Answer:
Deferred tax asset = $21000
Explanation:
Given the warranty liability = $105000
Effective tax rate = 20%
The deferred tax asset can be calculated by calculating the effective tax from the warranty liability. Therefore, just multiply the effective tax rate to the warranty liability.
Deferred tax asset = Effective tax rate x Warranty liability
Deferred tax asset = 20% x $105000
Deferred tax asset = $21000
On May 10, 2020, Marin Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2020. Greig agrees to pay the full contract price of $2,060 on July 15, 2020. The cost of the goods is $1,350. Marin delivers the product to Greig on June 15, 2020, and receives payment on July 15, 2020. Prepare the journal entries for Marin related to this contract. Either party may terminate the contract without compensation until one of the parties performs
Answer:
May 15, 2020
No Entry
June 15, 2020
Debit: A/R for 2,060
Credit: Revenue for 2,060
Debit: COGS for 1,350
Credit: Inventory for 1,350
July 15, 2020
Debit: Cash for 2,060
Credit: A/R for 2,060
Explanation:
Preparation of the journal entries for Cosmo related to this contract.
May 15, 2020
No Entry
June 15, 2020
Debit: A/R for 2,060
Credit: Revenue for 2,060
Debit: COGS for 1,350
Credit: Inventory for 1,350
July 15, 2020
Debit: Cash for 2,060
Credit: A/R for 2,060
Insert your overall conclusions about the relevance and significance of macroeconomics. Assess the effectiveness of your economic policy decisions. Did your economic policy decisions produce the anticipated results?
Answer:
Macroeconomics is a very relevant subfield of economics because it studies economic matters at the aggregate level, that means things such as inflation, unemployment, economic growth, investment, saving, and many other economic phenomena that are very relevant for all countries, all governments, and essentially everybody around the world.
Macroeconomics is a contested field, with some points in agreement, but many others in dispute among economists. For this reason, the policy recommendations that are based on macroeconomic criteria are often very different, and frequently clash into political conflict.
Economic policy decisions never produce exactly the expected result, but they often give a satisfactory result (not always). For example, the monetary policy based on the principles of monetarism did manage to bring down inflation substantially ever since it began to be applied in the late 1970s.
Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is: [Round your answer to the nearest two decimal places...ex: 3.246
Answer:
.77
Explanation:
Calculation to determine what The acid-test (quick) ratio is
Using this formula
Quick Assets = Cash+Accounts Receivable/Current liabilities
Let plug in the formula
Quick Assets=$62,000+43,000/$137,000
Quick Assets=$105,000/$137,000
Quick Assets= .77
Therefore The acid-test (quick) ratio is .77
Purple Lemon Fruit Company has two divisions: one is very risky, and the other exhibits significantly less risk. The company uses its investors’ overall required rate of return to evaluate its investment projects. It is most likely that the firm will become:
Answer: b. Riskier over time, and its value will decrease
Explanation:
Because the company is using the investor's required rate of return instead of one that takes into account the riskiness of the two division, you find that risk is not being adequately accounted for.
This would lead to a situation where the company becomes riskier because it is not accounting for its risk properly. With higher risk, the company will be unable to seek funding easily which would lead to lower investments being undertaken and an overall decrease in company value.
The Down and Out Co. just issued a dividend of $2.91 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity?
Answer:
14.81%
Explanation:
Cost of equity = (Dividend for next period / Current price) + Growth rate
Cost of equity = (($2.91*1.06) / $35) + 0.06
Cost of equity = $3.0846/$35 + 0.06
Cost of equity = 0.08813143 + 0.06
Cost of equity = 0.14813143
Cost of equity = 14.81%
2. In what ways does the division between value creation and value delivery help clarify the process of refining the business model
Answer:
Value creation refers to the process of creating a company value based on the demands of the consumer and their willingness to use the value. The action of drifting wealth in a value networks is essential to the idea of shared value.
In other words, The way you create your goods such that they provide the most value to the customers who use them is called value delivery. Customers can receive worth in the shape of goods, perks, and characteristics, among other things. Anything that adds worth to the consumer 's experience should be included in the value ordering process.
A nation can accelerate its economic growth by a) reducing the number of immigrants allowed into the country b) adding to its capital stock c) printing more money d) imposing tariffs and quotas on imported goods
Answer:
b) adding to its capital stock
Explanation:
It is correct to say that a country accelerates its economic growth by increasing its capital stock, as the index that measures economic growth in a country is the GDP, which is the country's gross domestic product, that is, everything that the country produced during the period of one year.
So when there is an increase in the capital stock in the economy, whether by an increase in investment in the country or by industrial activity, it means that there is an increase in the production of goods, an increase in employment, an increase in purchasing power and therefore an increase in the index that measures economic growth, GDP.
Lightfoot Inc., a software development firm, has stock outstanding as follows: 20,000 shares of cumulative preferred 4% stock, $20 par, and 25,000 shares of $50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $6,000; second year, $10,000; third year, $50,250; fourth year, $78,000.Calculate the dividends per share on each class of stock for each of the four years.
Answer:
For first year, we have:
Cumulative preferred dividend per share = $0.30 per share
Common dividend per share = $0
For second year, we have:
Cumulative preferred dividend per share = $0.50 per share
Common dividend per share = $0
For third year, we have:
Cumulative preferred dividend per share = $1.60 per share
Common dividend per share = $0.73 per share
For fourth year, we have:
Cumulative preferred dividend per share = $0.80 per share
Common dividend per share = $2.48 per share
Explanation:
Cumulative preferred stock has a clause that mandates the corporation to pay all dividends, including those that were previously missed, before common shareholders can get their dividend payments.
Annual cumulative preferred dividend = 20,000 * $20 * 4% = $16,000
Therefore, we have:
For First Year
Distributed dividends = $6,000
Cumulative preferred dividend paid = Distributed dividends = $6,000
Common dividend paid = $0
Cumulative preferred dividend per share = Cumulative preferred dividend paid / Number of cumulative preferred shares outstanding = $6,000 / 20,000 = $0.30 per share
Common dividend per share = $0
Cumulative preferred dividend carried forward = Annual cumulative preferred dividend - Cumulative preferred dividend paid = $16,000 - $6,000 = $10,000
For Second Year
Distributed dividends = $10,000
Cumulative preferred dividend payable = Annual cumulative preferred dividend + Cumulative preferred dividend brought forward = $16,000 + $10,000 = $26,000
Cumulative preferred dividend paid = Distributed dividends = $10,000
Common dividend paid = $0
Cumulative preferred dividend per share = Cumulative preferred dividend paid / Number of cumulative preferred shares outstanding = $10,000 / 20,000 = $0.50 per share
Common dividend per share = $0
Cumulative preferred dividend carried forward = Cumulative preferred dividend payable - Cumulative preferred dividend paid = $26,000 - $10,000 = $16,000
For Third Year
Distributed dividends = $50,250
Cumulative preferred dividend paid = Annual cumulative preferred dividend + Cumulative preferred dividend brought forward = $16,000 + $16,000 = $32,000
Common dividend paid = Distributed dividends - Cumulative preferred dividend paid = $50,250 - $32,000 = $18,250
Cumulative preferred dividend per share = Cumulative preferred dividend paid / Number of cumulative preferred shares outstanding = $32,000 / 20,000 = $1.60 per share
Common dividend per share = Common dividend paid / Number of common shares outstanding = $18,250 / 25,000 = $0.73 per share
For Fourth Year
Distributed dividends = $78,000
Cumulative preferred dividend paid = Annual cumulative preferred dividend = $16,000
Common dividend paid = Distributed dividends - Cumulative preferred dividend paid = $78,000 - $16,000 = $62,000
Cumulative preferred dividend per share = Cumulative preferred dividend paid / Number of cumulative preferred shares outstanding = $16,000 / 20,000 = $0.80 per share
Common dividend per share = Common dividend paid / Number of common shares outstanding = $62,000 / 25,000 = $2.48 per share
Splish Brothers Inc. reported net income of $394000 for the year. During the year, accounts receivable increased by $29000, accounts payable decreased by $12000 and depreciation expense of $61000 was recorded. Net cash provided by operating activities for the year is
Answer:
$414000
Explanation:
Calculation to determine what Net cash provided by operating activities for the year is
Net income $394000
Less Receivable increased ($29000)
Less Accounts payable decreased ($12000)
Add depreciation expense $61000
Net Net cash provided by operating activities $414000
Therefore Net cash provided by operating activities for the year is $414000
The financial records of ABC Partnership reflect the following capital account balances:
Arthur $150,000
Beatrice 350,000
Charles 100,000
Arthur, Beatrice, and Charles share equally in profits and losses. On January 1, Charles meets with Arthur and Beatrice and decides to withdraw from the partnership in return for a cash payment of $100,000.
What is the balance in Arthur's capital account after Charles' withdraw and distribution of $100,000?
Answer: $150,000
Explanation:
Charles's capital account balance is worth $100,000 which is exactly the amount of cash that will be given to him when he exits the partnership. There ware no bonuses to be given as a result.
Because of this, the other partners will keep the same capital account balances as before Charles left. Had it been that they had to pay Charles more than what his account balance was worth, the bonus would have been paid by the two remaining partners from their capital account balances.
3. The USD depreciates 2% versus the JPY. The USD appreciates 1% versus the MXN. What is the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate
Answer:
The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.
Explanation:
The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate can be stated using the folowing 3 steps.
Step 1. State the initial exchange rates of the currency pairs.
Let first assume the initial exchange rates are as follows:
USD1 = JPY1
USD1 = MXN1
Therefore, we have the initial cross rate as follows:
MXN1 = USD1 = JPY1
MXN1 = JPY1
Step 2. Determine the new exchange rates
The new exchange rates can be determined as follows:
When the USD depreciates 2% versus the JPY, this implies that USD1 * (100% + 2%) = USD1.02 has to be exchanged for JPY1. Therefore, we now have:
USD1.02 = JPY1, or
USD1 = JPY1/1.02
USD1 = JPY0.98
Also, when The USD appreciates 1% versus the MXN, this implies that USD1 * (100% - 1%) = USD0.99 has to be exchanged for MXN1. Therefore, we now have:
USD0.99 = MXN1, or
USD1 = MXN1/0.99
USD1 = MXN1.01
Therefore, we have the new cross rate as follows:
MXN1.01 = USD1 = JPY0.98
MXN1.01 = JPY0.98
MXN1.01 / 1.01 = JPY0.98/1.01
MXN1 = JPY0.97, or
MXN1/0.97 = JPY0.97/0.97
MXN1.03 = JPY1
Therefore, the new exchange rates are as follows:
USD1.02 = JPY1
USD0.99 = MXN1
MXN1.03 = JPY1
c. Determination of appreciation or depreciation we might see in the MXN/JPY
Percentage of depreciation of MXN against JPY = ((Initial MXN/JPY - New MXN/JPY) / Initial MXN/YPY) * 100 = ((1.03 - 1) / 1) * 100 = 3%
Since the percentage of depreciation of MXN against JPY is 3%, this also implies that the percentage of appreciation of JPY against MXN is 3%.
Therefore, the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.
The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: entertainment, $70; postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.
Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.
______________ a. Fund amount is being reduced.
_____________ b. Fund amount is being increased.
_______________ c. Fund is being eliminated.
_______________ d. Fund is being established.
Answer:
(a) Debit Petty cash account for $150; and Credit Bank for $150.
(b) Debit Petty cash account for $122; and Credit Bank for $122.
The correct options are:
a. Fund amount is being reduced.
c. Fund is being eliminated.
Explanation:
(a) Prepare journal entries to record establishment of the fund.
The journal entry will look as follows:
Details Debit ($) Credit ($)
Petty cash account 150
Bank 150
(To record petty cash fund establishment.)
(b) Prepare journal entries to record reimbursement of the fund at the end of the current period.
Since the fund contained $28 at the end of the current period, we have:
Amount to reimburse = entertainment + postage + printing = $70 + $30 + $22 = $122
The journal entry will now look as follows:
Details Debit ($) Credit ($)
Petty cash account 122
Bank 122
(To record petty cash fund reimbursement.)
c. Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.
The correct options are:
a. Fund amount is being reduced.
c. Fund is being eliminated.
This is because they both in indicate outflows from the petty cash fund.
McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.
Answer:
1,350 units
Explanation:
The computation of the break-even point in composite units is shown below;
Composition contribution margin per unit is
= ($75 - $35) × 5 + ($95 - $40) × 2
= 310
Now break-even point in composite units is
= Fixed cost ÷ Composition contribution margin per unit
= $418,500 ÷ 310
= 1,350 units
Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be
Answer:
Fixed Cost = $10,000
Variable Costs = $90,000
Explanation:
Variable Cost per unit = $72,000 ÷ 12,000
= $6
Variable Costs at 15,000 units = $6 x 15,000
= $90,000
Fixed Cost (given) = $10,000
Oxford Company uses a job order costing system. In the last month, the system accumulated labor time tickets total $24,600 for direct labor and $4,300 for indirect labor. How are these costs recorded
Answer:
Debit : Work in Process - Direct Labor $24,600
Debit : Work in Process - Indirect Labor $4,300
Credit : Salaries and Wages Payable $28,900
Explanation:
The Journal entry accumulated costs in work in process as shown above.
Cray Company started year 2 with $60,000 in its cash and common stock accounts. During year 2 Cray paid $45,000 cash for employee compensation. Assume this is the only transaction that occurred in year 2. Required Determine the total amount of assets at the end of year 2, assuming Cray is a manufacturing company and the employees were paid to make products. Determine the amount of expense recognized on the year 2 income statement, assuming Cray is a manufacturing company and the employees were paid to make products. Determine the total amount of assets at the end of year 2, assuming Cray is a service company. Determine the amount of expense recognized on the year 2 income statement, assuming Cray is a service company.
Answer:
Hi BubbleTeaLover!
Here you go:
Manufacturing:
Total Assets: $60,000
Total Expenses: $0
Service:
Total Assets: $15,000
Total Expenses: $45,000
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Answer:
??
Explanation:
At a sales volume of 34,000 units, Carne Company's sales commissions (a cost that is variable with respect to sales volume) total $741,200. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 32,300 units
Answer: $704,140
Explanation:
Find the rate of commission per sales first:
= Commission / Number of units sold
= 741,200 / 34,000
= $21.80 commission per unit
If there are 32,300 units, the commission will be:
= 32,300 * 21.80
= $704,140
What is the Investment in Mopsy Co. balance as of December 31, 2020, if the equity method has been applied
Answer:
$1,609,000
Explanation:
Calculation to determine the Investment in Mopsy Co. balance as of December 31, 2020, if the equity method has been applied
First step is to calculate the Unrecorded Patents Amortization
Unrecorded Patents Amortization
=$1,400,000-[($6,400,000 - $3,000,000)×30%] /10 years
Unrecorded Patents Amortization
=$1,400,000- ($3,400,000 × 30%)/10 years
Unrecorded Patents Amortization
=$1,400,000 - $1,020,000/10 years
Unrecorded Patents Amortization = $380,000 / 10 years
Unrecorded Patents Amortization= $38,000
Now let determine the Investment
Investment=$1,400,000 + $180,000 + $225,000 - $60,000 - $60,000 - $38,000 - $38,000
Investment= $1,609,000
Therefore the Investment in Mopsy Co. balance as of December 31, 2020, if the equity method has been applied is $1,609,000
Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.
Jan. 4 Sold $14,000 of antiques on account, credit terms are n/30. Cost of goods is $7,000.
8 Received a $400 sales return on damaged goods from the customer. Cost of goods damaged is $150.
13 Antique Mall received payment from the customer on the amount due from Jan. 4, less the return.
20 Sold $4,900 of antiques on account, credit terms are 1/10, n/45, FOB destination. Cost of goods is $2,450.
20 Antique Mall paid $70 on freight out.
29 Received payment from the customer on the amount due from Jan. 20, less the discount.
Answer:
Antique Mall
Journal Entries:
Jan. 4 Debit Accounts Receivable $14,000
Credit Sales Revenue $14,000
credit terms are n/30.
Debit Cost of goods sold $7,000
Credit Inventory $7,000
Jan. 8 Debit Sales Returns $400
Credit Accounts Receivable $400
Debit Damaged Goods $150
Credit Cost of goods sold $150
Jan. 13 Debit Cash $13,600
Credit Accounts Receivable $13,600
Jan. 20 Debit Accounts Receivable $4,900
Credit Sales Revenue $4,900
credit terms are 1/10, n/45, FOB destination.
Debit Cost of goods sold $2,450
Credit Inventory $2,450
Jan. 20 Debit Freight-out Expense $70
Credit Cash $70
Jan. 29 Debit Cash $4,851
Debit Cash Discounts $49
Credit Accounts Receivable $4,900
Explanation:
a) Data and Analysis:
Jan. 4 Accounts Receivable $14,000 Sales Revenue $14,000
credit terms are n/30.
Cost of goods sold $7,000 Inventory $7,000
Jan. 8 Sales Returns $400 Accounts Receivable $400
Damaged Goods $150 Cost of goods sold $150
Jan. 13 Cash $13,600 Accounts Receivable $13,600
Jan. 20 Accounts Receivable $4,900 Sales Revenue $4,900
credit terms are 1/10, n/45, FOB destination.
Cost of goods sold $2,450 Inventory $2,450
Jan. 20 Freight-out Expense $70 Cash $70
Jan. 29 Cash $4,851 Cash Discounts $49 Accounts Receivable $4,900
If you encounter a process that has limited flexibility, shorter lead times, and cheaper products, customization most likely is occuring:
Answer: late in the supply chain
Explanation:
Assemble to order refers to a strategy whereby the products ordered by customers are manufactured quickly while they are customizable to an extent
Even though the basic parts of the product are manufactured already, they're not yet assembled until an order comes in.
If a process that has limited flexibility, shorter lead times, and cheaper products, customization most likely is occuring late in the supply chain.
In a situation where a process with limited flexibility, shorter lead times, and cheaper products, customization of the product or service will most likely occur D. Late in the Supply Chain
Given the process's limited flexibility and shorter lead times, customization, which is a process that tailors a product or service to meet specific customer's or market's demands, cannot occur early, at every step of the Supply Chain, or before procurement of raw materials.
Thus, customization occurs later in the Supply Chain when the goods are about to be delivered to the customer because delivery and satisfying customers or the market are the ultimate goals of any Supply Chain management.
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When moving up along an existing supply curve, all variables other than price are
O increasing
decreasing
O held constant
O fluctuating
When moving up along an existing supply curve, all variables other than price are held constant. Hence, Option (C) is correct.
When analyzing a supply curve, economists typically assume that all other variables except price remain constant.
This assumption allows for a simplified analysis of the relationship between price and quantity supplied, isolating the impact of price changes on supply.
In reality, numerous factors influence supply, such as input costs, technology, government regulations, and producer expectations.
However, when studying the impact of price on supply, economists use the concept of ceteris paribus (all other things being equal) to hold these other factors constant and focus solely on the relationship between price and quantity supplied.
Thus, by assuming that all other variables are constant, economists can create a simplified model that helps understand the basic behavior of supply and the upward-sloping nature of the supply curve.
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When moving up along an existing supply curve, all variables other than price are
A) increasing
B) decreasing
C) held constant
D) fluctuating
f the wage rate is $20 per unit and if the firm uses two units of capital in the short run with rental rate of $200 per unit then what is the average total cost for the 30th unit of production created
Answer:
The average total cost for the 30th unit of production created is:
= $420.
Explanation:
a) Data and Calculations:
Wage rate per unit = $20
Capital rental rate per unit of capital = $200
Units of capital per unit = 2
Capital rental rate per unit of product = $400 ($200 * 2)
Total cost for each unit of production = $420 ($400 + $20)
b) More capital is consumed by the production of this product. The production is capital-intensive while labor is very cheap. To product a unit, the company will incur $20 in labor and $400 in capital. The total unit cost is $420 (cost of labor and capital per unit)
The average total cost for the 30th unit of production created is $420
What is average total cost?Average Total Cost refers to the combination of all fixed and variable costs per unit in producing a product.
Given the above information, the
Total cost for each unit of production
= $420 ($400 + $20)
The above means that more capital is consumed by the production of this product. Also, the production is capital-intensive while labor is very cheap.
To produce a unit, the company will incur $20 in labor and $400 in capital. The total unit cost is $420 (cost of labor and capital per unit)
Hence, the average total cost for the 30th unit of production created is $420
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W, Inc. plans to have the same inventories at year end as was in the beginning of the year. The expected total fixed costs for the year are $288000, and the estimated variable costs per unit are $14. The planned number of units to be sold during the year is 60000, and the average unit selling price is $20. The maximum sales level within the relevant range are 70000. Requirements: NOTE: (SHOW ALL WORK) 1. What is the contribution margin ratio
Answer:
i needd points
Explanation:
lol
All sales are made on credit. Based on past experience, the company estimates 0.3% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense
Answer:
Missing word "A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $350,000 debit, Allowance for uncollectible accounts 650 debit, Net Sales 795,000 credit"
Net credit sales = $795,000
Bad debt expense = 0.3% * Net credit sales
Bad debt expense = $795,000 * 0.3%
Bad debt expense = $2,385
Adjusting entry
Date General Journal Debit Credit
Bad debt expense $2,385
Allowance for uncollectible accounts $2,385
(To record bad debt expense)
Suppose that Jeremiah was unfairly terminated before his employment contract expired, and he had to spend $500 to find another job. His job search expenditures would be considered _____ damages.
Answer:
Incidental damages
Explanation:
In a situation where an employer doesn't fulfill a contract agreement with an employee, just like in the question above, where Jeremiah was unfairly terminated before his employment contract expired, he has the right to collect "damages" which is legal compensation for financial losses caused by the termination of his employment contract before it expired. Incidental damage is the answer because Jeremiah incurred expenses where he had to spend $500 to find another job as a result of the employer's breach of the contract.
What is the present value of the annual interest payments on a 10-year, $1,000 par value bond with a coupon rate of 10 percent paid annually, if the yield on similar bonds is 9 percent?
Answer: $641.77
Explanation:
First find the interest payments:
= Coupon rate * par value
= 10% * 1,000
= $100
The constant payment represents an annuity therefore the present value is that of an annuity.
Present value of an annuity = Annuity * Present value interest factor of annuity, 9% , 10 years
= 100 * 6.4177
= $641.77
R(0,t) is the Spot Zero-Coupon (or Discount) Rate. It is the annualized rate on a pure Unit Discount bond B(0,t) - the bond that pays 1 dollar at time t. Assume that R(0,13) = 8.00 per cent. What is the price of B(0,13)? Answer with three decimal digits accuracy. Example: 0.728
Answer:
0.368
Explanation:
Price of B(0,13) = 1 / (1 + interest rate)^years
Price of B(0,13) = 1 / (1 + 8%)^13
Price of B(0,13) = 1 / (1+0.08)^13
Price of B(0,13) = 1 / (1.08)^13
Price of B(0,13) = 1 / 2.7196237
Price of B(0,13) = 0.3676979247
Price of B(0,13) = 0.368
Chang Industries has 2,800 defective units of product that have already cost $14.80 each to produce. A salvage company will purchase the defective units as they are for $5.80 each. Chang's production manager reports that the defects can be corrected for $5.20 per unit, enabling them to be sold at their regular market price of $22.60. The incremental income or loss on reworking the units is:
Answer:
If the units are rework, income will increase by $32,480 (48,720 - 16,240).
Explanation:
Giving the following information:
The previous cost will not be taken into account, because it is constant for both options.
Number of units= 2,800
Sell as-is:
Selling price= $5.8
Re-work:
Unitary cost= $5.2
Selling price= $22.6
We need to calculate the effect on the income of both options:
Sell as-is:
Effect on income= 2,800*5.8= $16,240 increase
Re-work:
Effect on income= 2,800*(22.6 - 5,2)
Effect on income= $48,720 increase
If the units are rework, income will increase by $32,480 (48,720 - 16,240).
An investor currently holds stock in Giggle Corporation and is considering buying stock in either Macrosoft Corporation or Faceplant Corporation. All three stocks have the same expected return and risk. The correlation between Giggle & Macrosoft is 0.25. The correlation between Giggle and Faceplant is -0.10. Portfolio risk is expected to:
a. Increase regardless of whether she buys Macrosoft or Faceplant since they are equally risky
b. Decline more when the investor buys Faceplant
c. Cannot tell from information provided – need to know risk, return and proportion of each stock in the portfolio
d. Stay the same regardless of whether Macrosoft or Faceplant is added since all three have the same risk
e. Decrease more when the investor buys Macrosoft
Answer:
b
Explanation:
Portfolio diversification is the process of holding different asset and security classes in order to minimise the non systemic risk of the portfolio
Correlation is a statistical measure used to measure the relationship that exists between two variables.
1. Positive correlation : it mean that the two variables move in the same direction. If one variable increases, the other variable also increases. It increases the risk of the portfolio
For example, there should be a positive correlation between quantity supplied and price
When there is a positive correlation, the graph of the variables is upward sloping
2. Negative correlation : it mean that the two variables move in different direction. If one variable increases, the other variable decreases. It decreases the risk of the portfolio
For example, there should be a negative correlation between quantity demanded and price
When there is a negative correlation, the graph of the variables is downward sloping
3. Zero correlation : there is no relationship between the variables. It decreases the risk of the portfolio