The sales manager believes at 10% increase in variable unit selling expense well increase sales volume. if the sales volume increases by 28.5% what will be the change in net operating income? Is this a good idea, why or why not?

Answer:

The answer is cutbacks in defense production

One of the main reasons of the recession which was immediate after the world war 2 was the government's inability to produce anything as most expense was carried out in the event of the war which decreased the gross domestic product making the economy to fall into recession.

Answer:

Cutbacks in defense production.

Explanation:

World War II refers to a global war that started in 1939 and ended in 1945.

The end of World War II was immediately followed by a recession known as the Recession of 1945.

The Recession of 1945 occurred as a result of the reduction in government spending especially on defense production like arms and ammunition due to demobilization and movement to peacetime from a wartime economy.

This resulted into an enormous fall in gross domestic product (GDP) and the US economy technically entered a recession.

Therefore, cutbacks in defense production caused a recession in the years immediately following World War II.

Answer:

a. $15,369.28

b. $16,332.28

c. $19,347.60

Explanation:

a. What is the present value of purchasing the car?

PV of resale = SP ÷ (1 + r)^n ................................................. (1)

Where SP = Resales proceed = $20,500

r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly

n = number of periods = 3 years = 3 × 12 = 36 months

Substituting into equation (1), we have:

PV of resale = $20,500 ÷ (1 + 0.005)^36 = $17,130.7208354753

Net PV = Purchase price - PV of resale

            = $32,500 - $17,130.7208354753

Net PV = $15,369.28

Therefore,  the present value of purchasing the car $15,369.28.

b. What is the present value of leasing the car?

PV of future period payment can be calculated using the following formula:

PV of monthly payment = M × 1 - (1 + r)^-n ÷ r .......................................... (2)

Where,

M = monthly payment = $494

r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly

n = number of periods = 3 years = 3 × 12 = 36 months

Substituting into equation (2), we have:

PV of monthly payment = $494 × {[1 - (1 + 0.005)^-36] ÷ 0.005}

PV of monthly payment =  $16,238.2820221969  

PV of leasing the car = Today's payment + PV of monthly payment

                                   = $94 + $16,238.2820221969

PV of leasing the car = $16,332.28

Therefore, PV of leasing the car is $16,332.28.

c. What break-even resale price in three years would make you indifferent between buying and leasing?                    

This will be calculated by equating the PV of leasing the car to the difference between the purchase price and the PV of resale as follows:

PV of leasing car = Purchase price - PV of resale

$16,332.28 = $32,500 - PV of resale

Solving for PV of resale, we have:

PV of resale = $16,167.72.

The future value (FV) of resale price in 3 years can be calculated as follows:

FV of resale = PV of resale × (1 + r)^n

FV of resale = $16,167.72 × (1 + 0.005)^36 = $19,347.60

Therefore, the break even resale price in 3 years is $19,347.60.

Answer:

C. 5 minutes per window

Explanation:

Hello, I felt there was an error in the question, and I believe it should be "each window takes 5 minutes" and not "each window takes 55 minutes". I was able to retrieve the question elsewhere and have attached it for your perusal :)

Cycle Time is the time taken between two successive deliveries. Simply spoken, it is the time taken from when the order is initiated to when the order is successfully accomplished. It is important not to confuse cycle time with lead time. Lead time is the time between when an order is requested to when it is delivered. For example, in this case, the window may have been requested to be manufactured half hour before Alex started work on it. Thus, the lead time would be 35 minutes (30 minutes prior + 5 minutes it takes to complete). Cycle time on the other hand is simply 5 minutes on an order. It takes 5 minutes to complete a window and each order is only one window. Hence, cycle time is 5 minutes per window.

Hope this helps :)

Answer:

Explanation:

1. Calculate the price of the car in a year from now.

This is add the 4% on the current price:

2. Calculate the amount of money that must be put aside to have $20,800 in a year:

Use the formula of monthly compound interest, with 6% annual interest

Answer:

$ 714.957,6‬

Explanation:

We should solve for the book value afer four years:

3,800,000 x (0.2 + 0.32 + 19.2 + 11.52) =

3,800,000 x       0,8272‬    =  3.143.360

book value: 3,800,000 - 3,143,360 = 656.640‬

Now, we compare it against our expected sales value

745,000 - 656,640 = 88,360

This gain will be taxes at 34%

88,360 x 34% = 30.042,4‬

Now, the after tax salvage value will be :

745,000 - 30,042.4 = 714.957,6‬

Answer:

a. True

Explanation:

The capital account of a soul proprietor is similar to the equity account of a company. It shows  how much the business owes the owner.

This includes the amount invested and net income over the years posted as part of the retained earnings.

Net income is the difference between the total revenue and total expenses.

Net income = $220,000 - $150,000

= $70,000

Net balance in capital account = $13,000 + $70,000

= $83,000

Revenue accounts have credit balances, liability accounts have credit balances, expense accounts have debit balances, asset accounts have debit balances, and the owner capital account has a credit balance.

1. Revenue accounts normally have credit balances. These accounts increase on the credit side and decrease on the debit side.

2. Liability accounts normally have credit balances. These accounts increase on the credit side and decrease on the debit side.

3. Expense accounts normally have debit balances. These accounts increase on the debit side and decrease on the credit side.

4. Asset accounts normally have debit balances. These accounts increase on the debit side and decrease on the credit side.

5. The owner's capital account normally has a credit balance. This account increases on the credit side and decreases on the debit side.

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Answer: A. New buy

Explanation:

The situation described is most likely a NEW BUY situation because it bares some characteristics of same. In a new buy, customers generally take their time to make a decision and put the seller through a lot of paperwork in the case of corporate entities in a bid to assess the risk or cost of the new product. It is also necessary to do so as they have no previous experience with the seller and so trust cannot play a center stage.

Jenny also implied that it was the first time she had met them and it was also the first time they had been introduced to the product so there is that.

If you have any need for clarification do react or comment.

Group of answer choices:

A) New buy

B) Modified rebuy

C) Straight rebuy

D) Generic buy

E) Adapted buy

Answer:

The correct answer is letter "A": New buy .

Explanation:

In the corporate world, the new buy refers to the process in which a firm engages in the purchase of a new product or service. The company needs time to research different options attempting to select the most suitable. From the seller side, they must provide as many details of their goods as possible to attract new consumers. Persuasion is a key factor to close the deal.

After the decision is taken, some organizations may still be looking for options in case the product bought does not meet their standards.

Answer:

$1,899.12

Explanation:

We use the PMT formula that is shown in the attachment below:

Provided that

Present value = $305,000 - $30,500 = $274,500

Future value = $0

Rate of interest = 5.57% ÷ 12 = 0.46416666%

NPER = 12 months × 20 = 240 months

The formula is shown below:

= PMT(Rate;NPER;-PV;FV;type)

The present value come in negative

So, after solving this, the monthly payment is $1,899.12

Answer:

Direct Material Price Variance = ( Ap - Sp) * AQ

($1.70 - $1.75) * 52,400 = (-0.05)*52,400 = -$2,620 Favorable

Direct Material Quantity Variance = ( Aq - Sq)* Sp

( 52,400 -53,400) $1.75 = -$1,750 Favorable

Total materials cost variance = Material price variance + Material quantity variance

                                                 = -$2,260 (f) + -$1,750 (f)

                                                =-$4,010 (F)

Explanation:

Ap = Actual Price

Sp = Standard Price

Aq = Actual Quantity

Sq = Standard Quantity

F= Favorable

Answer:

Total $986.2534

Explanation:

We have to discount the annual bond against the same rate but compounding semiannualy

[tex](1+ 0.0875/2)^2 -1 = r_e\\1.0894140625 - 1 = r_e\\0.0894140625 = r_e[/tex]

Now we discount the 12 coupon payment and the maturity at the given discount rate

[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]

C 87.500 (1,000 x 0.0875)

time 12

rate 0.0894140625

[tex]87.5 \times \frac{1-(1+0.0894140625)^{-12} }{0.0894140625} = PV\\[/tex]

PV $628.4172

[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]  

Maturity   1,000.00

time   12.00

rate  0.0894140625

[tex]\frac{1000}{(1 + 0.0894140625)^{12} } = PV[/tex]  

PV   357.84

PV c $628.4172

PV m  $357.8362

Total $986.2534

Answer:

$50 million

Explanation:

The computation is shown below:

As we know that

Required reserve = Deposits × Required reserve ratio

= $200 million × 0.20

= $40 million

Now the excess reserves is

= Bank reserves - required reserve

= $50 million - $40 million

= $10 million

So, the money creation is

Money creation = Money multiplier × excess reserve

where,

Money multiplier = 1 ÷ required reserve ratio

= 1 ÷ 0.20

= 5

So, the money creation is

= 5 × $10 million

= $50 million

Answer: CPM and PERT use different activity time estimates.

Explanation:

Program (Project) Management and Review Technique (PERT) is appropriate when the project time needed to complete different activities are unknown while the Critical Path Method or CPM is fitted for recurring projects in nature. PERT deals with activities that are not predictable but CPM deals with repetitive activities. PERT focuses/concentrates on time while CPM focuses on time-cost & trade-off. Also, PERT requires three-time estimate while CPM requires one-time estimate. PERT uses a probabilistic model and on the other hand, CPM uses a deterministic model. In PERT, a technique of planning and controlling time is used but CPM uses a technique to control cost and time.

Answer:

The correct answer is letter "D": CPM integrates time and cost performance while PERT is based solely on time performance.

Explanation:

The Project Management and Review Technique also called PERT is used to plan and control the time of uncertain activities during the development of a project. The PERT is an event-oriented technique. The Critical Path Method or CPM is a statistical technique used to control the cost and time of well-defined activities of a project. The CPM is activity-oriented.

Answer:

$274,500

Explanation:

*March 1 : Amount spent = 540,000;  Period = 10

Weighted average accumulated expenditure = (10/12)*540000= 450,000

*June 1: Amount spent = 900,000;  Period = 7

Weighted average accumulated expenditure = (7/12)*900000= 525,000

*July 1: Amount spent = 2,250,000;  Period = 6

Weighted average accumulated expenditure = (6/12)*2250000= 1,125,000

*December 1: Amount spent = 2,250,000;  Period = 1

Weighted average accumulated expenditure = (1/12)*2250000= 187,000  

Therefore total Weighted average accumulated expenditure = 2,287,500

Interest on weighted average = 12%  *  2,287,500  = 274,500 = Avoidable interest

Calculation of Actual interest on the instruments;

Bond: 13%*6,000,000= 780,000

Note: 10%*2,400,000= 240,000

Loan: 12%*4,500,000= 540,000

Actual interest = 1,560,000

According to GAAP; The least amount between Actual Interest and Avoidable interest can be capitalized.

Following the figures above, amount of interest to be capitalized in 2017 in relation to the construction of the building is $274,500

Answer:

The book value at the end of year 3 is $100,000

Explanation:

Yearly Depreciation =(cost+cost of dismantling-salvage value)/useful life

cost is $200,000

cost of dismantling is $5000

salvage value is $30000

useful life is 5 years

Yearly depreciation=(200000+5000-30000)/5

Yearly depreciation=$35000

Depreciation for three years=$35000*3

                                               =$105000

Book value at the end of year 3=total cost of machine-three years' depreciation

Book value at end of year 3=$200000+$5000-$105000

Book value at the end of year 3=$100,000

Answer:

d. ​Both A&B

Explanation: Auction is a term used in the field of marketing or trading of goods where bidders are allowed to make bids(amount which they intend to pay for a given product) the Product can either be an Artwork or other goods like furniture,Cars, clothes etc.

A common value auction is a type of auction where certain information about the value of a product are available to some bidders and other sets of bidders have other information about the value.

DISPLAYING INFORMATION ABOUT A COMMON VALUE AUCTION IS GOOD FOR THE BIDDERS AS IT REDUCES THE RISK THEY FACE ESPECIALLY BEFORE BUYING THE PRODUCT AND FOR THE AUCTIONEER AS IT HELPS TO ATTRACT MORE BIDDERS.

Answer:

Negative externality is the point at which the onlooker bears the expense of any action. To disguise this externality, government forces charge equivalent to the outside expense.  

In negative externality showcase delivers more amount than socially ideal amount. At the point when government forces charge, it decreases the market amount and brings it equivalent to ideal amount.

The firm will choose to abate the first 30 pounds of particulates it emits because the abatement costs are less than the pollution tax. If Congress imposes a carbon emissions tax, there's a conflict between the benefits to the townspeople and the costs to the factories, making it difficult to achieve the optimal outcome due to misaligned incentives.

When a government imposes a corrective tax on goods or services that cause external costs, such as pollution, firms are presented with a choice. They can either continue their activities as before and pay the tax, which is intended to internalize the external cost, or they can take measures to reduce the externality and pay for the cost of abatement.

In the scenario where a firm faces a pollution tax of $1,000 for every 10 pounds of particulates emitted, the firm must compare the cost of abatement with the cost of paying the tax. Given that the first 10 pounds of abatement costs $300, the second 10 pounds costs $500, and the third 10 pounds costs $900, which are all less than the $1,000 tax, the firm will choose to abate the first 30 pounds of particulates. For the fourth 10 pounds, which would cost $1,500 to abate, the firm will choose to pay the tax, as it is cheaper than the cost of abatement.

Taking into account the benefits to the community and the costs to the factories, if Congress proposes a tax on carbon emissions, the townspeople might collectively benefit by a dollar amount equivalent to $300 each. However, the factories will see reduced profits by $1 million each, prompting a consideration of how much each side might be willing to spend to either support or oppose the tax. This scenario illustrates the challenges in reaching a societally optimal outcome, as the interests of different stakeholders must be balanced, and frequently, individual incentives can misalign with the societal good.

Answer:

Thus, Work in process inventory (Ending) = $23,840

Explanation:

Below is the Schedule of Cost of Goods Manufactured:

Cost of materials requisitioned = 51,200

Manufacturing overhead applied = 92,640

Direct materials used = 46,700

Indirect materials = 4,500

Direct labor = 77,200

Total manufacturing cost = 216,540

Work in process inventory, beginning = 30,300

Work in process inventory, ending = 23,840

Cost of goods manufactured = 223,000

Applied Manufacturing overhead  = Direct labor cost x 120%

                                                         = 77,200 x 120%

Applied Manufacturing overhead= $92,640

Cost of manufactured  goods = Total manufacturing cost + Work in process inventory (beginning) - Work in process inventory (Ending)

223,000 = 216,540+30,300 - Work in process inventory (Ending)

Work in process inventory (Ending) = (216,540 +30,300) - 223,000

                                                           = 246,840 - 223,000

                                                           = 23,840

Thus, Work in process inventory (Ending) = $23,840

Answer:

23100

Explanation:

To get to this answer we must use process costing and we will begin by explaining what it is first.

A process costing system is used in industries where masses of similar products or services are produced. Products are produced in the same manner and consume the same amount of direct cost overheads.it is therefore unnecessary to assign costs to individual units of outputs for that period.

The term work-in-progress (WIP) is a production and supply-chain management term describing partially finished goods awaiting completion. WIP refers to the raw materials, labour, and overhead costs incurred for products that are at various stages of the production process

Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labour cost and manufacturing overhead.

Direct materials are raw materials that are made into finished products. These are not materials that are used in the production process. Direct materials are goods that physically become the finished product at the end of the manufacturing process.

Direct labour cost is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a work order, or provision of a service.

23,100

Explanation:

Beginning WIP---------------------------------------30,400

Add: Total manufacturing costs

Direct materials used  

(51,100 - 4,500) ----------------------46,600

Direct labour----------------------------77,000

Overhead (120% x 77,000) --------92,400-----216,000

Total cost in work in process--------------------246,400

Less; Ending WIP--------------------------------------? -----

Cost of goods manufactured--------------------223,300

Ending WIP = 246,400 - 223,300 = 23,100

Zupan's law firm should recognize the revenue in April, as that is when the services were performed and, thus, the revenue was earned. This is in accordance with the accrual basis of accounting where revenue is recognized when it is earned, not when payment is received.

The subject of this question pertains to revenue recognition, a fundamental concept in accounting. In accordance with the accrual basis of accounting, revenues are recognized when they are earned, regardless of when the payment is received. In this scenario, Susan Zupan's firm should recognize the revenue from the legal engagement in April because that is the month the work was completed and the services were rendered.

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Option b) April is the correct choice.

This question relates to the recognition of revenue in accordance with Generally Accepted Accounting Principles (GAAP). According to GAAP, revenue should be recognized when it is earned and realizable. In the case of Susan Zupan, who performed the legal work in April, the revenue should be recognized in April when the service was provided.

Therefore, the correct answer is April, aligning with the principle that revenue is recognized when services are performed.

Complete Question

Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, when should it recognize revenue from this engagement?

a) March

b) April

c) May

d) June

Question is incomplete, Complete question is as follows :

Suppose Kyoko is an avid reader and buys only mystery novels. Kyoko deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.

Initially, the purchasing power of Kyoko's $3,000 deposit is___________mystery novels.

For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Kyoko's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates.

Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Kyoko will not buy seven-tenths of a mystery novel.

When the rate of inflation is equal to the interest rate on Kyoko's deposit, the purchasing power of her deposit ______ over the course of the year.

Answer:

1) Purchasing power = 3000/15 = 200 novels

2) 0% Annual inflation rate:

Novel price = $ 15

Number of novels bought = 3300/15 = 220 novels

Real rate of interest = Nominal interest rate - Inflation = 10% - 0 = 10%

10% Annual inflation rate:

Novel price =10% of 15 + $ 15  = 1.5 +15 = 16.5

Number of novels bought = 3300/16.5 = 200 novels

Real interest rate = Nominal interest rate - Inflation = 10% - 10% = 0%

13%  Annual inflation rate:

Novel price = 13% of 15 + $15= 1.95 + 15= 16.95

Number of novels bought = 3300/16.95 = 194.69 = 195 novels

Real rate of interest = Nominal interest rate - Inflation = 10% - 13% = - 3%

3) remains same over the course of year

Kyoko's initial purchasing power is 200 mystery novels. With different inflation rates, her purchasing power decreases to 181 novels (10% inflation) and 177 novels (13% inflation). The real interest rate is 10%, 0%, and -3% for inflation rates of 0%, 10%, and 13% respectively.

Since each mystery novel costs $15.00, Kyoko can initially purchase $3000 / $15.00 = 200 mystery novels.

With an annual inflation rate of 0%, the price of a mystery novel remains the same at $15.00. Therefore, Kyoko's purchasing power remains at 200 mystery novels.

With an annual inflation rate of 10%, the new price of a mystery novel after one year is $15.00 * (1 + 10%) = $15.00 * 1.10 = $16.50. Kyoko's purchasing power after one year is $3000 / $16.50 = 181 mystery novels.

With an annual inflation rate of 13%, the new price of a mystery novel after one year is $15.00 * (1 + 13%) = $15.00 * 1.13 = $16.95. Kyoko's purchasing power after one year is $3000 / $16.95 = 177 mystery novels.

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. So, at an inflation rate of 0%, the real interest rate is 10% - 0% = 10%. At an inflation rate of 10%, the real interest rate is 10% - 10% = 0%. And at an inflation rate of 13%, the real interest rate is 10% - 13% = -3%.

When the inflation rate is equal to the interest rate, the purchasing power of Kyoko's deposit remains the same over the course of the year.

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Answer:

a.                                                 2005     2006      2007         2008

Holding period return                10%        -7.27%    5.88%        -100

b. Geometric  average return = -100

c. Dollar weighted return= -2.70%

Explanation:

Holding period return = [tex]\frac{income+(end period value - original value)}{original value}[/tex]

                                    =[tex]\frac{o + ( 55 - 50)}{50}[/tex] * 100

                                    = 10%

geometric average return = (( 1+r)*(1+r2)*(1+r3)*(1+r4))^1/4   - 1

dollar weighted return = (initial investment + additions) /  (initial investment -withdrawals)

                                      = ( 5000+ 2750)/(5000-3825-4050)

                                      = 7750/-2875

                                      =

Answer:

False

Explanation:The Par value of a stock is has a different value when compared with its market value. Well established companies usually have have a higher market value when compared to its par value. The par value of a stock can be represented in three different ways

1) When the par value of a stock is equal with the market value.

2) When the par value of a stock is lower than the market value.

3) When the par value of a stock is Higher than the market value.

WHEN THE PAR VALUE OF A CAPITAL STOCK IS EQUAL TO THE CAPITAL STOCK IS ISSUED WITH THE PAR VALUE ONLY WHEN THE PAR VALUE IS EQUAL TO THE MARKET VALUE.

Final answer:

To calculate the cost of inventory for Ace Incorporated as of June 30, transactions with Diamond Inc. and Club Corp. were evaluated, adjusting for returns and discounts. After applying the respective discounts, the total inventory cost as of June 30 is $4,559.

Explanation:

To calculate the inventory cost for Ace Incorporated as of June 30, first, we address each transaction sequentially. With a perpetual inventory system, inventory values and costs of goods sold are updated continuously with each purchase or sale.

Therefore, the total inventory cost as of June 30 is the sum of payments made to both suppliers, $3,249.50 + $1,309.50 = $4,559.

The cost of inventory for Ace Incorporated as of June 30 is $4,515.50 after accounting for goods purchased, returns, and discounts.

During the month of June, Ace Incorporated purchased goods from two suppliers.

The sequence of events was as follows: June 3 Purchased goods for $4,800 from Diamond Inc. with terms 3/12, n/45. 5 Returned goods costing $1,450 to Diamond Inc. for credit on account. 6 Purchased goods from Club Corp. for $1,350 with terms 3/12, n/45. 11 Paid the balance owed to Diamond Inc. 22 Paid Club Corp. in full.

Required: Assume that Ace uses a perpetual inventory system and that the company had no inventory on hand at the beginning of the month.

Calculate the cost of inventory as of June 30.

To answer this, follow these steps:

Answer:

c) $1,099

Explanation:

First, the multiple chices for the question

a) $1,692 b) $705 c) $1,099 d) $1,058 e)$1,189

Solution

what are we given,

First the future value = $1000 (which is the par value)

Years left to maturity = 7 yeras

Periods to consider = 2x7 = 14 (since the bonds involve a semi-annual payment)

Coupon rate = 12%

Therefore, we calculate teh interest amount as follows

= Future value x (coupon rate/2) =

$1000 x  (0.12/2)= $60

Step 2: Calculate the Present value Based on given figures

Rate to use for present value = Required rate of return/2 = 10%/2 = 5%

Considering the Present Value

= PV(Rate,nper, pmt, FV)

PV ( 5%, 14, 60, 1000) = $1098.99

PResent Value =  $1098.99

Final answer:

To find the intrinsic value of the bond, calculate the present value of the remaining semi-annual coupon payments and the par value at the required semi-annual rate of return, which is 5%.

Explanation:

The student's question pertains to the calculation of the intrinsic value of a bond. The Pennington Corporation issued 30-year bonds with a coupon rate of 12 percent, semi-annual payments, and a par value of $1,000. With 7 years remaining to maturity and the current required rate of return at 10 percent, we would need to calculate the present value of the remaining coupon payments and the par value of the bond.

To calculate this, we need to discount the semi-annual interest payments, which would be $60 (12% of $1,000 divided by 2), as well as the $1,000 par value, using the semi-annual discount rate (which would be 5%, half of the 10% required return). This requires calculating the present value of an annuity for the interest payments, plus the present value of a single sum for the par value of the bond.

Answer:

Freezer 2 is the better option because it has higher present worth.

Explanation:

Final answer:

This engineering question deals with the selection of a cryogenic freezer by analyzing after-tax present worth, demonstrating the significance of tax rates, recaptured depreciation, and after-tax MARR in such decisions. It encompasses evaluating investment returns at different costs, the impact of tax credits, and considerations for maximum investment based on borrowing costs.

Explanation:

The question relates to the decision of selecting a cryogenic freezer for a biotech company, considering after-tax present worth (ATPW), which involves applying principles of engineering economics. It underscores the importance of understanding the effective income tax rate, recaptured depreciation, and after-tax minimum acceptable rate of return (MARR) in evaluating investment options. The hypothetical scenarios provided include calculating rates of return on investments at different costs, the impact of an investment tax credit, and determining the maximum investment based on borrowing costs. This forms a basis for applying tax effects and financing costs to investment decisions in engineering economic analysis.

Key Concepts

Effective income tax rate and its influence on net taxable income.

The role of recaptured depreciation in investment decisions.

Calculating after-tax present worth for comparing investment options.

The effect of investment tax credits on the attractiveness of an investment.

Linking borrowing costs to the maximum payable for an investment without the benefit of tax credits.

The correct statement is that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income when the Subsidiary sells the land, assuming there is no recapture of previously deducted Sec. 1231 losses.

When the Parent Corporation sells land to the Subsidiary Corporation, realizing a $25,000 gain, this gain is typically deferred for tax purposes in a consolidated return because it is an intercompany transaction. Therefore, answer a, which suggests a $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary, is incorrect since this gain is not immediately recognized.

When the Subsidiary Corporation later sells the land to a nonmember, the entire gain realized, including the previously deferred gain from the intercompany sale plus any additional gain recognized by the Subsidiary, is recognized. Therefore, the correct statement is c, which states that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land, assuming no recapture of previously deducted Sec. 1231 losses must occur. This includes the deferred gain and the additional gain on the final sale.

Answer:

The annual fixed cost of e-commerce option is $2180 as shown above

The unit price for the unit price for the e-commerce option is $4.5($4 original price plus the extra $0.50 as a result of cut taken by the site owner)

The variable cost for the self-developed site is $3

If sells 200 items he would prefer self-developed option with a lower amount of loss $1800

If sell 700 items he would  prefer e-commerce option with amount of $1130 as losses

Explanation:

Options                            Self-Built site                 E-commerce

Fixed cost                         $2000                            $2180  ($2000+15*12)          

Variable cost                    $3                                     $3

Revenue                            $4                                     $4.5 ($4+$0.5)

The profit under each option when 200 items are sold are :

Self-developed option:

revenue=$4*200=$800

total cost =$2000+($3*200)

total cost =$2600

Profit/(loss) =$800-$2600

loss=-$1800

e-commerce

revenue=$4.5*200=$900

total cost=$2180+($3*200)

total cost =$2780

profit/(loss)=$900-$2780

loss=-$1880

when 700 items were sold:

self-developed option;

revenue=$4*700=$2800

total cost=$2000+($3*700)

total cost=$4100

profit/(loss)=$2880-$4100

loss=-$1220

e-commerce option

revenue =$4.5*700

revenue=$3150

total cost=$2180+(700*$3)

total cost=$4280

loss=$3150-$4280

loss=-$1130

The annual fixed cost for the e-commerce site option is $180. The unit price for the e-commerce option would be $4.5. If Jonathan sells 200 items, the self-developed site option would be preferred, while if he sells 700 items, the e-commerce option would be preferred.

a. The annual fixed cost for the e-commerce site option is $180 (15*12 months).

b. The unit price for the e-commerce option would be $4.5 ($4 + $0.5).

c. The variable cost for the self-developed site option is $3 per item sold.

d. If Jonathan sells 200 items, the self-developed site option would be preferred as the cost would be $600 for the e-commerce site and $600 for the self-developed site.

e. If Jonathan sells 700 items, the e-commerce option would be preferred as the cost would be $1,260 for the e-commerce site and $2,100 for the self-developed site.

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Answer:

9.08%

Explanation:

We use the RATE formula that is shown in the attachment below

Given that,  

Present value = $898,.49

Assuming figure - Future value or Face value = $1,000  

PMT = 1,000 × 6% ÷ 2 = $30

NPER =  4 years × 2 = 8 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

Therefore,

After solving this, the yield to maturity is 9.08%

Answer:

1. please refer to item 1 in explanation table below

2. $477, 400

3. $256, 600

4. $15.91

Explanation:

Loring Company

(1) Classification of costs:

Direct Materials Direct Labor Overhead Selling Expense Admin Expense

Direct materials          $210, 000    

Factory rent   $20, 000  

Direct labor  $123, 000    

Factory utilities   $6, 400  

Supervision in factory   $54, 000  

Indirect labor   $34, 000  

Depreciation of factory equipment   $6, 000  

Sales commission    $26, 000  

Sales salaries    $66, 000  

Advertising      $34, 000  

Depreciation on headquarter building     $9, 600

Salary of corporate receptionist     $35, 000

Other administrative costs     $186, 000

Salary of factory receptionist   $24, 000  

(2) Total Product cost is the total cost incurred in the production process. It is a sum of all direct labor costs, direct material costs and factory overhead costs. Factory overhead costs include factory rent, factory utilities, salaries of factory supervisor, indirect labor, indirect materials and depreciation of all equipment and plants used in the factory. These are basically all costs that re directly, and indirectly involved in the production process.  

Total Product cost = $210, 000 + $20, 000 + $123, 000 + $6, 400 + $54, 000 + $34, 000 + $34, 000 + $6, 000 + $24, 000 = $477, 400

(3) Total Period cost is any cost that cannot be capitalized into inventory, prepaid expenses or fixed assets. This cost is the cost that is incurred not as a result of production. They are incurred independently of the production process.

Total period costs = $26, 000 + $66, 000 + $34, 000 + $9, 600 + $35, 000 + $186, 000

= $356, 600

(4) Unit cost = $477, 400 / 30, 000 = $15.91

Final answer:

The total product cost of Loring Company is $477,400, the total period cost is $356,600, and the unit product cost for last year is $15.91 per unit, assuming 30,000 units were produced.

Explanation:

To classify each of the Loring Company's costs and calculate the total product cost, period cost, and unit product cost, we can separate the costs into categories of product and period costs. Product costs include all the costs that are necessary to manufacture a product, whereas period costs are non-manufacturing costs that are expensed within the period they are incurred.

Classified Costs:

Total Product Cost:

The total product cost equals the sum of all product costs:

Total Period Cost:

The total period cost equals the sum of all period costs:

Unit Product Cost:

If 30,000 units were produced last year, the unit product cost would be calculated by dividing the total product cost by the number of units:

Answer:

The fair price per share today is $96.40

Explanation:

The fair price per share can be calculated using the DDM approach whereby the expected future dividends are discounted back to calculate the fair value of the share today.

The fair price per share will be,

P0 or V = 4 / (1+0.05) + 3.5 / (1+0.05)²  + [(3.5 * (1+0.014)) / 0.05 - 0.014] / (1+0.05)²

Fair price per share = $96.40

Answer:

$96.403(Approx)

Explanation:

Using The dividend discount model (DDM) which is a method or technique that is used in the valuation of a company's stock price based on the premise that the company’s stock is worth of all of its potential dividend payments, discounted back to their current value.

Value after year 2=(D2*Growth rate)/(Required return-Growth rate)

=(3.5*1.014)/(0.05-0.014)

=98.583

Hence fair price=Future dividend and valu x Present value of discounting factor(rate%,time period)

=4/1.05+3.5/1.05^2+98.583/1.05^2

=$96.403(Approx)