Answer:
$118.83 per month that Zach must save.
Explanation:
This is a future value annuity as we know the cruise will cost $16500 in 4 years time as estimated by Zach for the cruise.
Fv is the future value for the annuity which is $16500
we also have i the interest rate which is 3.99% monthly
n is the number of periods in which the monthly amount is saved 4 x 12 =48
now we will substitute to the following formula and solve for C the monthly payments that Zach saves for the cruise:
Fv =C [((1+i)^n -1)/ i] now we substitute
$16500 = C[((1+3.99%)^48 -1)/3.99%)] then solve for C
$16500/[(1+3.99%)^48 -1)/3.99%] = C
C = $118.83 that Zach must save per month for 4 years to afford the cruise.
Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $800,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. days What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 45th day? Do not round intermediate calculations. Round your answer to the nearest dollar. $
Final answer:
The days sales outstanding (DSO) is 0.104 days and the average amount of receivables is $226,849. If Snider toughens its collection policy to all nondiscount customers paying on the 45th day, the DSO would be 0.095 days and the average receivables would be $207,671.
Explanation:
The days sales outstanding (DSO) can be calculated using the formula:
DSO = [(30% × 10) + (70% × 50)] / 365
Plug in the values:
DSO = [(30% × 10) + (70% × 50)] / 365
= [3 + 35] / 365
= 38 / 365
= 0.104
Now, to find the average amount of receivables, we can use the formula:
Average Receivables = (DSO × Annual Sales) / 365
Plug in the values:
Average Receivables = (0.104 × $800,000) / 365
= $226.849
If Snider toughens its collection policy and all nondiscount customers pay on the 45th day, the new DSO can be calculated as:
DSO = [(30% × 10) + (70% × 45)] / 365
= [3 + 31.5] / 365
= 34.5 / 365
= 0.095
Using the formula for average receivables, the new average receivables would be:
Average Receivables = (0.095 × $800,000) / 365
= $207,671
"For minimizing the cash conversion cycle, a firm should" ________. A. increase mail managing, processing, and clearing time when collecting from customers B. turn over inventory as quickly as possible without stockouts C. pay off accounts payables as fast as possible to gain credibility D. grant longer credit terms to customers to maintain healthy business relations
Answer:
B. turn over inventory as quickly as possible without stockouts.
Explanation:
Inventory turnover is defined as the number of times a business sells off its stock on hand and so require replenishment in a year.
The higher the inventory turnover, the higher the number of sales and higher profits.
Cash conversion cycle is how long a business can survive without cash and investing in inventory to increase sales.
To minimise cash conversion cycle a business should ensure it sells of its inventory quickly without stockout.
During April, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units. 33,000 were in process In the production department at the beginning of April and 260,000 we started and completed In April. April's beginning Inventory units were 70% complete with respect to materials and 30% complete with respect to conversion. At the end of April, 65,000 additional units were in process In the production department and we 70% complete with respect to materials and 20% complete with respect to conversion. 1. Compute the number of units transferred to finished goods. Units transferred out 2. Compute the number of equivalent units with respect to both materials used and conversion used In the production department for April using the weighted-average method.
Answer:
1) completed and transferred 293,000
Equivalent units under W/A method:
EU materials 338,500
EU conversion 306,000
Explanation:
Beginning WIP 33,000
started and completed 260,000
completed and transferred 293,000
Ending WIP 65,000
EU under weighted-average methood:
complete and transferred plus percentage of completion ending WIP
293,000 + 65,000 x 70% = 338,500
293,000 + 65,000 x 20% = 306,000
True or false: Native advertising is being studied by both industry associations and US federal government regulators, who are concerned with the blurring of lines between editorial content and advertising.
Answer:
The statement is: True.
Explanation:
Native advertising refers to matching the form and function of the promotion with the medium it is being published. In other words, it is the type of advertising transmitted in a similar medium of what the product might be used for. Nowadays it is more commonly spread in social media and the products inherent with its use.
The Federal Trade Commission Act (FTC) is in charge of the advertising in the U.S. Along with the government, the FTC reviews deceiving promotion that does not link the content of the products offered with their true form. The Bureau of Consumer Protection is the body that enforces regulation on fraudulent marketing practices granted by the FTC.
Final answer:
Native advertising is being studied by both industry associations and US federal government regulators, who are concerned with the blurring of lines between editorial content and advertising. - True
Explanation:
Native advertising is designed to match the form and function of the platform upon which it appears, leading to a potential conflict of interest for genuine news organizations. The concern arises as these advertisements, which are made to look like editorial content, blur the lines between journalism and promotion, making it challenging for readers to distinguish between unbiased news and paid content.
Legally, there have been a variety of regulations imposed on businesses to prevent false or misleading practices, including the prohibition of false advertising. The federal government and courts have also required disclosures on certain products, like food and tobacco, and have regulated professions such as lawyers in their advertising practices to maintain transparency and prevent fraud.
You're trying to save to buy a new $230,000 Ferrari. You have $32,000 today that can be invested at your bank. The bank pays 5.5 percent annual interest on its accounts. How long will it be before you have enough to buy the car?
Answer:
37 years
Explanation:
We know,
Future value = Present value (1 + r)^n
Given,
Future value, FV = $230,000;
Present value, PV = $32,000;
Interest rate, r = 5.5% = 0.055;
We have to determine how many years later I can purchase the Ferrari.
Now, putting the values into the formula, we get,
FV = PV × (1 + r)^n
or, $230,000 = $32,000 × (1 + 0.055)^n
or, $230,000 ÷ $32,000 = (1 + 0.055)^n
or, 7.1875 = (1 + 0.055)^n
or, log 7.1875 = n × log 1.055
or, n × log 1.055 = log 7.1875 [Changing the side]
or, n = log 7.1875 ÷ log 1.055
Using financial calculator/Scientific Calculator,
or, n = 0.8566 ÷ 0.0233
Therefore, n = 36.76 or almost 37 years.
Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable. Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the expected variable cost
Final answer:
To calculate the expected variable cost for producing 115,000 units, the variable cost per unit ($4) is multiplied by the number of units (115,000), equaling $460,000.
Explanation:
When determining the expected variable cost of producing 115,000 units at Simon Inc., we first need to establish the variable cost per unit. Given that Simon Inc. is currently producing 110,000 units at a variable cost of $440,000, the unit variable cost is calculated by dividing the total variable costs by the number of units produced. This results in a cost of $4 per unit ($440,000 / 110,000 units).
Since variable costs vary directly with the level of production within the relevant range, and Simon Inc. is expected to produce 115,000 units next year which falls within the relevant range of 100,000 to 120,000 units, we can simply multiply the unit variable cost by the number of units expected to be produced.
Therefore:
Variable cost per unit = $440,000 / 110,000 = $4 per unitExpected variable cost for 115,000 units = 115,000 units * $4 per unitExpected variable cost = $460,000Final answer:
The expected variable cost for Simon Inc. to produce 115,000 units next year, based on the current production of 110,000 units at a cost of $440,000, is calculated to be $460,000.
Explanation:
To calculate the expected variable cost for producing 115,000 units next year when Simon Inc. currently produces 110,000 units at a variable cost of $440,000, we need to use a cost-variable relationship based on the principle of proportionality within the relevant range. The given relevant range is from 100,000 to 120,000 units, which Simon Inc. is within. Thus, to find the variable cost per unit, we divide the total variable cost by the number of units currently produced:
Total Variable Cost / Number of Units = Variable Cost per Unit.$440,000 / 110,000 units = $4 per unit.Next, we multiply the cost per unit by the new production amount:
Variable Cost per Unit x Number of Units (next year) = Expected Total Variable Cost Next Year.$4 per unit x 115,000 units = $460,000Therefore, if Simon Inc. produces 115,000 units next year, the expected variable cost is $460,000.
Units to Earn Target Income Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).Required:
Be sure to read the instructions on each panel for additional guidance.
1. Calculate the number of helmets Head-First must sell to earn operating income of $81,900.
2. Check your answer by preparing a contribution margin income statement based on the number of units calculated
Explanation:
1. The computation of the number of helmets sell to earn operating income is shown below:
= (Fixed expenses + target profit) ÷ (Contribution margin per unit)
where,
Contribution margin per unit = Selling price per unit - Variable expense per unit
= $75 - $40
= $30
So, the number of helmets sold is
= ($49,500 + $81,900) ÷ ($30)
= 4,380 helmets
2. And , the contribution margin income statement is presented below:
Sales (4,380 helmets × $75) $328,500
Less: Variable cost (4,380 helmets × $45) ($197,100)
Contribution margin $131,400
Less: Total fixed cost (49,500)
Net income $81,900
Stacy Monroe wants to create a fund today that will enable her to withdraw $35,000 per year for 6 years, with the first withdrawal to take place 4 years from today. Click here to view factor tables If the fund earns 15% interest, how much must Stacy invest today? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Final answer:
To calculate how much Stacy must invest today to be able to withdraw $35,000 per year for 6 years, starting 4 years from today, we can use the present value of an annuity formula.
Explanation:
To calculate how much Stacy must invest today, we can use the formula for present value of an annuity. The formula is:
PV = A * (1 - (1+r)^(-n)) / r
Where PV is the present value, A is the amount that Stacy wants to withdraw each year, r is the interest rate, and n is the number of years. In this case, Stacy wants to withdraw $35,000 per year, the interest rate is 15%, and she wants to withdraw for 6 years starting 4 years from today. Let's substitute these values into the formula:
PV = 35000 * (1 - (1+0.15)^(-6)) / 0.15 = $146,049.21
Therefore, Stacy must invest $146,049.21 today in order to be able to withdraw $35,000 per year for 6 years, starting 4 years from today.
Davy Company had a beginning work in process inventory balance of $32,000. During the year, $54,500 of direct materials was placed into production. Direct labor was $63,400, and indirect labor was $19,500. Manufacturing overhead is applied at 125% of direct labor costs. Actual manufacturing overhead was $86,500, and jobs costing $225,000 were completed during the year. What is the ending work in process inventory balance
Answer:
Explanation:
Davy Company
Ending Work in process inventory:
Beginning Work in process inventory $32,000
Materials placed in production $54,500
Direct Labor $63,400
Manufacturing Overhead applied $79,250 [125% of $63,400]
Total cost of work in process $229,150 [add up all of the above numbers]
Less: Jobs completed during the year $225,000
Ending Work in process inventory $4,150
1. Find a site on the Web that offers classified ads for horses. Compare this site to exchangehunterjumper in terms of the services offered (the customer value proposition). What does The Exchange offer that other sites do not?
Answer:
Bigeq.com is a site that also offers classified ads for horses, and is one of the ExchangeHunterJumper.com’s biggest market competitor. One service that the Exchange offers that this site does not is that the Exchange professionally screens horses that are listed, while Bigeq.com allows anyone to post sales ads. Therefore, the horses on the Exchange are more likely to be appropriately described and have a better track record than those on Bigeq.com. However, this does mean that Bigeq.com typically has more horses listed than the Exchange does.
Another service that the Exchange provides is that all of the horses listed have high-quality videos and photos within the site that the customer can view, while not all of the horses on Bigeq.com have videos or photos, and those that do are linked to outside websites, some of which are not very good quality. The Exchange continually updates information on the horses available, while the ads on Bigeq.com are static once they have been submitted by the seller.
ExchangeHunterJumper is a specialized platform providing niche services for hunter/jumper show horses, emphasizing professional presentation and marketing, unlike broader classified ad sites like EquineNow or HorseClicks.
Explanation:To compare classified ad sites for horses, one would look for reputable platforms such as EquineNow or HorseClicks, which offer a variety of services ranging from ads for selling horses to equipment and even real estate. When compared to ExchangeHunterJumper, which specializes in the sale of hunter/jumper show horses, it's evident that The Exchange offers a more niche service. The Exchange provides a customer value proposition focused on high-caliber show horses and includes services such as professional photography and marketing for each listed horse to ensure they are presented in the best possible way. Other sites may have a broader scope but might not offer the same level of presentation or specialization in the hunter/jumper discipline.
By focusing on quality over quantity and the niche of show horses, The Exchange establishes itself as a premium offering within the equestrian market.
Learn more about Classified Ads for Horses here:https://brainly.com/question/14989741
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The capital budgeting director of Sparrow Corporation is evaluating a project that costs $200,000, is expected to last for 10 years and produce cash flows of $44,503 per year. What is the project's IRR?
Answer:
IRR of the project is 18%
Explanation:
The first table showing the cash flows for the 10 years and the formula for computing the IRR.
The second table showing the IRR of the project, which is 18%.
Computing the IRR by using the excel formula, which as:
=IRR(values,guess)
where
values are from year 0 to year 10
guess will be 0
So,
=18%
NOTE: The cash flow of year 0 is negative because it is costs of the project, which is paid.
An electronics company makes devices for two different federal agencies. The company just completed the two contracts. The Homeland Security contract was for 2,200 devices and took 27 workers two weeks (40 hours per week) to complete. The DEA contract was for 5,454 devices that were produced by 35 workers in three weeks. Calculate the productivity for the Homeland Security contract in units produced per labor hour. (Round your answers to 2 decimal places.)
Answer: 1.02 unit per hour
Explanation: total unit of devices for homeland security is 2200 units
Total labourer = 27 people
Total hour for two weeks = 40 × 2 = 80
Productivity per hour = devices number/total hour 2200/ 80 = 27.5
productivity for the Homeland Security contract in units produced per labor hour = 27.5/27 = 1.0185 = 1.02
The fair rate is 8%. What is 100 per year, forever, worth now?
2.What is the same 100 per year worth if it only lasts for 15 years?
3.What if the 100 was the past cash flow and we expect it to grow at 5% forever?
4.What if we only get the 100 once at the end of this year?
5.What if it we get it once, at the end of ten years?
6.If we get the 100 each year for ten years and invest each payment in an account that earns 8% how much will be there at the end?
Answer:
1. $1,250
2. $855.95
3. $3,333.33
4. $92.59
5. $46.32
6. $671.01
Explanation:
1.
$100 per year forever
Constant Cash flow every year forever is actually a perpetuity its present value is
PV of Perpetuity = Cash flow / rate of return
PV of $100 Perpetuity = $100 / 0.08 = $1,250
2.
$100 per year for 15 years
Constant Cash flow every year for specific time period is actually a Annuity its present value is
PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-15 ) / 0.08 ] = $855.95
3.
$100 per year grow at 5% forever
It is a growing perpetuity and its present value will be calculated as follow
Present value of growing perpetuity = Cash flow / Rate of return - growth rate
Present value of growing perpetuity = $100 / 0.08 - 0.05 = $3,333.33
4.
$100 once at the end of this year
Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-1 = $92.59
5.
$100 once after 10 years
Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-10 = $46.32
6.
$100 each year for 10 years @ 8%
PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-10 ) / 0.08 ] = $671.01
Answer: Please refer to the explanation section
Explanation:
Investment = 100
Interest rate = r = 8%
1. Value of a Perpetual (forever) investment
Present Value = Investment/r = 100/0.08 = 1250
Present Value = $ 1250
2. Present Value with a period of 15 years
Present Value = Investment/(1+r)^n
Present Value = 100/(1+0.08)^15 = 31.524170497
Present Value = $ 31.52
3. Present Value of a Perpetual (forever) investment with Growth rate of 5%
Present Value = Investment/r = 100/0.08 – 0.05 = 3333.333333
Present Value = $ 3333.33
4. Future Value if we get 100 at the end of the year
Future Value = investment(1+r) = 100(1+0.08) = 108
Future Value = $ 108
5. Future Value if we get 100 at the end of 10 years
Future Value = investment(1+r) = 100(1+0.08)^10 = 251.524170497
Future Value = $ 251.52
6. Future Value if 100 is reinvested every year for 10 years
Future Value = Payment x [(1+r)^n – 1)/ r]
Future Value = 100 x [(1+0.08)^10 – 1)/ 0.08)
Future Value = 1448.6562466 = $ 1448.66
Cruella Inc. owns 85% of Horace Co. During 20X9, Cruella sells goods to Horace with a 25% gross profit. Horace sold all of these goods to a 3rd party in 20X9. For the 20X9 consolidated financial statements. How should the summation of the Cruella and Horace income statement items be adjusted?
a. No adjustment is needed.
b. Sales and COGS should be reduced by 80% of the intercompany sales amount.
c. Net income should be reduced by 80% of the gross profit on intercompany sales amount.
d. All intercompany sales and costs of goods sold must be eliminated in consolidation
Answer:
Option A is the correct answer,no adjustment is needed.
Explanation:
When related companies sell to each other,the sales transaction is not sales in actual sense,as it is likened to the left hand of an individual exchanging cash with the right hand,in other words, the cash is still owned by the same person.
The same concept is applicable to subsidiaries and parent,the sales recorded from a group perspective is when they sold to external third parties.
When sales happen between related companies, a provision for unrealized profits has to be made to the tune of inventory purchased from related companies not yet sold externally,as the whole of the goods have been to third parties, no such provision or adjustment is required.
Answer:
d. All intercompany sales and costs of goods sold must be eliminated in consolidation.
Explanation:
For a group of companies, the figure to be used in the profit and loss account must only be sales to and purchases from customers or companies that are not part of the group. For this reason, intra group sales are to be eliminated from sales and cost of sales figures used in the profit and loss account.
In addition, unrealized profit on goods should also be eliminated in case there are some of the goods related intra good sales that are not yet sold.
Therefore, the correction is d. All intercompany sales and costs of goods sold must be eliminated in consolidation.
Becky only eats out at Macaroni Grill, and she eats out three times per month. She receives a raise from $31,900 per year to $33,500 per year and decides to eat out five times per month. Use the midpoint method to calculate the monthly income elasticity of demand for eating out. Round your answer to two decimal places. units units This good is a normal good and income-inelastic. an inferior good. a normal good and income-elastic.
Answer:
This good is a normal good and income-inelastic
Explanation:
Elasticity of demand measures the degree of responsiveness of quantity demanded to changes in price.
Elasticity of demand = (new quantity demanded - old quantity demanded) / ( new quantity demanded - old quantity demanded) / 2) / (New income - Old income ) / (old income + new income)/2)
(5 - 3) / (3 + 5)/ 2) / ( 33500-31900) / (31900+33500)/2) = 6.45
The coefficient of elasticity is greater than one, therefore, demand is income elastic.
This means that a small change in income leads to a greater change in quantity demanded.
A normal good is a good whose demand increases when income increases and falls when income falls.
Eating out is a normal good because her demand increased when income increased.
I hope my answer helps you
In 2019, Aurora received a $25,000 bonus computed as a percentage of profits. In 2020, Aurora’s employer determined that the 2019 profits had been incor-rectly computed, and Aurora had to refund the $8,000 in 2020. Assume that Aurora was in the 35% tax bracket in 2019 but in the 12% bracket in 2020.
a. In 2019, how much is Aurora required to include in income?
b. In 2020, what is the amount of the deduction Aurora can claim? What is the reduction in taxes for 2020 as a result of the deduction?
Answer:
Answers are explained below in the explanation part.
Explanation:
(a) In 2019, Aurora is required to add $25000 income because this was the amount that was transferred initially to employee from the employer.
(b) In 2020, Aurora can claim a deduction of $2800 (8000*35% = 2800). Now in 2020, Aurora will not be given reduction in taxes as she has claim amount due from taxes which she claimed of the extra taxes charged in year 2019.
At the end of the year, the deferred tax asset account had a balance of $12 million attributable to a cumulative temporary difference of $30 million in a liability for estimated expenses. Taxable income is $35 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. Prepare the journal entry(s) to record income taxes assuming it is more likely than not that one-fourth of the deferred tax asset will not ultimately be realized.
Answer:
please see explanation
Explanation:
The following journal entry shall be booked in respect of income taxes to be recognized in the accounts of the corporation given in the question
Debit Credit
Deferred tax asset $12 million
Income taxes expense $2 million
($30 million*40%)
Income taxes payable $14 million
($35 million*40%)
Since, it is probable that the company will not be able to realize the 1/4th of the deferred tax asset which has been recognized by it, therefore the deferred tax asset shall be accordingly reduced through following journal entry:
Debit Credit
Profit or loss(tax expense) $3 million
(12*1/4)
Deferred tax asset $3 million
1.
Debit Income tax expense 2
Debit Deferred tax asset 12
Credit Income tax payable 142
2.
Debit Income tax expense 3
Credit Valuation allowance—Deferred tax asset 3
Explanation:
Deferred tax asset ($30 × 40%) = $12 million
Income tax payable ($35 × 40%) = $14 million
Valuation allowance – deferred tax asset (1/4 × $12) = $3 million
Chris Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 5 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 5 years, by conducting some research online, Chris has developed the following estimates.
Engine Overhaul Estimated Cash Outflow Probability Assessment
$300 10%
470 30%
740 50%
880 10%
How much รhould Chris Bowie deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 3 years to pay for the overhaul?
Answer:
$515.53
Explanation:
CALCULATION OF THE ESTIMATED CASH OUTFLOW EXPENSES FOR ENGINE OVERHAUL
Engine Overhaul Probability Estimated Cash
estimated cash outflow(X) (Y) flow ( X * Y)
$370 10% $37
$470 30% $141
$720 50% $360
$760 10% $76
$2320 $614
Present Value Factor, PVF, of 3 years and 6% = 0.839619(from the table)
hence, value = $614 x 0.839619
= $515.53
Amount Deposited = $516 (approx)
is starting her own accounting firm and hires , a freelance web designer who specializes in responsive design to build her business’ website. Two weeks into the job, finds a full-time position at an advertising company and assigns her contract obligations to Max, a former college friend to complete the work for Reilly. Based on these facts can, assign her design contract to ?
Answer:
No, contracts for personal services are not assignable.
Explanation:
According to a different source, these are the options that come with this question:
Yes, as long as the assignment does not increases the burden on Max.
Yes, Claire can assign her obligations under the contract to anyone who accepts.
No, contracts for personal services are not assignable.
No, the assignment is not valid since Max did not give any consideration.
This is most likely not a good strategy for this woman. The fact that this woman has been hired as a freelance web designer means thta the woman is beig paid for her professional expertise. No one else can perform the job in the way that she can perform it. Therefore, she cannot assign this duty to another person.
You were given $16,000 by a relative with no strings attached. You decide to pursue 2 goals: (1) buy a motorbike today and (2) buy a used car for $12,000 when you graduate college in 4 years. Your interest rate is 2% compounded annually. How much can you spend on a motorbike today?
Answer:
You can spend $4,913.86 to buy a motorbike.
Explanation:
Giving the following information:
You were given $16,000 by a relative with no strings attached. You decide to pursue 2 goals: (1) buy a motorbike today and (2) buy a used car for $12,000 when you graduate college in 4 years. Your interest rate is 2% compounded annually.
To buy the car, you can separate in the present the amount of money required to reach $12,000 in 4 years. The rest of the money can be used to buy a motorbike.
First, we need to calculate the present value of $12,000 using the following formula:
PV= FV((1+i)^n
PV= 12,000/1.02^4= $11,086.14
16,000 - 11,086.14= $4,913.86
An airline expects to SELL one million gallons of jet fuel in one month and decides to use heating oil futures for hedging. We suppose the correlation between jet fuel price and heating oil price is 0.93, the volatility of heating oil price is 0.03, the volatility of jet fuel oil price is 0.02. Each heating oil futures contract allows you to trade 42,000 gallons of heating oil. How many contracts should be used in hedging
Answer:
14 contracts should be used in hedging.
Explanation:
The heating oil price is 0.93
The volatility of heating oil price is 0.03,
The volatility of jet fuel oil price is 0.02
Determining Minimum variance ratio
0.93×0.02/0.03 = 0.62
Each heating oil futures contract trade is 42,000 gallons of heating
ThereforeThe optimal number of contract is :
O.62×1,000,000/ 42,000 = 14.76
Converting 14.65 to nearest whole number will give us 14
DRK, Inc., has just sold 100,000 shares in an initial public offering. The underwriter’s explicit fees were $60,000. The offering price for the shares was $40, but immediately upon issue, the share price jumped to $44
a. What is your best guess as to the total cost to DRK of the equity issue?.
b. Is the entire cost of the underwriting a source of profit to the underwriters?
Answer:
A. $460,000
B. No
Explanation:
Given:
Number of share = 100,000
underwriter’s explicit fee = $60,000
Offer price = $40
New Price = $44
A.
The Total cost of Equity share = [tex][Number of equity share \times (New price - old price)] + explicit fees[/tex]
[tex]= [100,000 \times (44-40)] + 60,000\\= [100,000 \times4] + 60,000\\= 400,000 + 60,000\\= 460,000[/tex]
B.
No. The brokers do not catch the portion of the costs relating to the price quoted.
Final answer:
The total cost to DRK, Inc. for the equity issue is $460,000, considering both explicit fees and the opportunity cost from underpricing. Not all the underwriting costs are profit, as underwriters also have associated expenses.
Explanation:
The total cost to DRK, Inc. of the equity issue can be calculated by considering both the explicit fees paid to the underwriters and the opportunity cost of underpricing the shares. The explicit fees are given as $60,000.
The opportunity cost, known as underpricing, is the difference between the offering price and the immediate post-issue share price, multiplied by the number of shares. This can be calculated as follows: (Post-issue price – Offering price) × Number of shares = ($44 – $40) × 100,000 = $400,000.
Therefore, the total cost of the equity issue would be the explicit fees plus the underpricing cost: $60,000 + $400,000 = $460,000.
As for the second question, the entire cost of underwriting is not pure profit for the underwriters. They incur costs to market, sell and organize the share issue. However, the difference between the price they pay for the shares and the price at which they sell the shares to investors (minus their costs) would be their profit.
An automated assembly robot that cost $400,000 has a depreciable life of 5 years with a $100,000 salvage value. The MACRS depreciation rates for years 1, 2, and 3 are 20%, 32% and 19.2% respectively. What is the book value at the end of year 6
Answer:
Book Value at end of year 6 = $100,000
Explanation:
An Asset is depreciated to salvage value therefore when depreciation is complete the book value equals salvage value or zero.
Salvage value is an estimated value of what the company expects to earn after using the asset maybe when selling off the asset.
Answer:
Check the explanation
Explanation:
Year Depreciation Rate Depreciation=400000*rate Book value
1 20 80000 320000
2 32 128000 192000
3 19.2 76800 115200
4 11.52 46080 69120
5 11.52 46080 23040
6 5.76 23040 0
Therefore, the book value at the end of year 6 = 0
Orion Flour Mills purchased a new machine and made the following expenditures:
Purchase price $67,000
Sales tax 5,600
Shipment of machine 920
Insurance on the machine for the first year 620
Installation of machine 1,840
The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Record the above expenditures for the new machine.
Answer:
Debit: Machine $75,360
Debit: Insurance $620
Credit: Cash $3,380
Credit: Accounts Payable $72,600
Explanation:
Before the journal is prepared, we have to do some calculations and provide explanation as follows:
Apart from the insurance cost which will be reports as just insurance expenses for the year, all other costs in the questions are relevant costs that will be added together as the costs of the machine equipment as follows:
Machine cost = Purchase price + Sales tax + Machine shipment + Machine Installation
= $67,000 + $5,600 + $920 + 1,840
Machine cost = $75,360
Account payable and cash can also be calculated as follows:
Account payable = Purchase price + Sales tax = $67,000 + $5,600 = $72,600
Cash = Machine shipment + Machine Installation + Machine insurance = $920 + 1,840 + $620 = $3,380
Journal entries
Debit: Machine $75,360
Debit: Insurance $620
Credit: Cash $3,380
Credit: Accounts Payable $72,600
Being the record of purchase of new machine
Note: Also see the journal entries in the attached as a complement to the above.
The total cost of the machine purchased by Orion Flour Mills is recorded by capitalizing the purchase price, sales tax, shipment, insurance, and installation costs, summing up to $75,980. The machinery asset account is debited, and accounts payable or cash is credited accordingly for each expenditure.
Explanation:When Orion Flour Mills purchased a new machine, the total expenditures should be recorded as the cost of the machine on the company's books. The expenditures to be included are the purchase price of the machine, sales tax, shipment cost, insurance for the first year, and installation costs. Here is how each cost is recorded:
Purchase price: $67,000Sales tax: $5,600Shipment of machine: $920Insurance on the machine for the first year: $620Installation of machine: $1,840All these costs are capitalized as they are necessary to bring the machine to its intended use. Therefore, the journal entry to record the machine's cost would debit the machinery asset account and credit accounts payable for the purchase price plus sales tax, and debit machinery asset account while crediting cash for the other expenditures.
Journal Entry:
Debit Machinery $72,600 (Purchase Price + Sales Tax)Credit Accounts Payable $72,600Debit Machinery $3,380 (Shipment + Insurance + Installation)Credit Cash $3,380The total recorded cost of the machine will be $72,600 + $3,380 = $75,980.
If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $10 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July?
Answer:
6,000
Explanation:
This question is incomplete. I have given the complete question in addition to my solution below.
If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $10 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July?
Morganton Company makes one product and it provided the following information to help prepare the master budget:
The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 9,700, 28,000, 30,000, and 31,000 units, respectively. All sales are on credit.
Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
The ending finished goods inventory equals 20% of the following month’s unit sales.
The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound.
Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.
The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $67,000.
Variable manufacturing overhead = $10 per direct labor hour
Amount of time required to finish one unit of goods = 2 hours
Direct labor wage rate = $15 per hour
Amount of raw materials required to finish one unit of goods = 4 pounds
Cost of raw materials = $2.50 per pound
Budgeted selling price per unit = $70
Budgeted unit sales for August = 30,000
Therefore, Unit costs = (4*2.50)+(15*2)+(10*2) = $60 per unit
And cost of goods sold = 28,000 * 60 = $1,680,000
(Gross margin) = (70-60)*28,000
= $280,000
The ending finished goods inventory balance for July = 20% of the following month's (August’s) unit sales.
= 0.20 * 30,000 = 6,000
A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane per shift. One cashier mans all 4 self-checkouts per shift (answering questions, checking for un-scanned items, taking coupons, etc). Checkout on the new lanes takes 1.25 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition, the electricity costs for both setups are $0.06 per checkout while bagging (material) costs are $0.12 per checkout with the old system and $0.20 for the new system. The new 4 self-checkout lanes also requires a total of $25 in capital costs per day. Assume that the lanes are always in use for 16 hours per day (2 shift), for the old system the average revenue per checkout is $12 and $10 for the new system, and a worker (cashier and bagger) makes $10/hour.
(a) How many checkouts did the old system provide in a shift?
(b) How many checkouts does the new system provide?
(c) What is the multifactor productivity for each system?
Answer:
a. 2560 checkout
b. 3072 checkout
c. Old system = 3.85 checkout/$
New system = 5.56 checkout/$
Explanation:
Given:
Checkout lanes = 4
a.
How many checkouts did the old system provide in a shift?
Given
Lanes = 2
Time in use = 16 hours --- Convert to seconds
Time = 16 * 3600 = 57600 seconds
Checkout = 1 per 45 seconds
Number of check outs is calculated as:
2 lanes * 57600 seconds * 1 checkout / 45 seconds
Number of checkout = 2560 checkouts
b.
How many checkouts does the new system provide?
Lanes = 4
TimeTime in use = 16 hours --- Convert to minutes
Time = 16 * 60 = 960 minutes
Number of check outs is calculated as:
4 lanes * 960 minutes * 1 checkout / 1.25 minutes
Number of checkout = 3072 checkouts
c.
Given
Electricity costs for both setups are $0.06 per checkout
Bagging (material) costs are $0.12 per checkout with the old system
Bagging (material) costs are $0.20 per checkout with the old system
Cost for the old system is calculated by:
$0.06 * 2560 + $0.12 * 2560
= $153.6 + $307.2
= $460.3
Multifactor = 2560 checkout/$460.3
Multifactor = 5.56 checkout/$
Cost for the new system is calculated by:
0.06 * $3072 + 0.20 * $3072
= $184.32 + $614.4
= $798.72
Multifactor = 3072 checkout/$798.72
Multifactor = 3.85 checkout/$
The old system could provide 1280 checkouts in one shift while the new system can provide 768. The multifactor productivity, which equals output divided by the sum of labor, capital, and material inputs, is higher for the old system (37.5) as compared to the new system (29.5).
Explanation:(a) The old system: First, we need to convert 16 hours (the length of one shift) into minutes since our other time measurements are in minutes. That gives us 960 minutes (16 * 60). Considering each checkout took 45 seconds, or 0.75 minutes, we can calculate the number of checkouts in one shift by dividing the total minutes by the checkout time: 960 / 0.75 = 1280 checkouts.
(b) The new system: Here, the checkout time is 1.25 minutes. Using the same method as above, 960 / 1.25 gives us 768 checkouts in one shift.
(c) The multifactor productivity is calculated as the output divided by the sum of labor, capital, and material inputs.
For the old system: Output = $12 * 1280 (revenue per checkout * number of checkouts) = $15,360. Labor = 2 workers * 16 hours * $10/hour = $320. Capital is the electricity cost, which is $0.06 * 1280 = $76.8. Material is the bag cost, which is $0.12 * 1280 = $153.6. Therefore, the multifactor productivity is $15,360 / ($320+$76.8+$153.6) = 37.5.
For the new system: Output = $10 * 768 = $7680. Labor = 16 hours * $10/hour = $160. Capital is both the electricity cost, $0.06 * 768 = $46.08, and the daily capital cost of $25. Material is the bag cost, which is $0.20 * 768 = $153.6. Therefore, the multifactor productivity is $7680 / ($160+$46.08+$25+$153.6) = 29.5.
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Exxon Mobil Corporation explores, produces, refines, markets, and supplies crude oil, natural gas, and petroleum products in the United States and around the world. Required: Indicate how the accounts normally should be categorized on a classified balance sheet. Also indicate whether the account normally has a debit or credit balance.
Answer:
The accounts to be categorized are as follows.
(1) Notes and loans payable (short term) (2) Materials and supplies (3) Common stock (4) Patents (an intangible asset) (5) Income taxes payable (6) Long-term debt (7) Marketable securities (short term investments) (8) Property, plant and equipment (9) Retained earnings (10) Notes and accounts receivable (short term) (11) Investments (long term) (12) Cash and cash equivalents (13) Accounts payable (14) Crude oil products and merchandise (15) Additional paid up capital
The balance sheet classification of these accounts is as follows.
Account Classification Balance
(1) Notes and loans payable Current liability Credit
(2) Materials and supplies Current asset Debit
(3) Common stock Shareholders' equity Credit
(4) Patents Non-current asset Debit
(5) Income taxes payable Current liability Credit
(6) Long-term debt Non-current liability Credit
(7) Marketable securities Current asset Debit
(8) Property, plant and equipment Non-current asset Debit
(9) Retained earnings Shareholders' equity Credit
(10) Notes and accounts receivable Current asset Debit
(11) Investments (long term) Non-current asset Debit
(12) Cash and cash equivalents Current asset Debit
(13) Accounts payable Current liability Credit
(14) Crude oil products Current asset Debit
(15) Additional paid up capital Shareholders' equity Credit
The activities of Exxon Mobil Corporation are represented in different categories on a classified balance sheet. These categories include Non-Current Assets (mostly with debit balance), Current Assets, Current Liabilities (mostly with credit balance), Non-Current Liabilities, and Shareholder's Equity (with credit balance). The crude oil, natural gas, and petroleum products form part of the Inventory under Current Assets.
Explanation:The accounts represented in Exxon Mobil Corporation's activities - exploration, production, refining, marketing, and supplying of crude oil, natural gas, and petroleum products are typically categorized under several categories on a classified balance sheet. These categories include Non-Current Assets, Current Assets, Current Liabilities, Non-Current Liabilities, and Shareholder's Equity.
The exploration, production, and refining activities mostly relate to Non-Current Assets and would usually have a debit balance. These include accounts such as Property, Plant, and Equipment, Intangible Assets, and Investments.
The marketing and supplying activities usually pertain to Current Assets and Current Liabilities. Current Assets like Inventory, and Accounts Receivable, would ordinarily have a debit balance while Current Liabilities, like Accounts Payable, would have a credit balance. The crude oil, natural gas, and petroleum products they sell would fall under Inventory in Current Assets.
Lastly, the Shareholder's Equity section would usually have a credit balance, representing the owners' claim on the company's assets after all debts have been paid. This section includes Retained Earnings and Common Stock.
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Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.)
Answer:
Simple Payback period is 2.52 years.
Discounted Payback period is 2.97 years
Explanation:
Payback period is the number of years that a project takes to recover the project's initial investment.
Simple Payback
Project A
Time: 0 1 2 3 4 5
Cash flow –$1,500 $550 $630 $620 $400 $200
Payback period = 550/550 + 630/630 + (1500-550-630)/620 = 2.52 years
Payback period = Approximately 2.52 years
In simple term it will take 2.52 years to recover the initial investment.
Discounted payback
Project A
Time: 0 1 2 3 4 5
Cash flow –$1,500 $550 $630 $620 $400 $200
PV @ 9% –$1,500 $505 $530 $479 $283 $130
Payback period = 505/505 + 530/530 + (1500-505-530)/479 = 2.97 years
Payback period = Approximately 2.97 years
It will take about 2.97 years to recover the initial investment of $1,500 using discount rate of 9%
Project A's payback statistic is 3.06 years, indicating that it takes 3.06 years for the project to recoup its initial investment.
Project A Cash Flows
| Year | Cash Flow |
| 0 | -$\$10,000 |
| 1 | \$2,000 |
| 2 | \$3,500 |
| 3 | \$5,000 |
| 4 | \$9,000 |
Payback Calculation
Determine the cumulative cash flows at the end of each year:
| Year | Cumulative Cash Flow |
| 0 | -$\$10,000 |
| 1 | -$\$8,000 |
| 2 | -$\$4,500 |
| 3 | \$500 |
| 4 | \$14,500 |
Identify the year where the cumulative cash flow becomes positive. In this case, it's year 3.
Calculate the remaining investment:
Remaining investment = Initial investment - Cumulative cash flow at the end of year 2
Remaining investment = $10,000 - $500 = $9,500
Calculate the proportion of the remaining investment that is recovered in the next year:
Proportion of remaining investment recovered in year 4 = Remaining investment / Cash flow in year 4
Proportion of remaining investment recovered in year 4 = $9,500 / $9,000 = 1.0556
Calculate the payback statistic:
Payback statistic = Year 2 + (Proportion of remaining investment recovered in year 4)
Payback statistic = 2 + 1.0556
Payback statistic = 3.0556
Rounded Payback Statistic
The payback statistic for Project A is 3.06 years, rounded to two decimal places. This means that it takes 3.06 years for the project to recover its initial investment.
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The incomes of all families in a particular suburb can be represented by a continuous random variable. It is known that the median income for all families in this suburb is $60,000 and that 40% of all families in the suburb have incomes above $72,000.
a) For a randomly chosen family what is the probability that its income will be between $60000 and $72000.
b) If the distribution function for the income is known to be uniform what is the probability that a random chosen family has an income below $65000.
Answer:
a) 0.10 or 10%
b) 0.5417 or 54.17%
Explanation:
a) The median income of $60,000 is at the 50th percentile of the distribution. If 40% if incomes are above $72,000, then an income of $72,000 is at the 60th percentile of the distribution. Therefore, the probability that a family's income will be between $60,000 and $72,000 is:
[tex]P( \$60,000 \leq X \leq \$72,000)=0.6-0.5\\P( \$60,000 \leq X \leq \$72,000)=0.1 = 10\%[/tex]
b) If the distribution is known to be uniform, the probability that a random chosen family has an income below $65,000 is:
[tex]P( X \leq \$65,000)=0.5+\frac{65,000-60,000}{72,000-60,000}*0.1\\ P( X \leq \$65,000)=0.5417 =54.17\%[/tex]
In probability and statistics, a randomly chosen family has a 10% chance of having an income between $60,000 and $72,000 given the provided information. If the income distribution is uniform and the upper limit is assumed at $72,000, the probability of a family having an income below $65,000 is approximately 42%.
Explanation:The questions pertain to the fields of probability and statistics in mathematics.
For (a), it is indicated that 40% of families have an income above $72,000, which means that 60% of families have an income of $72,000 or less. Since the median income is $60,000, half of the families earn this amount or less. Therefore, the probability that a randomly chosen family has an income between $60,000 and $72,000 is the difference between these two percentages, which is 10% or 0.10.
For (b), in a uniform distribution, the probability is calculated as the length of the interval divided by the total length. Here, we don't know the upper limit of the income range. However, we can still make an estimation. If we assume the upper limit to be $72,000 (as 40% of people make more than this), the probability of a randomly chosen family having income below $65,000 would be the ratio of (the difference between the lower bound of $60,000 and $65,000) to (the difference between the lower and upper bounds, which is $12,000). So that would roughly be $5,000/$12,000 = 0.42 or 42%.
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The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.The process for converting present values into future values is calledcompounding . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?a. The present value (PV) of the amount depositedb. The trend between the present and future values of an investmentc. The duration of the deposit (N)The interest rate (I) that could be earned by deposited funds
Answer:
B. The trend between the present and future values of an investment