Suppose the market for computer chips is dominated by two firms: Intel and AMD. Intel has discovered how to make superior chips and is considering whether or not to adopt the new technology. Adoption would entail a fixed setup cost of C but would increase revenues. However, if Intel adopts the new technology, AMD can easily copy it at a lower setup cost of C/2. If Intel adopts and AMD does not, Intel would earn $20 in revenues while AMD would earn $0. If Intel adopts and AMD does likewise, each firm will earn $15 in revenues. If Intel does not adopt the new technology, it will earn $5 and AMD will earn $2. a. Write this game in extensive form. b. Under what conditions (i.e., for what values of C) does AMD have an incentive to adopt the new technology if Intel introduces it
Answers
Answer:
Explanation:
See the figure below.
b. AMD's payoff from adopting must exceed its payoff from not adopting. This is true if 15 - C/2 > 0. Solving for C, we find that AMD has an incentive to adopt if Intel adopts whenever C < 30.
c. No. When C = 12, AMD's best strategy is to adopt if Intel adopts, which means Intel would earn only 3by adopting. By not adopting, Intel can earn a payoff of 5; Intel's best option is not to adopt. This is the only Nash equilibrium, and it is also a subgame perfect Nash equilibrium
Related Questions
Thrifty Co. reported net income of $573,650 for its fiscal year ended January 31, 2020. At the beginning of that fiscal year, 100,000 shares of common stock were outstanding. On October 31, 2019, an additional 30,000 shares were issued. No other changes in common shares outstanding occurred during the year. Also during the year, the company paid the annual dividend on the 40,000 shares of 6%, $50 par value preferred stock that were outstanding the entire year.
Required:
a. Calculate basic earnings per share of common stock for year ended January 31, 2020.
b. If Thrifty Co.’s preferred stock were convertible into common stock, what additional calculation would be required?
Answers
Answer:
a. The basic earnings per share of common stock for year ended January 31, 2020 is $3.56 per share
b. If Thrifty Co.’s preferred stock were convertible into common stock, it would be required to calculate Dluted EPS.
Explanation:
a. In order to calculate the BEPS we would have to use the following formula:
BEPS = Net income available to common stockholders / Weighted Avg. no. of common stock
Net income available to common stockholders=$573,650
Weighted Avg. no. of common stock = 100,000 + (30,000 x 3/12)
Weighted Avg. no. of common stock = 107,500
BEPS = Net income available to common stockholders / Weighted Avg. no. of common stock
BEPS = $573,650 / 107,500
BEPS= $3.56 per share
b. If Thrifty Co.’s preferred stock were convertible into common stock, it would be required to calculate Dluted EPS.
The production head at the Omnitone Paint Company would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?
A) intended strategy
B) emergent strategy
C) unrealized strategy
D) tactical strategy
Answers
Answer: Emergent Strategy
Explanation:
An emergent strategy is an approach to take action not stated or planned in the initial stage but emerges and develops with time in an organization during an ongoing project as the organisation changes and advances.
This realized strategy helps to identify unforeseen circumstances that arises during implementation of task and therefore the organisation will have to incorporate the result from new strategy which will be beneficial in the long run especially for future purposes.
Here in Omnitone organisation, the coming up with new colors during experimenting with colors which became popular showed implementation of emergent strategy.
A company owns an empty office building and is deciding how to use it next year. It would cost $100,000 to staff the office and $15,000 for equipment. The revenues would be $160,000. Meanwhile, it could rent the office to another company for $75,000 in revenues. In both cases, the company must pay $5,000 for the building's electricity.
Required:
a) If the company is seeking to maximize its economic profit, which course should it pursue and what is the outcome?
Answers
Answer:
It is more profitable to rent the office. Income will increase by $30,000
Explanation:
Giving the following information:
It would cost $100,000 to staff the office and $15,000 for equipment. The revenues would be $160,000.
Rent= $75,000 in revenues.
We need to calculate the most profitable decision:
Option A:
Income= 160,000 - 100,000 - 15,000= 45,000
Option B:
Rent= 75,000
It is more profitable to rent the office.
The balance sheet for the newly formed ACME Bank is shown below.ACME Bank Balance Sheet 1Assets Liabilities and net worthReserves $151,000 Checkable deposits $140,000Property $275,000 Stock shares $286,000Required:
a. Toshi, the owner of Toshi's Produce, negotiates with the bank to obtain a $28,000 loan to buy a new delivery truck. The amount of the loan is added to the available balance of Toshi's checking account. Fill in the new values that will appear in the balance sheet immediately after the loan is finalized.ACME Bank Balance Sheet 2Assets Liabilities and net worthReserves ???? Checkable deposits ????Loans ???? Stock shares ????Property ????
Answers
Answer:
Explanation:
As the loan has not been used yet, it will stay in the Loan account of the bank. The balances on the books for ACME will therefore be,
Reserves - $151,000.
It does not change as loan has not been used yet. If Toshi was to use loan then this figure will reduce because withdrawals are given from the Bank reserves.
Checkable Deposits will increase by the loan amount as that was where Toshi was credited to.
= 140,000 + 28,000
= $168,000
Loans - $28,000
The bank will now have a loan balance of $28,000 on its debit side to reflect the loan it just gave out.
Stock Shares - $286,000.
Not affected by the transaction.
Property - $275,000
Not affected by the transaction.
Immediately after Toshi's loan is finalized, the Balance Sheet of ACME Bank will look like this:
ACME Bank
Balance Sheet
Assets Liabilities and Net Worth
Reserves $179,000 Checkable deposits $168,000
Property $275,000 Stock shares $286,000
Total assets $454,000 Total Liabilities & net worth $454,000
Data and Calculations:
ACME Bank Balance Sheet
Assets Liabilities and Net Worth
Reserves $151,000 Checkable deposits $140,000
Property $275,000 Stock shares $286,000
Total assets $426,000 Total Liabilities & net worth $426,000
a. Reserves $28,000 Checkable deposits $28,000
Thus, ACME Bank's Reserves will increase by $28,000, and its Checkable deposits will also increase by $28,000.
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Ahnberg Corporation had 740,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 360,000 shares of convertible preferred stock. The preferred shares are convertible into 720,000 shares of common stock. During the year Ahnberg paid $216,000 cash dividends on the preferred stock. Net income was $2,806,000.What were Ahnberg's basic and diluted earnings per share for the year?
Answers
Answer:
Diluted EPS 1.92
Explanation:
Ahnberg Corporation
1
Net income 2,806,000
Less: Preferred Dividends 216,000
Net income for Common Stockholders 2,590,000
Divide by Common shares outstanding 740,000
Basic EPS 3.5
2
Net income 2,806,000
Divide by Common shares deemed outstanding 1,460,000
(740,000+720,000)
Diluted EPS 1.92
Therefore Ahnberg's basic and diluted earnings per share for the year will be 1.92
Answer:
Basic earnings per share is $3.50 and for the year and diluted earnings per share is $1.92
Explanation:
In order to calculate the basic earnings per share for the year we would have to use the following formula:
Basic EPS=(Net Income - preferred dividends)/Weighted average shares outstanding
Basic EPS=($2,806,000-$216,000)/740,000
Basic EPS=$3.50 per share
Diluted EPS=Total Income-preferred dividends/(outstanding shares+Diluted Shares)
Diluted EPS=$2,806,000/(740,000+720,000)
Diluted EPS=$1.92 per share
Listed below are selected transactions for the Gotham City Garbage Service, which is accounted for in an Enterprise Fund. All amounts are in thousands of dollars.
Transactions:
1. Services of $8,250 were provided and billed to outside customers.
2. Services of $1,500 were provided and billed to the General Fund.
3. $1,500 was collected from other funds, and $7,500 was collected on account.
4. $100 of accounts receivable were written off as uncollectible.
5. Estimated bad debts for the year were $220.
Requirement:
1. Prepare the journal entries required in the Enterprise Fund. If no entry is required, state "No entry required" and explain why.
2. Compute the amount of sales revenues that should be reported for the Enterprise Fund.
Answers
Answer:
journal entries
1.
Trade Receivable - Outside Customers $8,250 (debit)
Revenue $8,250 (credit)
2.
Trade Receivable - General Fund $1,500 (debit)
Revenue $1,500 (credit)
3.
Cash $9,000 (debit)
Trade Receivables $7,500 (credit)
Revenue $1,500 (credit)
4.
Bad Debts Written off $100 (debit)
Trade Receivables $100 (credit)
5.
Doubtful Debts $220 (debit)
Provision for Doubtful Debts $220 (credit)
Amount of sales revenues :
Revenue = $8,250 + $1,500 + $1,500
= $ 11,250
Explanation:
For amount of sales revenues ADD Revenue recorded in Journals 1 to 3
Stubs-R-Us is a local event ticket broker. Last year, the company sold 750,000 tickets with an average commission of $10. Because of the general economic climate, Stubs expects ticket volume to decline by 20 percent. In addition, employees at a local insurance company headquarters accounted for 8 percent of Stubs’ volume. The headquarters relocated to another state and all the employees closed their accounts.
Offsetting these factors is the observation that the average commission per sale is likely to increase by 13 percent because the average ticket prices are expected to be larger in the coming year.
Required:
Estimate commission revenues for Stubs-R-Us for the coming year.
Answers
Answer:
$6,237,600
Explanation:
The computation of Estimate commission revenues is shown below:-
In the Coming year the market volume = 100% - 20%
= 80%
In the Coming year the number of sales = 100% - 8%
= 92%
In the coming year the Average commission per trade = 100% + 13%
= 113%
Commission revenue = Sold tickets × Average commission × In the Coming year the market volume × In the Coming year the number of sales × In the coming year the Average commission per trade
= 750,000 × $10 × 0.80 × 0.92 × 1.13
= $6,237,600
We applied the same formula to find out the commission revenue earned by the company
Bergamo Bay's computer system generated the following trial balance on December 31, 2017. The company's manager knows something is wrong with the trial balance because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Payroll Payable) has not been recorded.
Debit Credit
Cash $66,000
Accounts receivable 44,000
Raw materials inventory 27,000
Work in process inventory 0
Finished goods inventory 9,000
Prepaid rent 3,000
Accounts payable $9,900
Notes payable 12,900
Common stock 30,000
Retained earnings 82,000
Sales 182,200
Cost of goods sold 102,000
Factory overhead 25,000
Operating expenses 41,000
Totals $317,000 $317,000
After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.
Materials requisition 21-3010: $4,300direct materials to Job 402
Materials requisition 21-3011: $7,300direct materials to Job 404
Materials requisition 21-3012: $1,800indirect materials
Labor time ticket 6052: $7,000direct labor to Job 402
Labor time ticket 6053: $5,000direct labor to Job 404
Labor time ticket 6054: $4,000indirect labor
Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 150% of direct labor cost.
Prepare a revised trial balance
Prepare a balance sheet as of December 31, 2017.
Prepare an income statement for 2017
Answers
Answer:
Bergamo Bay's Computer System
a) Revised Trial Balance on December 31, 2017:
Debit Credit
Cash $32,000
Accounts receivable 44,000
Raw materials inventory 13,600
Work in process inventory 47,400
Finished goods inventory 9,000
Prepaid rent 3,000
Accounts payable $9,900
Notes payable 12,900
Common stock 30,000
Retained earnings 82,000
Sales 182,200
Cost of goods sold 102,000
Factory overhead 25,000
Operating expenses 41,000
Totals $317,000 $317,000
b) Balance Sheet as of December 31, 2017:
Assets:
Cash $32,000
Accounts receivable 44,000
Raw materials inventory 13,600
Work in process inventory 47,400
Finished goods inventory 9,000
Prepaid rent 3,000
$149,000
Accounts payable $9,900
Notes payable 12,900
Common stock 30,000
Retained earnings 96,200
$149,000
c) Income Statement for 2017:
Sales $182,200
less Cost of Goods Sold 102,000
less Factory Overhead 25,000 127,000
Gross Profit 55,200
Less Operating Expenses 41,000
Net Income 14,200
Explanation:
a) Prepared Trial Balance on December 31, 2017:
Debit Credit
Cash $66,000
Accounts receivable 44,000
Raw materials inventory 27,000
Work in process inventory 0
Finished goods inventory 9,000
Prepaid rent 3,000
Accounts payable $9,900
Notes payable 12,900
Common stock 30,000
Retained earnings 82,000
Sales 182,200
Cost of goods sold 102,000
Factory overhead 25,000
Operating expenses 41,000
Totals $317,000 $317,000
b) Raw Materials Inventory
As per Trial Balance $27,000
less Job 402 materials (4,300)
less Job 404 materials (7,300)
less indirect materials (1,800)
Adjusted Raw Materials Inventory $13,600
c) Work in Process:
As per Trial Balance $0
add Job 402 materials 4,300
add Job 404 materials 7,300
add indirect materials 1,800
add Job 402 labor 7,000
add Job 404 labor 5,000
add indirect labor 4,000
Work in Process Overhead 18,000
Adjusted Work in Process $47,400
d) Cash Balance:
As per Trial Balance $66,000
Work in Process Labor (16,000)
Work in Process Overhead (18,000)
Adjusted Cash balance $32,000
e) Retained Earnings
Opening Balance $82,000
add Net Income 14,200
Ending Balance $96,200
The art appreciation society operates a museum for the benefit and enjoyment of the community. During hours when the museum is open to the public, two clerks who are positioned at the entrance collect a $5.00 admission fee from each nonmember patron. Members of the Art Appreciation Society are permitted to enter free of charge upon presentation of their membership cards. At the end of the day, one of the clerks delivers the proceeds to the treasurer. The treasurer counts the cash in the presence of the clerk and places it in a safe. Each Friday afternoon the treasurer and one of the clerks deliver all cash held in the safe to the bank, and receive an authenticated deposit slip which provides the basis for the weekly entry in the cash receipts journal.The Board of Directors of the Art Appreciation Society has identified a need to improve their control procedures for cash admission fees. The board has determined that the cost of installing turnstiles, sales booths, or otherwise altering the physical layout of the museum will greatly exceed any benefits which may be derived. However, the board has agreed that the sale of admission tickets must be an integral part of its improvement efforts.Required: Identify three internal control weaknesses and suggest a solution for each. Be as specific as possible.
Answers
Answer:
1)
Deficiency:
There is no method for determining the exact number of members of the Art Appreciation Society that actually enter the museum every day. The person that allows them to enter is the same person that charges the entrance fee.
Recommendation:
Since there are two clerks, one should deal with paying patrons and the other one should be in charge of allowing non paying members of the Art Appreciation Society to enter the museum.
2)
Deficiency:
There is no method that controls and documents the number of paying visitors.
Recommendation:
The simplest and cheapest way to solve this issue is to issue prenumbered tickets to paying visitors.
3)
Deficiency:
There is a chance that the same clerk delivers the cash to the treasurer and goes to the bank to make the deposit. if this happens, there would be no control over the daily proceeds and the money deposited.
Recommendation:
One of the clerks should be in charge of delivering the daily proceeds to the treasurer, and the other one should be in charge of going to the bank with the treasurer. Probably the best alternative would be that the clerks change tasks every week, e.g. one week clerk 1 delivers the cash to the treasurer, next week clerk 2 should do it.
Weaknesses in the collecting and recommendation systems.
Weaknesses:One problem is that the gathered amount should not be deposited by the Treasurer and Clerk since they are collecting and retaining the money for a long time before depositing it.
Recommendation:A different individual should be selected to deposit this amount on a regular basis, as involving more people reduces the chance of fraud and ensures a flawless internal control system.
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or False: The following statement accurately describes how firms make decisions related to issuing new common stock. Taking flotation costs into account will reduce the cost of new common stock. True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost—similar to how the after-tax cost of debt is calculated. False: Flotation costs are additional costs associated with raising new common stock.
Answers
Answer: False: Flotation costs are additional costs associated with raising new common stock.
Explanation:
Floatation costs are indeed an expense associated with issuing new stock which consist of expenses such as legal and underwriting fees.
They increase the cost of common stock because they are taken from common stock. They cannot be compared to debt because debt is an expense so tax reducing it reduces our cost but when the floatation costs are removed from stock, we get less.
The Counting Crows Company uses standard costing. During 2018, 12,000 pounds of direct material were purchased at an average cost of $5.20 per pound. Also during 2018, 10,500 pounds of direct material were used to produce 5,000 units. For 2018, the standards for direct materials were 2 pounds per unit at $5.50 per pound. Compute the direct materials quantity variance for 2018. A. $3,600 unfavorable B. $2,750 unfavorable C. $3,600 favorable D. $3,150 favorable E. No choices are correct
Answers
Answer:
Direct material quantity variance= $2,750 unfavorable
Explanation:
Giving the following information:
Also during 2018, 10,500 pounds of direct material was used to produce 5,000 units. For 2018, the standards for direct materials were 2 pounds per unit at $5.50 per pound.
To calculate the direct material quantity variance, we need to use the following formula:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (2*5,000 - 10,500)*5.5
Direct material quantity variance= $2,750 unfavorable
Hickory Manufacturing Company forecasts the following demand for a product (in thousands of units) over the next five years: Used from book Currently the manufacturer has seven machines that operate on a two-shift (eight hours each) basis. Twenty days per year are available for scheduled maintenance of equipment with no process output. Assume there are 250 workdays in a year. Each manufactured good takes 30 minutes to produce. a. What is the capacity of the factory
Answers
Answer:
51,520 units
Explanation:
a. The computation of the capacity of the factory is shown below:
Capacity of the factory = (Number of workdays in a year - number of given days) × number of hours × number of shifts × number of machines × basis
= (250 days - 20 days) × 8 hours × 2 shifts × 7 × 2
= 51,520 units
We simply applied the above formula to determine the capacity of the factory
Based on the information given the capacity of the factory is 51,250 units.
a. Capacity in units
First step is to calculate capacity in machine hours
Capacity in machine hours = Number of workdays × Number of shifts per day× Number hours per shifts × Number of machines
Let plug in the formula
Capacity in machine hours= (250 days - 20 days) × 2 shifts × 8 hours × 7
Capacity in machine hours=230 days× 2 shifts × 8 hours × 7
Capacity in machine hours=25,760 machine hours
Second step is to calculate the capacity in units
Capacity in units=Capacity in machine hours×2 units per hour
Capacity in units=25,760 machine hours×2 units per hour
Capacity in units=51,520 units
b. Capacity level for the next five year
Year Forecast demand × Capacity= Ratio
1 60,000/51,520=1.16
2 79,000/51,520=1.53
3 81,000/51,520=1.57
4 84,000/51,520=1.63
5 84,000/51,520=1.63
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Listmann Corp. processes four different products that can either be sold as is or processed further. Listed below are sales and additional cost data:
Product Sales Value without Processing Additional Costs Sales Value after processing
Premier $1,350 $900 $2,700
Deluxe 450 225 630
Super 900 450 1,800
Basic 90 45 180
Which product(s) should not be processed further?
Answers
Answer:
The product Deluxe sgould not be processed further.
Explanation:
Giving the following information:
Sales - Value without Processing - Additional Costs - Sales Value after processing
Premier: $1,350 - $900 - $2,700
Deluxe: 450 - 225 - 630
Super: 900 - 450 - 1,800
Basic: 90 - 45 - 180
We need to calculate the contribution margin of each product before and after processing.
Premier:
Before= 1,350
After= 2,700 - 900= $1,800
It is more profitable to continue processing.
Deluxe:
Before= 450
After= 630 - 225= $405
It is more profitable to sell before processing.
Super:
Before= 900
After= 1,800 - 450= $1,350
It is more profitable to continue processing.
Basic:
Before= 90
After= 180 - 45= 135
It is more profitable to continue processing.
In the summer of 2008, at Heathrow airport in London, Bestofthebest (BB), a private company, offered a lottery to win a Ferrari or 90,000 British pounds, equivalent at the time to about $180,000. Both the Ferrari and the money, in 100 pound notes, were on display. If the U.K. interest rate was 5% per year, and the dollar interest rate was 2% per year (EARs), how much did it cost the company in dollars each month to keep the cash on display? That is, what was the opportunity cost of keeping it on display rather than in a bank account? (Ignore taxes.)
Answers
Answer:
The cost for the company is 375 pounds.
Explanation:
In order to calculate how much did it cost the company in dollars each month to keep the cash on display we would have to make the following calculations:
Current exchanage rate between Pound and dollar = $180,000 / 90,000 pound
= $2 per pound.
Total amount in Display = $180,000
Interest rate in USA = 2%
Monthly cost = $180,000 × 2% / 12
= $3300
Monthly opportunity cost of keeping it on display rather than in a bank account is $300.
Monthly Cost in term of pound = 90,000 × 5% / 12
= 375 Pound.
Monthly cost in term of pound is 375 pound.
Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 120,000 units per year. The total budgeted overhead at normal capacity is $1,080,000 comprised of $420,000 of variable costs and $660,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 74,000 putters, worked 98,300 direct labor hours, and incurred variable overhead costs of $133,200 and fixed overhead costs of $612,000.
Required:
a. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
b. Compute the applied overhead for Byrd for the year.
c. Compute the total overhead variance.
Answers
Answer:
Instructions are below.
Explanation:
Giving the following information:
Standard= 1 direct labor hour per unit
The total budgeted overhead at normal capacity is $1,080,000 comprised of $420,000 of variable costs and $660,000 of fixed costs.
During the current year, Byrd produced 74,000 putters, worked 98,300 direct labor hours, and incurred variable overhead costs of $133,200 and fixed overhead costs of $612,000.
First, we need to calculate the estimated overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= (420,000 + 660,000)/120,000
Estimated manufacturing overhead rate= $9 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 9*98,300= $884,700
Finally, the total overhead variance:
Overhead variance= real overhead - allocated overhead
Overhead variance= 745,200 - 884,700
Overhead variance= 139,500 favorable
Suppose the Fed raises the required reserve ratio, a move that is normally thought to reduce the money supply. However, banks find themselves with a reserve deficiency after the required reserve ratio is increased and are likely to react by requesting a loan from the Fed.
Does this action prevent the money supply from contracting as predicted? Explain your answer.
Answers
Answer:
It hinders or prevents the money supply from contracting as much and as fast as it would have contracted if the banks had not gone to the Fed for loans. moreover, it is only a short-run phenomenon. Once the banks repay the Fed loans (probably within the next two to four weeks), reserves will leave the banking system, and the money supply will decline as predicted. The loans the Fed makes to banks create a lag between the increase in the required reserve ratio and the full contractionary effect on bank reserves and the money supply.
Explanation:
Stella Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period:
Direct materials $ 8
Direct labor $ 9
Manufacturing overhead (70% variable and 30% unavoidable fixed) $10
A special order has been received by Stella Corp. for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Stella Corp. is now selling 120,000 fans through regular channels each period. What should Stella Corp. use as a minimum selling price per fan in negotiating a price for this special order?
a. $27 per fan
b. $24 per fan
c. $28 per fan
d. $31 per fan
Answers
Answer:
c. $28 per fan
Explanation:
Consider the Costs to provide for the Special Order. Exclude the fixed overheads as these are already absorbed in the current production activity of 120,000 fans.
As a minimal the Stella Corp. should be able to cover the variable costs resulting from the special offer calculated as below
Costs to provide for the special Order. per fan
Direct materials $ 8 .00
Direct labor $ 9.00
Manufacturing Overhead $10 × 70% $ 7.00
Shipping Costs $ 4.00
Total $28.00
Therefore, Stella Corp. should use $28.00 as a minimum selling price per fan in negotiating a price for this special order.
Economic expansion throughout the rest of the world raises the world interest rate. Use the Mundell–Fleming model to illustrate graphically the impact of an increase in the world interest rate on the exchange rate and level of output in a small open economy with a floating-exchange- rate system.
Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv. the direction the curves shift; and v. the new short-run equilibrium.
Answers
Answer: The answer is provided below
Explanation:
The fiscal expansion in the rest of the world will lead to an increase in the world interest rate and a decrease in the domestic investment.
As a result, a rise in the world interest rate will lead to an increase in the national income and also lower the nominal exchange rate.
The diagram has been attached.
The annual budgeted conversion costs for a lean cell are $180,000 for 1,000 production hours. Each unit produced by the cell requires 20 minutes of cell process time. During the month, 600 units are manufactured in the cell. The estimated materials costs are $30 per unit. (Do not round per unit cost. If required, round your answers to the nearest dollar.)
Required:
1. Journalize the following entries for the month:
a. Materials are purchased to produce 500 units.
b. Conversion costs are applied to 600 units of production.
c. The cell completes 450 units, which are placed into finished goods.
If an amount box does not require an entry, leave it blank.
Answers
Answer: Please see in explanation column
Explanation:
Budgeted Conversion Cost $ 180,000
Total Production hours = 1,000 hours
Conversion cost per production hour = 180,000/1,000 = $ 180 per hour
Production time per unit produce = 20 minutes
Conversion cost per unit -- first mins change to hrs
60min = 1 hour
20 min= 20/60=0.33hr
$ 180 x 0.333333 = $ 59.999per unit
Material cost per unit = $ 30 per unit
Total cost per unit production =
Material cost per unit+ conversion cost per unit = 30+ 59.999= $ 89.999per unit
a)Material Required per unit = $30 per unit
Material purchase for 500 units =30 x 500 = $15,000
b)Conversion cost per unit produce = $ 59.999 per unit
number of units for conversion= 600
Conversion Cost applied for 600 units =( 600 x 59.999 = $35,999.4 rounded to $36,000
Total cost of goods complete per unit = $ 89.999 per unit
Number of units completed = 450 units
Total Cost of Goods completed = 450 x 89.999= $ 40,499.55 =$40,500
A) JOURNAL ENTRY For purchase of raw material for 500 units at $30
Accounts title Debit Credit
Raw and In process Inventory 15,000
Accounts Payable 15,000
B)JOURNAL ENTRY For applied conversion cost to in process inventory for 600 units at $59.999
Raw and in process inventory $36,000
Conversion Cost $36,000
C)JOURNAL ENTRY For completing 450 units at a total cost of $89.999
Finished Goods Inventory $ 40,500
Raw and in Process Inventory $ 40,500
Branford Inc. reported the following results from the sale of 24,000 units of SR-90:
Sales $ 542,000
Variable manufacturing costs 240,000
Fixed manufacturing costs 144,000
Variable selling costs 53,800
Fixed administrative costs 35,700
Elkhorn Company has offered to purchase 3,400 SR-90s at $15 each. Branford has available capacity, and the president is in favor of accepting the order. The president feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because the "full cost" of production is $16. Which of the following correctly notes the change in income if the special order is accepted?
a. $10,200 increase.b. $3,400 increase.c. $3,400 decrease.d. None of the answers is correct.e. $10,200 decrease.
Answers
Answer:
d. None of the answers is correct
$17,000 increase
Explanation:
As per the given question the solution is provided below:-
For reaching the change in income if the special order is accepted we need to follow some steps which are as follows:-
Step 1
Variable manufacturing cost per unit = Variable manufacturing costs ÷ Sale units
= $240,000 ÷ 24,000
= $10
Step 2
Cost related with special order = Number of units × Variable manufacturing cost per unit
= 3,400 × $10
= $34,000
Step 3
Income from special order = Number of units × Selling price
= 3,400 × $15
= $51,000
Therefore the Change in income if special order is accepted = Income from special order- Cost related with special order
= $51,000 - $34,000
= $17,000 increase
d. None of the answers is correct the right answer is $17,000 increase.
To reach the change in income if special order is accepted we simply put the values into formula.
Assume the following relationships for the Caulder Corp.: Sales/Total assets 1.4x Return on assets (ROA) 6% Return on equity (ROE) 9% Calculate Caulder's profit margin assuming the firm uses only debt and common equity, so total assets equal total invested capital. Round your answer to two decimal places. 4.29 % Calculate Caulder's debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. Round your answer to two decimal places. %
Answers
Answer:
(a) 4.2% (b) 0.52
Explanation:
Solution
The sale of total assets = 1.4
Return on assets and PAT/assets= 6%
ROE PAT/Equity =9%
(a)Profit margin/PAT/Sales is defined as follows:
profit margin = ROA/(Sales/Total assets)= 6%/1.4 = 0.42 = 4.2%
(b) ROE=profit margin X*Sales/Assets X (Assets/Equity)
= Assets/Equity=9%/ =(4.2%*1.4)
9% (0.058)
= 0.005292 = 0.52
Equity/assets 0.52
Debt assets=1- equity/assets
0.52
Command-and-control legislation, as compared to incentive-based regulation: Group of answer choices discourages the use of comparative advantage in the short run, but encourages the development of new technology in the long run. encourages the use of comparative advantage in the short run, and the development of new technology in the long run. discourages the use of comparative advantage in the short run, and discourages the development of new technology in the long run. encourages the use of comparative advantage in the short run, but discourages the development of new technology in the long run.
Answers
Answer:
discourages the use of comparative advantage in the short run, and discourages the development of new technology in the long run.
Explanation:
Control and command regulations are those that states the goals to be achieved and dictates steps to be taken to achieve these goals.
On the other hand incentive based regulations are those that focus on how to motivate employees to achieve organisational goals.
Because of lack of focus on employee buy in the control and command regulations are less effective in the short run and also in the long run. So it discourages the use of comparative advantage in the short run, and discourages the development of new technology in the long run
Producers' surplus is __________.
O the difference between the price a seller receives for a good and the price a buyer pays for the good.
O equal to price times quantity sold.
O equal to the seller's minimum price and the buyer's maximum price.
O the difference between the price a seller receives for a good and the minimum price for which he would have sold the good.
O the difference between the price a buyer pays for a good and the highest price he would have paid for the good.
Answers
Answer:
the difference between the price a seller receives for a good and the minimum price for which he would have sold the good.
Explanation:
Producer surplus is the difference between the price a seller sells her goods and the least price she would be willing to sell her goods.
Consumer surplus is the difference between the price a buyer pays for a good and the highest price he would have paid for the good.
I hope my answer helps you
Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. Standard Custom Direct labor costs $60,000 $103,000 Machine hours 1,400 1,290 Setup hours 96 400 Total estimated overhead costs are $300,000. Overhead cost allocated to the machining activity cost pool is $195,000, and $105,000 is allocated to the machine setup activity cost pool.Compute the overhead rate using the traditional (plantwide) approach.
Answers
Answer:
Estimated manufacturing overhead rate= $1.84 per direct labor dollar
Explanation:
Giving the following information:
Total Direct labor costs= 60,000 + 103,000= $163,000
Total estimated overhead costs are $300,000.
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= 300,000/163,000
Estimated manufacturing overhead rate= $1.84 per direct labor dollar
On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows: Accumulated Depreciation—Building $747,950 Merchandise Inventory $939,850 Administrative Expenses 545,700 Notes Payable 240,200 Building 2,416,650 Office Supplies 20,650 Cash 180,250 Salaries Payable 7,700 Cost of Merchandise Sold 3,965,850 Sales 6,126,850 Interest Expense 9,550 Selling Expenses 717,650 Kathy Melman, Capital 1,545,600 Store Supplies 87,000 Kathy Melman, Drawing 181,750 a. Prepare a multiple-step income statement for the year ended March 31, 2019. Racine Furnishings Company Income Statement For the Year Ended March 31, 2019
Answers
Answer:
Net Income $66100
Explanation:
Racine Furnishings Company
Multi Step Income Statement
For the Year Ended March 31, 2019
Sales 6,126,850
Cost of Merchandise Sold 3,965,850
Gross Profit 2161000
Less Operating Expenses
Depreciation $747,950
Supplies Expense ( 87000- 20650) 66350
Salaries Expense 7,700
Selling Expenses 717,650
Administrative Expenses 545,700
Operating Income 75,650
Other Expenses
Interest Expense 9,550
Net Income $66100
From the sales cost of merchandise sold is subtracted to get the gross profit. The operating expenses are subtracted from the gross profit to get the operating income. Other expenses such as interest expense is subtracted to get the net income.
An analysis of comparative balance sheets, the current year’s income statement, and the general ledger accounts of Wellman Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary.
1. Indicate how each item should be classified in the statement of cash flows using these four major classifications: operating activity (indirect method), investing activity, financing activity, and significant noncash investing and financing activity.
(a) Payment of interest on notes payable.
(b) Exchange of land for patent.
(c) Sale of building at book value.
(d) Payment of dividends.
(e) Depreciation.
(f) Receipt of dividends on investment in stock.
(g) Receipt of interest on notes receivable.
(h) Issuance of common stock.
(i) Amortization of patent.
(j) Issuance of bonds for land.
Answers
Answer and Explanation:
The classification are as follows
(a) Payment of interest on notes payable = Operating activities as cash outflow
(b) Exchange of land for patent = Non cash investing activity as it does not involve cash transactions
(c) Sale of building at book value = Investing activities as cash inflow which is represented in a positive sign
(d) Payment of dividends. = Financing activities as cash outflow which is represented in a negative sign
(e) Depreciation = It is added to net income and shown in operating activities
(f) Receipt of dividends on investment in stock = Operating activities as cash inflow
(g) Receipt of interest on notes receivable = Operating activities as cash inflow
(h) Issuance of common stock = Financing activities as cash outflow
(i) Amortization of patent = Operating activities as cash inflow and added to the net income
(j) Issuance of bonds for land = Non cash investing activity as it does not involve cash transactions
Answer:
The classification are as follows
(a) Payment of interest on notes payable = Operating activities as cash outflow
(b) Exchange of land for patent = Non cash investing activity as it does not involve cash transactions
(c) Sale of building at book value = Investing activities as cash inflow which is represented in a positive sign
(d) Payment of dividends. = Financing activities as cash outflow which is represented in a negative sign
(e) Depreciation = It is added to net income and shown in operating activities
(f) Receipt of dividends on investment in stock = Operating activities as cash inflow
(g) Receipt of interest on notes receivable = Operating activities as cash inflow
(h) Issuance of common stock = Financing activities as cash outflow
(i) Amortization of patent = Operating activities as cash inflow and added to the net income
(j) Issuance of bonds for land = Non cash investing activity as it does not involve cash transactions
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Explanation:
Concord Company, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1, 2017. The lease is for a 7-year period and requires equal annual payments of $26,143 at the beginning of each year. The first payment is received on January 1, 2017.
Concord had purchased the machine during 2016 for $75,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Concord. Concord set the annual rental to ensure an 8% rate of return.
The machine has an economic life of 8 years with no residual value and reverts to Concord at the termination of the lease.
Required:
1. Compute the amount of the lease receivable. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
2. Prepare all necessary journal entries for Headland for 2017. (Round answers to decimal places e.g. 5,125.)
Answers
Answer and Explanation:
1. The computation of lease receivable is shown below:-
Amount of Lease Receivable = Present value amount i.e calculated by using the present value formula shown in the spreadsheet
Given that
Rate = 8%
NPER = 7 years
PMT = $26,143
FV = $0
The formula is
= -PV(RATE;NPER;PMT;FV;TYPE)
After applying this above formula, the present value is $146,998.94
2. Now The Journal entry is shown below:-
a. Lease Receivable A/c Dr, $146,998.94
Cost of Goods Sold Dr, $75,000
To Inventory A/c $75,000
To Sales $146,998.94
(Being lease receivable is recorded)
Here we debited the lease receivables and cost of goods sold as it increased the assets and expenses and we credited the inventory and sales as it reduced the assets and increased the revenues
b. Cash A/c Dr, $26,143
To Lease receivable A/c $26,143
(Being the first payment of lease is recorded)
For recording this we debited the cash as it increased the sales and credited the lease receivables as it decreased the assets
c. Interest Receivable A/c Dr, $9,668.432 {($146,998.4 - $26,143) × 8%}
To Interest Income A/c $9,668.432
(Being accrued interest is recorded)
For recording this we debited the cash as it increased the sales and credited the interest income and it increased the revenue
angaroo inc is a U.S. company whose shares are listed on and freely traded on the New York stock exchange. Let ???????? be the price of Kangaroo inc shares in dollars, at time ???? (measured in years). Time zero is today.You are (still) the Global Head of Equity Options trading at Goldman Sachs. You are approached by a hedge fund that today wants to buy a security (called a SQUARED DIFFERENCE contract) that has the following features:The SQUARED DIFFERENCE security has a maturity of one year.At maturity, the SQUARED DIFFERENCE security pays an amount in dollars equal to the amount(????????)????????(????????)???? (????????)????Here, ???????? and ???????? are, respectively, the Kangaroo inc share price one year from now and the share price today.Assume that the risk-free interest rate is zero per cent and that Kangaroo inc shares pay no dividends. Assume that the share price, in dollars, today is ???????? = 1.Using Excel, build a four-step binomial tree (this means each time step corresponds to three months). (Hint: It is the same idea as we did in classes and assignments but whereas, before, we had one, two or three steps, now you will have four binomial steps).Assume the absence of arbitrage throughout and assume that there are no transactions costs.a) Assume (to begin with) that the volatility of Kangaroo inc shares is ????????. Using your binomial tree, what is the price today of this SQUARED DIFFERENCE security? (???? marks)b) Still assuming the volatility of Kangaroo inc shares is ????????, and using the binomial tree, what is the delta hedge at each step. To answer this, do a screen-shot (Control-C then Control V on a pc) of the delta hedges. Do you see a pattern in the delta hedges? What is it? (???? marks)c) Now assume instead that the volatility of Kangaroo inc shares is ????????. What is the price today of this SQUARED DIFFERENCE security? (???? mark)d) Now assume instead that the volatility of Kangaroo inc shares is ????????, then ????????, then ????????, then finally ???????????? (skip ????, ????, ???? and ???????? - you will (hopefully) already see a pattern emerging).For each case, what is the price today of this SQUARED DIFFERENCE security? (Hint: If you do this in excel in an efficient manner, this can be done very rapidly). (???? marks)Give your answers to parts (a), (c) and (d) (in dollars) by filling out the table below (replacing x.yyyyyyy) giving every answer to ???? decimal places (you will see that the answers are quite small so that is why I am asking for ???? decimal places but this is no hassle - decimal places are "free" in excel since excel allows you to format up to ???????? decimal places – Google this formatting feature if you have not seen it before):e) What is the pattern of prices? (A graph might be helpful here but is not obligatory). For example, could you guess (with a slight approximation – not to ???? decimal places! - by doing the calculations in your head) what the price would be if the volatility were, for example, to be ????.???????? or ????????? How are you able to guess? In one or two brief sentences, what is the pattern? (???? marks)Hint: When you examine the payoff of this SQUARED DIFFERENCE security (i.e., in equation (*)), does the pattern of prices look intuitive? Why?P.S. Don’t worry about the seemingly small prices. If a bank or hedge fund wanted to actually trade a security like this, they would actually trade, for example, ten million times the security that I have described and then all the answers would just get scaled up by this same constant amount.
Answers
Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three- O Company, a subsidiary incorporated in the United States. Required: Given the limited information provided, (a) determine the best transfer pricing method ___________________________________ and (b) the appropriate transfer price $____________ in the following situation: Lahdekorpi manufacturers wooden puzzles at a cost of $2 each and sells them to Three- O Company for distribution in the United States. Other Finnish puzzle manufacturers sell their product to unrelated customers and normally earn a gross profit equal to 50 percent of the production cost.
Answers
Answer:
Lahdekorpi OY, a Finnish corporation and Three-O Company, a subsidiary incorporated in the United States
Transfer Pricing:
a) The best transfer pricing method in this case is the cost plus method. This gives the transfer price as Cost + 50%.
b) The appropriate transfer price should be $3 ($2 x 1.5).
Explanation:
Transfer pricing arises when controlled entities set prices for exchange of goods and services. When Lahdekorpi OY, a Finnish corporation, sells wooden puzzles to Three-O Company, given their relationship, transfer pricing has arisen. It is the assignment of cost for goods and services exchanged between related parties, like a parent and a subsidiary.
There are many Transfer Pricing methods which entities and the taxing authorities can use to determine the best transfer price. According to the Organisation for Economic Co-operation and Development (OECD) Multinational Entities and tax authorities can use any of these five main transfer pricing methods:
a) Comparable uncontrolled price (CUP) method. The CUP method is grouped by the OECD as a traditional transaction method (as opposed to a transactional profit method)
b) Resale price method
c) Cost plus method
d) Transactional net margin method (TNMM)
e) Transactional profit split method.
LaQuesha Jackson has made a considerable fortune. She wishes to start a perpetual scholarship for engi- neering students at her school. The scholarship will provide a student with an annual stipend of $10,000 for each of 4 years (freshman through senior), plus an additional $5000 during the senior year to cover job search expenses. Assume that students graduate in 4 years, and the money is paid at the beginning of each year with the first award at the beginning of Year 1. The interest rate is 10%.
Required:
a. Determine the equivalent uniform annual cos (EUAC) of providing the scholarship.
b. How much money must LaQuesha donate?
Answers
Answer:
A) EUAC = 38625.09 / 3.4869 = 11077.354
B) $83225.79
Explanation:
A ) Determining the EUAC of providing the scholarship
EUAC = sum of present values / sum of present value factors
present value is calculated as ( p ) = year * present value factor
the present value factor for the various(4) years are : ( 1.000, 0.9091,0.8264,0.7513 ) = 3.4869
present value for the 4 years =( $10000 , $9,090.91, 8264.46, 11269.72 )
total = $38625.09
therefore EUAC = 38625.09 / 3.4869 = 11077.354
B ) THE MONEY LAQUESHA MUST DONATE
interest rate for perpetuity = 1.10 ^4 - 1
= 1.4641 -1 = 0.4641
therefore amount to be donated = total present value / interest rate for perpetuity
= 38625.09 / 0.4641 = $83225.79