Answer:
8.15 %
Explanation:
Weighted Average Cost of Capital (WACC) is the business Cost of permanent sources of finance pooled together. It shows the risk of the business and is used to evaluate projects.
WACC = Cost of Equity x Weight of Equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt
Remember to use the After tax cost of debt :
After tax cost of debt = Interest x ( 1 - tax rate)
= 6.50% x (1 - 0.40)
= 3.90 %
therefore,
WACC = 11.25% x 55% + 6.00% x 10% + 3.90 % x 35%
= 8.15 %
Thus,
Quigley's WACC is closest to 8.15 %.
The political business cycle refers to Group of answer choices the fact that about every four years some politician advocates greater government control of the Fed. the potential for a central bank to increase the money supply and therefore real GDP to help the incumbent get re-elected. the part of the business cycle caused by the reluctance of politicians to smooth the business cycle. changes in output created by the monetary rule the Fed must follow.
Answer:
the potential for a central bank to increase the money supply and therefore real GDP to help the incumbent get re-elected.
Explanation:
A political business cycle can be defined as a business cycle that typically arises from the manipulation and tweaking of economic policy tools such as fiscal policy and monetary policy by incumbent (serving) politicians, in order to stimulate and enhance the economy of a particular country before an election. Thus, this would go a long way to boost the chances of the candidate representing the particular political party and reelection into office by the people.
Hence, the political business cycle refers to the potential for a central bank to increase the money supply and therefore real GDP to help the incumbent get re-elected.
The Gross Domestic Products (GDP) is a measure of the total market value of all finished goods and services made within a country during a specific period.
Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country.
Basically, the four (4) major expenditure categories of GDP are consumption (C), investment (I), government purchases (G), and net exports (N).
Additionally, Gross Domestic Products (GDP) of a country's economy gives an insight to it's social well-being such as Real GDP.
Leaders at ABC Corp. now encourage employees to experiment with new ideas. In particular, the executives emphasize that reasonable mistakes are tolerated and expected as part of the discovery process. Which of the following best describes what these leaders are trying to develop?
a. cross-pollination
b. a learning orientation
c. associative play
d. intuitive decision making
e. escalation of commitment
Answer:
b. a learning orientation
Explanation:
The learning orientation would be focused on the learning, its persistance, hard work, watching the situations that would result in performing the task in a better way and at the same time we would able to learn it from the given situation that consist of the challenges & efforts with respect to the work
Therefore as per the given situation, the option b is correct
A company is considering replacing an old piece of machinery, which cost $601,300 and has $350,900 of accumulated depreciation to date, with a new machine that has a purchase price of $483,600. The old machine could be sold for $64,500. The annual variable production costs associated with the old machine are estimated to be $156,700 per year for 8 years. The annual variable production costs for the new machine are estimated to be $101,400 per year for 8 years.
Required:
A. Prepare a differential analysis dated September 13 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
B. Determine whether the company should continue with (Alternative 1) or replace (Alternative 2) the old machine.
C. What is the sunk cost in this situation?
X
Differential Analysis
A company is considering replacing an old piece of machinery, which cost $600,000 and has $350,000 of accumulated depreciation to date, with a new machine that has a purchase price of $545,000. The old machine could be sold for $231,000. The annual variable production costs associated with the old machine are estimated to be $61,000 per year for eight years. The annual variable production costs for the new machine re estimated to be $19,000 per year for eight years.
Required:
A. Prepare a differential analysis dated September 13 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
B. Determine whether the company should continue with (Alternative 1) or replace (Alternative 2) the old machine.
C. What is the sunk cost in this situation?
X
Differential Analysis
A. Prepare a differential analysis dated September 13 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
Differential Analysis
Continue with Old Machine (Alternative. 1) or Replace Old Machine (Alternative. 2)
September 13
1
Continue with Old Machine
Replace Old Machine
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
6
7
8
Answer:
Question Aa. Alternative 1–$1,253,600
Alternative 2 –$1,230,300
Differential effect $ 23,300
b.The company should replace the old machine.
c Sunk cost $250,400
Question Ba. Alternative 1–$488,000
Alternative 2 –$466,000
Differential effect $ 22,000
b.The company should replace the old machine.
c Sunk cost $250,000
Explanation:
Question Aa. Preparation of a differential analysis dated September 13
DIFFERENTIAL ANALYSIS
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
September 13
Continue with Old Machine (Alternative 1); Replace Old Machine (Alternative 2) ; Differential
on Income (Alternative 2)
Revenues:
Proceeds from sale of old
machine $ 0 $64,500 $64,500
Costs:
Purchase price 0 –$483,600 –$483,600
Variable production costs (8 years)–$1,253,600 –$811,200 $442,400
($156,700*8=$1,253,600)
($101,400*8=$811,200)
Income (Loss) –$1,253,600 –$1,230,300 $ 23,300
b. The company should replace the old machine.
c. Calculation for The sunk cost
Using this for formula
Sunk cost= Book value- Accumulated
depreciation
Let plug in the formula
Sunk cost=$601,300-$350,900
Sunk cost=$250,400
Question Ba. Preparation of a differential analysis dated September 13
DIFFERENTIAL ANALYSIS
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
September 13
Continue with Old Machine (Alternative 1); Replace Old Machine (Alternative 2) ; Differential
on Income (Alternative 2)
Revenues:
Proceeds from sale of old
machine $ 0 $231,000 $231,000
Costs:
Purchase price 0 –$545,000 –$545,000
Variable production costs (8 years)–$488,000 –$152,000 $336,000
($61,000*8=$488,000)
($19,000*8=$152,000)
Income (Loss) –$488,000 –$466,000 $ 22,000
b. The company should replace the old machine.
c. Calculation for The sunk cost
Using this for formula
Sunk cost= Book value- Accumulated
depreciation
Let plug in the formua
Sunk cost=$600,000-$350,000
Sunk cost=$250,000
The Terme Corporation is contemplating the purchase of new equipment, which may potentially increase revenues by 30%. Currently, sales are $830,000 per year and cost of sales are 65% of sales. The equipment is expected to last for 4 years with no residual value. The cash outflow expected at the beginning of the year is $289,200. Ignoring income taxes, what is the estimated annual net operating income increase/decrease
Answer:
Annual net operating income= $14,850
Explanation:
The annual net operating income is the incremental sales less costs of good sold and annual depreciation.
Annual depreciation = (Cost of equipment - Salvage value)Number of years
= (289,200-0)/4 = 72,300
Increase in sales= $249,000
Annual net operating income = 249,000- (65%×249,000)-72,300=301,200
Annual net operating income= $14,850
On January 1, 2018, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. If unexpected turnover in 2019 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2019? Group of answer choices $150,000. $30,000. $60,000. $120,000.
Answer:
$120,000
Explanation:
Calculation to determine What amount should M recognize as compensation expense for 2019
First step is to calculate the Value of the option using this formula
Value of the option = Stock options × Fair value of the options
Let plug in the formula
Value of the option=90,000*$5
Value of the option=$450,000
Now let determine compensation expense for 2019
2019 Compensation expense=[($450,000*(100%-10%))*2/3]-$450,000/3 years
2019 Compensation expense=[($450,000*90%)*2/3]-$150,000
2019 Compensation expense=($405,000*2/3)-$150,000
2019 Compensation expense=$270,000-$150,000
2019 Compensation expense=$120,000
Therefore The amount that M recognize should recognize as compensation expense for 2019 is $120,000
Suppose that Freddie's Fries has annual sales of $520,000; cost of goods sold of $395,000; average inventories of $11,000; average accounts receivable of $27,000, and an average accounts payable balance of $22,000. Assuming that all of Freddie's sales are on credit, what will be the firm's cash cycle? (Round your answer to 2 decimal places.)
Answer:
8.78
Explanation:
The computation of the cash cycle is given below;
We know that
Cash cycle = Inventory conversion period + Receivables conversion period - Payables conversion period.
Here
1. Inventory conversion period = Avg. Inventory ÷ (COGS ÷365)
= (11,000) ÷ (395000 ÷ 365)
= 10.16
2. Receivables conversion period = Avg. Accounts Receivable ÷ (Credit Sales × 365)
= (27000/520000) × 365
= 18.95
3. Payables conversion period = Avg. Accounts Payable ÷ (Purchases × 365)
= (22000 ÷ 395000) × 365
= 20.33
Now the cash cycle is
= 10.16 + 18.95 - 20.33
= 8.78
Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2017. The following transactions occurred during the month of May.
May 1 Stockholders invested $15,000 cash in the business in exchange for common stock.
2 Paid $600 for office rent for the month.
3 Purchased $500 of supplies on account.
5 Paid $150 to advertise in the County News.
9 Received $1,400 cash for services performed.
12 Paid $200 cash dividend.
15 Performed $4,200 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $1,200 for services performed on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $2,000 paying $200 in cash and the balance on account.
30 Paid $180 for utilities.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format. Assume the note payable is to be repaid within the year.
Assets = Liabilities +
Stockholders' Equity Date Cash + Accounts Receivable + Supplies + Equipment=Notes Payable+Accounts Payable + Common Stock + Retained Earnings Revenues ? Expenses ? Dividends
Angie relocated for her job and is looking for a new fitness facility to attend an aerobics class. She should make sure that these facilities follow the guidelines for health and fitness facilities established by the _____.
a. The National Center for Complementary and Alternative Medicine
b. The Better Business Bureau
c. The National Strength and Conditioning Association
d. The American Council on Exercise
e. The American College of Sports Medicine
Answer:
c
Explanation:
Stitch Fix is an online personal styling service that was founded in 2011. This company combines computer algorithms with human stylists to deliver a personalized online shopping experience to customers through a subscription service. Users fill out a survey that outlines their style preferences and price range, then stylists hand-select clothing and ship it to the customers. Which of the following statements most likely does not represent an opportunity for Stitch Fix?
A. increasing life expectancy by 5 years.
B. increase in the company's efficiency due to improvements in the value chain.
C. global economic growth will reach 10% next year.
D. a growing population of environmentally conscious consumers.
Answer:
A
Explanation:
there is no correlation between the clothes been made for customers and an increase in life expectancy
The company's efficiency is increased as a result of tailoring customers clothes to be exactly what they want.
Also, Stitch Fix contributes to GDP as a result they can contribute to global economic growth
Hershberger's Farms plans to mix two types of food to make a mix of low cost feed for the animals in his farm. A bag of food costs $10 and contains 40 units of protein, 20 units of minerals and 10 units of vitamins. A bag of food B costs $12 and contains 30 units of proteins, 20 units of minerals and 30 units of vitamins. Daily minimum requirements consist of 150 units of proteins, 90 units of minerals and 60 units of vitamins.
a. Based on the lowest possible cost, how many bags of food A and food B should be consumed by the animals each day?
b. What is the overall cost? $46.50
c. Was there any unused resources?
Answer:
Following are the responses to the given choices:
Explanation:
For point a:
It is possible to say that as the material unit in either bag are same, the minimum bag number is 90 /20 = 4.5
rounded off=Minimum 5 bags
They will try to use all of these bags as the cost of bag A is poor.
When we have five bags of protein A, therefore the vitamin requirements were n’t fulfilled.
Currently, using 4 bags of A and 1 B bag, protein, vitamin and mineral obligations are fulfilled. They all are met.
Therefore, 4 food bags A and 1 food bag B need to be consumed due to the lowest cost.
For point b:
Cost total:
[tex]=( 4 \times 10 ) + ( 1 \times 12)\\\\=40 +12\\\\= \$52[/tex]
For point c:
The following are unused resources:
[tex]\text{Protein = Bag A + Bag B - Consumption}\\\\= 160 + 30 - 150\\\\=190-150\\\\= 40\\\\Minerals = 10 \\\\vitamins = 10[/tex]
Using the estimated sales and production of 140,000 boxes of Chap-Off, the Accounting Department has developed the following manufacturing cost per box: Direct material $ 3.70 Direct labor 2.00 Manufacturing overhead 1.60 Total cost $ 7.30 The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap-Off, Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $1.20 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would be reduced by 20%. Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid
Answer:
Silven Industries
If Silven buys its tubes from the outside supplier, it will be able to avoid $1.10 of its own Chap-Off manufacturing costs per box
Explanation:
a) Data and Calculations:
Estimated Production and Sales Units of Chap-Off = 140,000 boxes
Manufacturing cost per box: Avoidable costs
Direct material $ 3.70 $0.74 ($3.70 * 20%)
Direct labor 2.00 0.20 ($2.00 * 10%)
Manufacturing overhead 1.60 0.16 ($1.60 * 10%)
Total cost $ 7.30 $1.10
Outside supplier's price for tubes = $1.20 per box
b) Unless there an alternative use for the machine used in making the tubes internally exists, it may not be cost-effective for Silven to buy from the outside supplier. Alternatively, it should renegotiate a price per box that is less than $1.10 in order to stop making the tubes internally.
Grass Frog Company sells merchandise only on credit. For the year ended December 31, 2018, the following data are available:
Sales (all on credit) $2,100,000
Accounts Receivable, January 1, 2018 305,000
Allowance for doubtful accounts,
January 1, 2018 (credit) 25,000
Cash collections during 2018 1,980,000
Accounts written off as uncollected
(default) during 2018 15,000
1. Determine the balance of Accounts Receivable at December 31, 2018.
2. Assume that the company estimates bad debts at 4% of credit sales. What amount will the company record as bad debt expense for 2018?
3. What journal entry Grass Frog prepare to record bad debt expense for 2018 (related to part 2)?
4. Now assume the company estimates bad debts based on the aging method. Estimate the ending balance in the allowance for doubtful accounts at December 31, 2018 using the information below:
AGE CLASS % UNCOLLECTIBLE AMOUNT
Not Past Due 1% $220,000
1-30 Days Past Due 5% $110,000
31-60 Days Past Due 10% $40,000
61-90 Days Past Due 25% $30,000
Over 90 Days Past Due 50% $10,000
1. What journal entry would Grass Frog prepare to record bad debt expense for 2018 (related to part 4)?
2. What is the net realizable value of the receivables to be reported on the balance sheet at year-end (assuming aging method was used by Grass Frog)?
Answer:
Grass Frog Company
1. The balance of Accounts Receivable at December 31, 2018 is:
= $410,000.
2. The amount that the company will record as bad debt expense for 2018 is:
= $74,000.
3. Journal Entry to record the bad debt expense for 2018:
Debit Bad Debt Expense $74,000
Credit Allowance for Doubtful Accounts $74,000
To record the bad debt expense for the year.
4. The ending balance in the allowance for doubtful accounts at December 31, 2018 is:
= $24,200
a. Journal Entry to record bad debt expense:
Debit Bad Debt Expense $14,200
Credit Allowance for Doubtful Accounts $14,200
To record the bad debt expense for the year.
b. The net realizable value of the receivables to be reported on the balance sheet at year-end (assuming aging method was used by Grass Frog) is:
Accounts receivable balance $410,000
Allowance for doubtful accounts (24,200)
Net realizable value = $385,800
Explanation:
a) Data and Calculations:
December 31, 2018:
Accounts Receivable
January 1, 2018 $305,000
Sales (all on credit) 2,100,000
Cash collections during 2018 (1,980,000)
Accounts written off during 2018 (15,000)
Dec. 31, 2018 balance $410,000
Allowance for doubtful accounts,
Accounts written off during 2018 $15,000
December 31, 2018 (4%) 84,000
January 1, 2018 (credit) (25,000)
Bad Debts Expense 74,000
AGE ANALYSIS:
AGE CLASS % UNCOLLECTIBLE ALLOWANCE
AMOUNT
Not Past Due 1% $220,000 $2,200
1-30 Days Past Due 5% $110,000 5,500
31-60 Days Past Due 10% $40,000 4,000
61-90 Days Past Due 25% $30,000 7,500
Over 90 Days Past Due 50% $10,000 5,000
Total $410,0000 $24,200
Accounts written off during 2018 $15,000
December 31, 2018 24,200
January 1, 2018 (credit) (25,000)
Bad Debts Expense 14,200
How do consumer preferences shape the market for livestock?
Answer:
The consumer preference is to have a meat that is leaner, and an equal amount of fat distributed throughout the meat.
Explanation:
This means that the cuts of meat that fit this description can be sold at a higher price than others.
Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $34 per pound and costs $26 per pound to produce. Product C would sell for $61 per pound and would require an additional cost of $22 per pound to produce. The differential cost of producing Product C is a.$22 per pound b.$34 per pound c.$61 per pound d.$26 per pound
Answer:
a.$22 per pound
Explanation:
The computation of the differential cost for producing product C is given below:
As we know that
Differential cost is the extra cost that to be incurred for producing or generating the product.
Since in the question it is given that there is an additional cost of $22 per pound so the same would be considered
hence, the option a is correct
During the year, ABC. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for investing net cash flows on the Statement of Cash Flows (put a minus number in front if it is negative)
Answer:
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The following amounts were received by ABC throughout the course of the year: $10,000 from consumers; $6,000 from the bank for long-term borrowing; $5,000 to suppliers; $1,000 in dividends; $2,000 to employees; and $8,000 for machinery. The amount that would be reported for investment net cash flows is -8000.
What is meant by Cash Flow?A cash flow is a physical or fictitious flow of funds:
The phrase "cash flow" is typically used to represent payments that are anticipated to occur in the future, are thus unknown, and so need to be projected using cash flows;
A cash flow in its restricted sense is a payment (in a currency), especially from one central bank account to another;
A cash flow is determined by its time t, nominal amount N, currency CCY, and account A; symbolically, CF = CF (t,N,CCY,A).
Nonetheless, it is common to use the term "cash flow" in a less precise sense to describe (symbolic) payments into or out of a business, project, or financial product.
Learn more about Cash Flow, from :
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Hordel Company needs to determine a markup for a new product. Hordel expects to sell 6,100 units and wants a target profit of $93 per unit. Additional information is as follows: Variable product cost per unit $ 80 Variable administrative cost per unit 35 Total fixed overhead 53,000 Total fixed administrative 11,050 Using the variable cost method, what markup percentage to variable cost should be used
Answer:
See below
Explanation:
Total variable cost = Variable product cost + Variable administrative cost per unit
= (6,100 × $80 per unit) + (6,100 × $35)
= $488,000 + $213,500
= $701,500
Total fixed cost = Total fixed overhead + Total fixed administrative cost
= $53,000 + $11,050
= $64,050
Total fixed cost per unit = $64,050 ÷ 6,100 = $10.5
Total cost = Total variable cost + Total fixed cost
= $701,500 + $64,050
= $765,550
Target profit = 6,100 × $93 = $567,300
Desired selling price = Total cost + Target profit
= $765,550 + $567,300
= $1,332,850
Desired selling price per unit = $1,332,850 ÷ 6,100 = $218.5
Therefore,
Markup percentage on variable cost
= [(Desired selling price per unit - Variable cost per unit) ÷ Variable cost per unit] × Variable cost per unit
= [($218.5 - 115) ÷ (115)] × 115
= 103.5%
Total quality management (TQM) is defined as a comprehensive approach dedicated to continuous quality improvement, training, and customer satisfaction. TQM is led by top management and supported throughout the organization. This activity is important because TQM requires hard work, and managers should understand its core principles in order to properly instill and support TQM in their organizations.
1. Employees, suppliers, and customers are all entrusted with decision-making power.
(Click to select) People orientation Improvement orientation
2. The way to success in business is through continuous, small enhancements to products.
(Click to select) People orientation Improvement orientation
3. Is driven by strong support at the highest levels of the organization.
(Click to select) People orientation Improvement orientation
4. The focus is on creating the most value possible for customers.
(Click to select) People orientation Improvement orientation
5. Assumes that it is better to expend more resources getting something right the first time than to have to engage in costly repairs and reworking after the fact.
(Click to select) People orientation Improvement orientation
6. Executives and researchers at the corporate level frequently interact with front-line salespeople to garner information on customer and product issues.
(Click to select) People orientation Improvement orientation
Solution :
TQM stands for Total quality management. It is a comprehensive approach and is led by the top management and is supported through the organization. This process is dedicated to the continuous quality improvement and training and customer satisfaction.
People orientation :
Entrusted, focus, interact
Improvement orientation :
Enhancement, resources, strong
Thomas believes that he has an NOL for the current year and wants to carry it back to a previous year and receive a tax refund. In determining his NOL, Thomas offset his business income by alimony payments he made to his ex-wife, contributions he made to his traditional Individual Retirement Account (IRA), and moving expenses he incurred. His reason for using these items in the NOL computation is that each item is a deduction for AGI.
Required:
Identify the relevant tax issues for Thomas
Answer:
The relevant tax issues for Thomas to consider are whether the amount of NOL would be reduced if ; payments made with regards to Alimony , Moving Expenses and contributions made to Traditional IRA are included .
Explanation:
The relevant tax issues for Thomas to consider are whether the amount of NOL would be reduced if ; payments made with regards to Alimony , Moving Expenses and contributions made to Traditional IRA are included .
according to rule : Non business deductions are limited in the Ongoing year's NOL hence Non business deductions made with regards to Alimony , Moving Expenses and contributions made to Traditional IRA are included the amount of NOL will reduce.
On December 31, 2019, Burke Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of
Answer:
$39,405
Explanation:
Computation for the present value of the lease payments.
Using this formula
Present value of the lease payments=Beginning annual payments*Present value of an annuity due of 1 for 5 periods at 5%.
Let Plug in the formula
Present value of the lease payments=$8,668 × 4.54595
Present value of the lease payments=$39,405
Therefore the present value of the lease payments is $39,405
Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 15,400 units of the part that are needed every year.
Per Unit
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Supervisor's salary $6.60
Depreciation of special equipment $7.70
Allocated general overhead $4.80
An outside supplier has offered to make the part and sell it to the company for $27.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $21,400 of these allocated general overhead costs would be avoided.
Required:
a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.
b. Which alternative should the company choose?
Answer:
Broce Corporation
a. The Financial Impact of Buying Part U67 is as follows:
Differential Analysis:
Cost of buying from supplier = $415,800 (15,400 * $27)
Avoidable cost of making = 303,220
Differential cost for buying = $112,500
b. The company should choose to continue to produce the part internally.
Explanation:
a) Data and Calculations:
Production units for the year = 15,400
Per Unit Costs:
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Total variable costs $11.70
Supervisor's salary $6.60
Depreciation of special equipment $7.70
Allocated general overhead $4.80
Total fixed costs $19.10
Total costs $30.80
Outside supplier's offer per unit = $27
Avoidable costs:
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Supervisor's salary $6.60
Total avoidable variable costs $18.30 * 15,400 = $281,820
General overhead costs 21,400
Total avoidable costs = $303,220
Differential Analysis:
Cost of buying from supplier = $415,800 (15,400 * $27)
Avoidable cost of making = 303,220
Differential cost for buying = $112,500
Ginger attacks Richard and cuts him with a knife. He sues Ginger. The jury awards Richard $50,000 for medical expenses and lost time at work and adds $100,000 to the award because Ginger was so vicious. The $100,000 is called: A. punitive damages B. compensatory damages C. nominal damages D. an equitable remedy E. none of the other choices
Answer: A. punitive damages
Explanation:
Punitive damages are awarded by a court in order to further punish the guilty party for their actions which according to the court shows that the party committed the crime intentionally.
They are awarded on top of the compensatory damages and are usually larger than the compensatory damage. The compensatory damage here is the $50,000 that was awarded for medical expenses which means that the $100,000 is for punitive damages.
Suppose you've just inherited $66,000 from your rich Aunt. You're trying to decide whether to keep the $66,000 in cash so that you can use it for transactions or to deposit the entire amount in a savings account for one year. Suppose that the interest rate on a savings account is 2.5% per year. What would be the opportunity cost of holding the $66,000 as money
Answer:
Opportunity cost of holding the money = $1.650
Explanation:
Opportunity cost is the value of the next best alternative sacrificed in favour of a decision.
The opportunity cost of holding the money is the interest on deposit that would be have been earned should it be invested at the savings rate.
Interest on savings deposit = interest rate × deposit
= 2.5%× 66,000= $1,650
Opportunity cost of holding the money = $1.650
The opportunity cost of holding the money is $1,650.
Opportunity cost can be described as the cost of the next best option forgone when one alternative is chosen over other alternatives. The opportunity cost of holding the cash is the interest on the deposit that would be forgone.
Interest rate = amount deposited x interest rate
$66,000 x 2.5%
= $66,000 x 0.025 = $1,650
A similar question was answered here: https://brainly.com/question/25811386
Cooper Company currently uses the FIFO method to account for its inventory but is considering a switch to LIFO before the books are closed for the year. Selected data for the year are:
Merchandise inventory, January 1 $1,430,000
Current assets 3,603,600
Total assets (operating) 5,720,000
Cost of goods sold (FIFO) 2,230,800
Merchandise inventory, December 31 (LIFO) 1,544,400
Merchandise inventory, December 31 (FIFO) 1,887,600
Current liabilities 1,144,000
Net sales 3,832,400
Operating expenses 915,200
1. Compute the current ratio, inventory turnover ratio, and rate of return on operating assets assuming the company continues using FIFO.
2. Repeat part (a) assuming the company adjusts its accounts to the LIFO inventory method.
Answer:
Cooper Company
1. FIFO:
Current ratio
= 3.15
Inventory turnover ratio
= 1.34
Rate of return on operating assets
= 12%
2. LIFO:
Current ratio
= 2.85
Inventory turnover ratio
= 1.73
Rate of return on operating assets
= 12.8%
Explanation:
a) Data and Calculations:
Merchandise inventory, January 1 $1,430,000
Current assets 3,603,600
Total assets (operating) 5,720,000
Cost of goods sold (FIFO) 2,230,800
Merchandise inventory, December 31 (LIFO) 1,544,400
Merchandise inventory, December 31 (FIFO) 1,887,600
Current liabilities 1,144,000
Net sales 3,832,400
Operating expenses 915,200
FIFO
Merchandise inventory, December 31 (FIFO) $1,887,600
Cost of goods sold (FIFO) 2,230,800
Goods available for sale $4,118,400
Merchandise inventory, January 1 1,430,000
Purchases $2,688,400
LIFO:
Goods available for sale $4,118,400
Merchandise inventory, December 31 (LIFO) 1,544,400
Cost of goods sold (LIFO) $2,574,000
Income Statements FIFO LIFO
Net sales $3,832,400 $3,832,400
Cost of goods sold (FIFO) 2,230,800 2,574,000
Gross profit $1,601,600 $1,258,400
Operating expenses 915,200 915,200
Net income $686,400 $343,200
Merchandise inventory, December 31 (LIFO) 1,544,400
Merchandise inventory, December 31 (FIFO) 1,887,600
Difference between FIFO and LIFO = 343,200
FIFO Difference LIFO
Current assets 3,603,600 343,200 3,260,400
Total assets (operating) 5,720,000 343,200 5,376,800
Cost of goods sold (FIFO) 2,230,800 2,574,000
Merchandise inventory, January 1 1,430,000 1,430,000
Merchandise inventory, December 31 1,887,600 1,544,400
Current liabilities 1,144,000 1,144,000
Average inventory 1,658,800 1,487,200
FIFO:
Current ratio = current assets/current liabilities
= $3,603,600/$1,144,000 = 3.15
Inventory turnover ratio = Cost of goods sold/Average Inventory
= $2,230,800/$1,658,800
= 1.34
Rate of return on operating assets = Net income/Total assets * 100
= $686,400/$5,720,000 * 100
= 12%
LIFO:
Current ratio = $3,260,400/$1,144,000
= 2.85
Inventory turnover ratio = $2,574,000/$1,487,200
= 1.73
Rate of return on operating assets = $686,400/$5,376,800 * 100
= 12.8%
Park Place Company reported cost of goods sold of $140,000 for the year 2020. Park Place also reported the following amounts on its balance sheets. Jan. 1, 2020Dec. 31, 2020 Inventory$25,000$27,500 Accounts payable15,00014,500 What amount would be reported as cash paid to suppliers in the operating activities section of the statement of cash flows using the direct method
Answer:
the cash paid to supplier is $143,000
Explanation:
The computation of the cash paid to the supplier is given below;
Purchases = Ending inventory + cost of goods sold - beginning inventory
= $27,500 + $140,000 - $25,000
= $142,500
Now the Cash paid to supplier is
= Beginning account payable + purchases - ending account payable
= $15,000 + $142,500 - $14,500
= $143,000
hence the cash paid to supplier is $143,000
Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received: How much will Bidder B have to spend to purchase all of the shares that have been allocated to him
Answer:
$4,320.00
Explanation:
Calculation to determine How much will Bidder B have to spend to purchase all of the shares that have been allocated to him
Bidder B Cost = 300 *[900/(100 + 300 + 400+200)] *$16
Bidder B Cost = 300*[900/1,000)*$16
Bidder B Cost = 300*0.9*$16
Bidder B Cost = $4,320.00
Therefore The amount that Bidder B will have to spend to purchase all of the shares that have been allocated to him is $4,320.00
Entries for bonds payable and installment note transactions
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
2016
July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 2016, at a market (effective rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30.
Oct. 1. Borrowed $200,000 by issuing a six-year, 6% installment note to Nicks Bank. The note requires annual payments of $40,673, with the first payment occurring on September 30, 2017.
Dec. 31. Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment.
31. Paid the semi-annual interest on the bonds. The bond discount amortization of $261,693 is combined with the semi-annual interest payment.
31. Closed the interest expense account.
2017
June 30. Paid the semi-annual interest on the bonds. The bond discount amortization of $261,693 is combined with the semi-annual interest payment.
Sept. 30. Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28,673.
Dec. 31. Accrued $2,570 of interest on the installment note. The interest is payable on the dat of the next installment note payment.
31. Paid the semi-annual interest on the bonds. The bond discount amortization of $261,693 is combined with the semi-annual interest payment.
31. Closed the interest expense account.
2018
June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only).
Sept. 30. Paid the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393.
Instructions:
1. Journalize the entries to record the foregoing transactions.
2. Indicate the amount of the interest expense in (a) 2016 and (b) 2017.
Answer:
Winklevoss Inc.
Journal Entries:
2016
July 1. Debit Cash $63,532,267
Debit Bonds Discount $10,467,733
Credit 11% Callable Bonds Payable $74,000,000
To record the issuance of 20-year, 11% callable bonds dated
Oct. 1. Debit Cash $200,000
Credit 6% Installment Note Payable (Nicks Bank) $200,000
To record the issuance of a six-year, 6% installment note.
Dec. 31. Debit Interest Expense $3,000
Credit Interest Expense Payable $3,000
To accrue interest for 3 months.
Dec. 31. Debit Interest Expense on Bonds $4,331,693
Credit Bond discount amortization $261,693
Credit Cash $4,070,000
To record the first semiannual interest payment.
Dec. 31. Debit Income Summary $4,334,693
Credit Interest Expense $4,334,693
To close the expense accounts.
2017
June 30. Debit Interest Expense on Bonds $4,331,693
Credit Bond discount amortization $261,693
Credit Cash $4,070,000
To record the second semiannual interest payment.
Sept. 30. Debit 6% Installment Notes Payable $28,673
Debit Interest Expense $9,000
Debit Interest Expense Payable $3,000
Credit Cash $40,673
To record installment payment, including interest.
Dec. 31. Debit Interest Expense $2,570
Credit Interest Expense Payable $2,570
To accrue interest.
Dec. 31. Debit Interest Expense on Bonds $4,331,693
Credit Bond discount amortization $261,693
CreditCash $4,070,000
To record semiannual interest payment.
Dec. 31. Debit Income Summary $4,334,263
Credit Interest Expense $4,334,263
To close the interest expense account.
2018
June 30. Debit 11% Callable Bonds Payable $74,000,000
Credit Bond Discount $1,480,000
Credit Cash $72,520,000
To record the bond redemption only.
Sept. 30. Debit 6% Installment Notes Payable $30,393
Debit Interest Expense $7,710
Debit Interest Expense Payable $2,570
Credit Cash $40,673
To record the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393.
Explanation:
a) Data and Analysis:
2016
July 1. Cash $63,532,267 Bonds Discount $10,467,733 11% Callable Bonds Payable $74,000,000 issue of 20-year, 11% callable bonds dated
July 1, 2016, at a market (effective rate of 13%, receiving cash of . Interest is payable semiannually on December 31 and June 30.
Oct. 1. Cash $200,000 6% Installment Note Payable (Nicks Bank) $200,000
issuance of a six-year, 6% installment note to . The note requires annual payments of $40,673, with the first payment occurring on September 30,
2017.
Dec. 31. Interest Expense $3,000 Interest Expense Payable $3,000
Dec. 31. Interest Expense on Bonds $4,331,693 Bond discount amortization $261,693 Cash $4,070,000
Dec. 31. Income Summary $4,334,693 Interest Expense $4,334,693
2017
June 30. Interest Expense on Bonds $4,331,693 Bond discount amortization $261,693 Cash $4,070,000
Sept. 30. 6% Installment Notes Payable $28,673 Interest Expense $9,000 Interest Expense Payable $3,000 Cash $40,673
Dec. 31. Interest Expense $2,570 Interest Expense Payable $2,570
Dec. 31. Interest Expense on Bonds $4,331,693 Bond discount amortization $261,693 Cash $4,070,000
Dec. 31. Income Summary $4,334,263 Interest Expense $4,334,263
2018
June 30. 11% Callable Bonds Payable $74,000,000 Bond Discount $1,480,000 Cash $72,520,000 To record the bond redemption only.
Sept. 30. 6% Installment Notes Payable $30,393 Interest Expense $7,710 Interest Expense Payable $2,570 Cash $40,673
the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393.
The following transactions occurred during July: Received $1,600 cash for services performed during July. Received $7,800 cash from the issuance of common stock to owners. Received $800 from a customer as payment for services performed during June. Billed $4,700 to customers for services performed on account in July. Borrowed $3,300 from the bank and signed a promissory note. Received $2,200 from a customer for services to be performed during August. What is the amount of revenue that will be reported on the income statement for the month ended July 31
Answer:
the amount of revenue that should be reported is $6,300
Explanation:
The computation of the amount of revenue that should be reported is shown below;
= Cash received + service revenue earned on the account
= $1,600 + $4,700
= $6,300
hence, the amount of revenue that should be reported is $6,300
Basically we add the two items so that the correct value could arrive
Dos Amugus Company has income from continuing operations of $621,000 (after tax) for the year ended December 31, 2020. It also has the following items (before considering income taxes): (1) An unrealized loss of $120,000 available-for-sale-securities. (2) A gain of $60,000 on the discontinuance of a major component. (3) A cumulative effect of a change in accounting principle that resulted in an increase in prior years' depreciation of $50,000. Assume all items are subject to income taxes at a 30% tax rate. Prepare an income statement, beginning with income from continuing operations. DOS AMUGUS COMPANY Partial Statement of Comprehensive Income For the Year Ended December 31, 2020
Answer:
Dos Amugus company
Partial Statement of Comprehensive Income
Particulars Amount
Income from continuing operations $621,000
Discontinued operations. Gain on discontinued $42,000
segment net of tax (60,000 * 30% of 60,000)
Net income $663,000
Other comprehensive income ($84,000)
Unrealized holding loss, on available for sale
securities net of income tax (120,000-30%*120,000)
Comprehensive income $579,000
Garth is best friends with Wayne, the CEO of Great Pharma, Incorporated (GPI), a publicly traded corporation. GPI had just made an important discovery: the cure for cancer. The information has been kept secret by GPI. Before the news was made public in a press conference, Wayne told Garth about it on May 1 and that day Garth bought 10,000 shares of GPI stock. The press conference was on May 2 and after the announcement, GPI stock went up $50 a share. Garth immediately sold his stock and made $500,000. Garth is known in the law of insider trading as a/an
Answer:
Garth is known in the law of insider trading as a
secondary insider.
Explanation:
Garth's contact with inside information in GPI is not primary since he does not have the direct privileged information, unlike Wayne, his friend, who is also the CEO of GPI. However, he has benefited from secondary information through Wayne. His conduct is also a violation of the Securities Act as amended. He used non-publicly available information to trade on the stock of GPI and made huge profits.
Data for 2021 were as follows: PBO, January 1, $246,000 and December 31, $276,000; pension plan assets (fair value) January 1, $190,000, and December 31, $239,000. The projected benefit obligation was underfunded at the end of 2021 by:
Answer: $37000
Explanation:
The projected benefit obligation was underfunded at the end of 2021 by:
PBO December 31 = $276,000
Less: Pension plan assets (fair value) December 31 = $239,000.
Then, the projected benefit obligation was underfunded at the end of 2021 by ($276000 - $239000) = $37000