Answer:
1. Revenue and Spending Variance
Revenue = (19,380 - 16,400) = 2980 U
Expenses
Wages & Salaries = 8,559 - 8,525 = 34 U
Fuel = 1,870 - 1,938 = 68 F
Airport Fees = 2,808 - 2,693 = 115 U
Aircraft Depreciation = 0 None
Office Expenses = 287 - 455 = 168 F
Total Expenses = 87 F
Net Operating Income = 5,275 - 2,114 = 3161 U
2. Activity Variances
Activity Variances are used to compare revenue and cost item between the planning budget and flexible budget of the company.
Revenue = 18,700 - 19,380 = 680 U
Expenses
Wages and salaries = 8,385 - 8,559 = 174 U
Fuel = 1,870 - 1,938 = 68 U
Airport fees = 2,740 - 2,808 = 68 U
Aircraft depreciation = 495 - 513 = 18 U
Office expenses = 285 - 287 = 2 U
Total expense = 330 U
Net operating income = 4,925 - 5,275 = 350 U
Calculate current assets Sales Revenue $25,000 Accounts Payable $1,200 Accounts Receivable $2,600 Inventory $3,200 Supplies $300 Cost of Goods Sold $16,000 Notes Payable (due in 2 years) $24,000 Equipment $40,000 Accumulated Depreciation $12,000 Land $30,000 Unearned Revenue $1,100 Taxes Payable $1,400 Prepaid Rent (3 months) $2,100 Cash $5,200
Answer: $13,400
Explanation:
Current Assets are those that will be used up in a year and in this question are;
= Accounts Receivable + Inventory + Supplies + Prepaid rent + Cash
= 2,600 + 3,200 + 300 + 2,100 + 5,200
= $13,400
Jammer Company uses a perpetual weighted average inventory system and reports the following: August 2 Purchase 17 units at $15.00 per unit. August 18 Purchase 19 units at $13.00 per unit. August 29 Sale 34 units. August 31 Purchase 22 units at $18.00 per unit. What is the per-unit value of ending inventory on August 31?
Answer:
Weighted-average ending inventory cost= $17.75
Explanation:
First, we need to calculate the total cost of ending inventory:
August 2= 17*15= 255
August 18= 19*13= 247
August 29= (19*13 + 15*15)= (472)
August 31= 22*18= 396
Total ending inventory= $426
Now, the weighted average cost per unit of ending inventory:
Ending inventory in units= 24
Weighted-average ending inventory cost= (426/24)
Weighted-average ending inventory cost= $17.75
On January 2, 2017, Kellogg Corporation acquired equipment for$800,000. The estimated life of the equipment is 5 years or 80,000 hours. The estimated residual value is $10,000. What is the book value of the asset on December 31, 2018, if Kellogg Corporation uses the straight−line method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
A. $790,000
B. $800,000
C. $484,000
D $642,000
Answer:
Book value of the asset = $484,000
Explanation:
Given:
Equipment cost = $800,000
Residual value = $10,000
Computation:
Depreciation = (Equipment cost - Residual value) / Life
Depreciation = ($800,000 - $ 10,000) / 5
Depreciation = $ 158,000 per year
Depreciation for 2 year =$ 158,000 x 2
Depreciation for 2 year = $316,000
Book value of the asset = Equipment cost - Depreciation for 2 year
Book value of the asset = $800,000 - $316,000
Book value of the asset = $484,000
The Republic of Yuck is a simple economy with no government, no taxes, and no imports and exports. Yuckers (citizens of Yuck) are creatures of habit. They have a rule that everyone saves exactly 22 percent of income. Assume that planned investment is fixed and remains at 67 billion Yuck dollars.Expert economists of the Republic of Yuck have estimated the following:Real GDP (Y) 192 billion Yuck dollarsPlanned Investment Spending (U): 67 billionYuck dollars You are asked by the business editor of the Weird Herald, the local newspaper, to predict the economic events of the next few months.Based on the information given above you predict that the inventories will _____ and output will _____ ,a. stay unchangedb increasec. decrease
Answer:
The inventories will decrease and output will increase
Explanation:
Note: The organized question is as attached
Real GDP is 192 billion
They consumes (100 - 22) = 78% of income.
Therefore, the consumption is 78% of 192 billion = 149.76 billion
The Investment is fixed at 67 billion . This implies that aggregate expenditure (AE = C + I) = 149.76 billion + 67 billion = 216.76 billion
Since Aggregate expenditure(AE) is greater than Real GDP (Y), It is likely that the inventories will decrease and the firms will produce more so that output will increase.
Excerpts from Dowling Company's December 31, 2021 and 2020, financial statements and key ratios are presented below (all numbers are in millions): 2021 2020Accounts receivable (net) $22 $33 Net sales $132 $117 Cost of goods sold $77 $72 Net income $22 $34 Inventory turnover 6.05 Return on assets 12.3 % Equity multiplier 2.53 Dowling's return on equity for 2021 is: (Round your answer to 1 decimal places.)Multiple Choicea) 7.7%.b) 16.7%.c) 31.1%.d) 24.1%.
Answer:
The answer is "12.7"
Explanation:
In the question the correct choice is missing so, its correct solution can be defined as follows:
Following are the formula for calculating the "Average Inventory":
Formula:
[tex]\therefore \text{Inventory Turnover} = \frac{ \text{Cost of Goods Sold}} { \text{Average Inventory}}\\\\\\\because \text{Average Inventory} = \frac{ \text{Cost of Goods Sold}} {\text{Inventory Turnover}}[/tex]
[tex]=\frac{\$ \ 77}{ 6.05}\\\\=12.7\\[/tex]
Radford Inc. manufactures a sugar product by a continuous process, involving three production departments-Refining, Sifting, and Packing. Assume that records indicate that direct materials, direct labor, and applied factory overhead for the first department, Refining, were $388,000, $141,000, and $96,800, respectively. Also, work in process in the Refining Department at the beginning of the period totaled $29,800, and work in process at the end of the period totaled $30,000.
Required: a.
(1) On September 30, journalize the entry to record the flow of costs into the Refining Department during the period for direct materials
(2) On September 30, journalize the entry to record the flow of costs into the Refining Department during the period for direct labor
(3) On September 30, journalize the entry to record the flow of costs into the Refining Department during the period for factory overhead
b. On September 30, journalize the entry to record the transfer of production costs to the second department, Sifting
Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
Answer:
Following are the solution to this question:
Explanation:
In point 1:
Date Title post reference Dr. Cr. 30-sep Method work – refining 141 388000
Materials 131 385000
In point 2:
Date Title post reference Dr. Cr. 30-sep Method work – refining 141 141000
Payable Wages 251 141000
In point 3:
Date Title post reference Dr. Cr. 30-sep Method work – refining 141 96800
Factory overhead- refining 151 96800
In part B:
Date Title post reference Dr. Cr. 30-sep Method work – Sifting 142 625600
[tex](388000+141000+96800+(29800-30000))[/tex]
Method work – refining 141 625600
Which of the following summarizes the AIDA steps in the persuasive process? A. Get attention, insinuate action, create desire, initiate acceptance B. Get acceptance, invite questions, designate action, encourage attention C. Get attention, arouse interest, create desire, encourage action D. Get attention, initiate action, discuss benefits, create acceptance
Answer:
C. Get attention, arouse interest, create desire, encourage action
Explanation:
Remember, AIDA which stands for Awareness, Interest, Desire, Action refers to a step process that explains the main thought process an individual passes through before they finally decide to buy a product or service.
The persuasive process begins:
First with getting attention or awareness for the product or service. Next, arouse interest in the minds of potential customers, this, in turn, creates desire, which leads to the final step; encourage action to buy the product or service.
Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller's market share. This justification for diversification is best described as _________.A) utilizing common infrastructures.B) capitalizing on core competencies.C) reducing corporate risk.D) using portfolio analysis.
Answer:
The correct answer is the option B: Capitalizing on core competencies.
Explanation:
To begin with, in the field of business when we talk about "core competencies" we use the term to refer to something that a company can add to its business strategy with the purpose to add more value to the final benefit that the final consumer will obtain from the consumption of the good. Therefore that it means that capitalizing on core competencies refers to the situation where a company decides to add a superior value to its product by achiving diversification in its strategy and more specifically in this case, in its marketing campaign so that is why that Philip Morris will capitalize on core competencies by using marketing expertises from the other firm that has just bought.
What are three strategies that you can use to make better financial decisions?
Given the following list of outlays, indicate whether each is normally considered a capital expenditure or an operating expenditure.
Outlays Classification of Expenditure
a. Initial lease payment of $5,000 for electronic point-of-sale cash register systems. ____________________________
b. An outlay of $20,000 to purchase patent rights from an inventor. ____________________________
c. An outlay of $80,000 for a major research and development program. ____________________________
d. An $80,000 investment in a portfolio of marketable securities. ____________________________
e. A $300 outlay for an office machine. ____________________________
f. An outlay of $2,000 for a new machine tool An outlay of $240,000 for a new building. ____________________________
g. An outlay of $240,000 for a new building. ____________________________
h. An outlay of $1,000 for a marketing research report. ____________________________
Answer:
a. Initial lease payment of $5,000 for electronic point-of-sale cash register systems.
Operating expenditure. This is like regular rental payments. No Asset is created.
b. An outlay of $20,000 to purchase patent rights from an inventor.
Capital Expenditure. An Asset is acquired & it will written off over its life. Patent life is usually 20 yrs
c. An outlay of $80,000 for a major research and development program.
Operating Expenditure. No Asset is created. This expenditure will be passed through P&L acct
d. An $80,000 investment in a portfolio of marketable securities.
Capital Expenditure. Investment in security a/c is an Asset acct & will be in Balance sheet
e. A $300 outlay for an office machine.
Capital Expenditure. Office machine is an Asset.
f. An outlay of $2,000 for a new machine tool
Operating Expenditure. Machine tool is a expenses item
g. An outlay of $240,000 for a new building.
Capital Expenditure. A New Assets created in Balance sheet
h. An outlay of $1,000 for a marketing research report.
Operating Expenditure: This expenditure is passed through P&L
What is the effect on real GDP of a $150 billion change in planned investment if the MPC is 0.65? $ nothing billion. (Enter your response rounded to the nearest whole number.)Consumption $1,200 2,100 3,000 Disposable Income $3,000 4,000 5,000 Given the consumption schedule in the table above, the marginal propensity to consume is:______a. 0.1b. 0.3c. 0.9d. 0.6
Answer and Explanation:
The computation of the effect on real GDP is shown below:
change in GDP is
= Multiplier × change in investment
= 1 ÷ (1 - MPC) × change in investment
= 1 ÷ (1 - 0.65) × $150 billion
= 2 × $150 billion
= $300 billion
And, the marginal propensity to consume is
= Change in spending of consumer ÷ income change
= (2,100 - 1,200) ÷ (4,000 - 3,000)
= 900 ÷ 1,000
= 0.9
Suppose $200 is deposited in a savings account at the beginning of each of 15 years and the account pays 8% per annum, the value at the end of 15 years will be about:_________.
Answer:
FV= $5,864.86
Explanation:
Giving the following information:
Annual deposit= $200 at the beginning
Number of periods= 15 years
Interest rate= 8%
To calculate the future value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}
A= annual deposit
FV= {200*[(1.08^15) - 1]}/0.08 + {[(200*(1.08^15)] - 200}
FV= 5,430.42 + 434.44
FV= $5,864.86
If one of the objective coefficients changes within of its allowable increase or allowable decrease (same as within of Maximum and Minimum Objective Coefficients), then:______.
A. The final objective function value will change by the size of the change times the final value of the decision variable related to this objective coefficient.
B. The model must be resolved to know the full effects of the change.
C. The final objective function value will change by the size of the change times the difference between the left and side and the right-hand side of the constraint.
D. The final objective function value will change by the size of the change times the shadow price.
Answer:
A. The final objective function value will change by the size of the change times the final value of the decision variable related to this objective coefficient.
Explanation:
By modifying the one coefficient of the objective with the rise or decrease in the permitted modify the amount of the objective function i.e. final. Also the magnitude of modifying the value would be equivalent to the modify of the change in terms of coefficient times the final value with respect to the decision variable that is interrelated to the coefficient of the objective
hence, the correct option is a.
The chapter explains that to be professionally successful, you must learn to communicate ______ and Mercedes suggests you can do this by ______.a. âdigitally; leveraging your own experience as a Millennial.b. "virtually" with globalâ teams; asking advice onâ face-to-face relationship building.c. globally; sharing moments of company significance with the public.d. in a wide range of workâ situations; learning new skills from more experienced peers.e. through common social mediaâ channels; relying on your personal social media practices.
Answer:
The chapter explains that to be professionally successful, you must learn to communicate __in a wide range of work situations;____ and Mercedes suggests you can do this by __learning new skills from more experienced peers.____.
Explanation:
In our modern business world, communication is key. To be successful, the professional must learn new skills and apply them on an ongoing basis. They must be ready to share impactful stories with others and to communicate under a variety of platforms.
Randy Rudecki purchased a call option on British pounds for $0.07 per unit. The strike price was $1.45 and the spot rate at the time the option was exercised was $1.46. Assume there are 30,600 units in a British pound option. What was Randy's net profit on this option?
Answer:
$30,599.94
Explanation:
Profit per unit on exercising the option = $1.45 - $1.45 = $0.01
Premium paid per unit = $0.07
Net Profit per unit = Profit per unit on exercising the option - Premium paid per unit
Net Profit per unit = $0.01 - $0.07
Net Profit per unit = -$0.06
Net profit per option = 30,600 units * -$0.06
Net profit per option = $30,599.94
Larkin Corporation acquired two inventory items at a lump-sum cost of $120,000. The acquisition included 3,000 units of product LG and 7,000 units of product KB. LG normally sells for $30 per unit and KB for $10 per unit. If Larkin sells 1,000 units of LG, what amount of gross profit should it recognize? a. $20,000. b. $24,500. c. $2,500. d. $7,500.
Answer:
d. $7,500
Explanation:
The computation of the gross profit is shown below:
But before that following calculations need to be done
Tota sales are
= 3000 units × $30 + 7,000 units × $10
= $90,000 + $70,00 0
= $160,000
Now the weighted of LG is
= $90,000 ÷ $160,000 × $120,000
= $67,500
The unit cost would be
= $67,500 ÷ 3,000 units
= $22.5 per unit
Finally the gross profit is
= (Sales price - cost price) × number of units sold
= ($30 - $22.5) × 1,000
= $7,500
hence, the correct option is d. $7,500
When a company sells goods, it removes their cost from the balance sheet and reports the cost on the income statement as:A. Selling Expenses.B. Cost of Goods Sold.C. Finished Goods Inventory.D. Inventory.
Answer:
B. Cost of Goods Sold.
Explanation:
When a company sells goods, it removes their cost from the balance sheet and reports the cost on the income statement as cost of goods sold.
For instance, in a perpetual system of inventory; which can be defined as a method of financial accounting, that involves the updating informations about an inventory on a continuous basis (in real-time) as the sales or purchases are being made by the customers, through the use of enterprise management software applications and a digitized point-of-sale equipment.
Under a perpetual system of inventory, updates of the journal entry for cost of goods sold or received would include debiting accounts receivable and crediting sales immediately as it is being made or happening. The advantage of the perpetual system of inventory over the periodic system of inventory is that, it ensures the inventory account balance is always accurate provided there are no spoilage, theft etc.
In Accounting, to record a journal entry for a sale on account, the account receivable would be debited because it is an asset and shall be increased with debits while crediting the sales account for the amount being paid by the customer.
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n)6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange-traded fund (ETF)with a 10% expected return and a 20% volatility. Assume that the ETF you invested in returns -10%. Then the realized return on your investment is closest to ________.
A)-18%
B)-10%
C)-23%
D)-26%
Answer:
D)-26%
Explanation:
The computation of the realized return on your investment is shown below:
= (Rate of return × total investment) - (interest paid)
= (-10% × $20,000) - (6% × $1,000)
= (-$2000 - $600)
= -$2,600
Now the Rate of return is
=(-$2,600 ÷ $10,000)
= -26%
hence, the realized return on your investment is -26%
Therefore the correct option is D.
Stepsis is doing laundry today, but the machine is not working, she crawls in and sees whats wrong, she fixes it but shes stuck, she calls StepBro.
What should StepBro do?
A. Call Jamal
B. Pull her out
C. Dice Roll Dance And Bunny Hop Dance
D. I like ya cut G her
Answer:
b or d
Explanation:
because pulling her out might get the problem done faster , but I like ya cut g her could resolve in even more action . um I go with d
Answer:
B
Explanation:
Be a decent human being boys
Leia just read that the national debt owed by the federal government is at an all-time high. (Explain any possible impact on the federal government from unexpected inflation.)
Answer:
If the government of the country where Leia is from has a national debt at an all-time high, and at the same time, unexpected high inflation hits, the situation for the government can become extremely dire.
This is because high inflation will lower the value of the domestic currency, which is probably not the currency in which most of of the debt is owed. The proportion of the national debt that is owed in foreign currency will then become more expensive, because more units of domestic currency will be needed to exchange for the foreign currency, rendering the cost of the national debt a lot higher.
Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is:_______.a. $105,000.00. b. $46,666.67. c. $35,000.00. d. $61,950.00
Answer: $46666.67
Explanation:
From the question, we are informed that Henri earned a salary of $50,000 in 2001 and $70,000 in 2006 and that the consumer price index was 177 in 2001 and 265.5 in 2006.
For us to calculate Henri's 2006 salary in 2001 dollars, we have to multiply Henri's 2001 real salary by the price in 2001. This will be:
= (70000/265.5) × 177
= $46666.67
A tax structured so that people with the same income pay the same percentage of their income in taxes is called a (an)____________. a. flat tax. b. regressive tax. c. progressive tax. d. excise tax.
Answer:
c. progressive tax
Explanation:
Progressive tax can be regarded as one of the tax structure whereby the tax payer that receive higher incomes in the state pay a higher share of taxes from the income they made, which is different from those that receive Lower income. It is a tax system whereby when there is increase in tax rate then the taxable amount increases too. It should be noted that the tax structured where people with the same income pay the same percentage of their income in taxes is reffered to as progressive tax. wealth/property tax is one of the example of progressive tax.
Answer:
c. progressive tax
In practice which market index would best be used as a proxy for the market portfolio in theâ CAPM?
A. Wilshire 5000
B. Dow Jones Industrial Average
C. U.S. Treasury Bill
D. S&P 500
Answer:
D. S&P 500
Explanation:
The market index that is used as a proxy for the portfolio of the market in the Capital Asset Pricing Model (CAPM) is S&P 500. This refers to a broad index of the market that involves the 500 stocks performance listed on the US stock exchange. Also it used for the calculation market weighted so that the value of the index could come
Hence, the correct option is d.
A building was purchased for $68,000. The asset has an expected useful life of eight years and depreciation expense each year is $5,000 using the straight-line method. What is the residual value of the building?A. $13,625 B. $8,625 C. $37,000.
The options provided are incorrect. The correct answer is given below.
Answer:
Residual value = $28000
Explanation:
The straight line method of charging depreciation is a method that charges a constant depreciation expense throughout the useful life of the asset. The formula to calculate the depreciation expense under the straight line method is as follows,
Depreciation expense = (Cost - Residual value) / Estimated useful life of the asset
Plugging in the values for depreciation expense, cost and estimated useful life, we can calculate the residual value to be,
5000 = (68000 - Residual value) / 8
5000 * 8 = 68000 - Residual value
40000 + Residual value = 68000
Residual value = 68000 - 40000
Residual value = $28000
Smith Corporation is considering an investment that will cost $10,000 now and will produce cash inflows of $5,000 in year one, $5,000 in year two, and $2,000 in year three. Assuming a discount rate of 8%, what is the net present value of this investment?
A. $1,025
B. $504
C. $180
D. - $126
Answer:
B. $504
Explanation:
The computation of the net present value of this investment is shown below:
Year Cash flow PV factor at 8% Present value
0 -$10,000 1 -$10,000
1 $5,000 0.92593 $4,629.63
2 $5,000 0.85734 $4,286.69
3 $2,000 0.79383 $1,587.66
Net present value $503.99
hence, the correct option is b. $504
In its ads, Clorox touts the effectiveness of its Disinfecting Wipes by claiming that they disinfect better than those made by Windex, a competing brand. This is: 1. reminder advertising. 2. comparative advertising. 3. primary advertising. 4. selective advertising. 5. institutional advertising.
Answer: I would say 2. Comparative advertising
Explanation: In terms of comparing Clorox is saying, “yeah we disinfect better than windex over there.”
Jaguar-Land Rover and Chery's partnership can be described as a:_______.a. joint venture.b. exporting.c. license.d. franchise.
Answer:
.a. joint venture.
Explanation:
joint venture can be regarded as a kind of strategic alliances of business arrangement whereby there is an agreement by two parties to gather their resources ( money ,time, asset)together to achieve a goal, this could be a business activities, engaging in projects and do on. In this case Jaguar-Land Rover and Chery's partnership can be described as joint venture because they are different parties that comes together with their resources.
Jaguar-Land Rover and Chery's partnership can be described as a Joint venture. The correct option is a.
Chery Jaguar Land Rover (formally Chery Jaguar Land Rover Automotive Company Ltd.) is a Chinese automaker headquartered in Changshu.
It was created as a 50:50 joint venture between UK-based Jaguar Land Rover, a subsidiary of Tata Motors of India, and Chinese state-owned carmaker Chery to allow the manufacturing of Jaguar Cars and Land Rover vehicles in China's mainland. Chery Jaguar Land Rover's initial assembly plant is located in Changshu, and manufacturing began in October 2014. In August 2010, it was announced that Chery and Jaguar Land Rover were in talks about forming a Chinese joint venture manufacturing firm.
Learn more about joint venture, here:
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Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 90,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $1,080,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $1,098,900 and its actual total direct labor was 93,350 hours.
Required:
Answer:
1. Predetermined overhead rate = $12.50
2. Job Cost = $62,500
Explanation:
Note: The Requirement is attached as picture below
1. Predetermined fixed overhead rate = Estimated fixed manufacturing overhead / Estimated total amount of the allocation base
Predetermined fixed overhead rate = $1,080,000 / 90,000
Predetermined fixed overhead rate = $12 per Direct labor hour
The Predetermined variable overhead rate per Direct labor hour is $0.50
Predetermined overhead rate = Fixed overhead rate + Variable overhead rate
Predetermined overhead rate = $12 + $0.50
Predetermined overhead rate = $12.50
2. The total job cost is given below:
Job Cost = Direct material + Direct labor + Overheads
Job Cost = $38,000 + $21,000 + (280*$12.50)
Job Cost = $38,000 + $21,000 + $3,500
Job Cost = $62,500
If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years
Answer:
the balance of the account at the end of 10 years is $377,336.78
Explanation:
The computation of the balance of the account at the end of 10 years is shown below;
Future value = PMT × [((1 + rate of interest)^time period - 1) ÷ rate of interest]
= $30,000 × [((1 + 0.05)^10 -1) ÷ 0.05]
= $30,000 [((1 + 0.62889 - 1) ÷ 0.05
= $30,000 × 12.5779
= $377,336.78
Hence, the balance of the account at the end of 10 years is $377,336.78
Hodgkiss Mfg., Inc., is currently operating at only 91 percent of fixed asset capacity. Current sales are $715,000. Fixed assets are $520,000 and sales are projected to grow to $790,000. How much in new fixed assets are required to support this growth in sales?
Answer:
$2,980
Explanation:
To calculate the amount of new fixed assets required to support project sales, we need to first determine the amount of fixed assets required to support $1 of sales
The sales value at full capacity is;
Full capacity sales = 715,000 / 0.91
Full capacity sales = $785,714
To calculate the $ amount of fixed asset requires to support $1 in sales, we need to first calculate the ratio of fixed asset to sales. The ratio is;
Fixed asset to sales = 520,000 / 785,714 = 0.662
Hence, to support a sales of level of $790,000 the total amount of fixed assets required will be;
Total fixed assets required = $790,000 × 0.662 = $522,980
Therefore, new fixed assets required
= $522,980 - $520,000
= $2,980