Answer:
(A) A total profit of $37,000
Explanation:
Number of bicycles sold last year = 500
Assuming the company only manufactured 500 bicycles last year.
Fixed cost per unit = $10
Variable cost per unit = $15
Total cost per unit = fixed cost + variable cost = $10 + $15 = $25
Total cost for 500 units of bicycles manufactured = 500 × $25 = $12,500
Selling price per bike = $100
Total revenue for 500 bikes sold = 500 × $100 = $50,000
The company made a profit because the total revenue generated is greater than the total cost incurred.
Total profit = total revenue - total cost = $50,000 - $12,500 = $37,500
The company most likely had a profit of $37,000
Production used 2.5 labor hours per finished unit, and the company actually paid $21 per hour, totaling $52.50 per unit of finished product. What amount is the company’s direct labor rate variance for March?
Answer:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual hours
Explanation:
Giving the following information:
The production used 2.5 labor hours per finished unit, and the company paid $21 per hour, totaling $52.50 per unit of finished product.
We weren't provided with enough information to solve the problem. We need estimated production hours and rates. But, I can leave the formula to solve it.
To calculate direct labor rate variance, we need to use the following formula:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Hours
Retained earnings is a. The positive cash flows of a company. b. The net worth of a company. c. The owners' equity that has accumulated as a result of profitable operations. d. Equal to the total assets of a company.
Answer:
The correct answer is letter "C": The owners' equity that has accumulated as a result of profitable operations.
Explanation:
Retained Earnings are the part of the company's net profits it does not pay out as dividends to shareholders. The company retains the money and reinvests it in the company, or uses it to pay off a part of its debt. To see how much profits a corporation has kept, look under the Shareholder's equity in the Balance Sheet.
Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter’s stock currently trades for $28.00 per share, what is the expected rate of return?
The expected rate of return for Walter Utilities stock, which trades at $28.00 and is expected to pay a $2.05 dividend growing at 6.50% annually, is calculated using the dividend discount model to be 13.82%.
The question asks how to calculate the expected rate of return on a stock from Walter Utilities, which pays an annual dividend and expects a constant growth in this dividend. Since the stock currently trades for $28.00, and the company will pay a $2.05 dividend at the end of the year that grows at a rate of 6.50% annually, we can use the dividend discount model (DDM) to calculate the required rate of return.
The formula for the expected rate of return using DDM is:
Expected Rate of Return = (Dividend Payment / Current Stock Price) + Dividend Growth Rate
Using the provided figures:
Expected Rate of Return = ($2.05 / $28.00) + 6.50%
Expected Rate of Return = 7.32% + 6.50%
Expected Rate of Return = 13.82%
This is the expected rate of return for Walter Utilities stock.
The expected rate of return for Walter Utilities is calculated using the Gordon Growth Model and is found to be 13.82%, considering the given dividend, growth rate, and stock price.
To calculate the expected rate of return for Walter Utilities, we can use the Gordon Growth Model (also known as the Dividend Discount Model). This model assumes that dividends will grow at a constant rate indefinitely. The formula for the model is:
P = D / (r - g)
Where P is the current stock price, D is the dividend per share one year from now, r is the required rate of return (which we are solving for), and g is the growth rate of dividends.
Rearranging the formula to solve for r:
r = (D / P) + g
Using the numbers given, the expected dividend (D) is $2.05, the growth rate (g) is 6.50%, and the current stock price (P) is $28.00.
Therefore, the expected rate of return (r) would be:
r = ($2.05 / $28.00) + 0.0650
After calculating, we find that:
r= 0.0732 + 0.0650
r = 0.1382 or 13.82%
This implies that an investor would expect a 13.82% return on their investment in Walter Utilities, considering the expected dividend and growth rate.
If a sample of items is taken and the mean of the sample is outside the control limits, the process is: in control, but not capable of producing within the established control limits. producing high quality products. likely out of control and the cause should be investigated. monitored closely to see if the next sample mean will also fall outside the control limits. within the established control limits with only natural causes of variation.
Answer: likely out of control and the cause should be investigated.
Explanation: The Mean is a term used both in Statistics, Economics, mathematics etc to describe the average of a set of numbers. The Arithmetic mean can be calculated by adding up a set of numbers and dividing the number by the frequency or the number of occurrences.
IF A MEAN IS WITHIN THE LIMITS OF A SET OF NUMBERS THE PROCESS IS SAID TO BE UNDER CONTROL WHILE IF THE MEAN IS OUTSIDE THE LIMITS OF A SET OF NUMBERS THE PROCESS IS SAID TO BE LIKELY OUT IF CONTROL AND THE ROOT CAUSE HAS TO INVESTIGATED TO ESTABLISH THE ROOT CAUSE.
Brief Exercise 8-06 The cash register tape for Bluestem Industries reported sales of $6,871.50. Record the journal entry that would be necessary for each of the following situations. (a) Cash to be accounted for exceeds cash on hand by $50.75. (b) Cash on hand exceeds cash to be accounted for by $28.32. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 52.75.)
The question deals with recording journal entries for cash transactions in a business. It presents two scenarios: one where there's less cash on hand than expected, and one where there's more. For each, a unique journal entry is required, taking into account an 'over and short' account to record discrepancies.
Explanation:The subject of this question relates to accounting and how to record journal entries related to cash transactions in a business environment. In particular, Bluestem Industries has reported sales of $6,871.50, and there are two different situations for which journal entries are required.
In the first scenario (a), the cash to be accounted for exceeds the cash on hand by $50.75. In other words, Bluestem Industries has less cash on hand than it should have. The journal entry would be: Debit Sales Revenue $6,921.25 (this is the cash to be accounted for, or $6,871.50 plus the $50.75 difference), Credit Cash $6,871.50, Credit Over and Short $49.75 (which is the account used to record discrepancies in the cash account). In the second scenario (b), the cash on hand exceeds the cash to be accounted for by $28.32. Now, Bluestem has more cash on hand than it should. The journal entry would be: Debit Sales Revenue $6,871.50, Debit Over and Short $28.32, Credit Cash $6,899.82 (or $6,871.50 plus the $28.32 excess). Learn more about Accounting for Cash Transactions here:
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An important lesson about pricing is a. When bargaining with the customer, do not bargain over the unit price, bargain over the bundled price b. Bargain with the customer over everything c. When bargaining with the customer, do not bargain over the bundled price, bargain over unit price d. Do not bargain with the customer
Answer:
The correct answer is letter "A": When bargaining with the customer, do not bargain over the unit price, bargain over the bundled price.
Explanation:
Bargaining is the act by which a buyer and a seller discuss what should be the price the buyer should pay and the seller should accept for a product or service. From the seller side, it is convenient if the bargain is done in bundled goods since the overall discount could be offset by the discount of one or two units included in the bundle. If case the bargain is only negotiated for one unit, the sellers' expected profit will be reduced.
Given the following changes what is the net effect on cash? (1) Accounts Receivables increases by $150; Inventory decreases by $95; Accounts Payable increases by $225; Common dividend payment of $55.
Answer:
Net Cash Increase of $115
Explanation:
Receivable Increases by $150 means a cash outflow in receivable by $150 because Increase in Receivable indicates that there are more sale on credit is made than cash received from the customers. So, the outflow in the receivable section is more than the inflow.
Inventory Decreases by $95 means the inventory sold during the period is more than purchases / manufactured. It result in cash inflow as cash is not being held in the form of inventory.
Accounts Payable increases by $225 means that company is making less payment to its suppliers, so that its balance has been increase. Company made more purchases than payment made to suppliers. Net cash Inflow is observed from this.
Common dividend payment of $55 means a direct cash outflow because actual cash has been paid during the year.
Net Effect on Cash = Cash inflows - Cash outflows
Net Effect on Cash = ( Inventory decrease + Accounts Payable increase ) - ( Accounts Receivables increase + Common dividend payment )
Net Effect on Cash = ( $95 + $225 ) - ( $150 + 55 )
Net Effect on Cash = $320 - $205
Net Effect on Cash = $115
Net Cash Increase of $115
Sean works for Cash'n'Carry, a payday loan company. He has been asked to develop an ethical mission statement to reassure customer concerns regarding predatory lending practices. a. Nonterritorial offices b. Flattened management hierarchies c. Emphasis on ethics
Answer:
c. Emphasis on ethics
Explanation:
Sean has been tasked with developing a ethical mission statement with a view of reassuring customers on predatory lending practices.
This is a renewed emphasis on the ethics of the company and by so doing it will reassure the company is aware of the ethical practice in this regard and that they are pledging to act ethically.
Ethics is defined as the process of systemising and recommending concepts of right and wrong. It is also called moral philosophy.
Intuit Labs, a division of Intuit, the accounting and payroll software developer, follows a "Design for Delight (D4D)" development philosophy, which states that products should delight customers by providing experiences that exceed expectations. Which new product development approach is Intuit using?
Options:
A. Team based new product development
B. Customer centered new product development
C. Crowdsoursing
D. Systematic new product development
E. New Market Strategy.
Answer:
B. Customer centered new product development.
Explanation: Customer centered new product development is a product development concept which is focuses more on the satisfaction of the needs of the customer. This type of product development strategy ensures that the needs of the customers, some times research or surveys or questionaires are used to first determined the needs of the target market or target customers before finally designing the product.
a. Suppose that businesses buy a total of $110 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $64 billion in wages, $12 billion in rent, and $22 billion in interest, how much are households paid for providing entrepreneurial ability?
Answer:
Enterprenural ability= $12 billion
Explanation:
Enterprenural ability can be defined as the human resource that gives the ability to combine other resources available to a business to create a product, make non routine decisions, innovate, and bear risks.
The main traits of an enterpreneur are research, focus, cash management, communication, and learning.
In the given instance a company buys four resources (labour, land, capital, and enterprenural ability) for $110 billion from households.
Enterprenural ability= Total spent- wages - rent- interest
Enterprenural ability= 110 billion- 64 billion- 12 billion- 22 billion
Enterprenural ability= $12 billion
Households are paid $12 billion for providing entrepreneurial ability. This is calculated by subtracting the total funds received in wages, rent, and interest from the total resources purchased by businesses.
Explanation:To find out how much households are paid for providing entrepreneurial ability, we need to subtract the wages, rent, and interest that households receive from the total amount businesses pay for the four resources. So, to calculate this:
Sum up the amounts households receive for wages, rent, and interest: $64 billion + $12 billion + $22 billion = $98 billion.Subtract this sum from the total amount businesses pay for the four resources: $110 billion - $98 billion = $12 billion.Therefore, households are paid $12 billion for providing entrepreneurial ability.
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Rowan Co. purchases 900 common shares (40%) of JBI Corp. as a long-term investment for $580,000 cash on July 1. JBI Corp. paid $11,000 in total cash dividends on November 1 and reported net income of $220,000 for the year.
Prepare Rowan's entries to record the purchase of JBI shares, the receipt of its share of JBI dividends and the December 31 year-end adjustment for its share of JBI net income.
Answer:
See explanation section
Explanation:
Rowan Co.
Journal Entries
1. July 1 Investment - JBI Corp. Debit $580,000
Cash Credit $580,000
(As Rowan purchases JBI co. share as an investment, an asset (Investment) increases and another asset (Cash).
2. November 1 Cash Debit $4,400
Dividend on Investment - JBI Corp. Credit $4,400
(As JBI co. received dividend, Rowan co. received cash for investing in JBI co.'s 40%)
Calculation: $11,000 × 40% = $4,400.
3. December 31 Investment - JBI Co. Debit $88,000
Share of Net Income - JBI Co. Credit $88,000
(As Rowan Co. purchases JBI company' s share, they will receive the share of net income of JBI co.)
Calculation: $220,000 × 40% = $88,000
Describe the difference between period costs and product costs.
(Period /Product costs) are operating costs that are expensed in the accounting period in which they are incurred.
(Period/Product costs) are all costs of a product that GAAP requires companies to treat as an asset for extemal financial reporting. These costs are recorded as an asset (inventory) on the balance sheet until the asset is sold. The cost is then transferred to an expense account, ??.
On the income statement, ?? is subtracted from ?? to determine gross proft. The ?? are then subtracted to determine operating income.
Classify Lawlor's costs as period costs or product costs.
If the costs are product costs, further classify as direct materials, direct labor or manufacturing overhead.
Shaft and handle of weed trimmer
Motor of weed trimmer
Factory labor for workers assembling weed trimmers
Nylon thread used by the weed trimmer (not traced to the product)
Glue to hold housing together
Plant janitorial wages
Depreciation on factory equipment
Rent on plant
Sales commissions
Administrative salaries
Plant utilities
Shipping costs to deliver finished weed trimmers to customers
Explanation:
The period cost is the cost that is incurred with the passage of time. It mainly involves the major portion of the selling and administration expenses like - selling expenses, advertising expenses. It is a fixed cost
While the product cost involves the cost related to the product. It involves direct material cost, direct labor cost, and the manufacturing overhead cost. It is a variable cost
So, the period cost is the operating cost that are expenses when it is incurred
Whereas the product cost is treat as an asset for external financial reporting. First this is recorded as an asset on the balance sheet until asset is sold and then it is transferred to the cost of goods sold i.e expense account
Now on the income statement the product cost or cost of goods sold is subtracted from the sales revenue so that the gross profit could come
Then the period cost is deducted to find out the operating income
Now the classification of the product cost and the period cost are as follows
Shaft and handle of weed trimmer = Direct material cost
Motor of weed trimmer = Direct material cost
Factory labor for workers assembling weed trimmers = Direct labor cost
Nylon thread used by the weed trimmer (not traced to the product) = Manufacturing overhead cost
Glue to hold housing together = Manufacturing overhead cost
Plant janitorial wages = Manufacturing overhead cost
Depreciation on factory equipment = Manufacturing overhead cost
Rent on plant = Manufacturing overhead cost
Sales commissions = Period cost
Administrative salaries = Period cost
Plant utilities = Manufacturing overhead cost
Shipping costs to deliver finished weed trimmers to customers = Period cost
Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,100,000 for 20 years with the first payment due today. If the interest rate is 3.25 percent, what is the value of this liability today?
Answer:
The value of Liability is $15,993,281
Explanation:
Red Sun Rising Corp. is making annuity Payment of $1,100,000 for a period of 20 years. The value of this liability can be calculated by taking net present value of all future cashflows.
Present value of Annuity = P [ 1 - ( ( 1 + r )^-n ) / r ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 3.25% )^-20 ) / 3.25% ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 0.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $15,993,280.76
The value of the liability today for Red Sun Rising Corp.'s lease is $17,181,350.71.
Explanation:To determine the value of the liability, we need to calculate the present value of the lease payments. The present value of an annuity formula can be used for this calculation. The formula is:
PV = PMT x (1 - (1 + r)^-n) / r
Where PV is the present value, PMT is the annual payment, r is the interest rate, and n is the number of periods.
Substituting the values into the formula, we get:
PV = $1,100,000 x (1 - (1 + 0.0325)^-20) / 0.0325
Calculating this gives us the value of the liability today as $17,181,350.71.
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When Jeff Bezos founded Amazon in 1994, he was laying the foundation for the world’s largest ________, because Amazon uses the Internet to make its products and services available to its consumers.
Answer:
correct answer is electronic marketing channel
Explanation:
Amazon is American multinational technology company that was founded on July 5, 1994 by Jeff Bezos
Amazon initially start an online marketplace for the book but later expand to sell software, electronic , video games, and furniture and toy etc
as it is an online retail store that make product and service to customers
so that it is an electronic market channel.
so correct answer is electronic marketing channel
below is the equity section of the balance sheet of bottle inc. as of december 31, 2014: common stock, $12 par value $2,280,000 paid-in capital in excess of par 1,330,000 the company only has one class of common stock and no preferred stock. what was the price of the common stock when it was first issued?
Answer:
The price of the common stock when it was first issued was $19 per share
Explanation:
Price at which the stock is issued is consists of Par value and add-in-capital in excess value. It is recorded in different accounts and reported as separately on the balance sheet.
Common Stock at par value of $12 = $2,280,000
Number of outstanding shares = 2,280,000 / 12 = 190,000 shares
Paid-in-Capital in Excess = $1,330,000 / 190,000 = $7 per share
As we know
Price of share = Par value + Paid in capital in excess
Price of share = $12 + $7 = $19 per share
Derst Inc. sells a particular textbook for $22. Variable expenses are $13 per book. At the current volume of 51,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:a. $352,000
b. $1,276,000
c. $1,628,000
d. $924,000
Answer:
None of the choice is correct; The correct answer is $459,000
Explanation:
The company is just breaking even at current volume of 51,000 books sold per year, then its revenue = total cost
↔ unit sold * selling price = fixed cost + unit sold * variable cost
↔ 51,000 * $22 = fixed cost + 51,000 * $13
↔ Fixed cost = $1,122,000 - $663,000
↔ Fixed cost = $459,000
The Marigold Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Marigold has decided to locate a new factory in the Panama City area. Marigold will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three very similar buildings that will meet their needs.
Building A: Purchase for a cash price of $600,000, useful life 25 years.
Building B: Lease for 25 years with annual lease payments of $69,000 being made at the beginning of the year.
Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year.
The Black Knights Inc. has no aversion to being a landlord Instructions In which building would you recommend that The Black Knights Inc. locate, assuming a 12% cost of funds?
Answer:
The solution the given problem is done below.
Explanation:
Building A: Purchase for a cash price of $600,000, useful life 25 years.
—PV = $600,000.
Building B: Lease for 25 years with annual lease payments of $69,000 being made at the beginning of the year.
Rent X (PV of annuity due of 25 periods at 12%)
PV =$69,000 X 8.78432
PV=$606,118.08
Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year.
PV of Building C—
Rent X (PV of ordinary annuity of 25 periods at 12%)
=$7,000 X 7.84314
PV=$54,901.98
Cashpurchasepriceof…………….$650,000.00
PV of rental income,……………..(54,901.98)
Net present value…………………..$595,098.02
In which building would you recommend that The Black Knights Inc. locate, assuming a 12% cost of funds?
Lease Building C since the present value of its net cost is the smallest.
13-1. Liquidated Damages. Carnack contracts to sell his house and lot to Willard for $100,000. The terms of the contract call for Willard to make a deposit of 10 percent of the purchase price as a down payment. The terms further stipulate that if the buyer breaches the contract, Carnack will retain the deposit as liquidated damages. Willard makes the deposit, but because her expected financing of the $90,000 balance falls through, she breaches the contract. Two weeks later, Carnack sells the house and lot to Balkova for $105,000. Willard demands her $10,000 back, but Carnack refuses, claiming that Willard’s breach and the contract terms entitle him to keep the deposit. Discuss who is correct.
Explanation:
In this case, the clause of a contract stipulates that, in the event of a potential breaches or infringements of the contract, a certain percentage of the dollar is to be payed. However, liquid is specified, deposited, or fixed. Liquidated judgments are therefore distinguished from fines. A fine shall be incurred in case of a default or breach of a contract which shall penalize the infringement by the party. The fine shall be paid. Provisions for liquidated losses usually often apply. However the clause covering the amount will not be applied, and recapture will not be limited to actual penalties, where, however, the courts think that includes a fine.
When a legal rule needs to be settled on liquidated damages or fines, the courts will address these two issues. The first question is: was it clear that in case of an violation it would be impossible to measure damages before the deal has been concluded?
Second, I would like to ask:
Was the figure a fair and not unreasonable calculation of damages? The deal will still be restitution in this case. The bond that recovers goods, properties or funds previously transferred to each other. If the goods or properties may be recovered, they have to be recovered. Now if the property or product is taken, it is appropriate to render restitution in an quantity of equal dollars. Restitution may be appropriate, though, when a contract is terminated.
In this contract dispute, the issue is whether Carnack can retain Willard's deposit as liquidated damages. The enforceability of liquidated damages clauses depends on the reasonableness of the amount and whether it represents a good faith estimate of the actual damages. In this case, the deposit amount of $10,000 may be considered reasonable based on the subsequent sale price of the property.
Explanation:In this case, the issue is whether the provision in the contract that allows Carnack to retain the deposit as liquidated damages is enforceable. Liquidated damages are predetermined amounts of money agreed upon in a contract that serves as compensation for a party's breach of the contract. The general rule is that liquidated damages are enforceable if the amount is reasonable and represents a good faith estimate of the actual damages that would be incurred.
In this case, the deposit of $10,000 represents 10% of the purchase price, which is a common practice in real estate transactions. Moreover, Carnack was able to sell the house and lot to Balkova for $105,000, which is $5,000 more than the original purchase price. Therefore, it can be argued that the amount of the deposit is a reasonable estimate of the damages suffered by Carnack as a result of Willard's breach.
Based on these factors, it is likely that Carnack is correct in claiming the deposit as liquidated damages. However, it is important to note that the enforceability of liquidated damages clauses can vary depending on the jurisdiction. Therefore, it would be advisable for Carnack to consult with a local attorney to confirm the validity of the provision in this specific case.
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Assume that you are planning to test a client's account reconciliation. you could test either by inspecting documentation of the reconciliation or by rerperforming the reconciliation. What factors would cause you to choose re-performance instead of inspection of documentation?
Final answer:
Choosing between re-performing a client's account reconciliation and inspecting documentation depends on the assurance needed, risk of misstatement, quality of client documentation, and historical errors. Re-performance is more direct and reliable but also more time-consuming compared to documentation inspection.
Explanation:
When planning to test a client's account reconciliation, the choice between re-performing the reconciliation and inspecting documentation depends on several factors. Re-performance might be chosen over documentation inspection if there's a need for higher assurance, when the risk of material misstatement is deemed to be high, or when the documentation provided by the client is not sufficiently detailed or objective. Moreover, if there's a history of errors in the client's accounting processes or discrepancies noted in previous audits, an auditor might opt for re-performance to verify the accuracy of the current reconciliation process.
Re-performance provides the auditor with first-hand evidence regarding the effectiveness of the client's internal controls and the accuracy of their account reconciliation. It is a more direct and often a more reliable method of testing than examining documentation, which could be incomplete or misleading. However, it is also more time-consuming and costly. In contrast, inspecting documentation can be efficient and effective when the internal controls environment is strong, and no significant issues have arisen in the past.
Sheffield Corp. just began business and made the following four inventory purchases in June: June 1 290 units $2030 June 10 340 units 2516 June 15 200 units 1540 June 28 290 units 2291 $8377 A physical count of merchandise inventory on June 30 reveals that there are 350 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory (rounded to whole dollar) for June is $2753. $2450. $2765. $2474.
Answer:
The amount allocated to ending inventory for June is $2,753
Explanation:
The FIFO is a method used to account value for inventory. Under the method, the first item of inventory purchased is the first one sold.
A physical count of merchandise inventory on June 30 reveals that there are 350 units on hand.
Following the FIFO, 350 units on hand include:
290 units were purchased on June 28: $2,291
60 units were purchased on June 15: $1,540/200 x 60 = $462
The amount allocated to ending inventory = $2,291 + $462 = $2,753
Zero-base budgeting: a. means the Congress has ""sunseted"" an agency. b. means that an agency does not automatically receive its previous year’s base budget. c. is unconstitutional. d. none of the above
Answer: b. means that an agency does not automatically receive its previous year’s base budget.
Explanation: By definition, zero-based budgeting (ZBB) implies commencing a budget from a zero base and justifying each segment of the budget rather than merely adding to historical budgets or actual.
Conventionally, budgets are queried when they show variations from previous years but in ZBB, there is a positive attempt to eliminate inefficiencies and slack from current expenditures.
The concept of ZBB was developed by Peter Pyhor in 1969 and identified the following structured systematic approach to budgeting:
* organisations are divided into sections known as decision unit or expense control units
* decision units are clearly defined
* for each unit, a decision package is defined for the minimum level of spending and this sets the tone for the cost, purpose, and performance measurement and consequences
* similar decision package is defined for incremental allocations to activities
* decision package is specified for alternative methods of performing those activities
* decision packages are ranked
Example of ZBB is: if an organization notices a percentage increase on an expenditure line, the organization can compare all available and suitable alternatives before taking that increase as bona fide, the organization can also consider using its outsourced or internal employees to achieve same purpose. Proper scrutiny is required in ZBB unlike the traditional budgeting process.
There are other types of budgets like rolling and flexible budgeting.
16-26Coronado Company’s net income for 2020 is $51,000. The only potentially dilutive securities outstanding were 1,200 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 9,000 shares of common were outstanding during 2020. The average market price of Coronado’s stock during 2020 was $15.(a) Compute diluted earnings per share.
Answer:
The diluted earnings per share is $5.25
Explanation:
In this question, we are asked to compute the diluted earnings per share.
To calculate this, we employ the mathematical formula below for diluted earnings per share:
Diluted earnings per share
= (Total income - preference dividends) /( outstanding shares + diluted shares)
To be able to use this formula, we need a formula expression to get the value of the diluted shares.
Diluted shares = Options issued - value of options
Also,
Amount paid towards shares = Options issued * Exercise price per share = 1,200 * 6 = $ 7,200
Value of options = Amount paid towards shares / Current market price = $ 7,200 /$ 15= 480
Hence, diluted shares = 1,200 - 480 = 720
Thus, the diluted earnings per share =
( 51,000) / ( 9,000 +720) = $5.25 per share
Jand, Inc., currently pays a dividend of $1.24, which is expected to grow indefinitely at 5%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $30.16, what is the required rate of return?
Answer:
9.32%
Explanation:
The formula to compute the required rate of return is shown below:
Market price per share = Next year dividend ÷ (Required rate of return - growth rate)
where,
Market price per share is $30.16
Next year dividend is
= $1.24 + $1.24 × 5%
= $1.24 + 0.062
= $1.302
And, the growth rate is 5%
So, the required rate of return is
$30.16 = ($1.302) ÷ (Required rate of return - 5%)
Let us assume the required rate of return be X
So,
$30.16X - $1.508 = $1.302
After solving this, the required rate of return is 9.32%
On January 1, 2021, Instaform, Inc., issued 10% bonds with a face amount of $51 million, dated January 1. The bonds mature in 2040 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannual
Required:
1-a. Determine the price of the bonds at January 1, 2021.
1-b. Prepare the journal entry to record their issuance by Instaform.
2-a. Assume the market rate was 9%. Determine the price of the bonds at January 1, 2021.
2-b. Assume the market rate was 9%. Prepare the journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.
Answer:
1a. The price of the bonds at 12% yield is $43,326,388.60
1b. The journal entries to record the issuance are as follows:
Dr Cash $43,326,388.60
Dr Discount on the bond $7,673,611.40
Cr Bonds payable $51,000,000
2aAt the market rate of 9% bonds issue price is $55,692,404.03
2b.Journal entries when market rate is 9%
Dr Cash $55,692,404.03
Cr Premium on the bond $4,692,404.03
Cr Bonds payable $51,000,000.00
3.The journal entries if Broadcourt Electronics purchashed the entire issue as shown in 2 above
Dr Premium on the bonds $4,692,404.03
Dr Investment in bonds $51,000,000.00
Cr Cash $55,692,404.03
Explanation:
Find attached.
The bond's issue price depends on the market yield at that time. Journal entries at issuance debit Cash and credit Bonds Payable. When purchased by a company, it debits Investments and credits Cash.
Explanation:Firstly, we need to compute the price of the bond. The price at issue is the present value of the future cash flows, which are interest payments of ($51 million * 10%)/2 = $2.55M every six months for 40 periods (20 years * 2) and the face value of $51M at the end of the 20 years. Using the semi-annual market yield of 12%/2 = 6% (1-a) or 9%/2 = 4.5% (2-a), the present values of the cash flows can be calculated. Journal entries would consist of debiting 'Cash' and crediting 'Bonds Payable' for the issue price (1-b and 2-b).
For instance Broadcourt Electronics, the entry would debit 'Investments' and credit 'Cash' for the calculated price of the bonds (3).
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Merrill Corp. has the following information available about a potential capital investment: Initial investment $ 1,700,000 Annual net income $ 190,000 Expected life 8 years Salvage value $ 250,000 Merrill’s cost of capital 10 % Assume straight line depreciation method is used. Required: 1. Calculate the project’s net present value. 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent. 3. Calculate the net present value using a 15 percent discount rate. 4. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 15 percent.
Answer:
1./
INITIAL INVESTMENT
= $1600000
ANNUAL NET CASH FLOW
= NET INCOME + DEPERICATION
= $250000 + [($1600000 - $350000) / 8]
= $250000 + $156250
= $406250
SALVAGE VALUE
= $350000
NPV
= -$1600000 + $406250 * PVIFA 10%, 8 PERIODS + $350000 * PVIF 10% *PERIOD
= -$1600000 + $406250 * 5.3349 + $350000 * 0.4665
= -$1600000 + 2167303.13 + $163275
= $730578.13
2./
AS THE NPV IS GREATER THAN 0 OR POSITIVE THE IRR IS GREATER THAN 10%
3./
INITIAL INVESTMENT
= $1600000
ANNUAL NET CASH FLOW
= NET INCOME + DEPERICATION
= $250000 + [($1600000 - $350000) / 8]
= $250000 + $156250
= $406250
SALVAGE VALUE
= $350000
NPV
= -$1600000 + $406250 * PVIFA 20%, 8 PERIODS + $350000 * PVIF 20% *PERIOD
= -$1600000 + $406250 * 3.8372 + $350000 * 0.2326
= -$1600000 + $1558862.5 + $81410
= $40272.5
4./
AS THE NPV IS GREATER THAN 0 OR POSITIVE THE IRR IS GREATER THAN 20%
Explanation:
The net present value (NPV) of the project is approximately $102,275.15. The internal rate of return (IRR) cannot be determined without making calculations. To calculate the NPV using a 15% discount rate, the same steps are followed but with a 15% discount rate instead of 10%.
Explanation:To calculate the net present value (NPV) of the project, we need to discount the future net income and salvage value using the cost of capital. The NPV is the sum of the present values of each cash flow. In this case, the initial investment of $1,700,000 is not discounted because it occurs in the present. The annual net income of $190,000 is discounted for 8 years using a 10% discount rate. The salvage value of $250,000 is discounted back to the present using the same 10% discount rate.
The NPV can be calculated as follows:
NPV = -Initial Investment + Present Value of Net Income + Present Value of Salvage Value
NPV = -$1,700,000 + ($190,000 / 1.10^1) + ($190,000 / 1.10^2) + ... + ($190,000 / 1.10^8) + ($250,000 / 1.10^8)
By calculating this expression, we find that the project's NPV is approximately $102,275.15.
To determine whether the internal rate of return (IRR) is more or less than 10%, we compare the IRR to the cost of capital. If the IRR is greater than the cost of capital, the project is considered favorable. In this case, the IRR is not given, so we cannot determine whether it is more or less than 10% without making calculations.
If we want to calculate the NPV using a 15% discount rate, we follow the same steps as before but use a 15% discount rate instead of 10%. However, without any specific cash flows or further information, it is not possible to calculate the exact NPV using a 15% discount rate. We can only provide an estimation based on the given information.
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How would a decrease in the price of the feed grains used to feed cattle affect the market for beef? a. The demand for beef would decrease, decreasing beef prices. b. The supply of beef would decrease, increasing beef prices. c. The demand for beef would increase, increasing beef prices. d. The supply of beef would increase, decreasing beef prices.
Answer: The supply of beef would increase, decreasing beef prices.
Explanation: if there is a decrease in the price of the feed grains used to feed cattle, it would leads to an increase in the supply of beef in the market and consequently decrease the price of beef in the market. It would result to an increase in the supply of beef because the cattle rearers would have enough feeds for the cattle which will make them grow faster.
A decrease in the cost of feed grains would likely increase the supply of beef, which could lead to a decrease in the price of beef. This is because lower production costs would allow farmers to raise more cattle for beef, thus increasing supply.
Explanation:If the price of feed grains that are used to feed cattle falls, it reduces the cost of producing beef. Consequently, this may lead to an increase in the supply of beef as cattle farmers may find it more profitable to raise more cattle for beef production. This, in turn, could potentially lead to a decrease in beef prices because when supply increases relative to demand, prices typically fall. Therefore, the correct option is d. The supply of beef would increase, decreasing beef prices.
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As a result of an increase in the value of the dollar in relation to other currencies, American producers now pay less in dollar terms for foreign steel, a major commodity used in production. This will cause a the aggregate curve to the _____________
Answer:
It will shift to the right
Explanation: When the value to dollar in relation to other currencies increases,It will be favourable to the American investors as they will spend less in Dollar terms for the goods supplied and services rendered by citizens of other countries where the United States Dollars have a favourable exchange rate against their own currencies this will cause the AGGREGATE SUPPLY CURVE TO SHIFT TO THE RIGHT INDICATING A FAVOURABLE AGGREGATE SUPPLY.
An electronics firm is currently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit. Fixed costs are$14,000 per month. Current volume is 30,000 units per month. The firm wants to improve the product quality by adding a new piece of equipment at an additional fixed cost of $6,000 a month. Variable cost would increase to $0.60 a unit but volume should jump to 50,000 units a month due to improved productivity. Although the new product is of a higher quality, the firm intends to stay with the selling price of $1.00 per unit (for competitive purposes). (a) Should the firm buy the new equipment?(b) The firm is now considering stepping the new volume to 45,000 units a month to produce even better quality products and increase the selling price to $1.10 a unit. Under these circumstances, should the company buy the new equipment and increase the selling price?
Answer:
Part (a) Should the firm buy the new equipment
The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.
Part (b) should the company buy the new equipment and increase the selling price?
The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.
Explanation:
Part (a) Should the firm buy the new equipment
Do Not Buy Buy New Equipment
$ $
Sales 30,000 50,000
Less Variable Cost 15,000 30,000
Contribution 15,000 20,000
Less Fixed Costs 14,000 20,000
Net Income 1,000 0
The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.
Part (b) should the company buy the new equipment and increase the selling price?
Do Not Buy Buy New Equipment
$ $
Sales 30,000 49,500
Less Variable Cost 15,000 27,000
Contribution 15,000 22,500
Less Fixed Costs 14,000 20,000
Net Income 1,000 2,500
The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.
A cost-volume-profit analysis suggests the firm should buy the new equipment and increase the selling price to yield a higher profit despite a decrease in volume. The firm breaks even in the first scenario and makes a profit in the second scenario.
Explanation:The subject of your question revolves around cost-volume-profit analysis. This is a method used in managerial economics to understand the relationship between a firm's costs, its production volume, and its profits. This is done by considering the impact of different levels of output and costs on a company's net income.
In order to determine whether the firm should buy the new equipment, we need to conduct a cost-volume-profit analysis. If the firm goes ahead with its plan for improved quality, the total cost (including fixed and variable costs) will be $20,000 + ($0.60 x 50,000) = $50,000. Given their plan to stay at the $1.00 selling price, the total revenue will be $1.00 x 50,000 = $50,000. As you can see, the total cost equals the revenue, meaning there is neither a profit nor loss, effectively breaking even in this scenario.
In the other scenario, where the firm increases the selling price to $1.10 and volume drops to 45,000 units, the revenue would now be $1.10 x 45,000 = $49,500. The total cost will be $20,000 + ($0.60 x 45,000) = $47,000. This means the firm would make a profit as the revenue is higher than the total cost. Therefore, under these changed circumstances, it would be advisable for the company to buy the new equipment and increase the selling price.
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On October 15, 2019, Jon purchased and placed in service a used car. The purchase price was $38,000. This was the only business use asset Jon acquired in 2019. He used the car 80% of the time for business and 20% for personal use. Jon used the regular MACRS method and does not claim any expense under § 179 or additional first-year depreciation. If required, round your answers to the nearest dollar. Click here to access Exhibit 8.4 and Exhibit 8.5 of the textbook. Click here to access the limits for certain automobiles. a. Is the car eligible for additional first-year depreciation? Yes b. What MACRS convention applies to the new car? Mid-quarter c. Is the automobile considered "listed property"? Yes d. Does the automobile satisfy the "predominantly used for business" definition? Yes e. The total cost recovery deduction Jon may take for 2019 with respect to the car is $
Cost recovery deduction = $1520
Solution:
Given data
purchase price = $38,000
used the car business = 80%
used the car personal = 20%
solution
cost recovery limit are,
cost recovery limit = asset value × statutory % × mid quarter convention
We recognize the 5-year MACRS convention of car and the depreciation rate of MACRS is 20 percent in the first year.
so we use MACRS statutory % method
cost recovery limit = $38000 × 5%
cost recovery limit = $1900
we know maximum limit is $3160
so cost of recovery is $1900
so,
cost recovery deduction is
cost recovery deduction = cost recovery limit - personal use
cost recovery deduction = $1900 - ( $1900 × 20% )
cost recovery deduction = $1520
A local finance company quotes an interest rate of 18.1 percent on one-year loans. So, if you borrow $39,000, the interest for the year will be $7,059. Because you must repay a total of $46,059 in one year, the finance company requires you to pay $46,059/12, or $3,838.25 per month over the next 12 months.
a.What rate would legally have to be quoted? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
APR________ %
b.What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
EAR______%
Final answer:
To determine the APR and EAR for the finance company's loan, specific financial formulas must be utilized that incorporate the effects of compounding, which are not provided by the simple interest quote.
Explanation:
The local finance company quoting an interest rate of 18.1% on a $39,000 loan results in an annual interest amount of $7,059. Given that the total repayment amount is $46,059 to be paid over 12 months, the monthly payment would be $3,838.25. However, the Annual Percentage Rate (APR) and Effective Annual Rate (EAR) are not immediately evident from these numbers, as they would incorporate the effect of compounding on the interest rate.
To find the APR, which is the nominal interest rate without compounding, we can use the formula provided by financial regulations, which typically involves dividing the total amount of interest paid by the loan amount and then multiplying by 100 to get a percentage. It is important to note that while the APR provides a way to compare different loans, it does not account for the effects of compounding.
To calculate the EAR, which includes the effects of compounding, we use a different formula that takes into account the frequency of compounding within the year. In cases where monthly payments are involved, this would be compounded monthly. The EAR formula reflects the actual yearly rate that borrowers would pay if they account for compounding within the year.
The legally quoted APR for the loan is 18.12%,
and the effective annual rate (EAR) is 19.76%. These rates account for the monthly interest and compounding effects over the year.
Calculating the Required Interest Rates
To determine the legally required quoted interest rate (APR) and the effective annual rate (EAR) for a loan, you can follow these steps:
a. Annual Percentage Rate (APR):
The APR is the nominal interest rate considering the costs associated with the loan. Here, we calculate the monthly interest rate first:
The total interest [tex]APR = 0.09843 * 12 * 100 = 118.12%.[/tex]the year is $7,059.
The principal is $39,000.
The monthly payment is $3,838.25.
The monthly interest rate can be calculated using the formula: R = (payment/principal) - 1.
So, R = $3,838.25 / ($39,000 / 12) - 1 = 0.09843.
Convert the monthly rate to an annual rate: APR = 0.09843 * 12 * 100 = 118.12%.
APR = 18.12%
b. Effective Annual Rate (EAR):
The effective annual rate considers the compounding effect:
The EAR is calculated using the formula:[tex](1 + monthly interest rate)^12 - 1.[/tex]
With the monthly rate R = 0.09843, we get:
[tex](1 + 0.09843)^12 - 1 = 0.19759.[/tex]
EAR = 19.76%
Therefore, the legally quoted APR is 18.12%, and the effective annual rate (EAR) is 19.76%.