.
Scotland Corporation had net income for 2018 of $ 77 comma 000. Scotland had 13 comma 000 shares of common stock outstanding at the beginning of the year and 26 comma 000 shares of common stock outstanding at the end of the year. There were 11 comma 000 shares of preferred stock outstanding all year. During 2018, Scotland declared and paid preferred dividends of $ 22 comma 000. What is Scotland's earnings per share? (Round the answer to two decimal places.)
Answer:
$2.82 per share
Explanation:
The computation of the earning per share is shown below:
Earning per share = (Net income - preferred dividend) ÷ (Weighted average Number of common shares)
where,
Weighted average number of common shares is
= (13,000 shares + 26,000 shares) ÷ 2
= 19,500 shares
So, the earning per share is
= ($77,000 - $22,000) ÷ (19,500 shares)
= $2.82 per share
Assume the following amounts: Total fixed costs $ 23 comma 000 Selling price per unit $ 19 Variable costs per unit $ 12 If sales revenue per unit increases to $ 22 and 14 comma 000 units are sold, what is the operating income? A. $ 163 comma 000 B. $ 117 comma 000 C. $ 308 comma 000 D. $ 140 comma 000
Answer:
B. $ 117 comma 000
Explanation:
Selling price per unit $ 19 *14, 000= $ 266000
Variable costs per unit $ 12 *14, 000= $ 168,000
Contribution Margin $ 98,000
Less Total fixed costs $ 23, 000
Operating Income $ 75,000
If sales revenue per unit increases to $ 22
Selling price per unit $ 22 *14, 000= $ 308000
Variable costs per unit $ 12 *14, 000= $ 168,000
Contribution Margin $ 140,000
Less Total fixed costs $ 23, 000
Operating Income $ 117,000
Answer:
B. $ 117 comma 000
Explanation:
The Net/operating income is the difference between the total sales and total costs, Total cost is made up of the fixed and variable cost.
Like the total sales, the total variable cost is also affected by the level of activities or units produced/sold.
Mathematically,
Net income = Total sales - variable cost - fixed cost
= $22(14,000) - $12(14,000) - $23,000
= $117,000
Your neighborhood self-service laundry is for sale and you consider investing in this business. For the business alone and no other assets (such as building and land), the purchase price is $240,000. The net cash flows for the project are $30,000 per year for the next 5 years. You plan to borrow the money for this investment at 5%.
Answer:
The complete present value calcuation is below.The net present value of this project is: $77,930.58 (assuming a value for the sale of the business equal to the purchase price).
Explanation:
For this problem, the first and basic question is:
Prepare a net present value calculation for this project. What is the net present value of this project?Solution
The net present value is equal to: the present value of the future cash flows less present value of the investements.
1. Present value of the future cash flows:
The discount factor is equal to 1 / [1 + (1 + r)ⁿ]
Where:
r = 5% = 0.05n = the number of yearYear Cash flow Discount factor Present value
1 $30,000 1/(1 + 0.05) $30,000/1.05 = $28,571.43
2 $30,000 1/(1 + 0.05)² $30,000/(1.05)² = $27,210.88
3 $30,000 1/(1 + 0.05)³ $30,000/(1.05)³ = $25,915.13
4 $30,000 1/(1 + 0.05)⁴ $30,000/(1.05)⁴ = $24,681.07
5 $30,000 1/(1 + 0.05)⁵ $30,000/(1.05)⁵ = $23,505.78
5 $240,000* 1/(1 + 0.05)⁵ $240,000/(1.05)⁵ = $188,046.28
*For the year 5 you must also consider the value of the business, which is unknow. You should have some information about it. Although unrealistic, at this stage we can just assume a value: let's say it is the same purchase price: $240,000. That is what the last line shows:
The discount the value of the value of the business is:
$240,000 / (1.05)⁵ = $188,046.28The total present value of the future cash flows is the sum of the present values of all the cash flows:
$28,571.43 + $27,210.88 + $25,915.13 + $24,681.07 + $23,505.78 + $188,046.28 = $317,930.58
2. Calculate the net present value:
Net present value == Total present value of future cash flows - investment
Net present value = $317,930.58 - $240,000 = $77,930.58Gilberto's Performance Pizza is a small restaurant in Philadelphia that sells gluten-free pizzas. Gilberto's very tiny kitchen has barely enough room for the four ovens in which his workers bake the pizzas. Gilberto signed a lease obligating him to pay the rent for the four ovens for the next year. Because of this, and because Gilberto's kitchen cannot fit more than four ovens, Gilberto cannot change the number of ovens he uses in his production of pizzas in the short run.
However, Gilberto's decision regarding how many workers to use can vary from week to week because his workers tend to be students.
Each Monday, Gilberto lets them know how many workers he needs for each day of the week. In the short run, these workers are ________ inputs, and the ovens ________ inputs.
Answer:
In the short run, these workers are variable inputs, and the ovens fixed inputs.
Explanation:
In this matter, we can say that workers are variable inputs, due to the fact that there is a possibility that Gilberto varies the number of workers hired in relation to their production needs. Ovens, on the other hand, can be considered as fixed inputs, which are those inputs, whose quantities cannot be changed in the short term.
A college professor decides to run for Congress in a district with 450,000 registered voters. In a survey she commissioned, 58% of the 4000 registered voters interviewed indicated that they plan to vote for her. The population of interest is the:
Answer:
450,000 registered voters in the district
Explanation:
Population of interest is defined as the population that is under study and abouth which information is collected. Population of interest can be people, objects, measurements, and so on.
It is from the population of interest that the researcher draws samples that are studied. Insights from studying the sample will be used to draw conclusions about the population.
In this instance 4,000 voters interviewed is the sample. They were drawn from the population of interest made up of 450,000 registered voters in the district.
The population of interest is the registered voters in a congressional district. To estimate proportions like voter support or political awareness, sample size calculations are conducted to achieve a desired confidence level and margin of error. Confidence intervals can then be used to estimate the true proportion of a characteristic within the population.
Explanation:The population of interest in the question is the body of registered voters in a particular congressional district. This population would be the group of individuals from which data is being gathered or about whom conclusions are to be made based on the survey results. In the context given, the survey is used to estimate the support that a college professor running for Congress might receive from the 450,000 registered voters in her district.
When estimating the true proportion of a population based on survey results, it is essential to determine the sample size needed to achieve results within a certain margin of error and with a specified level of confidence. For example, to achieve a 95% confidence level and a 5% margin of error in determining the political awareness of college students, a specific sample size must be calculated using statistics formulas.
Interpreting Survey Results and Confidence Intervals
In another scenario, a student may find that 300 out of 500 surveyed students are registered voters, and from this, a confidence interval can be computed to estimate the true proportion of registered voters among the student population. This confidence interval provides a range in which the true percentage of registered voters is likely to fall, considering the sample data and the chosen confidence level, such as 90%.
Megley Cheese Company is a small manufacturer of several different cheese products. One of the products is a cheese spread that is sold to retail outlets. Jason Megley must decide how many cases of cheese spread to manufacture each month. The probability that the demand will be six cases is 0.1, for 7 cases is 0.3, for 8 cases is 0.5, and for 9 cases is 0.1. The cost of every case is $45, and the price that Jason gets for each case is $95. Unfortunately, any cases not sold by the end of the month are of no value, due to spoilage.
How many cases of cheese should Jason manufacture each month?
Answer:
Explanation:
Cost of every cases is $45.6 cases cost is = $45*6=$270
Demand
Profit Expected Profit
6 0.1 300 30
0.3 300 90
0.5 300 150
0.1 300 30
Answer: Total 300
Answer 7 to 9:
Profit Expected Profit
9 0.1 165 16.5
0.3 260 78
0.5 355 177.5
0.1 450 45
Answer Total 317.00
Answer 8 to 9 :
6(0.1) + 7(0.3) + 8(0.5) + 9(0.1) = 7.6
Jason should manufacture 8 cases of cheese spread each month to maximize his profit.
Explanation:In order to determine how many cases of cheese Jason should manufacture each month, we need to calculate the expected value of the demand. The expected value is calculated by multiplying each possible demand by its corresponding probability and summing them up. So, the expected value would be: (6 cases)(0.1) + (7 cases)(0.3) + (8 cases)(0.5) + (9 cases)(0.1) = 7.9 cases. Since we can't manufacture a fractional number of cases, Jason should manufacture 8 cases each month.
Let's calculate the profit for manufacturing 8 cases. The cost for 8 cases is 8 * $45 = $360, and the revenue is 8 * $95 = $760. The profit is revenue minus cost, so $760 - $360 = $400.
Therefore, Jason should manufacture 8 cases of cheese spread each month in order to maximize his profit.
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3. This year, Paula and Simon (married filing jointly) estimate that their tax liability will be $200,000. Last year, their total tax liability was $170,000. They estimate that their tax withholding from their employers will be $175,000. Are Paula and Simon required to increase their withholdings or make estimated tax payments this year to avoid the underpayment penalty? If so, how much?
Answer:
When a taxpayer has an underpayment of estimated tax or fall behind on his/her tax prepayment, then he/she is required to pay a penalty on Form 2210. This penalty is called underpayment penalty.
According to the tax laws, Mr. P and Ms. S can avoid an underpayment penalty if their withholding's and estimated tax payments equal or exceed one of the following two safe harbors:
90 percent of current tax liability ($200,000 x 90% = $180,000) 110 percent of previous year tax liability (110% x $170,000 = $187,000)From the above calculation, it is clear that Mr. P and Ms. S's withholding's ($175,000) do not equal or exceed the amount of two safe harbors. So, they need to increase their withholding's or make estimated payments to avoid underpayment penalty.
If Mr. P and Ms. S increase their withholding's by $5,000 or make estimated payments of $1,250
per quarter ($5000/4), they can avoid the underpayment penalty.
Mr. Paula and Simon average gross income is greater than $150,000, so 110% is taken.
Answer:
yes they are required to increase their withholding tax by $5000
Explanation:
Paula and Simon will have to increase their withholding or make estimated tax payments to avoid underpayment penalty if the fall inside these two categories
current tax withheld for current year ≤ 90% of the current tax liability or
current tax withheld ≤ 110% of the previous year tax liability
current tax liability = $200000
last year tax liability = $170000
tax withheld = $175000
90% of $200000 = $180000: Is greater than tax withheld ( $175000 )
110% of $170000 = $187000 : Is greater than tax withheld ( $175000 )
To avoid underpayment penalty Paula and Simon should increase their withholding by at least $5000 or make estimated quarterly payments of $1250
Bally Manufacturing sent Intel Corporation an invoice for machinery with a $13,500 list price. Bally dated the invoice July 29 with 3/10 EOM terms. Intel receives a 20% trade discount. Intel pays the invoice on August 11. What does Intel pay Bally
Answer:
$10,584
Explanation:
Given
Cost of Machinery = $13,500
Trade Discount = 20%
Cash Discount = 2%
First, we Calculate the Net Price
Net Price = $13,500(100% - 20%)
Net Price = $13,500(80%)
Net Price = $13,500 * 0.8
Net Price = $10,800
Applying Cash discount;
Payment = $10,800(100% - 2%)
Payment = $10,800(98%)
Payment = $10,800 * 0.98
Payment = $10,584
Hence, Intel pays Bally $10,584
Lionworks, Inc. has goods available for sale in the amount of $123,000; beginning inventory is $41,000; ending inventory is $38,000; and cost of goods sold is $80,000. How many days could Lionworks operate without buying any more inventory? (Round any intermediary calculations two decimal places, X.XX, and your final answer to the nearest day.)
Answer:
DSI = 180.21 DAYS.
Explanation:
Average inventory = [(open) inventory +(end) inventory] / 2
= (41000+38000)/2 = 39500
As we know that : Days sales of inventory (DSI)= ( Average inventory / cost of goods sold) * 365
= (39500 / 80000 ) * 365
= 180.21 days. It tells the effectiveness of company inventory management,here lionworks takes 180 average days to sell of his entire inventory
The LaGrange Corporation had the following budgeted sales for the first half of the current year: Cash Sales Credit Sales January $ 80,000 $ 180,000 February $ 85,000 $ 200,000 March $ 48,000 $ 160,000 April $ 43,000 $ 128,000 May $ 53,000 $ 230,000 June $ 110,000 $ 220,000 The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on sales: 50% in month of sale 40% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $75,000, of which $47,000 represents uncollected December sales and $28,000 represents uncollected November sales. What is the budgeted accounts receivable balance on May 31
Answer:
Budgeted Accounts Receivable Balance on May 31 = $127,800
Explanation:
Accounts Receivables are current assets of a company resulting from selling on credit and these accounts are the uncollected, outstanding balances.
Judging by the collection schedule we can determine the budgeted Accounts Receivables (uncollected) balances at 31 May
The November balance equals to 10% of total Credit sales and 10 % of November sales are collected in January
the December balance equals 50% and 40% of the balance will be collected on January and 10% collected in February.
Fast forward to the collection of May
details credit sales May Uncollected
Mar $160,000*10% $16,000
April $128,000 * 40% $51,200
$128,000 *10% $12,800
May $230,000 *50% $115,000
$230,000 *50% $115,000
TOTAL $127,800
The budgeted June sales at 31 May have not yet occurred so the balance accounts receivable at 31 May include only the uncollected percent from April and May.
The LaGrange budgeted Accounts Receivable Balance on May 31 is computed as follows:
10% of March credit sales $16,000 ($160,000 x 10%)
40% of April credit sales 51,200 ($128,000 x 40%)
50% of May credit sales 115,000 ($230,000 x 50%)
Total balance $182,200
Data and Calculations:
Cash Sales Credit Sales
January $ 80,000 $ 180,000
February $ 85,000 $ 200,000
March $ 48,000 $ 160,000
April $ 43,000 $ 128,000
May $ 53,000 $ 230,000
June $ 110,000 $ 220,000
Thus, at the end of the month of May, the Accounts Receivable Balance of The LaGrange Corporation is $182,200.
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Lowlife Company defaulted on a $250,000 loan that was due on December 31, 2018. The bank has agreed to allow Lowlife to repay the $250,000 by making a series of equal annual payments beginning on December 31, 2019.
1. Calculate the required annual payment if the bank’s interest rate is 10% and four payments are to be made.
2. Calculate the required annual payment if the bank’s interest rate is 8% and five payments are to be made.
3. If the bank’s interest rate is 10%, how many annual payments of $51,351 would be required to repay the debt?
4. If three payments of $104,087 are to be made, what interest rate is the bank charging Lowlife?
Provided is a step-by-step calculation of loan repayments under varying conditions, demonstrating how to compute the required annual payment for different interest rates and payment plans.
Explanation:The subject of this question is the calculation of loan repayments under varying conditions, a critical aspect of financial management and business math. The factors to consider are principal amount ($250,000), the annual interest rate, the number of payments, and the payment amount.
Step-By-Step Calculation
1. When the bank's interest rate is 10% and four payments are to be made, the required annual payment is calculated using the formula for the payment of an ordinary annuity, which is P * r / 1 - (1 + r)^ -n. Here, n=4, r=10% and P=$250,000. Substituting these values, we get an annual payment of $82,731.97
2. When the bank's interest rate is 8% and five payments are to be made, substituting n=5, r=8%, and P=$250,000 into the formula above, we get an annual payment of $64,402.88
3. If the bank's interest rate is 10%, and the annual payment is $51,351, it would take approximately 6 payments to repay the loan completely. This can be calculated by rearranging the annuity formula above to solve for n.
4. If three payments of $104,087 are made, the interest rate charged by the bank can be calculated by rearranging the annuity payment formula to solve for r. Plugging in P=$250,000, PMT=$104,087 and n=3, we get an interest rate of approximately 11%.
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1. Required annual payment if the bank’s interest rate is 10% and four payments are to be made: $78,899.37
2. Required annual payment if the bank’s interest rate is 8% and five payments are to be made: $70,200.91
3. Number of annual payments of $51,351 required to repay the debt at a 10% interest rate: 5 payments
4. Interest rate the bank is charging Lowlife if three payments of $104,087 are to be made: 7.75%
Let's address each question one by one:
Step 1
1. Calculate the required annual payment if the bank’s interest rate is 10% and four payments are to be made:
We can use the formula for the annual payment of an installment loan:
[tex]\[ P = \frac{PV \times r}{1 - (1 + r)^{-n}} \][/tex]
Where:
- P = annual payment
- PV = present value of the loan ($250,000)
- r = annual interest rate (as a decimal)
- n = number of payments (4)
Substituting the given values:
[tex]\[ P = \frac{\$250,000 \times 0.10}{1 - (1 + 0.10)^{-4}} \]\[ P = \frac{\$250,000 \times 0.10}{1 - (1.10)^{-4}} \]\[ P = \frac{\$250,000 \times 0.10}{1 - 0.6830} \]\[ P = \frac{\$25,000}{0.317} \]\[ P \approx \$78,899.37 \][/tex]
So, the required annual payment is approximately $78,899.37.
Step 2
2. Calculate the required annual payment if the bank’s interest rate is 8% and five payments are to be made:
Using the same formula:
[tex]\[ P = \frac{\$250,000 \times 0.08}{1 - (1.08)^{-5}} \]\[ P \approx \$70,200.91 \][/tex]
So, the required annual payment is approximately $70,200.91.
Step 3
3. If the bank’s interest rate is 10%, how many annual payments of $51,351 would be required to repay the debt?:
We can rearrange the formula to solve for n:
[tex]\[ n = -\frac{\log(1 - \frac{PV \times r}{P})}{\log(1 + r)} \][/tex]
Substituting the given values:
[tex]\[ n = -\frac{\log(1 - \frac{\$250,000 \times 0.10}{\$51,351})}{\log(1 + 0.10)} \]\[ n \approx 5.0 \][/tex]
So, approximately 5 annual payments of $51,351 would be required to repay the debt.
Step 4
4. f three payments of $104,087 are to be made, what interest rate is the bank charging Lowlife?:
We can rearrange the formula to solve for [tex]\( r \):[/tex]
[tex]\[ r = \left( \frac{P}{PV} \right)^{1/n} - 1 \][/tex]
Substituting the given values:
[tex]\[ r = \left( \frac{\$104,087}{\$250,000} \right)^{1/3} - 1 \]\[ r = \left( \frac{0.41635}{0.10} \right)^{1/3} - 1 \]\[ r \approx 0.0775 \][/tex]
So, the bank is charging an interest rate of approximately 7.75%.
Garfield Industries is expanding its operations throughout the Southeast United States. Garfield anticipates that the expansion will increase sales by $1,000,000, and increase the costs of goods sold by $700,000. Depreciation expenses will rise by $50,000 and interest expense will increase by $150,000. The company’s tax rate will remain at 40 percent. If the company’s forecast is correct, how much will net income increase or decrease, as a result of the expansion?
Answer:
$60,000 increase
Explanation:
The company's additional earnings before interest and taxes (EBIT) are subjected to a 40% tax rate. The company's EBIT is:
[tex]EBIT = Sales - Cost+Depreciation\\EBIT = 1,000,000-700,000+50,000\\EBIT =\$350,000[/tex]
The change in income is determined as the EBIT minus taxes and interest expense:
[tex]I = \$350,000*(1-0.4) -\$150,000\\I=\$60,000[/tex]
Therefore, Garfield Industries experienced a $60,000 increase in its income as a result of the expansion.
The net income will increase by $100,000 as a result of the expansion.
Explanation:To calculate the net income increase or decrease, you need to subtract the increased costs of goods sold, depreciation expenses, and interest expense from the increased sales. The tax rate of 40 percent should be applied to the resulting amount to calculate the net income. So, the net income increase or decrease can be calculated as follows:
Increased sales: $1,000,000Increased costs of goods sold: $700,000Depreciation expenses increase: $50,000Interest expense increase: $150,000Net income increase or decrease = (Increased sales - Increased costs of goods sold - Depreciation expenses increase - Interest expense increase) * Tax rate
= ($1,000,000 - $700,000 - $50,000 - $150,000) * 0.40
= $100,000
Therefore, the net income will increase by $100,000 as a result of the expansion.
Art Kumar lives on the outskirts of Draper and has a 1-acre lot next to his home. He plans to grow vegetables on the lot and sell them at the downtown market during the summer. He doesn’t have enough time to grow the vegetables himself, so he has hired a local college student to plant and tend the garden and sell the crops at the market. Art is considering five vegetables to plant that seem to be popular at the market—asparagus, corn, tomatoes, green beans, and red peppers. Art estimates the following yields per acre for each vegetable—2,000 pounds of asparagus, 7,200 pounds of corn, 25,000 pounds of tomatoes, 3,900 pounds of green beans, and 12,500 pounds of red peppers. The costs per acre are $1,800 for asparagus, $1,740 for corn, $6,000 for tomatoes, $3,000 for green beans, and $2,700 for red peppers. Asparagus sells for $1.90 per pound, corn sells for $0.10 per pound, tomatoes sell for $3.25 per pound, green beans sell for $3.40 per pound, and red peppers sell for $3.45 per pound. He has budgeted $5,000 for the garden. Talking to some of the other market vendors, he estimates that he will not sell more than 1,200 pounds of asparagus, 10,000 pounds of tomatoes, 2,000 pounds of green beans, and 5,000 pounds of red peppers. Art wants to know the portion of his lot that he should plant with each vegetable to maximize his revenue.
Answer:
10,000 pounds of Tomatoes; 780 pounds of Green Beans; and 5,000 pounds of Red Pepper.
Explanation:
The following information was provided in the question and computed.
Yield per acre (pound): 2,000 (asparagus), 7,200 (corn), 25,000 (tomatoes), 3,900 (green beans), 12,500 (red pepper).
Cost per acre: $1,800 (asparagus), $1,740 (corn), $6,000 (tomatoes), $3,000 (green beans), $2,700 (red pepper).
Selling price per pound: $1.90 (asparagus), $0.10 (corn), $3.25 (tomatoes), $3.40 (green beans), $3.45 (red pepper).
Sales volume limit (pound): 1,200 (asparagus), nil (corn), 10,000 (tomatoes), 2,000 (green beans), 5,000 (red pepper).
Given the above, we compute the cost per pound for each vegetable as follows: [tex]\frac{Cost Per Acre}{Yield Per Acre}[/tex]
Cost per pound: $0.9 (asparagus), $0.24 (corn), $0.24 (tomatoes), $0.77 (green beans), $0.22 (red pepper).
Using selling price per pound and Cost per pound, we compute the contribution per pound for each vegetable as follows: [tex]Selling Price Per Pound - Cost Per Pound[/tex]
Contribution per Pound: $1.00 (asparagus), -$0.14 (corn), $3.01 (tomatoes), $2.63 (green beans), $3.23 (red pepper).
To maximize revenue and profit, Art must focus on the vegetables with the highest contribution per Pound, in the following order.
4th (asparagus), 5th (corn), 2nd (tomatoes), 3rd (green beans), 1st (red pepper).
He will therefore plant according to the limit (volume) he can sell in the market.
1st plant: Red pepper = 5,000 pounds market limit (using [tex]\frac{Sales Limit}{Yield per Acre} = \frac{5,000}{12,000}[/tex] = 40% of the land available).
2nd plant: Tomatoes = 10,000 pounds market limit (using [tex]\frac{10,000}{25,000}[/tex] = 40% of the land available).
3rd plant: Green beans = using 20% of the land left = 20% * 3,900 yield per acre = 780 pounds.
"Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business
Options:
A. $20
B. $200
C. $40
D. $400
Answer:C. $40
Explanation: Opportunity cost is a term used in Economics to describe the value of the next most profitable alternative of this an investor puts his or her resources into,in this case the opportunity cost for Bubba is the percentage of the interest which Bubba earned from the interest.
Opportunity cost for Bubba can be calculated as follows
(2%/100)* $2,000=$40.
Opportunity cost helps economists to ensure that resources are effectively put to use.
Bubba's annual opportunity cost for using his $2,000 to buy a boat and equipment for his shrimp business, instead of leaving it in a savings account with a 2% interest rate, is $40 per year.
Explanation:The annual opportunity cost of the financial capital that Bubba invested in his shrimp business is the amount of interest he would have earned if he had left the $2,000 in his savings account. Since the savings account paid 2% interest, the opportunity cost is 2% of $2,000.
To calculate this, we use the formula for simple interest: Interest = Principal × Rate × Time. Here, the principal is $2,000, the rate is 2% (or 0.02 as a decimal), and the time is 1 year, since we are interested in the annual opportunity cost.
So, Bubba's opportunity cost is $2,000 × 0.02 × 1 = $40 per year.