Complete Question:
BenchMark, Inc., just paid a dividend of $3.45 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 13 percent on the stock for the first three years, a return of 11 percent for the next three years, and then a return of 9 percent thereafter. What is the current share price for the stock.
Answer:
BenchMark, Inc.
The current share price for the stock is:
$43.13
Explanation:
a) Data and Calculations:
Dividend per share = $3.45
Growth rate = 5%
Investors' required rate of return = 13%
Stock value = Dividend per share / (Required Rate of Return – Dividend Growth Rate)
= $3.45/(0.13 - 0.05)
= $43.13
b) We can calculate BenchMark's current share price, by dividing the dividend per share by the investors' required rate of return after subtracting the growth rate from the required rate of return.
Prepare a statement of cash flows using the indirect method for the year ended June 30, 2019. (Amounts to be deducted should be indicated with a minus sign.) IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Changes in current operating assets and liabilities Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2018 2019 Assets 93,700 $67,000 Cash Accounts receivable, net 99,500 86,800 6,700 74,000 121,000 Inventory Prepaid expenses 10,000 272,000 138,000 Total current assets 286,700 147,000 Equipment Accum. depreciation-Equipment (38,500) (20,500) $395,200 $389,500 Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable $48,000 $64,500 8,300 5,700 19,600 8,400 Total current liabilities 62,000 92,500 Notes payable (long term) Total liabilities 53,000 115,000 83,000 175,500 Equity Common stock, $5 par value Retained earnings 266,000 183,000 31,000 14,200 Total liabilities and equity $395,200 $389,500 IKIBAN INC Income Statement For Year Ended June 30, 2019 Sales $793,000 434,000 359,000 Cost of goods sold Gross profit Operating expenses Depreciation expense $81,600 Other expenses 90,000 Total operating expenses 171,600 187,400 other gains (losses) Gain on sale of equipment 4,300 Income before taxes 191,700 46,190 Income taxes expense $145,510 Net income Additional Information a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $80,600 cash. d. Received cash for the sale of equipment that had cost $71,600, yielding a $4,300 gain e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit.
Answer:
IKIBAN INC.
Statement of cash flow using indirect method for
the year ended June 30, 2019
Particulars Amount $
Cash flow from operating activities
Net Income 145,510
Adjustments to reconcile net income to net
cash provided by operating activities
Adjustment for non cash effects
Depreciation 81,600
Gain on sale of equipment -4,300
Change in operating assets & liabilities
Increase in accounts receivable -25,500
Decrease in inventory 34,200
Decrease in prepaid expenses 3,300
Decrease in accounts payable -16,500
Decrease in wages payable -11,300
Decrease in income taxes payable -2,700
Net cash flow from operating activities (A) 204,310
Cash Flow from Investing activities
New equipment purchased -80,600
Equipment sold 12,300
Net cash Flow from Investing activities (B) -68,300
Cash Flow from Financing activities
Cash dividends paid -162,310
($31,000 + $145,510 - $14,200)
Common stock issued 83,000
Notes payable paid -30,000
Net cash Flow from Financing activities (C) -109,310
Net Change in cash = A+B+C $26,700
($204,310 - $68,300 - $109,310)
Beginning cash balance $67,000
Closing cash balance $93,700
On September 1, 2003, Time Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to Unearned subscriptions revenue. What would be the required adjusting entry at December 31, 2003
Answer:
Total subscriptions revenue for the period= 4 months (September 1 - December 31)
= (600 * $81) * 4/12
= $48,600 * 4/12
= $16,200
Hence adjusting entry would be:
Deferred subscriptions revenue a/c Dr $16,200
To Subscriptions revenue Cr $16,200
Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,100 tons of plastic and sold 3,280 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,400, variable manufacturing costs were 17% of the sales price of units produced, variable selling expenses were 11% of the selling price of units sold, fixed manufacturing costs were $3,075,000, and fixed administrative expenses were $500,000. a. Prepare income statements for each year using variable costing. b. Prepare income statements for each year using absorption costing. c. Reconcile the differences each year in net income under the two costing approaches.
Answer:
a.Income Statement using variable costing
2016 2017
Sales $7,872,000 $9,840,000
Less Cost of Sales ($1,338,240) ($1,672,800)
Opening Stock $0 $334,560
Add Cost of Goods Manufactured $1,672,800 $1,338,240
Less Closing Stock ($334,560) $0
Contribution $6,533,760 $8,167,200
Less Expenses :
Fixed manufacturing costs ($3,075,000) ($3,075,000)
Selling Expenses : Variable ($862,920) ($1,082,400)
Selling Expenses : Fixed ($500,000) ($500,000)
Net Income / (loss) $2,095,840 $3,509,800
b.Income Statement using absorption costing
2016 2017
Sales $7,872,000 $9,840,000
Less Cost of Sales ($3,798,240) ($5,362,800)
Opening Stock $0 $949,560
Add Cost of Goods Manufactured $4,747,800 $4,413,240
Less Closing Stock ($949,560) $0
Gross Profit $4,073,760 $4,477,200
Less Expenses :
Selling Expenses : Variable ($862,920) ($1,082,400)
Selling Expenses : Fixed ($500,000) ($500,000)
Net Income / (loss) $2,710,840 $2,894,800
c. Reconciliation of Absorption costing Net Income to variable costing profit
2016 2017
Absorption Costing Net Income $2,710,840 $2,894,800
Fixed Manufacturing Cost in Opening Stock $0 $615,000
Fixed Manufacturing Cost in Closing Stock ($615,000) $0
Variable Costing Net Income $2,095,840 $3,509,800
Explanation:
Part a.
Under Variable Costing, Only Variable Manufacturing Costs are treated as Product costs. Fixed Manufacturing costs and All Non-Manufacturing Costs are treated as period costs.
Part b
Under Absorption Costing, Both Variable Manufacturing Costs and Fixed Manufacturing costs are treated as Product costs. All Non-Manufacturing Costs are treated as period costs.
Part c.
The difference between the Net Income under Absorption Costing and Variable Costing is due to Fixed Manufacturing Costs that are deferred in Inventory. This needs to be reconciled accordingly.
Your client purchases 100 shares of XYZ common stock at $50 and sells two XYZ Oct 55 calls for a premium of $2 each. This investor's maximum potential loss is
Answer: Unlimited
Explanation:
The client has 100 shares in XYZ which means that the first call is covered by this stock should the price of the stock increase and the buyer exercises the option. However, the second call is not completely covered by the shares that the client owns.
This is called an uncovered call and in theory, the losses that the client could get is unlimited because the XYZ stock value could rise forever.
On june the 1st 2016 falcon corp decided to repurchase its 10,000,000, 8% bond issue, maturing in 2023. the market price for the bonds on june 1st was 98. The carrying value at the time fof repurchase was 10,230,000. Make journal entries for repurchase of the bonds.
Answer:
June 1, 2016, outstanding bonds are repurchased at 98
Dr Bonds payable 10,000,000
Dr Premium on bonds payable 230,000
Cr Cash 9,800,000
Cr gain on extinguishment of bonds 430,000
Explanation:
Bonds have to be reported at historical cost plus any premiums or minus any discounts. Since the bonds were sold at a premium, the market interest must have been lower than the bonds' coupon. But market interest rates change over time, and now they are higher than the coupon that the bonds pay. This will result in a lower market price, and if the company repurchases them, the transaction will result in a gain since the bonds' carrying value is higher than the price paid to repurchase them.
1. __utilize working drawings, prints, and specifications to determine specific types of materials to be installed in the structure.
A. Suppliers
B. Architects
C. Tradesworkers
D. Engineers
Delaney takes out a $500,000 loan to open a new bar. He will repay the loan in 200 monthly installments, beginning 1 month from now. If he pays equal amounts of principal every month, what will be his third payment
Answer:
the question is incomplete, since you need an APR rate. I looked for similar question and the effective interest rate was 15%:
Delaney will pay $500,000 / 200 = $2,500 in principal every month.
His first payment will be = ($500,000 x 15% x 1/12) + $2,500 = $6,250 + $2,500 = $8,750His second payment will be = ($497,500 x 15% x 1/12) + $2,500 = $6,218.75 + $2,500 = $8,718.75His third payment will be = ($495,000 x 15% x 1/12) + $2,500 = $6,187.50 + $2,500 = $8,687.50Which one of the following generic types of competitive strategy is typically the "best" strategy for a company to employ?
A. A low-cost leadership strategy
B. A broad and narrow differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost differentiation leadership provider strategy
E. One that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities
Answer: One that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities
Explanation:
The generic types of competitive strategy is typically the "best" strategy for a company to employ is one that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities.
This is because the company has to consider it's resources, the market and other necessary factors before making a decision on that.
Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.5 percent. The bond sells for $955.25 and matures in 19 years. The par value is $1,000. What is the YTM of the bond
Answer:
5.89%
Explanation:
The computation of the yield to maturity could be find out by determining by applying the RATE formula i.e. to be shown in the attachment
Provided that,
Present value = $955.25
Future value or Face value = $1,000
PMT = 1,000 × 5.5% ÷ 2 = $27.50
NPER = 19 years × 2 = 38 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula , the YTM is
= 2.9473% × 2
= 5.89%
A firm's total cost of production is: a. marginal cost plus average cost. b. variable cost plus fixed cost. Please select the best answer from the cho
Answer:
b is the best answer ok plz
Besides not being required, why do you think a company would choose to report or not report a gross profit line? Why do you think many service companies in particular do not report a gross profit line?
Answer:
Gross profit = net sales revenue - cost of goods sold. But what happens when your company doesn't sell any goods, specially if they only sell services and it is impossible to determine the COGS.
This is basically an accounting issue since the IRS defines COGS as:
The cost of products or raw materials, including freight Storage Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products Factory overhead the cost of inventory items soldSo if your company doesn't sell any items from inventory, the IRS will not consider that your company incurred in COGS.
Reporting COGS is very useful for deducting business expenses, but it is not mandatory. Also, any expenses deducted as COGS cannot be deducted again as any other type of cost. So it is simply an accounting practice that helps certain industries to report their business expenses more clearly and in an orderly manner. But if it is too complicated to determine your company's COGS, then you can report your expenses in other ways and reduce your problems.
Gross profit is computed by subtracting the cost of goods sold (COGS) from revenue on a company's income statement (sales). What happens if your company doesn't sell any things, especially if it just sells services, and determining the COGS is impossible.
This is mostly an accounting issue, as COGS is defined by the IRS as:
Storage costs, as well as the cost of products or raw materials.
Workers' direct labor costs (including contributions to pension or annuity plans).
The cost of inventory products sold plus factory overhead.
As a result, if your company does not sell any inventory, the IRS will not consider your company to have incurred COGS.
COGS reporting is beneficial for deducting business expenses, although it is not required. Furthermore, any COGS charges cannot be deductible as any other form of cost. As a result, it is only an accounting method that assists some sectors in reporting their business expenses in a more clear and organized manner.
For more information about gross profit line refer to the link:
https://brainly.com/question/15291292
At Pharoah Electronics, it costs $33 per unit ($19 variable and $14 fixed) to make an MP3 player that normally sells for $55. A foreign wholesaler offers to buy 3,750 units at $28 each. Pharoah Electronics will incur special shipping costs of $1 per unit.
Required:
Assuming that Pharoah Electronics has excess operating capacity, indicate the net income (loss) Pharoah Electronics would realize by accepting the special order.
Answer:
Reject Order Accept order Net Income
Increase (Decrease)
Revenues = $0 $105,000 $105,000
(3750 units x $28)
Costs-Manufacturing = $0 -$71,250 -$71,250
(3750 units x $19 (VC) )
Shipping $0 -$3,750 -$3,750
(3750 units x $1)
Net Income $0 $30,000 $30,000
Pharoah Electronic would realize the net Income of $30,000 by accepting the special order. Hence, the special order should be accepted.
One major benefit of using the Bank Feeds feature in QuickBooks Online is that as you _________________ or __________________ transactions in QuickBooks Online from the downloaded transactions from the bank, they are marked ___________________. This makes the end-of-period bank reconciliation more efficient. Fill in the missing words in this statement.
Answer:
1. Exclude
2. Add
3. Reconciled
Explanation:
QuickBooks Online supports Bank feeds features, which in turn allows a user to perform ADDITION or EXCLUSION of transactions online, which results in such transaction are marked RECONCILED.
Hence, one of the major benefits of using the Bank Feeds feature in QuickBooks Online is that as you EXCLUDE or ADD transactions in QuickBooks Online from the downloaded transactions from the bank, they are marked RECONCILED. This makes the end-of-period bank reconciliation more efficient.
A new customer, age 45, has been terminated from his assembly-line job of the past 20 years at an automotive parts supplier. During that time period, he has accumulated $124,000 in the company's 401(k) plan. He wishes to rollover the funds to an IRA account with your brokerage firm. This customer, who is an unsophisticated investor, has the entire 401(k) invested in a growth mutual fund and has no other investments. As the representative for this customer, you should be concerned about:________
Answer:
communicating effectively with an unsophisticated customer in an understandable manner to assess financial goals and risk tolerance
Explanation:
The new customer who has accumulated $124,000 in his company's 401(k) plan wants to rollover his funds with a brokerage firm.
However he only invested in a growth mutual fund.
This is a scenario that could lead to total loss for the customer if the growth mutual fund fails. A better approach would have been to invest in more than one option.
The first action should be to communicate effectively with the unsophisticated customer in an understandable manner to assess financial goals and risk tolerance.
Based on his Prefered objectives an investment plan can be recommended for him
Which of the following statements regarding when and where online consumers shop and buy is most accurate?
a. Eighty percent of online sales occur on weekdays.
b. The busiest shopping day is Saturday.
c. Only 55 percent of consumers say they visit Web sites from their place of work.
d. Most people buy online when they are depressed.
e. Favorite Web Sites for workday shopping and buying feature shoes or work attire.
Answer:
The correct answer is the option A: Eighty percent of online sales occur on weekdays.
Explanation:
To begin with, an study done by a group of different consultant companies have demostrated that when it comes to online shopping the consumers tend to buy more at web sites the days of the week from Monday to Friday, more specifically being Wednesday the most busy day of shopping from the consumers and reaching a peek of eighty percent of the online sales. Moreover, the same study have found that the most visited web sites and stores where the people buy were the ones related to travelling and tickets sales of events, so that means that the entertainment was the most searched sector. And finally only a thirty percent of the whole said that they shop online from their work place.
Calculate the effective annual interest rate for the following: a. A 3-month T-bill selling at $97,645 with par value $100,000
Answer:
The effective annual rate is 10%
Explanation:
Future value = Present value * (1+r)^n
(1+r)^n = Future value / Present value
r = (Future value / Present value)^n - 1
Here r is the rate
Substitute the values as below
r = (Future value / Present value)^n - 1
r= ($100,000 / $97,654)^4 - 1
r = 1.10000 - 1
r = 0.10000
r = 10%
Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows: Product Names Window Cleaner (ammonia) Floor Cleaner (bleach) Direct materials information Standard ounces per unit oz. oz. Standard price (SP) per ounce ? Actual quantity (AQ) used per unit oz. oz. Actual price (AP) paid for material Actual quantity purchased (AQP) and used oz. oz. Price variance ? U Quantity variance U ? Flexible budget variance ? F Number of units produced What is the direct material quantity variance for the bleach?
Complete Question:
Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses ammonia, and floor cleanser that uses bleach. Information for the most recent period follows:
Product Names Window Cleaner Floor Cleaner
(ammonia) (bleach)
Direct materials information
Standard ounces per unit 16 oz. 24 oz.
Standard price (SP) per ounce $ 0.25 ?
Actual quantity (AQ) used per unit 20 oz. 22 oz.
Actual price (AP) paid for material $ 1.75 $ 0.72
Actual quantity purchased (AQP) / used 1,000 oz. 2,800 oz.
Price variance ? $ 56 U
Quantity variance $4,900 U ?
Flexible budget variance ? $ 504 F
Number of units produced 700 400
What is the direct materials flexible budget variance for ammonia?
A.$6,400 favorable
B.$6,400 unfavorable
C.$3,400 unfavorable
D.$3,400 favorable
Answer:
Squeaky CleanThe Direct Materials Flexible Budget Variance for ammonia is:
B. $6,400 unfavorable
Explanation:
1. Data and Calculations:
Actual quantity purchased = 1,000 oz
Actual price = $1.75
Standard price = $0.25
2. Direct Material Price Variance
= Actual Material Purchased (Actual Rate - Standard Rate)
= 1,000 * ($1.75 - $0.25)
= $1,500 (Unfavorable)
3. Direct Materials Quantity Variance is given as $4,900 Unfavorable.
4. Therefore, the Direct Material Flexible Budget Variance will be equal to the Direct Material Price Variance + the Direct Material Quantity Variance
Flexible Budget Variance for Ammonia
= $1,500 (U) + $4,900 (U)
= $6,400 (Unfavorable)
4. A flexible budget changes or flexes with the actual volume or level of activity. It is not like a static budget that remains static no matter the level of activity. With a flexible budget, the performance of managers can be judged more accurately because their performances are evaluated based on actual volumes or levels of activity.
Which of the following would not be classified as a material particiapant in an activity?
A. Short-term capital gains.
B. Charitable contributions.
C. MACRS depreciation expense.
D. Guaranteed payments.
Answer:
C. MACRS depreciation expense.
Explanation:
Material participation in an income-producing activity. That is, an activity that is regular, continuous, and substantial leading to income-producing actions, in which the taxpayer materially participates is an active income or loss.
Tom, Kirk, and Steve are triplets. They all decide to borrow $1,000 today to go on vacation. They will repay their loans, plus all the accrued interest, in one lump sum exactly 1 year from today. Tom borrows his money at 6 percent simple interest. Kirk’s loan is based on 6 percent interest compounded monthly. Steve is charged 6 percent compounded annually. Who pays the most interest? How much more interest does he pay more than his brothers?
Money from an allowance or job is known as
Answer:
Earnings?
Explanation:
┐( ∵ )┌ because you earned it?
Bill Padley expects to invest $25,000 for 3 years, after which he wants to receive $32,375.00. What rate of interest must Padley earn?
Answer:
8.99%
Explanation:
The formula to calculate the rate of interest is:
r=(FV/PV)^1/n - 1
r= rate of interest
FV= future value= $32,375
PV= present value= $25,000
n= number of period of time= 3
Now, you can replace the values in the formula:
r=(32,375/25,000)^1/3-1
r=1.295^1/3-1
r=0.0899→8.99%
According to this, the rate of interest that Padley must earn is 8.99%.
If the price level increases by 0.2 percent for every $100 billion increase in the money supply, by how much might prices rise if the Fed increases total reserves by $80 billion and the reserve requirement is 0.05?
Answer:
Increase in price level = 3.2%
Explanation:
Given:
Price level increases = 0.2
Reserves = $80 billion
Reserve requirement =0.05?
Computation:
Increase in money = Increase in reserves / Reserve ratio
Increase in money = $80 billion / 0.05
Increase in money = 1,600
And
Increase in price level = (Increase in money / 100) x 0.2%
Increase in price level = (1,600 / 100) x 0.2%
Increase in price level = 3.2%
Occasionally, ________________ may lead to pure monopoly; in other market conditions, they may limit competition ______________________. *
Answer:
barriers to entry; to a few oligopoly firms.
Explanation:
Occasionally, barriers to entry may lead to pure monopoly; in other market conditions, they may limit competition to a few oligopoly firms.
Monopoly can be defined as a type of market in which there is a single seller of a unique product. This sellers typically do not face any competition from others.
This ultimately implies that, when there are barriers to entry it may result in monopolistic competition among the sellers of goods having no close substitutes. These barriers consist of economies of scale, network externalities, copyright law, trademark, patent, governmental policies etc.
suppose company has a 32% income tax rate, a contribution margin ratio of 45% and fixe costs of 664,000. what sales volume is necessary to achieve and after tax income of 136000
Answer:
$1,777,777.78
Explanation:
The computation of the sales volume needs to be achieved is shown below:
Sales volume is
= Fixed cost + after tax income ÷ (contribution margin ratio)
= ($664,000 + $136,000) ÷ (0.45)
= $1,777,777.78
We ignored the income tax rate as there is no need in the computation part
By using the above formula, it can be determined in an easily manner
g Marigold Corp. sells its product for $80 per unit. During 2019, it produced 60000 units and sold 50000 units (there was no beginning inventory). Costs per unit are: direct materials $20, direct labor $12, and variable overhead $1. Fixed costs are: $720000 manufacturing overhead, and $90000 selling and administrative expenses. The per unit manufacturing cost under variable costing is
Answer: $33
Explanation:
Under the Variable Costing method, the only costs assigned to inventory are the direct costs as well as the Variable Overhead as these are all variable costs.
The other costs are then charged to an expense account.
Manufacturing cost per unit;
= Direct material + direct labour + Variable overhead
= 20 + 12 + 1
= $33
An investor buys a call at a price of $6.30 with an exercise price of $58. At what stock price will the investor break even on the purchase of the call?
Answer:
Break even price = $64.3
Explanation:
To get the break even price, we simply add up the call price with the exercise price
Call price = $6.3
Exercise price = $58
Break even price = $6.3 + $58 = $64.3
Suppose instead that an emissions tax is placed directly on consumers. Under what conditions will producers also bear some of the burden of this tax
Answer:
Emissions Tax on consumers:
Assuming that the demand for the product under which the emissions tax is placed directly on consumers is elastic, then producers will also bear some of the burden of this tax in lost sales. Warehouse costs will skyrocket as consumers literally boycott the products and producers are forced to stop further production. These have far-reaching implications.
Explanation:
By placing the burden on consumers directly, consumers will spend more for the same quantity of goods, if there are no substitutes. Such tax is usually levied to discourage consumption of certain goods.
Teton Trails manufactures backpacks for adventurers. The backpacks come in two types: Daytripper, and Excursion. Teton anticipates the following production volumes:
Daytripper: 2,000 backpacks in July, 2,200 backpacks in August
Excursion: 1,200 backpacks in July, 900 backpacks in August
Teton’s policy is to maintain ending inventories at 5% of what is expected for the next month. What is the budgeted level of production in July for both styles?
A. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
B. 2,000 Daytripper backpacks and 1,200 Excursion backpacks.
C. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
D. 1,990 Daytripper backpacks and 1,215 Excursion backpacks.
Answer:
The production level of Daytripper will be 2010 backpacks and the production level of Excursion will be 1185 backpacks. Thus, option C is the correct answer.
Explanation:
The production volume in July can be calculated by adding the production for July and the closing inventory in July and deducting the opening inventory in July from it.
Production level = Closing Inventory + Production - Opening Inventory
Daytripper = (2200 * 0.05) + 2000 - (2000 * 0.05)
Daytripper = 2010
Excursion = (900 * 0.05) + 1200 - (1200 * 0.05)
Excursion = 1185
Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces units of Part B89 annually. The annual costs to produce Part B89 at the level of units include: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase units of the part from the Nadal Parts Company for each, and the facilities currently used to make the part could be rented out to another manufacturer for a year, what should Lasso do? A. Make the part and save per unit. B. Buy the part and save per unit. C. Make the part and save per unit. D. Buy the part and save per unit.
Answer:
Make the part and save $3.00 per unit.
Explanation:
The numbers are missing, so I looked for a similar question to fill in the blanks:
The annual costs to produce Part B89 at the level of 9,000 units include:
Direct materials $3.00 Direct labor $8.00 Variable manufacturing overhead $4.00 Fixed manufacturing overhead $3.00 (non-avoidable)Total cost $18.00All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso Corporation can purchase 9,000 units of the part from the Nadal Parts Company for $20.00 each, and the facilities currently used to make the part could be rented out to another manufacturer for $18,000 a year, what should Lasso Corporation do?
we need to determine how much we can save by buying from Nadal = all avoidable costs can be saved = $18 - $3 = $15 per unit
net cost to buy = $20 - ($18,000 / 9,000) = $20 - $2 = $18 per unit
since the purchase cost is higher than the production costs, Lasso Corporation should keep producing the product.
What would you pay for a $110,000 debenture bond that matures in 15 years and pays $5,500 a year in interest if you wanted to earn a yield of:
Question
What would you pay for a $110,000 debenture bond that matures in 15 years and pays $5,500 a year in interest if you wanted to earn a yield of 8%:
Answer:
Price of bond = $ 81,753.72
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The price of the bond can be worked out as follows:
Step 1
PV of interest payments
annul interest payment = $5,500
Annual yield = 8%
Total period to maturity (in years) = 15
PV of interest =
5500 × (1- (1+0.08)^(-15)/)/0.08 = 47,077.13
Step 2
PV of Redemption Value
= 110,000 × (1.08)^(-15) = 34,676.59
Price of bond
47,077.13 + 34,676.59 =$ 81,753.72
Price of bond = $ 81,753.72