Answer:
The firm incur a loss of $ 9,000 due to future contract
Explanation:
Let's compute the gain of loss from the future hedge as follows
As the US firm is importing the goods it will have to pay for the value in US dollars
Contract Size = 2,000,000 peso
Spot rate on 15 July = $ 0.0570/ peso
September future price on July 15 = $ 0.0615/ peso
Difference in Spot and Future rate = ( September future price on July 15 - Spot rate on 15 July )
= ( 0.0615 - 0.0570 )
= $ 0.045/ peso
This means that the firm will have to pay additional $ 0.045/ peso for the future contract which is a loss for the US firm
Total Loss = Difference in Spot and Future rate * Contract size
Total loss = 0.045 * 2,000,000
Total loss = $ 9,000
The firm incur a loss of $ 9,000 due to future contract.
Index Corporation uses the FIFO method in its process costing system. The first processing department, the Forming Department, started the month with 17,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $9,010. An additional 76,000 units were started into production during the month and 83,000 units were completed and transferred to the next processing department. There were 10,000 units in the ending work in process inventory of the Forming Department that were 70% complete with respect to conversion costs. A total of $445,915 in conversion costs were incurred in the department during the month.
Required:1. The cost per equivalent unit for conversion costs for the month is closest to ___________. a. $5,150b. $5,300c. $5,867d. $5,050
Answer:
Cost per equivalent unit= $5.152
Explanation:
Cost per equivalent unit = Total conversion cost / Total equivalent unit
Fully worked = 76,000 - 10,000 = 66,000 units
Fully worked represents units started and completed in the same period.
Equivalent units
Item Units Equivalent unit
Opening inventory 17,000 90% × 17,000 = 15,300
Fully worked 66,0000 100% × 66,000 = 66,000
Closing inventory 10,000 70% × 10,000 = 7,000
Total equivalent units 88,300
Note also at that the degree of completion for opening inventory is the simply the balance of work remaining to be done.
For example, for materials, 10% of work has been done on the opening inventory in the last period, hence the balance of 90% would be done this period
Cost per equivalent unit = Total conversion cost / Total equivalent unit
= $( 9,010 + 445,915)/ 88300 units = $5.152
Cost per equivalent unit= $5.152
What is the difference between a horizontal merger and a vertical merger? A horizontal merger is a merger A. between firms of different sizes, while a vertical merger is a merger between firms of the same size. B. that would increase efficiency, while a vertical merger is a merger that would decrease efficiency. C. between firms in the same industry, while a vertical merger is a merger between firms at different stages of the production of a good. D. between firms that have market power, while a vertical merger is a merger between firms that are price takers. E. between firms in different industries, while a vertical merger is a merger between firms in the same industry. Which type of merger is more likely to increase the market power of a newly merged firm? __________ mergers are more likely to increase market power.
Answer:
A) A horizontal merger is a merger between firms in the same industry while a vertical merger is a merger between firms at different stages of production of a good.
B) Horizontal mergers are more likely to increase the market power of the newly merged firm.
Explanation:
A) A horizontal merger is a type of merger which takes place between businesses that sell the same type of product. It can also be described as the coming together of two or more companies that manufacture similar products, this is done to reduce the amount of competition in the market, share different types of skills that can boost the amount of profit incurred, increase the rate of expansion.
A vertical merger is a merger that exists between two of more organisations that manufacture products which are not alike in any way. The main objective of this merger is to lower the cost of production.
B) Horizontal mergers have the tendency to increase the market power by causing a decline in the amount of companies that are competing for the same product in the market.
4. You are considering adding a microbrewery onto one of your firm's existing restaurants. This will entail an increase in inventory of $8700, an increase in accounts payables of $2300, and an increase in property, plant, and equipment of $48,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the microbrewery is ________.
Answer:
$6400
Explanation:
Working capital is the net of current asset and current liabilities. it is a financial measure that gives insight into how liquid a company is considering that it shows whether or not the current assets can be used to settle the current obligations or liabilities of the company adequately.
The change in property, plant, and equipment of $48,000 is not an element of working capital, Hence change in working capital
= $8700 - $2300
= $6400
race acquired an activity four years ago. The loss from the activity is $50,000 in the current year (at-risk basis of $40,000 as of the beginning of the year). Without considering the loss from the activity, she has gross income of $140,000. If the activity is a convenience store and Grace is a material participant, what is the effect of the activity on her taxable income? Grace may deduct $ of the $50,000 loss due to the rules. $ is suspended. The available loss subject to the passive activity loss rules because . As a result, Grace's income for tax purposes is $ .
Answer: 12
Explanation:
42
Answer:
Grace taxable income during the year = $100,000
Given:
Current year loss = $50,000
The beginning of the year = $40000(At risk basis)
Gross income during the year = $140,000
Grace taxable income during the year = ?
Computation of Grace taxable income during the year :
Grace taxable income during the year = Gross income during the year - Deductible beginning loss during the year
Grace taxable income during the year = $140,000 - $40,000
Grace taxable income during the year = $100,000
Therefore, her taxable income reduced from $140,000 to $100,000
Explanation:
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An X-bar R chart was prepared for an operation using twenty samples with 5 pieces in each sample. X-bar-bar was found to be 33.6and R=bar was 6.2. During production a sample of 5 was taken and the pieces measured 36, 43, 37, 25, and 38. At the time this sample was taken: Select the correct answer:
a. Both the average and range were within control limits.
b. Neither the average nor range were within control limits.
c. Only the average was outside control limits.
d. Only the range was outside control limits.
Answer:
D) Only the range was outside control limits.
Explanation:
The range is the difference between the largest and smallest set of data, or in this case the longest and shortest pieces. In this case, the longest piece measured 43 and the shortest 25, so the range was 18 which is much higher than the control range, 6.2, so it clearly is outside any type of control limit.
The mean of the 5 samples was 35.8, which is only 2.2 away from the mean of the control chart. Even though it is higher than the control mean, the difference represents only 6.5% which can be considered normal.
Prestwich Company has budgeted production for next year as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Production in Units 60,000 80,000 90,000 70,000 Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:
Answer:
165,000 pounds
Explanation:
The computation of Budgeted purchases of material A for the second quarter is shown below:-
But before that first we need to calculate the raw material production required and total raw material required so that the budgeted purchase could come
Raw materials for production required = Units of required production × Per units of raw material required
= 80,000 × 2
= 160,000
Total raw material required = Desired raw material ending inventory + Raw materials for production required
= (90,000 × 2 pounds per unit × 25%) + 160,000
= 45,000 + 160,000
= 205,000
Budgeted purchases of material A for the second quarter = Total raw material required - Inventory of raw material in beginning
= 205,000 - (80,000 × 2 pounds per unit × 25%)
= 205,000 - 40,000
= 165,000 pounds
The Budgeted purchases of material A for the second quarter would be: 165,000 pounds.
Prestwich Company has budgeted production
First Quarter Second Quarter
Opening 30,000 40,000
[(80,000×2)×25/100=40,000]
Required for current production 120,000 160,000
(60,000×2) (80,000×2)
Required Closing Balance 32,000 45,000
[(80,000×2)×25/100] [(90,000×2)×25/100]
Need to be purchased 122,000 165,000
(120,000+32,000-30,000) (160,000+45,000-40,000)
Inconclusion the Budgeted purchases of material A for the second quarter would be: 165,000 pounds.
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Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect costs. The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed. The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period:
Department DLH Loans Processed Direct Costs
Consumer 14,000 700 $ 280,000
Commercial 8,000 300 $ 180,000
If Banc Corp. Trust uses a bankwide rate based on the number of loans processed, what would be the total costs for the Commercial Department?
--$118,800.
-- $180,000.
-- $298,800.
-- $318,000.
Answer:
The correct answer is A.
Explanation:
Giving the following information:
Estimated overhead= $396,000
Department:
Consumer= 700
Commercia= 300
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 396,000/1,000= $396 per loan processed.
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 396*300= $118,800
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Answer:
C
Explanation:
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Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year.
Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual direct labor used 5,545 hours for a total of $105,355
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound and 10 minutes of direct labor at $20 per hour.
Compute the direct materials price and quantity variances
Answer:
Instructions are below.
Explanation:
Giving the following information:
Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound.
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (4 - 4.05)*16,000
Direct material price variance= $800 unfavorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 30,000*0.5= 15,000
Direct material quantity variance= (15,000 - 16,000)*4
Direct material quantity variance= $4,000 unfavorable
Answer:
Direct materials price variance = $800 Unfavorable
Direct materials quantity variance = $4,000 Unfavorable
Explanation:
Direct materials price variance = Aq×Ap-Aq×Sp
= (16,000×$4.05) - (16,000×$4.00)
= $800 Unfavorable
Direct materials quantity variance = Aq×Sp - Sq×Sp
= (16,000×$4.00) - (30,000×0.50 pounds×$4.00 )
= $4,000 Unfavorable
There are five (5)
specific forces that are acting as stimulants for change, state and explain them with relevant examples
Answer:
Five specific forces that are acting as stimulants for change are:
a) Political Environment: This refers to the actions, laws, and regulations instituted by governments to control or regulate the activities of individuals and groups. The political environment can force individuals and groups to embrace changes in their behavior and practices. For example, governments at all levels impose income tax laws which must be complied with. Such laws will cause changes to happen at the individual and organizational levels. They can stimulate demand for goods and services. Nations, organizations, and individuals are also affected by world politics in various ways.
b) Demographic Forces: Demography is about the population of an entity. Changes in population dynamics can stimulate changes that modify the actions of individuals, organizations, and nations. In Japan with the number of old people who need care has exceeded new births. This demographic change has caused demand for old people's services to skyrocket while dampening demand for childcare products and services. A company engaged in the production of childcare products will be affected. Workers will also be affected as some may require retraining to fit in with the demographic demand.
c) Technolog: Technological advances have forced many changes in individuals, organizations, and nations. Sometime ago, European countries were the destinations of choice for manufactured products. But, due to technological advances, manufacturing of hardware products has been shifted to China, while most Europeans have embraced technological services, creation of software, and the internet of things. Technological changes can break or make businesses, even individuals and nations.
d) Social Trends: With environmental awareness created, global warming caused by the depletion of the ozone layer, and desertification of the natural environment by deforestation, many consumers are changing their attitudes and preferences to encourage biodiversity. Businesses have altered their practices in line with social trends and consumer preferences. Governments have intensified programs to check the damage to the environment.
e) Economic changes: During the 2008 worldwide recession, consumers lost their jobs. Individuals, businesses, and governments cut back on their spending. Economic downturns impacted businesses negatively. Many banks failed. Some banks and other companies filed for bankruptcy. To survive the economic forces, changes were embraced by many individuals, organizations, and governments. Companies which experienced stagnant U.S. sales during this time, took the opportunity to expand their markets to Africa, Europe, and Asia. Some other companies even relocated their production bases to those markets. These also created ripple effects, further dampening domestic jobs, demand, and gross domestic product.
Explanation:
Change is the only constant. But, changes are difficult to embrace. When they happen, there are consequences. Prudent individuals and organizations anticipate change. They prepare to embrace changes. They do not wait for change to happen. They implement changes. Change is a natural part of growth. We must work for it.
Changes can happen as a result of external forces as discussed above. There are also changes within entities. They are known as internal changes. Internal changes happen at the individual, group, and organizational levels. They may affect the workforce. Some changes are brought about by changes in managerial personnel and organizational structures. Some changes happen as a way to avoid developmental inertia. Overall, changes are good.
Marian, a top graduate from Loyola in Humanities, was hired by a major corporation into a management position. Marian finished the corporation's management training program top in her group, and is performing above the norm in her position. She is really enjoying her work.
As a black woman she feels isolated, as there are no other black women managers and few women in her area. One night at a company party she heard a conversation between two of her male co-workers and their supervisor. They were complaining to him about Marian's lack of qualifications and her unpleasant personality. They cursed affirmative action regulations for making the hiring of Marian necessary.
Crystal Glasses recently paid a dividend of $2.70 per share, is currently expected to grow at a constant rate of 5%, and has a required return of 11%. Crystal Glasses has been approached to buy a new company. Crystal estimates if it buys the company, its constant growth rate would increase to 6.5%, but the firm would also be riskier, therefore increasing the required return of the company to 12%. Should Crystal go ahead with the purchase of the new company?
Answer:
The purchase of the new company increases the price per share of Crystal from $47.25 to $52.28.As the price of the share will increase from purchase of the new company, Crystal should go ahead with the project.
Explanation:
To determine whether to purchase the company or not, we first need to calculate the current share price or fair value of share. We will use the constant growth model of DDM to estimate the current fair value as the dividends are expected to grow at a constant rate. It bases the value of a share on the present value of the expected future dividends.
The share price today can be calculated as,
P0 = D1 / r - g
Where,
D1 is the dividend expected for the next periodr is the required rate of returng is the growth rate in dividendsP0 = 2.7 * (1+0.05) / (0.11 - 0.05)
P0 = $47.25
If the purchase of the new company increases the fair value of the share more than its current level, then Crystal Glasses should go ahead with the purchase. We estimate the price per share if the new company is purchased as,
P0 = 2.7 * (1+0.065) / (0.12 - 0.065)
P0 = $52.28
As the price of the share will increase from purchase of the new company, Crystal should go ahead with the project.
Fredrick Paulson Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and the balance of the overhead is applied at the rate of $7.25 per direct labor hour. Required: Calculate the cost per unit of a production run of 540 neckties that required raw materials costing $2,110 and 69 direct labor hours at a total cost of $865. (Round your answer to 2 decimal places.)
Answer:
Unitary cost= $12.30
Explanation:
Giving the following information:
Overhead rate:
Rate 1= 150% of material costs
Rate 2= $7.25 per direct labor hour.
Production:
540 neckties
raw materials= $2,110
Direct labor hours= 69 direct labor hours at a total cost of $865.
First, we need to calculate the total cost:
Total cost= 2,110 + 865 + (1.5*2,110 + 7.25*69)
Total cost= $6,640.25
Unitary cost= 6,640.25/540= $12.30
g Jon owns a company in Santa Barbara that has a patent on a specialized product. The inverse demand for the product is P = 24 - q. Jon's cost function is C(q)=q^{2}. Concerned about the high price that Jon charges for his product, the government decides to subsidize Jon so as to eliminate the deadweight loss. How much must the per-unit subsidy be to completely eliminate the deadweight loss?
Answer:
$2 per-unit subsidy.
Explanation:
So, we are given the following data or parameters or information in the question above;
=> "The inverse demand for the product is P = 24 - q. "
=> "Jon's cost function is C(q)=q^{2}. "
(1). For profit to be maximized the value of Margin Revenue, MR = marginal cost, MC.
MR = marginal cost= dTR/ dq, where TR = p × q = (24 - q ) q = 24q - q^2.
MR = marginal cost = 24 - 2q.
Also, marginal cost, MC = dCq/dq = d/dq × (q)^2.
marginal cost, MC = 2q.
MR = MC; 24 - 2q = 2q.
q = 6.
NB: Pm = 24 - qm.
Pm = 24 - 6 = $18.
(2). For optimum quantity; p = marginal cost.
24 - q = 2q.
q* = 8.
p* = 2 × 8 =$ 16.
On a price versus quantity curve, the dead weight loss = area shaded under the curve.
Quantity to produce = 12.
At MC* = MR, Qm = Q* and On= p*.
The amount of per-unit subsidy be to completely eliminate the deadweight loss = 18 - 16 = $2.
Consider the following statement.
"When unemployment is present, an increase in government spending will tend to increase aggregate demand and real output by a larger amount than the initial increase in government spending."
Complete the following statement.
This statement is __________ because an expansionary fiscal policy will cause the total increase in aggregate demand to be___________ the initial increase in aggregate demand due to the multiplier process.
Answer:
True;greater than.
Explanation:
The statement that "when unemployment is present, an increase in government spending will tend to increase aggregate demand and real output by a larger amount than the initial increase in government spending." is true because an expansionary fiscal policy will cause the total increase in aggregate demand to be greater than the initial increase in aggregate demand due to the multiplier process.
The above is in accordance with the theory of John M. Keynes, he was a notable British economist.
According to the Keynesian theory, government spending or expenditures should be increased and taxes should be lowered when faced with a recession, in order to create employment and boost the buying power of consumers.
Describe the relationship between the manager and O.R specialist
Answer:
Explanation:
manager
'Sell' the decision to operating managers; get their understanding and cooperation.
The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. (Do not round intermediate calculations. Round your answers to two decimal places.) b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. (Do not round intermediate calculations. Round your answers to two decimal places.) Maturity (years) Price of Bond 1 $ 910.90 2 907.97 3 828.12 4 768.49 rev: 09_11_2017_QC_CS-99538
Answer:
Explanation:
future value = present value (1 + y)^n
where future value = $1000
present value = price of the bond
y = yield to maturity
n = number of years to maturity
re - writing above formula
y = (future value / present value)^1/n - 1
b)
forward rate = [(1 + yn)n / (1 + yn-1)n-1] - 1
where yn = YTM of current year
yn-1 = YTM of previous year
A mercury manometer (\rhorho= 13,600 kg/m^3) is connected to an air duct to measure the pressure inside. The difference in the manometer levels is 30 mm, and the atmospheric pressure is 100 kPa.
(a) Determine if the pressure in the duct is above or below the atmospheric pressure.
(b) Determine the absolute pressure in the duct.
Answer:
A) The pressure is below atm pressure
B) Pabs = 96 kPa
Explanation:
Pressure exerted by mercury = pgh
Where: p = density (13600 kg/m^3)
g = acceleration due to gravity 9.81 m/s^2
h = level difference within manometer = 30 mm = 30x10^-3 m
Pressure = 13600 x 9.81 x 30x10^-3
= 4002.43 Pa = 4.00243 kPa
This is below atmospheric pressure
Absolute pressure is calculated as:
Pabs = Pg + Patm
Pabs = -4 + 100 = 96 kPa
David is certified by his doctor as terminally ill with liver disease. His doctor certifies that he cannot reasonably be expected to live for more than a year. He sells his life insurance policy to Viatical Settlements, Inc., for $250,000. He has paid $20,000 so far for the policy.
How much of the $250,000 must David include in his taxtable income?
Answer:
0$
Explanation:
Life insurance proceeds are not included in gross income based on the premise that it would not be appropriate when the time of need to tax the proceeds from life insurance policy. For this reason, the major exclusion from gross income is been given for life insurance proceeds. To be excluded, the proceeds has to be paid to the beneficiary by reason of the death of the insured. Let's say the proceeds are taken over some years instead of in a lump sum, the insurance company will pay interest on the that proceeds that are not paid.
Answer:
Taxable income must not include $250,000
Explanation:
Since the life insurance payment is exempt from tax and is the reason why it is excluded from the computation of the gross income for those who are declared terminally ill persons. So $250,000 must not be included in the David's Taxable Income.
When looking at a country as a market or investment, the international business must consider the country's legal system. In that assessment, the firm needs to understand the differences between private actions, which refer to theft, piracy, blackmail, and the like from individuals or groups, and public actions, which are those actions taken by politicians and government bureaucrats. Either kind of action would pose a serious threat to the firm's investment or operations. Before the firm can seek legal remedies, it must clearly understand the options open to it.
In a legal sense, property refers to a resource over which an individual or a business holds a legal title. It is a resource that it owns. Countries differ in the extent to which their legal systems define and protect property rights, even those countries that are still nominally communist states. Property rights can be violated, sometimes by governments and sometimes by individuals or groups.
Determine form the followings if it pertains more to private or public actions in terms Of property rights and legal protections.
a. Legal mechanisms
b. Theft or blackmail
c. Bribery
d. Organizational plan/ protection money
e. Corruption
f. Weak legal system
Answer: Please refer to Explanation
Explanation:
PRIVATE ACTIONS in TERMS of PROPERTY RIGHTS and LEGAL PROTECTIONS.
These are actions that result from individuals or corporations that are not in the public domain.
Such actions include therefore.
a) Weak Legal System
Here the private action could be an individual taking advantage of a weak legal system to refuse to carry out an agreement knowing that the court will do nothing about it.
b) Theft of Blackmail
This is a private action where individuals or a group could try to steal or extort money from the company. For example, hackers stealing company data and demanding payment for it.
c) Organizational plan/ protection money.
Private action involving Racketeering.
PUBLIC ACTIONS in TERMS of PROPERTY RIGHTS AND LEGAL PROTECTIONS. .
These are actions by the Government or by it's agents.
a) Bribery
Public Actions where a government official or agent demands or would prefer that you pay them some fee to get things done faster or at all.
b) Corruption
Public action that goes hand in hand with bribery but encompasses more. For instance, the government may only award contracts to their own companies or companies they have a share in.
c). Legal Mechanisms
Public action that involves the laws and rules concerning the setting up of companies in the country such as licensing fees or Corporate taxes.
The following data are given for Harry Company:
Budgeted production 1,094 units
Actual production 975 units
Materials:
Standard price per ounce $1.777
Standard ounces per completed unit 12
Actual ounces purchased and used in
production 12,051
Actual price paid for materials $24,705
Labor:
Standard hourly labor rate $14.71 per hour
Standard hours allowed per completed
unit 4.7
Actual labor hours worked 5,021
Actual total labor costs $81,591
Overhead:
Actual and budgeted fixed overhead $1,141,000
Standard variable overhead rate $26.00 per standard labor hour
Actual variable overhead costs $140,588
Overhead is applied on standard labor hours.
Determine the direct labor rate variance.
a. $5,980 F
b. $20,937 F
c. $20,937 U
d. $5,980 U
Answer:
$7,732 unfavorable
Explanation:
The computation of the direct labor rate variance is shown below:
Direct labor rate variance = Actual time taken × (Standard rate - actual rate)
= 5,021 labor hours × ($14.71 - $81,591 ÷ 5,021 labor hours)
= 5,021 labor hours × ($14.71 - $16.25)
= $7,732 unfavorable
Since the actual rate is more than the standard rate so it would be lead to unfavorable variance
This is the answer but the same is not provided in the given options
Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs:
1.  Depreciation on salespersons’ cars.
2.  Rent on equipment used in the factory.
3.  Lubricants used for machine maintenance.
4.  Salaries of personnel who work in the finished goods warehouse.
5.  Soap and paper towels used by factory workers at the end of a shift.
6.  Factory supervisors’ salaries.
7. Heat, water, and power consumed in the factory.
8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)
9. Advertising costs.
10. Workers’ compensation insurance for factory employees.
11. Depreciation on chairs and tables in the factory lunchroom.
12. The wages of the receptionist in the administrative offices.
13. Cost of leasing the corporate jet used by the company’s executives.
14. The cost of renting rooms at a Florida resort for the annual sales conference.
15. The cost of packaging the company’s product.
Required:
Classify the above costs as either product costs or period costs for the purpose of preparing the financial statements for the bank.
Answer:
Product Costs :
2. Rent on equipment used in the factory.
3. Lubricants used for machine maintenance.
5. Soap and paper towels used by factory workers at the end of a shift.
6. Factory supervisors salaries
7. Heat, water, and power consumed in the factory.
10. Workers compensation insurance for factory employees.
11. Depreciation on chairs and tables in the factory lunchroom.
15. The cost of packaging the company`s product.
Period Costs :
1. Depreciation on salespersons cars.
4. Salaries of personnel who work in the finished goods warehouse.
8. Materials used for boxing products for shipment overseas.
9. Advertising costs.
12. The wages of the receptionist in the administrative offices.
13. Cost of leasing the corporate jet used by the company`s executives.
14. The cost of renting rooms at a Florida resort for the annual sales conference.
Explanation:
Product Costs are Costs attached to Product and Included in Valuation.
Period Costs are Not Attached to Products and are expended in Income Statement during the Period in which they are incurred.
Which of the following statements does correctly explain the effect of additional debt on the weighted average cost of capital (WACC)? Debtholders’ prior and "fixed" claim decreases the risk of stockholders’ "residual" claim, so the cost of stock (rs) goes down. Additional debt decreases the pre-tax of cost of debt (rd) because the decresaed risk of bankruptcy. The net effect of additional debt on WACC is to increase WACC. The net effect of additional debt on WACC is uncertain.
Answer: The net effect of additional debt on WACC is uncertain.
Explanation:
Weighted Average Cost of Capital (WACC) refers to the rate of return that a company is paying it's capital providers on average be it debt holders or shareholders.
Adding additional debt to the mix effects the WACC in an uncertain way due to the different ways the WACC could react. For example, adding additional debt decreases the after-tax cost of debt because debt is tax deductible which means that more money can flow to shareholders so that reduces the cost of equity. At the same time however, Additional debt can increase the risk of bankruptcy meaning that the before tax cost of debt rises which also increase the WACC.
The effect can swing either way thereby making it uncertain.
Selected information from Large Corporation's accounting records and financial statements for 2018 is as follows ($ in millions): Cash paid to acquire a patent $ 14 Treasury stock purchased for cash 11 Proceeds from sale of land and buildings 24 Gain from the sale of land and buildings 12 Investment revenue received 2 Cash paid to acquire office equipment 19 Large prepares its financial statements in accordance with IFRS. In its statement of cash flows, Large most likely reports net cash outflows from investing activities of:
Answer:
Large most likely reports net cash outflows from investing activities of $9 million.
Explanation:
Large Corporation
Statement of cash flows (extract)
$ in millions
Purchase of patent ($14)
Proceeds from sale of land and buildings 24
Cash paid to acquire office equipment (19)
Net cash flows from investing activities ($9)
Note that the purchase of treasury stock belongs to financing activities section of the cash flows, while gain from sale of land and buildings and investment revenue belong to operating activities section of the cash flows
Department R had 4,200 units in work in process that were 70% completed as to labor and overhead at the beginning of the period. During the period, 36,600 units of direct materials were added, 38,500 units were completed, and 2,300 units were 40% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories. The number of equivalent units of production for conversion costs for the period was:
a. 36,480
b. 38,500
c. 40,680
d. 45,000
Answer:
a. 36,480
Explanation:
Beginning work in process = 4,200 * (1 - 70%) = 1,260
Units started and completed = 38,500 - 4,200 = 34,300
Ending work in process = 2,300 * 40% = 920
Number of equivalent units = 1,260 + 34,300 + 920 = $36,480
Martinez Corp. provides security services. Selected transactions for Martinez Corp. are presented below.
Oct. 1 Issued common stock in exchange for $59,400 cash from investors.
2 Hired part-time security consultant. Salary will be $1,800 per month. First day of work will be October 15.
4 Paid 1 month of rent for building for $1,800.
7 Purchased equipment for $16,200, paying $3,600 cash and the balance on account.
8 Paid $1,200 for advertising.
10 Received bill for equipment repair cost of $370.
12 Provided security services for event for $2,900 on account.
16 Purchased supplies for $370 on account.
21 Paid balance due from October 7 purchase of equipment.
24 Received and paid utility bill for $133.
27 Received payment from customer for October 12 services performed.
31 Paid employee salaries and wages of $4,600.
Required:
A) Journalize the transactions.
Answer and Explanation:
The Journal entry is shown below:-
On Oct 1
Cash Dr, $59,400
To Common stock $59,400
(Being the issuance of the common stock is recorded)
On Oct 2
No Journal entry is required
On Oct 4
Rent expenses Dr, $1,800
To Cash $1,800
(Being the rent expense is recorded
On Oct 7
Equipment Dr, $16,200
To Cash $3,600
To Accounts payable $12,600
(Being equipment is recorded)
On Oct 8
Advertisement Dr, $1,200
To Cash $1,200
(Being cash paid is recorded)
On Oct 10
Repair expenses Dr, $370
To Accounts payable $370
(Being repair expenses is recorded)
On Oct 12
Accounts receivable Dr, $2,900
To service revenue $2,900
(Being service provided is recorded)
On Oct 16
Supplies Dr, 4370
To Accounts payable $370
(Being supplies purchased on account is recorded)
On Oct 21
Accounts payable Dr, $12,600
($16,200 - $3,600)
To Cash $12,600
(Being cash paid is recorded)
On Oct 24
Utility expenses Dr, $133
To Cash $133
(Being utility expense is recorded)
On Oct 27
Cash Dr, $2,900
To Accounts receivable $2,900
(Being cash received is recorded)
On Oct 31
Salaries and wages expenses Dr, $4,600
To Cash $4,600
(Being cash paid is recorded)
SnowDream operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 14 % return on investment on the company's $ 183,750,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowDream projects fixed costs to be $ 33,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $ 12 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.. Assume that SnowDream's reputation has diminished and other resorts in the vicinity are charging only $ 62 per lift ticket. SnowDream has become a price-taker and won't be able to charge more than its competitors. At the market price, SnowDream's managers believe they will still serve 752,000 skiers and snowboarders each season.
A. If SnowDream can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets.
B. Will investors be happy with the profit level? Show your analysis.
C. Calculate SnowDream's projected income and excess profit or shortfall.
Answer:
company's assets = $183,750,000
expected return on investment = 14%
fixed costs = $33,000,000
number of customers = 725,000
variable costs = $12 per customer x 725,000 = $8,700,000
price per ticket = $62
total expected revenue = $62 x 725,000 = $44,950,000
A. If SnowDream can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets.
expected profit = total revenue - total variable costs - total fixed costs = $44,950,000 - $8,700,000 - $33,000,000 = $3,250,000
B. Will investors be happy with the profit level? Show your analysis.
expected return on investment = $3,250,000 / $183,750,000 = 1.77%, which means that investors will not be happy with the profit level.
C. Calculate SnowDream's projected income and excess profit or shortfall.
SnowDreamProjected Income Statement
Total revenues $44,950,000
- Variable costs ($8,700,000)
Gross profit $36,250,000
- Operating expenses ($33,000,000)
Net income $3,250,000
Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 50-gallon batch.
3,920 ounces of grape concentrate at $0.01 per ounce
54 pounds of granulated sugar at $0.55 per pound
60 lemons at $0.70 each
50 yeast tablets at $0.21 each
250 nutrient tablets at $0.11 each
1,600 ounces of water at $0.005 per ounce
Hank estimates that 2% of the grape concentrate is wasted, 10% of the sugar is lost, and 25% of the lemons cannot be used.
Required:
1. Compute the standard cost of the ingredients for one gallon of wine. (Carry computations to two decimal places.) (Round unit costs to 2 decimal places, e.g. 2.75.)
Answer:
The standard cost of the ingredients for one gallon of wine is $3.50
Explanation:
In order to calculate the standard cost of the ingredients for one gallon of wine we would have to calculate the following formula:
Total Standard Cost = Standard Cost for Grape + Standard Cost for Sugar + Standard Cost for Lemon + Standard Cost for Yeast Tablets + Standard Cost for Nutrient Tablets + Standard Cost for Water
Standard cost of the ingredients for one gallon of wine
Grape = $40.00 [(3,920 / 0.98) x $0.01]
Sugar = $33.00 [(54 / 0.90) x $0.55]
Lemon = $ 56.00 [(60/ 0.75) x $0.70 ]
Yeast Tablets = $10.50 [50 x $0.21]
Nutrient Tablets = $27.50 [250 x $0.11]
Water = $8.00 [1,600 x $0.005]
Total Standard Cost = $40.00 + $33.00 + $56.00 + $10.50 + $27.50 + $8.00
Total Standard Cost = $175.00
Required Production = 50 Gallon batch.
The Standard cost per gallon = Total Standard Cost / Required Production
The Standard cost per gallon = $175.00 / 50 Gallon Batches
The Standard cost per gallon = $3.50 per gallon batch
The Standard Cost Per Gallon is $3.50
Innova uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows.
Direct materials $61.17
Direct labor 43.50
Overhead 126.50
Total $231.17
Overhead costs include variable material handling costs of $7.50, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60% variable costs and 40% fixed costs. A vendor has offered to supply the IMC2 component at a price of $200 per unit.
Required:
(a) Prepare the incremental analysis for the decision to make or buy IMC2.
(b) Should Innova purchase the component from the outside vendor if Innova’s capacity remains idle?
Answer:
a) Increase in cost as result of buying = $(6,430)
b) Decision
Innova should make the components internally, doing so would save it $6,430.
Explanation:
Variable material overhead = $7.50
Variable labor cost = 60%× (126.50 - 7.50 )= $71.4
Total variable overhead = 7.50 + 71.4 = $78.9
Unit variable cost = 61.17 + 43.50 + 78.9 = $193.57
Note that the balance of fixed costs were not considered because they are not relevant . This implies that they would be incurred either way.
$
Variable cost of making ($193.57× 1,000) = 193,570
Variable cost of external purchase ($200× 1,000) = 200,000
Extra variable cost of buying (6,430)
Buying the product externally would increase total cost by $(6,430)
Increase in cost as result of buying = $(6,430)
Decision
Innova should make the components internally, doing so would save it $6,430.
Heather cracked the screen of her old mobile phone a few months ago. She could still read the screen and conduct calls and read emails, but as the months have gone by the touch capability is becoming erratic. One weekend she decides it's time to go visit the local big box electronics store to be able to see the variety of new phones available. She hasn’t looked for a new phone for four or five years, so she wants to get a good feel for the options, sizes, and prices available now. When Heather is in the electronics store Karina, the salesperson, asks Heather if she can help her. Noticing that Heather is looking at the mobile phone aisle, what should Karina’s next step be?
a. Work at closing a sale with the consumer with the top end mobile phones
b. Build a relationship with the consumer and discover what the consumers' needs are
c. Provide the consumer with solutions and resolve the consumers needs
Answer:
Letter b is correct. Build a relationship with the consumer and discover what the consumers' needs are.
Explanation:
Analyzing the steps of a sales process, it can be said that Karina's next step in serving Heather would be to create a relationship with the client and discover her needs.
In order to achieve success in a sale, it is necessary for the salesperson to know the stages of the sales process well and to execute them in such a way that it is possible to understand the consumer's profile and find out what his needs and desires are, in order to offer the ideal product or service.
The creation of a relationship is important so that the seller can analyze specific characteristics of the consumer's profile, his wants and needs, it is important to be friendly, attentive and know how to argue, in order to make a good impression on the consumer and close the sale.