Answer:
See the journal entries and explanations below:
Explanation:
A. Prepare the journal entries for the first year of the stock-option plan.
We first calculate the Compensation Expense as follows:
Compensation Expense = (Number stock options outstanding * Fair value of options at grant date) / Service period = (5,600 * $6) / 5 = $6,720.
Note: There is no journal entry for January 1, 2017.
The journal entry for December 31, 2017 is as follows:
Date Details Dr ($) Cr ($)
31 Dec. 2017 Compensation Expense 6,720
Paid-in Capital - Stock Options 6,720
To record compensation expenses for 2017.
B. Prepare the journal entries for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2017.
We first calculate the following:
Unearned Compensation at January 1, 2017 = Number of option * Exercise price = 700 * $38 = $26,600
Common stock at January 1, 2017 = Stock par value * Number of option = $1 * 700 = $700
Compensation Expense at December 31, 2017 = January 1, 2017 Unearned Compensation / Service period = $26,600 / 5 = $5,320
The journal entries will be as follows:
Date Details Dr ($) Cr ($)
31 Jan. '17 Unearned Compensation 26,600
Common stock 700
Paid-in Capital in excess of par 25,900
To record unearned compensation on January 2017.
01 Dec. '17 Compensation Expense 5,320
Unearned Compensation 5,320
To record compensation expenses for 2017.
C. Now assume that the market price of Amazon stock on the grant date was $46 per share. Prepare the journal entries for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2017.
We first calculate the following:
Unearned Compensation at January 1, 2017 = Number of option * Exercise price = 700 * $46 = $32,200
Common stock at January 1, 2017 = Stock par value * Number of option = $1 * 700 = $700
Compensation Expense at December 31, 2017 = January 1, 2017 Unearned Compensation / Service period = $32,200 / 5 = $6,440
The journal entries will be as follows:
Date Details Dr ($) Cr ($)
31 Jan. '17 Unearned Compensation 32,200
Common stock 700
Paid-in Capital in excess of par 31,500
To record unearned compensation on January 2017.
01 Dec. '17 Compensation Expense 6,440
Unearned Compensation 6,440
To record compensation expenses for 2017.
A company's beginning Work in Process inventory consisted of 21,500 units that were 20% complete with respect to direct labor. These beginning units were completed and another 92,400 units were started during the current period. Of those started, 61,500 were finished and the remaining 30,900 were 40% complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:
Answer:95,360 units.
Explanation:The equivalent unit of production shows the quantity of work done by a manufacturing company on units of output partially completed at the end of a period.
Equivalent units of production =Units completed(work n progress at beginning + finished goods)+Ending work in progess
=(21,500+61, 500)+(30,900×40%)
=83,000 + 12,360
=95,360 units.
The equivalent units of production for conversion is 95,000 units.
A company started the year with the following: Assets $121,000; Liabilities $41,500; Common Stock $71,500; Retained Earnings $8,000. During the year, the company earned revenue of $6,400, all of which was received in cash, and incurred expenses of $3,700, all of which were unpaid as of the end of the year. In addition, the company paid dividends of $2,400 to owners. Assume no other activities occurred during the year. The amount of liabilities at the end of the year is
Answer:
$45,200
Explanation:
According to the scenario, the computation of the given data are as follows:
Liabilities = $41,500
Expense incurred during year = $3,700
So, we can calculate the total amount of liabilities by using the following formula:
Liabilities at the end of the year = Liabilities + Expense incurred
Liabilities at the end of the year = $41,500 + $3,700
= $45,200
On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $51,000. The cab has an expected salvage value of $12,000. The company estimates that the cab will be driven 200,000 miles over its life. It uses the units-of-production method to determine depreciation expense. The cab was driven 60,000 miles the first year and 63,000 the second year. What is the amount of depreciation expense reported on the Year 2 income statement and the book value of the taxi at the end of Year 2, respectively
Answer:
The amount of depreciation expense reported on the Year 2 is $12,285 and the book value of the taxi at the end of Year 2 is $27,015
Explanation:
In order to calculate the amount of depreciation expense reported on the Year 2 income statement and the book value of the taxi at the end of Year 2, respectively we would have to make the following calculations:
Particulars Amount
Cost of taxi $51,000.00
Salvage Value $12,000.00
Life in miles 200,000.00
Depreciation per mile = ($51,000.00 - $12,000.00 )/200,000=0.195
Depreciation for Year 1 = 60,000 * 0.195=11,700.00
Depreciation for Year 2 = 63,000 * 0.195=12,285.00
book value of the taxi, respectively, at the end of Year 2 = 51,000 - 11,700 - 12,285=27,015.00
The amount of depreciation expense reported on the Year 2 is $12,285 and the book value of the taxi at the end of Year 2 is $27,015
Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.
Commercial Residential
Revenues $300,000 $480,000
Direct materials costs $30,000 $50,000
Direct labor costs 100,000 300,000
Overhead costs 85,000 215,000 150,000 500,000
Operating income (loss) $85,000 $(20,000)
The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed:
Activity Cost Pools Estimated Overhead Cost Drivers
Scheduling and travel $85,000 Hours of travel
Setup time 90,000 Number of setups
Supervision 60,000 Direct labor cost
Expected Use of Cost Drivers per Product
Commercial Residential
Scheduling and travel 750 500
Setup time 350 250
What should Peggy Kingman do?
Answer and Explanation:
The explanation is shown below:-
First we need to find out the activity based overhead rates
Activity Estimated overhead Basis Quantity Activity based
cost overhead rates
Travel
and Scheduling $85,000 Hours of 1,250 $68
travel (700 + 500)
Set up time $90,000 Number of 600 $150
setups (350 + 250)
Supervision $60,000 Direct labor $400,000 15%
cost ($100,000 + $300,000)
Now we need to find out the overhead cost assigned to commercial which is shown below:-
Activity Activity based Actual allocation of Overhead
overhead rates cost drivers assigned
Travel and
Scheduling $68 750 $51,000
Set up time $150 350 $52,500
Supervision 15% $100,000 $15,000
Total $118,500
For computing the overhead assigned we simply multiply the activity based overhead rate with actual allocation of cost drivers.
after this we need to find out the overhead cost assigned to residential which is shown below:-
Activity Activity based Actual allocation of Overhead
overhead rates cost drivers
Travel and
Scheduling $68 500 $34,000
Set up time $150 250 $37,500
Supervision 15% $300,000 $45,000
Total $116,500
For computing the overhead we simply multiply the activity based overhead rate with actual allocation of cost drivers.
Finally we need to find out the operating income or loss for the commercial and residual which is shown below:-
Particulars Commercial Residential
Sales revenue $300,000 $480,000
Less: Direct material cost $30,000 $50,000
Less: Direct labor cost $100,000 $300,000
Less: Overhead costs
assigned $118,500 $116,500
Operating income (loss) $51,500 $15,500
The Peggy Kingman should establish the cost to be assigned based on the product lines for overhead cost as the Peggy Kingman is more focused to the overhead cost which were based on the activity cost drivers. Moreover, it shows a profit earned on residential product line
CommercialServices Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales $ 3,000,000 Net operating income $ 150,000 Average operating assets $ 750,000 The following questions are to be considered independently. Garrison 16e Rechecks 2019-01-10 Required: 1. Compute the company's return on investment (ROI).
Answer:
The answer is 0.20 or 20%
Explanation:
Solution
Given that:
The sales = $ 3,000,000
The Net operating income= $150,000
The Average operating assets =$ 750,000
The next step is to calculate the company return rate of investment
Thus,
The return of investment is stated as follows:
the return of investment = Net operating income divided by the average operating assets * 100
= $150,000/$750,000
= 0.2 * 100
= 20 %
Therefore, the company's ROI is 20%
Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2018, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $200,000, plus accrued interest, on June 30 of every year until the note is paid in full (on June 30, 2023). Show how the results of this transaction would be reported in a classified balance sheet prepared as of December 31, 2018. (Do not round intermediate calculations.)
Answer:
Explanation:
Balance sheet for Barton Chocolates as at December 31,2018
Current liabilities 230,000
Non current liabilities 800,000
Workings.
Loan - $1,000,000
Loan date = July 1
Reporting date = December 31
Timeline = 6 months / 1/2 years
Yearly installment = $200,000
Interest payable = 6/100*1000000*1/2 = 30,000
Current liabilities are liabilities that are due for settlement within a year
Therefore the current liability portion = $200000+30000= $230,000
The non current liability is the balance of the principal loan amount = 1000000=200000= 800000
You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.3 million Czech koruna today in exchange for a year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 2.8 million Thai baht today. If the current competitive market exchange rates are 25.49 koruna per dollar and 39.31 baht per dollar, what is the value of this deal?
Answer:
$19,002.77
Explanation:
The computation of the value of deal is shown below:
The value of the deal = Sales revenue - purchase cost
where,
Sales revenue is
= 2,300,000 ÷ 25.49 koruna per dollar
= $90,231.46
And, the purchase cost is
= 2,800,000 ÷ 39.31 baht per dollar
= $71,228.69
So, the value of the deal is
= $90,231.46 - $71,228.69
= $19,002.77
hence, the value of the deal is $19,002.77
The Callie Company has provided the following information: Operating expenses were $244,000; Cost of goods sold was $378,000; Net sales were $940,000; Interest expense was $47,000; Gain on sale of a building was $84,000; Income tax expense was $142,000. What was Callie's gross profit
Answer:
Callie's Gross Profit is $562000
Explanation:
Gross profit is the profit earned by a business after deducting the costs associated with producing or selling its goods (for manufacturing and trading businesses) or the costs associated with providing the services (for service businesses) from the net revenue.
It is the profit from the trading section of the business before deducting the operating and financing expenses of the business and before adding any other income.
The gross profit is simply calculated as follows,
Gross Profit = Net Revenue - Cost of Goods Sold
Callie's gross profit = 940000 - 378000
Callie's Gross Profit = 562000
The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials $ 15,000 Indirect labor 130,000 Property taxes, factory 8,000 Utilities, factory 70,000 Depreciation, factory 240,000 Insurance, factory 10,000 Total actual manufacturing overhead costs incurred $ 473,000 Other costs incurred: Purchases of raw materials (both direct and indirect) $ 400,000 Direct labor cost $ 60,000 Inventories: Raw materials, beginning $ 20,000 Raw materials, ending $ 30,000 Work in process, beginning $ 40,000 Work in process, ending $ 70,000 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $25 per machine-hour. A total of 19,400 machine-hours was recorded for the year.Prepare a schedule of cost of goods manufactured for the year.
Answer:
Cost of Goods Manufactured $893,000
Explanation:
Chang Company
Schedule of Cost of Goods Manufactured
Inventories: Raw materials, beginning $ 20,000
Add Purchases of raw materials $ 400,000
Less Raw materials, ending $ 30,000
Direct Materials Used $390,000
Direct labor cost $ 60,000
Manufacturing overhead Costs: $ 473,000
Indirect materials $ 15,000
Indirect labor 130,000
Property taxes, factory 8,000
Utilities, factory 70,000
Depreciation, factory 240,000
Insurance, factory 10,000
Total actual Manufacturing Costs 923,000
Add Work in process, beginning $ 40,000
Cost of Goods Available For Manufacture $ 963,000
Less Work in process, ending $ 70,000
Cost of Goods Manufactured $893,000
Applied Overhead = Rate * Hours worked
= 25* 19,400= 485,000
The applied overhead is subtracted or added to the cost of goods sold amount. It is not accounted for in the schedule of cost of goods manufactured.
Sandy wants to persuade her audience that the high cost of daily and seasonal ski passes led to the largest decline in revenue that Colorado's major ski resorts have seen in nearly a decade, and that ticket costs should be reduced. She should use what organizational pattern
Answer: argument from cause to effect
Explanation:
Arguments of Cause and Effect. or better still Claims of cause and effect are hypothesis which are supported the thought that one event usually controls or causes another. example from the question.
we all know that sometimes a rise in cost also can result in a decrease in sale or revenues because the case could also be. The reason for Colorado decline in revenue is as a results of visit sales thanks to high cost, and also the effect is that the decline in revenues generated.
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise:
a. A suitable location in a large shopping mall can be rented for $4,500 per month.
b. Remodeling and necessary equipment would cost $378,000. The equipment would have a 10-year life and a $37,800 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation.
c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $480,000 per year. Ingredients would cost 20% of sales.
d. Operating costs would include $88,000 per year for salaries, $5,300 per year for insurance, and $45,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales.
Required:
1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet
2-a. Compute the simple rate of return promised by the outlet
2-b. If Mr. Swanson requires a simple rate of return of at least 21%, should he acquire the franchise?
3-a. Compute the payback period on the outlet
3-b. If Mr. Swanson wants a payback of three years or less, will he acquire the franchise?
Answer:
1.) check attached picture
2a)Simple rate of return = 25.2%
2b) Yes
3a)2.92 years
3b) Yes
Explanation:
Kindly check attached picture
Many large, packaged goods marketers like Procter & Gamble, Kraft, and Pillsbury have used the product manager (or brand manager) system of marketing organization and implementation. Which of the following is the key advantage of this system?
A. Product managers have relatively little authority
B. Product managers are short-term in their orientation
C. Product managers have direct responsibility for research and development of new products
D. Product managers can assume profit-and-loss responsibility for the performance of the product line
E. Product managers have line responsibility over sales managers
Answer:
C. Product managers have direct responsibility for research and development of new products
Explanation:
The position of Product manager is an all-encompassing role. He is tasked with the job of ensuring the members of the team are up and doing; he ensures each member of the team supplies considerable input to the end that the team effort can be evidently seen. The Product manager is also saddled with the responsibility of ensuring swift communication amidst all parties; he splits complex tasks into easily understandable processes. He sets the target and goal for each team member; he is the one who accesses and optimizes team members' performances.
Despite and inspite of these varying responsibilities, the biggest and most vital task of the Product manager is to research products, assess the market (customers), create services/products which are innovative and solve critical problems thereby, adding value to the customer base. The more information he has about the market and need of the customers, the better he is able to tailor the products and services rendered to address those needs. Overall, the Product manager due to his extensive involvement and oversight, he ensures that the chances of product failure is significantly reduced.
In the light of the explanation above, Option C. (Product managers have direct responsibility for research and development of new products) is the correct answer.
Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $0.90; P0 = $27.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?
Answer:
The cost of equity from retained earnings based on the DCF approach is 10.50%
Explanation:
In order to calculate the cost of equity from retained earnings based on the DCF approach we would have to calculate the following formula:
Cost of Equity = (D1/P0) + growth rate
Cost of Equity =[($0.9 x 1.07)/$27.50] + 0.07
Cost of Equity = 0.1050
Cost of Equity =10.50%
Therefore, The cost of equity from retained earnings based on the DCF approach is 10.50%
In 2014, Elbert Corporation had net cash provided by operating activities of 531,000; net cash used by investing activities of 963,000; and net cash provided by financing activities of 585,000. At January 1, 2014, the cash balance was 333,000. Compute the December 31 2014, cash.
Answer:
December 31 2014, cash = $486,000
Explanation:
To solve this, we will classify the particulars as either income or expenditure,and find the difference. This is shown below:
Particulars income($) expenditure($)
operating activities 531,000 -
investing activities - 963,000
financing activities 585,000 -
January 1 cash balance 333,000 -
Total 1,449,000 963,000
∴ net cash available on December 31 2014 = Total income - expenditure
= 1,449,000 - 963,000 = $486,000
Suppose that the standard deviation of returns for a single stock A is σA = 30%, and the standard deviation of the market return is σM = 10%. If the correlation between stock A and the market is rhoAM = 0.3, then the stock’s beta is . Is it reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns? Yes No
Answer:
The stock’s beta is 0.90
Is not reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns
Explanation:
In order to calculate the stock’s beta we would have to calculate the following formula:
Beta of stock = (standard deviation of stock A x correlation between stock A and market) / standard deviation of market
beta = (30% x 0.3) / 10% = 0.90
The market is assumed to have a beta of 0.90 and beta of a stock is the volatility of the stock in relation to the market. Since, stock A has beta equal to the market, its volatility will be correlated with the market. Therefore is not reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns
Which of the following is an example of peakminusload pricing? A. charging less for vacations to Hawaii during December and January B. setting price equal to marginal cost when there is a capacity constraint C. selling excess capacity at lower prices D. charging more for electricity on hot days
Answer:
D. charging more for electricity on hot days.
Explanation:
This is a strategy that helps service providers in billing their customers when their in traffic on the usage of a particular service. This is charging higher of a certain service when their are a lot of users trying to be benefit or trying to use it at the same time. This can easily be seen in the case of utility usage amongst countries where this forms of billings are performed. That is why in the scenario above, the charging more for electricity on a hot day falls in place as the perfect option of peakminus loading price.
Answer:
D. charging more for electricity on hot days
Explanation:
Peak load pricing is charging more for a good or service when the demand for the good is higher.
During the hot weather, people would want to use fans and air conditioners, thus, the demand for electricity would be higher as people would need electricity to power these items. So increasing the price in the hurt weather is an example of peak load pricing.
I hope my answer helps you
Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a special price of $6 per unit. The regular selling price of the product is $8 per unit. Helix is operating at 75% of its capacity of 10,000 units. Identify whether the following costs are relevant to Helix's decision as to whether to accept the order at the special selling price. No additional fixed manufacturing overhead will be incurred because of this order. The only additional selling expense on this order will be a $0.50 per unit shipping cost. There will be no additional administrative expenses because of this order. Calculate the operating income from the order.
Answer:
Helix decision would be to accept this order at the special price because from the calculations they will still have a net income of $2,000 at this special price of $6 per unit
Explanation:
Selling price: at $6 per unit; This is a relevant cost ; Revenue = ($6*2000) units) $12,000
_________________________
Direct material cost: at $1 per unit; This is a relevant cost; Revenue = (1 * 2000) $2000
____________________________
Direct labor cost: at $2 per unit; This is a relevant cost ; Revenue = (2 * 2000) $4000
____________________________
Variable manufacturing overhead: at $1.50 per unit; This is a relevant cost; Revenue = (1.50 * 2000) $3,000
____________________________
Fixed manufacturing overhead: at $0.75 per unif; This is not a relevant cost; Revenue = $0 (not relevant)
_____________________________
Regular selling expenses: at $1.25 per unit; This is not a relevant cost; Revenue = $0(not relevant)
______________________________
Additional selling expenses(shipping cost) : at $0.50 per unit; This is a relevant cost; Revenue = (0.50 * 2000) $1,000
______________________________
Administrative expenses: at $0.75 per unit; This is not a relevant cost; Revenue = $0
__________________________
Total operating expenses: Sum of all relevant cost = (Direct material cost + Direct labor cost + Variable manufacturing overhead + Additional selling expenses) = ($2,000 + $4,000 + $3,000 + $1,000) = $10,000
__________________________
Net income : (Selling price - Total operating expenses)= ($12,000 - $10,000) = $2,000
________________________
Yes, Helix should accept the order at the special price
______________
Helix decision would be to accept this order at the special price because from the calculations they will still have a net income of $2,000 at this special price of $6 per unit
Tamarisk Corporation had the following 2020 income statement. Sales revenue $189,000 Cost of goods sold 129,000 Gross profit 60,000 Operating expenses (includes depreciation of $20,000) 54,000 Net income $6,000 The following accounts increased during 2020: Accounts Receivable $14,000, Inventory $10,000, Accounts Payable $12,000. Prepare the cash flows from operating activities section of Tamarisk’s 2020 statement of cash flows using the indirect method.
Answer:
Kindly check attached picture for Tamarisk Corporation Statement Of Income 2020 (indirect method)
On June 30, 2010, Microsoft Corporation was holding $4.8 billion of cash that it had collected from customers in advance for future software licenses and the future delivery of other products and services. In its financial statements, Microsoft classified and recorded this amount as
Answer: O the liability Unearned Revenue on its balance sheet.
Explanation:
Unearned Revenue is a liability that goes into the balance sheet to record the cash received for goods and/or services that the company have not delivered yet.
This is so that the company is not in violation of the Accrual Accounting concept known as the Revenue Recognition Principle that states that revenue should be recognised only in the period that they have been earned.
Microsoft in this scenario will record this cash as an Unearned Revenue and then consider it revenue when it has delivered the said goods and services.
Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:
Sales $17,600,000
Net operating income $6,200,000
Average operating assets $36,000,000
Required:
a. Compute the margin for Alyeska Services Company.
b. Compute the turnover for Alyeska Services Company.
c. Compute the return on investment (ROI) for Alyeska Services Company.
Answer:
a. The margin for Alyeska Services Company: 35.23%
b. The turnover for Alyeska Services Company: 0.49
c. The return on investment (ROI) for Alyeska Services Company: 17.22%
Explanation:
a. The profit margin reflects a company's overall ability to turn income into profit, is calculated by formula:
Profit margin = (Net operating income/Net sales ) x 100% = $6,200,000/$17,600,000 x 100% = 35.23%
b. Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:
Asset Turnover = Total Sales/ Average Total Assets = $17,600,000/$36,000,000 = 0.49
c. Return on investment (ROI) is calculated by using following formula:
ROI = Net income/Total investment x 100%
In Alyeska Services Company,
ROI = Net operating income/Average operating assets x 100% = $6,200,000/$36,000,000 x 100% = 17.22%
Gelb Company currently manufactures 53,500 units per year of a key component for its manufacturing process. Variable costs are $2.95 per unit, fixed costs related to making this component are $67,000 per year, and allocated fixed costs are $64,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 53,500 units and buying 53,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier
Answer and Explanation:
The computation of the total incremental cost is shown below;
For making 53,500 units
Particulars Relevant Relevant Total
Per Unit Fixed Costs Relevant Costs
Variable Cost
Per Unit $2.95 $157,825
(53,500 units × $2.95)
Fixed
Manufacturing
Costs $67,000 $67,000
Total Incremental Costs to Make $224,825
For making 53,500 units
Particulars Relevant Relevant Total
Per Unit Fixed Costs Relevant Costs
Purchase
Price
Per Unit $3.50 $187,250
(53,500 units × $3.50)
Total Incremental Cost to Buy $187,250
The company should buy the component from the outside supplier as it saves the cost for ($224,825 - $187,250) = $37,575 plus the buying cost is less than the making cost
You were recently hired at a software engineering company, and today is your first team meeting. You want to convey to your new team members that you are excited to join them and that you will be an engaged and respectful addition to the team.
What form of nonverbal communication will serve you best?
a. Hugs
b. Prolonged eye contact
c. Punctuality
Christie and Jergens formed a partnership with capital contributions of $250,000 and $350,000, respectively. Their partnership agreement calls for Christie to receive a $55,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $119,000, then Christie and Jergens's respective shares are:
Answer:
Christie and jergen's respective shares are $59,500 and $59,500
Explanation:
Solution
Recall that:
Christie and Jergens created a partnership with capital contributions of = $250,000 and $350,000
The contract terms enables Christie to receive an amount of = $55,000 per salary
An interest allowance is received by both of them equal to =10%
The net income of the Present year = $119,000
Thus,
We find the respective shares of both partners which is stated as follows :
Christie's net income = $59,500
Jergen's net income = $59, 500
The total for both is =$119,000
Hence, due to their partnership contract terms or agreement the sharing of the profit and loss is dividend equally between them.
Cooperton Mining just announced it will cut its dividend from $4.17 to $2.56 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.3 % rate, and its share price was $50.47. With the planned expansion, Cooperton's dividends are expected to grow at a 46% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk). Is the expansion a good investment?
Answer: New share price= Price = $35.38. No, it's not a good investment
Explanation:
First, we have to calculate the cost of equity.
Price = Dividend/r - g
Dividend = $4.17 × (1 + 3.3%)
= $4.17 × (1 + 0.033)
= $4.17 × 1.033
= $4.30761
Price = Dividend/r - g
50.47 = 4.30761/r - 0.033
r - 0.033 = 4.30761/50.47
r - 0.033 = 0.08535
r = 0.08535 + 0.033
r = 0.11835
Now, we have to calculate the new price with dividend of $2.56 and g= 4.6%.
Price = Dividend/r - g
Price = 2.56/0.11835 - 0.046
Price = 2.56/0.07235
Price = $35.38
The expansion isn't a good investment because the stock price is s reduced from $50.47 to $35.38
1. Of the 4 strategic approaches to international markets, which one(s) might be the best for a manufacturing company? a financial services company? or a company like Coke or Pepsi? Thoughts? 2. What strategy option for entering a foreign market might you employ if your firm is technology-centric? 3. What strategy option for entering a foreign market might you use if you were a start-up or smaller firm? 4. Why is the Think Global- Act Local strategy appear to be the best for many companies wishing to go global?
Answer:
1a. For manufacturing company– Buying a local manufacturing company
b. For a financial services company– Partnership
c. A company like Coke or Pepsi– Greenfield Investments
Explanation:
1a. Buying a local company saves valuable resources for the foreign manufacturing, and it allows for quick market knowledge since this company has already been in operations for a long time.
b. A partnership would be best for a financial services company, this would involve a smooth transition into new markets without having to spend much on physical structures as the domestic company is already having necessary infrastructures in place.
c. Coke and Pepsi would preferably choose to use the Greenfield investment strategy by building a new plant from the ground up because of its established quality standards as well as trade mark and intellectual property protection.
2. A technology-centric firm would benefit most by buying a Company because of the already available market share as well as benefiting from reduced government regulations.
3. If one is operating a start-up or smaller firm of course cost would be a major consideration, therefore selling out License to foreign companies may be effective. This would transfer the rights to use a product or service in a different market geography.
4. It provides a good foresight into the requirements needed to enter foreign markets.
Required information The Foundational 15 [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6, LO5-7, LO5-8] [The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 20,000 Variable expenses 12,000 Contribution margin 8,000 Fixed expenses 6,000 Net operating income $ 2,000 Foundational 5-11 11. What is the margin of safety in dollars
Answer:
$5,000
Explanation:
Sales $20,000
Variable expenses $12,000
Contribution margin $8,000
Fixed expenses $6,000
Net operating income $2,000
margin of safety in $ = current sales level - break even point
margin of safety in % = (current sales level - break even point) / current sales level
first we need to calculate the contribution margin per unit = $20 - $12 = $8 per unit
break even point = fixed costs / contribution margin = $6,000 / $8 = 750 units
sales level at break even point = 750 x $20 = $15,000
margin of safety in $ = $20,000 - $15,000 = $5,000
margin of safety = ($20,000 - $15,000) / $20,000 = $5,000 / $20,000 = 25%
A company plans to replace one of its machines 5 years from now. If they deposit $6,827 a month in an account that gives them 0.65% interest per month. How much money will they still need to pay for the machine if the cost is $1,123,553 at that time in the future?
Answer:
They would require $624,532.94 more
Explanation:
The first task is to compute the future value of the monthly deposit of $6,827 with an interest of 0.65% per month for five years.
=fv(rate,nper,-pmt,pv)
rate id 0.65% per month
nper is the number of deposits =5 years*12=60
pmt is the monthly deposit of $6,827
pv is the present value of deposits,it is unknown and taken as zero
=fv(0.65%,60,-6827,0)=$499,020.06
balance of the required funds=required funds-future value of the deposits
balance of required funds= $1,123,553-$499,020.06=$624,532.94
Below are the account balances for Cowboy Law Firm at the end of December. Accounts Balances Cash $ 4,600 Salaries expense 1,800 Accounts payable 2,600 Retained earnings 4,100 Utilities expense 1,000 Supplies 13,000 Service revenue 8,500 Common stock 5,200 Required: Use only the appropriate accounts to prepare an income statement.
Answer:
Cowboy Law Firm
Income statement for the period ended December
Amount in $
Service revenue 8,500
Utilities (1,000)
Salaries expense (1,300)
Net income/(loss) 6,200
Explanation:
An income statement is a part of the financial statements that shows how profitable the activities of an entity was for a given period of time. It is usually stated as the income statement for a period end.
The elements of the income statement include the revenue otherwise called sales, expenses including cost of goods sold, operating expenses etc and the profit or loss as well as the other comprehensive income/loss.
On November 4, 2016, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2016 and 2017, respectively, Blue took $642 and $5,128 of cost recovery. These amounts were incorrect; Blue applied the wrong percentages (i.e., those for 39-year rather than 27.5-year assets). Blue should have taken $910 and $7,272 cost recovery in 2016 and 2017, respectively. On January 1, 2018, the asset was sold for $180,000. Enter the values for each item below. If required, round all computations to the nearest dollar.a. The adjusted basis of the asset at the end of 2017 is $.b. The cost recovery deduction for 2018 is $.c. The__________ on the sale of the asset in 2018 is $
Answer:
a. $191,818
b. $303
c. The loss on the ale of the asset in 2018 is $11,515.
Explanation:
a. The adjusted basis of the asset at the end of 2017 is $
Asset cost = $200,000
Greater of allowed and allowable cost recover in 2016 = $910
Greater of allowed and allowable cost recover in 2017 = $7,272
Basis at the end of 2017 = Asset cost - Greater of allowed and allowable cost recover in 2016 - Greater of allowed and allowable cost recover in 2016 = $200,000 - $910 - $7,272 = $191,818
b. The cost recovery deduction for 2018 is $.
Cost recovery for 2018 = $200,000 * (0.5/12) * 3.636% = $303
c. The__________ on the sale of the asset in 2018 is $
Basis on date of sale = Basis at the end of 2017 - Cost recovery for 2018 = $191,515
Profit (Loss) on sale of asset = Sales proceed - Basis on date of sale = $180,000 − $191,515 = ($11,515) .
Therefore, the loss on the ale of the asset in 2018 is $11,515.
Consider each of the following independent scenarios:a.Terrin Belson, plant manager for the laser printer factory of Compugear Inc., brushed his hair back and sighed. December had been a bad month. Two machines had broken down, and some factory production workers (all on salary) were idled for part of the month. Materials prices increased, and insurance premiums on the factory increased. No way out of it; costs were going up. He hoped that the marketing vice president would be able to push through some price increases, but that really wasn’t his department.b. Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year. She was sure that her campaign to lower costs and use machinery more efficiently (enabling her factories to sell several older machines) was the reason why. Joanna planned to take full credit for the improvements at her semiannual performance review.c. Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing the recent cost increases for the laser printer line. Headquarters suggested raising prices. "Great," thought Gil, "an increase in price will kill sales and revenue will go down. Why can’t the plant shape up and cut costs like every other company in America is doing? Why turn this into my problem?"d. Susan Whitehorse looked at the quarterly profit and loss statement with disgust. Revenue was down, and cost was up—what a combination! Then she had an idea. If she cut back on maintenance of equipment and let a product engineer go, expenses would decrease—perhaps enough to reverse the trend in income.e. Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. She met with top staff and hammered out a 3-year plan to improve the situation. A centerpiece of the plan is the retiring of obsolete equipment and the purchasing of state-of-the-art, computer-assisted machinery. The new machinery would take time for the workers to learn to use, but once that was done, waste would be virtually eliminated.Required:For each of the above independent scenarios, indicate the type of responsibility center involved (cost, revenue, profit, or investment).
Answer: a. Cost center b. Investment center. c. Revenue center d. Profit center. d. Investment center.
Explanation:
a. Cost center
We are informed that Terrin Belson, a plant manager for the laser printer factory of Compugear Inc., complained that two machines had broken down, and some factory production workers were idled for part of the month. He also complained that materials prices has and insurance premiums on the factory has increased and costs were going up.
The responsibility center involved here is the cost center. Everything he was complaining about was with regards to the rise on costs of running the company. Therefore, the cost center should be in charge.
b. Investment center
We are told that Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year as she was sure that her campaign to lower costs and efficiently use of machinery was the reason for this.
This is the responsibility of the investment center. We can see that Joanna is talking about the increase in the return on investment. Therefore, the investment center should be responsible to handle this.
c. Revenue center
From the information, we are told that Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing recent cost increases for the laser printer line. The headquarters suggested that increase in prices will kill sales and that the revenue will go down.
The responsibility center involved in this situation is the revenue center. We can see that the headquarters was concerned that the increase will in price will affect revenue as the revenue will reduce. This is the revenue center in charge.
d. Profit center
We are told that Susan Whitehorse looked at the quarterly profit and loss statement with disgust as the revenue was down, and the cost was up. The responsibility center in charge here is the profit center as the main issue of discussion is about the profit and loss of the company.
e. Investment center
We are told that Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. and that after meeting with top staff, she gave out a 3-year plan to improve the situation as obsolete equipment will be retired and the state-of-the-art, computer-assisted machinery will be bought.
This is an investment because she told the firm to buy state-of-the-art, computer-assisted machinery will be bought in order to improve their fortunes. The responsibility center involved is the investment center.
