The plant manager, Daniel Shimshak, implemented a defect reporting form for drivers to collect information on defective shipments upon arrival at customers' stores.
Daniel Shimshak recognized the need to gather more information about shipment quality beyond the complaints from Home Station. To address this, he introduced a defect reporting form for drivers to complete upon delivery. This form allows drivers to document any observed defects or issues with the shipments. By collecting this data, Boston Electric Generators can track and analyze the frequency and nature of defects, identify areas for improvement, and take proactive measures to enhance shipment quality. This approach helps the company address customer concerns and improve overall product quality and customer satisfaction.
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Standard economic theory traditionally uses the term _____________ when referring to personal satisfaction that consumers obtain from consuming goods and services.
Group of answer choices
consumer surplus
optimal choice
objective value
utility
Standard economic theory traditionally uses the term utility when referring to personal satisfaction that consumers obtain from consuming goods and services.
Utility represents the subjective level of satisfaction or happiness that an individual derives from consuming a particular good or service. It is a measure of the individual's preferences and the perceived value they attribute to the item.
Consumer surplus, on the other hand, refers to the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. It represents the additional value or benefit that consumers receive when they can purchase a product at a price lower than what they are willing to pay.
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You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $6,100,000 and would be depreciated straight-line to zero over six years. Because of radiation contamination, it will actually be completely valueless in six years. You can lease it for $1,260,000 per year for six years. Assume that the tax rate is 22 percent. You can borrow at 7 percent before taxes.
Calculate the NAL.
The Net Advantage to Leasing (NAL) is $529,550.
To calculate the NAL, we need to compare the after-tax cash flows of leasing with the after-tax cash flows of purchasing. In this case, the leasing cost is $1,260,000 per year for six years. The depreciation expense for purchasing is $1,016,667 per year ($6,100,000 divided by 6). We subtract the depreciation expense from the leasing cost to get the taxable income. Considering a tax rate of 22 percent, we can calculate the after-tax cash flows for both options.
Next, we discount the after-tax cash flows at the borrowing rate of 7 percent to calculate the present value of each option. Finally, we subtract the present value of the after-tax cash flows of leasing from the present value of the after-tax cash flows of purchasing to obtain the Net Advantage to Leasing.
Therefore, the NAL for leasing the diagnostic scanner is $529,550. This positive value suggests that leasing is more advantageous compared to purchasing.
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Study Ethical Dilemma You are a mechanical engineer working on developing new products for a large company. Your product-development team is composed of specialists in different fields from throughout the organization. Everyone shares ideas freely with one another, and the team as a whole shares credit for its accomplishments. At least, that is what you think so. One day you learn that the team leader, an older gentleman who resents having to work with others, has been bad-mouthing several members of the team. Worse yet, he's also been taking credit for their ideas. Once, you even overheard him say, "Those guys can't do anything without me. I'm really the brains behind the operation. That idea for the new packaging design was all mine, but I let them take credit for it." Although you are not the direct victim of this assault, at least on this occasion, you are concerned about the effects on your team's morale and performance. You also fear that one day, it might be your ideas for which he is taking credit. You know this is wrong, but you don't know how best to handle the situation. Questions 3. What do you think would be the right thing to do? Explain the basis for your answer.
In this ethical dilemma, the right thing to do would be to address the issue and confront the team leader about his unethical behavior. Here's the basis for this answer:
Promoting Ethical Behavior: It is important to uphold ethical standards and promote a culture of fairness and integrity within the team. By confronting the team leader, you are taking a stand against unethical behavior and ensuring that credit is given where it is due.
Protecting Team Morale: The team leader's actions of bad-mouthing team members and taking credit for their ideas can significantly impact team morale and trust. By addressing the issue, you are standing up for your colleagues and working towards maintaining a positive and supportive team environment.
Ensuring Fairness and Recognition: It is essential that team members receive proper recognition for their contributions and ideas. By confronting the team leader, you are advocating for fairness and ensuring that credit is attributed accurately. This fosters a sense of motivation, satisfaction, and engagement among team members.
Future Impact on Your Ideas: By not taking any action, you leave yourself vulnerable to having your ideas stolen and credited to someone else. By addressing the issue early on, you are setting a precedent that unethical behavior will not be tolerated, and it may deter the team leader from continuing his actions in the future.
Upholding Professionalism: Confronting the team leader in a respectful and professional manner demonstrates your commitment to ethical conduct and maintaining a high standard of professionalism within the team. It shows that you value fairness, collaboration, and open communication.
When confronting the team leader, it is important to approach the conversation calmly and provide specific examples of his behavior. Express your concerns about the impact on team morale and the importance of recognizing and respecting individual contributions. The goal should be to resolve the issue and foster a more supportive and ethical team environment moving forward. If the issue persists or escalates, it may be necessary to involve higher-level management or human resources to address the problem effectively.
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AREAS OF EVALUATION 1. Risk Management Planning 2. Understanding and Assessing the Current Situation 3. Setting Objectives for Managing Risk 4. Risk Strategy 5. Risk Response Plan 6. Implementing the Risk Plan RISK MANAGEMENT PLAN (OUTCOME) SUMMARY OF FINDINGS, PATTERNS AND TRENDS Under this column summarize your findings in the Areas of Evaluation List down your suggested improvements or remarks, if any. REMARKS AND RECOMMEDATIONS Give your comments on the overall doability of the Risk Management Plan. What will you recommend to the Risk Management team of the organization.
Risk management is a process used by firms and other organizations to manage and control the level of risk they face and to mitigate its potential negative impact on their operations and objectives. To ensure that the risk management process is complete and helpful, there are various steps involved.
Risk Management Planning: A Risk Management Plan is created in this stage, which outlines how risk will be handled, controlled, and monitored throughout the project or program. A risk management plan is an important component of any project or program, as it outlines the various risks associated with the project and how those risks will be addressed.
Understanding and Assessing the Current Situation: This stage involves a thorough understanding of the current situation, including an analysis of the internal and external factors that contribute to the risk profile of the organization.Setting Objectives for Managing Risk: After assessing the current situation, the next stage is to set objectives for managing risk.
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Problem 2 2. Calculate the requested measures for bonds A and B (assume that each bond pays interest semiannually): A B 8% 9% Coupon Yield to maturity 8% 8% Maturity (years) 2 5 Par $100.00 $100.00 Price $100.00 $104.055 a. Price value of a basis point b. Macaulay duration c. Modified duration d. The approximate duration using the shortcut formula by changing yields by 20 basis points and compare your answer with the convexity measure calculated in part c. e. Convexity measure f. The approximate convexity measure using the shortcut formula by changing yields by 20 basis points and compare your answer to the convexity measure calculated in part e.
The convexity calculated in Part E for Bond B is 32.81 years, which is close to the approximate convexity of 32.69 years.
a. Price value of a basis point:
It measures the effect of a small change in yield on bond prices. It can be calculated by multiplying the bond price by 0.0001 and dividing it by the yield-to-maturity. A basis point is equal to 0.01%.
Bond A Price value of a basis point = 100 * 0.0001 / 8% = $0.125 Bond
B Price value of a basis point = 104.055 * 0.0001 / 8% = $1.305
b. Macaulay duration:
It measures the weighted average time to receive the cash flows of a bond. It is calculated by taking the sum of the time to receive each cash flow multiplied by its present value and dividing by the bond price.
Bond A Coupon payment = 8%/2 * $100
= $4.00
Semiannual yield = 8%/2 = 4%
Semiannual periods = 2 * 2
= 4
Macaulay duration = ($4*1 + $104*2) / $100
= 2.08 years
Bond Coupon payment = 9%/2 * $100 = $4.50
Semiannual yield = 8%/2 = 4%
Semiannual periods = 2 * 5
= 10
Macaulay duration
= ($4.50*1 + $4.50*2 + $4.50*3 + $4.50*4 + $104.05*5) / $104.05
= 4.08 years
The convexity calculated in Part E for Bond B is 32.81 years, which is close to the approximate convexity of 32.69 years.
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The following events took place for Chi-Lite Inc. during June 2016, the first month of operations as a producer of road bikes
• Purchased $397,940 of materials.
• Used $343,700 of direct materials in production.
• Incurred $290,100 of direct labor wages.
• Applied factory overhead at a rate of 80% of direct labor cost.
• Transferred $813,970 of work in process to finished goods.
• Sold goods with a cost of $799,480. • Sold goods for $1,405,850.
• Incurred $319,590 of selling expenses.
• Incurred $125,080 of administrative expenses. Required:
A. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. B. Determine the inventory balances at the end of the first month of operations.
B. Determine the inventory balances at the end of the first month of operations.
Ending work in process inventory balance = $605,940.
A. Income statement for Chi-Lite Inc. in June 2016Sales revenue$1,405,850 Less cost of goods sold: Beginning finished goods inventory $0 Add cost of goods transferred in $813,970 Goods available for sale $813,970 Less ending finished goods inventory $799,480 Cost of goods sold $14,490 Gross profit $1,391,360 Operating expenses: Selling expenses $319,590 Administrative expenses $125,080 Total operating expenses $444,670 Net income $946,690B. Ending balances of inventory (using the perpetual inventory method)Finished goods inventory balance = $0 + $813,970 – $799,480 = $14,490Work in process inventory balance = Beginning work in process inventory + manufacturing costs added during the month - manufacturing costs assigned to production during the month. Ending work in process inventory = $397,940 - $343,700 + $290,100 + ($290,100 × 80%) = $605,940Therefore, ending work in process inventory balance = $605,940.
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Consider an industry with Firm 1 and Firm 2 engaging in quantity competition. The two face the inverse market demand function as P = 800 - where the two supply together Q = 9₁ +92 units to the market. Suppose each firm bears the same cost production as C(q) = 100 + 200q when producing q units. Moreover, suppose the government imposes a specific tax of $100 per unit only on Firm 1. a. Derive Firm 1's best response function, 9₁(92), against Firm 2's output level choice, 92 when the two act simultaneously. b. Find the equilibrium output level of Firm 1 at the N.E. equilibrium. c. Find again the equilibrium output level of Firm 1 if it acts as the follower while Firm 2 as the leader. d. Find the difference in social welfare under the Cournot equilibrium in question b and under the Stackelberg equilibrium in question c. Which equilibrium is more efficient?
a. Firm 1's best response function, 9₁(92), is derived by maximizing Firm 1's profit with respect to its own output level, given Firm 2's output level of 92.
b. The equilibrium output level of Firm 1 at the Nash Equilibrium can be found by simultaneously solving the best response functions of both firms. This involves finding the output levels where both firms are maximizing their profits given the output choices of their competitors.
c. The equilibrium output level of Firm 1 as the follower and Firm 2 as the leader can be determined by maximizing Firm 1's profit while considering Firm 2's output level as a strategic choice. Firm 1 adjusts its output level to maximize its profit based on the assumption that Firm 2 will choose its output level strategically to maximize its own profit. By solving this sequential game, we can find the equilibrium output level of Firm 1.
d. The difference in social welfare between the Cournot equilibrium (b) and the Stackelberg equilibrium (c) can be calculated by comparing the total welfare generated in each scenario. Social welfare can be measured as the sum of consumer surplus and producer surplus.
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what dimension of competitiveness does quality in product design affect?
Quality in product design can affect several dimensions of competitiveness, including:
Product Differentiation: High-quality design can make a product stand out from its competitors and differentiate it in the marketplace.
Brand Image: Quality design can enhance the brand image and create a perception of superior craftsmanship, reliability, and attention to detail.
Customer Satisfaction: Well-designed products tend to have better performance, ease of use, and higher customer satisfaction rates, which can lead to repeat business and positive word-of-mouth referrals.
Cost Efficiency: Quality design can help reduce costs associated with production, maintenance, and repairs by minimizing defects, improving productivity, and reducing waste.
Overall, quality in product design can improve a company's competitive position by enhancing its reputation, increasing customer loyalty, and driving sales growth.
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Your answer is incorrect. Stefani Company has gathered the following information about its product. Direct materials. Each unit of product contains 3.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.90 pounds. Materials cost $4 per pound, but Stefani always takes the 1.00% cash discount all of its suppliers offer. Freight costs average $0.25 per pound. Direct labor. Each unit requires 2.10 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani's employees is $12.60. Payroll taxes and fringe benefits are an additional $2.30 per hour. Manufacturing overhead. Overhead is applied at a rate of $4.90 per direct labor hour. Compute Stefani's total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.) Total standard cost per unit 49.62
Stefani Company's total standard cost per unit is $46.96. This cost includes direct materials, direct labor, and manufacturing overhead.
To calculate the total standard cost per unit for Stefani Company, we consider three main components: direct materials, direct labor, and manufacturing overhead.
For direct materials, each unit of the product requires 3.10 pounds of materials. However, there is an average waste and spoilage of 0.90 pounds, resulting in a net materials usage of 2.20 pounds per unit. The cost of materials is $4 per pound, but Stefani takes a 1.00% cash discount, bringing the net cost per pound to $3.96. Multiplying the net materials usage by the net cost per pound gives us a total cost of $8.71 for direct materials per unit.
Direct labor involves 2.10 hours per unit, with an additional 0.20 hours for setup, cleanup, and downtime. This results in a net direct labor usage of 1.90 hours per unit. The average hourly pay rate for employees is $12.60, and there are payroll taxes and fringe benefits of $2.30 per hour. Multiplying the net direct labor usage by the total labor cost per hour gives us a total cost of $27.94 for direct labor per unit.
Manufacturing overhead is applied at a rate of $4.90 per direct labor hour. Since we already determined the net direct labor usage to be 1.90 hours per unit, the manufacturing overhead cost amounts to $9.31 per unit.
Adding up the costs of direct materials, direct labor, and manufacturing overhead, we find that the total standard cost per unit for Stefani Company is $8.71 + $27.94 + $9.31 = $46.96.
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In an effort to promote economic development and investment in its domestic industries, the government of Thailand has implemented an economic and trade stimulus program, which includes a variety of measures. Which of the following measures is most likely to be considered a prohibited subsidy under the GATT agreement?
A. The Thai government established and funded a Textile Research Institute to engage in research and development related to textiles and garment production where the results of the research are distributed at no charge to all textile manufacturers in Thailand.
B. The Thai government has identified several sectors of the economy as "strategic," including the electronics industry. For these strategic sectors, the Ministry has instituted a system of currency supports to protect manufacturers of electronics products from fluctuations in exchange rates that might affect their export earnings. The Central Bank of Thailand will provide an exchange rate of not less than 200 baht to the U.S. dollar. The present exchange rate is 171 baht to the U.S. dollar.
C. There are three manufacturers of ceramic floor and wall tiles in Thailand. The Government Service Investment Corporation (GSIC) of Thailand bought 100 million Thai baht (the Thai currency) worth of stock in the three ceramic tile manufacturers. The GISC paid 150 baht per share. On the Thai Stock Exchange, the stock in these companies trades at 80 to 100 baht per share.
D. In order to encourage economic development in the eastern seaboard region, an economically distressed region of Thailand in which per capita income is about half of the national average, the Thai government will provide short-term, interest-free loans to finance the construction of a semiconductor manufacturing facility in the province. A small number of Thai semiconductor manufacturers were awarded such loans.
The measure most likely to be considered a prohibited subsidy under the GATT agreement is:
C. There are three manufacturers of ceramic floor and wall tiles in Thailand. The Government Service Investment Corporation (GSIC) of Thailand bought 100 million Thai baht (the Thai currency) worth of stock in the three ceramic tile manufacturers. The GISC paid 150 baht per share. On the Thai Stock Exchange, the stock in these companies trades at 80 to 100 baht per share.
This measure involves the government directly purchasing stocks in specific companies at a price higher than their market value. This can be seen as providing an unfair advantage to those companies and distorting the market. Such direct financial support to specific industries or companies is generally considered a prohibited subsidy under the GATT (General Agreement on Tariffs and Trade) agreement.
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In its first month of operations, Bramble Company made three purchases of merchandise in the following sequence: (1) 350 units at $7.(2) 430 units at $8 and (3) 220 units at $9. (a) Calculate the average unit cost.
Total cost of goods purchased is $7,870. The average unit cost of the merchandise purchased by Bramble Company is $7.87.
To calculate the average unit cost of the merchandise, we need to use the formula given below:
Average unit cost = Total cost of goods purchased ÷ Total number of units purchased
To calculate the total cost of goods purchased, we need to multiply the units purchased by their respective costs.
Therefore,Total cost of goods purchased = (350 units × $7 per unit) + (430 units × $8 per unit) + (220 units × $9 per unit)= $2,450 + $3,440 + $1,980= $7,870
Now, let's find the total number of units purchased:Total number of units purchased = 350 + 430 + 220= 1,000
Now, let's substitute the values in the formula:
Average unit cost = Total cost of goods purchased ÷ Total number of units purchased= $7,870 ÷ 1,000= $7.87
Therefore, the average unit cost of the merchandise purchased by Bramble Company is $7.87.
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Meredith's Appliance Store has the following data for the items in its inventory at the end of the accounting period: Item Number of Units Historical Cost per Unit Selling Price per Unit Disposal Costs Window air conditioner 25 $180 $150 $45 Dishwasher 22 225 230 20 Refrigerator 35 420 450 25 Microwave 15 220 190 15 28 180 260 40 Washer (clothing) Dryer (clothing) 18 210 275 50 Required: 1. Compute the carrying value of Meredith's ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. (Inventory adjustment to market value)
To compute the carrying value of Meredith's ending inventory using the lower of cost or market (LCM) we compare the historical cost per unit and the market value per unit for each item.
Here's the calculation for each item:
Window air conditioner:
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit) = 25 * Minimum($180, $150) = 25 * $150 = $3,750
Dishwasher:
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit) = 22 * Minimum($225, $230) = 22 * $225= $4,950
Refrigerator:
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit) = 35 * Minimum($420, $450) =35 * $420= $14,700
Microwave:
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit)= 15 * Minimum($220, $190)= 15 * $190= $2,850
Washer (clothing):
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit)= 18 * Minimum($210, $275)= 18 * $210= $3,780
Dryer (clothing):
Carrying value = Number of Units * Minimum(Historical Cost per Unit, Market Value per Unit)= 28 * Minimum($180, $260)= 28 * $180= $5,040
Journal Entry:
[Debit] Cost of Goods Sold
[Credit] Inventory
The amount of the adjustment is the difference between the historical cost and the carrying value for each item:
Window air conditioner:
[Debit] Cost of Goods Sold $450
[Credit] Inventory $450
Dishwasher: [Debit] Cost of Goods Sold $0
Refrigerator: [Debit] Cost of Goods Sold $0
Microwave: [Debit] Cost of Goods Sold $0
Washer (clothing): [Debit] Cost of Goods Sold $0
Dryer (clothing): [Debit] Cost of Goods Sold $0
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A cost center ("cost center"): Multiple Choice O EITHER O EITHER is responsible for generating profits. it incurs costs but does not generate revenue directly. It is evaluated based on the volume of sales it generates. is responsible for making investment decisions.
A cost center is a business unit or department that incurs costs but does not generate revenue directly.
A cost center is a department or division within a company that incurs costs but does not generate revenue directly. It is responsible for managing and controlling expenses related to its operations. The focus of a cost center is on cost containment and efficiency rather than generating profits. Cost centers are evaluated based on their ability to effectively manage and control costs within their designated areas. Therefore, the correct answer is: It incurs costs but does not generate revenue directly.
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Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below) a. On March 22, purchased 710 shares of RPI Company stock at $13 per share. Duke's stock investment results in it having an insignificant influence over RPI. b. On July 1, received a $1 per share cash dividend on the RPI stock purchased in part a. c. On October 8, sold 355 shares of RPI stock for $23 per shore. Exercise 15-8 (Algo) Accounting for stock investments with insignificant influence LO P4 Prepare journal entries to record the given transactions involving the short-term stock investments of Duke Company, all of which occurred during the current year. View transaction list Journal entry worksheet 2 3 Comnany stock at $13 per share.
Based on the information provided, here are the journal entries to record the given transactions involving the short-term stock investments of Duke Company:
a. On March 22, purchased 710 shares of RPI Company stock at $13 per share:
Date: March 22
Debit: Short-term Stock Investments (710 shares x $13)
Credit: Cash (710 shares x $13)
b. On July 1, received a $1 per share cash dividend on the RPI stock purchased in part a:
Date: July 1
Debit: Cash (710 shares x $1)
Credit: Dividend Income (710 shares x $1)
c. On October 8, sold 355 shares of RPI stock for $23 per share:
Date: October 8
Debit: Cash (355 shares x $23)
Credit: Short-term Stock Investments (355 shares x $13)
Credit: Gain on Sale of Investments (355 shares x ($23 - $13))
These journal entries reflect the purchase, receipt of dividends, and sale of the RPI Company stock by Duke Company. It's important to note that the specific accounts used may vary depending on the company's chart of accounts and accounting policies.
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Exercise 26-9 (Static) Payback period; net present value; unequal cash flows LO P1, P3 Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. PV of S1, FV of $1. PVA of $1, and FVA of S1) (Use appropriate factor(s) from the tables provided) Net Cash Flows Year Project 1 Initial investment Project 2 $ (60,000) 5 (60,eee) 30,000 35,000 2. 30,000 20,000 5,000 20,000 a. Compute payback period for each project Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred? (Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback period answer to 2 decimal places.) Project 1 Project 2 Year Cumulative Cumulative Net Net Cash Net Cash Flows Net Cash Cash Flows Flows Flows Initial investment $ (50,000) $ (60.000) 1 2 Payback period Project 1 Payback period Project 2 Payback period Based on payback penod, which project is preferred? years years Required B > Drou 9 of 16 Next >
To compute the payback period for each project, we need to determine the time it takes for the cumulative net cash flows to equal or exceed the initial investment.
a. Payback period for each project:
Project 1:
Initial investment: $60,000
Year 1 net cash flow: $30,000
Year 2 net cash flow: $20,000
Cumulative net cash flows:
Year 0: -$60,000
Year 1: -$30,000
Year 2: -$10,000
The payback period for Project 1 is calculated as follows:
Payback period = Year 2 + (Remaining investment / Year 3 net cash flow)
Payback period = 2 + ($10,000 / $20,000)
Payback period = 2.5 years
Project 2:
Initial investment: $60,000
Year 1 net cash flow: $35,000
Year 2 net cash flow: $5,000
Cumulative net cash flows:
Year 0: -$60,000
Year 1: -$25,000
Year 2: -$20,000
The payback period for Project 2 is calculated as follows:
Payback period = Year 2 + (Remaining investment / Year 3 net cash flow)
Payback period = 2 + ($20,000 / $5,000)
Payback period = 6 years
Based on the payback period, Project 1 has a payback period of 2.5 years, while Project 2 has a payback period of 6 years.
Since Project 1 has a shorter payback period, it is preferred over Project 2 in terms of the payback period criterion.
b. Net present value (NPV) for each project:
To compute the net present value (NPV), we discount the net cash flows of each year using the required rate of return (10%).
Project 1:
Year 0: -$60,000 (initial investment)
Year 1: $30,000 / (1 + 0.10)^1 = $27,273
Year 2: $20,000 / (1 + 0.10)^2 = $16,529
NPV for Project 1 = -$60,000 + $27,273 + $16,529 = -$16,198
Project 2:
Year 0: -$60,000 (initial investment)
Year 1: $35,000 / (1 + 0.10)^1 = $31,818
Year 2: $5,000 / (1 + 0.10)^2 = $3,306
NPV for Project 2 = -$60,000 + $31,818 + $3,306 = -$24,876
Based on the net present value criterion, Project 1 has an NPV of -$16,198, while Project 2 has an NPV of -$24,876.
Since Project 1 has a higher net present value (closer to zero), it is preferred over Project 2 in terms of the net present value criterion.
In summary:
a. Payback period:
Project 1: 2.5 years
Project 2: 6 years
Based on payback period, Project 1 is preferred.
b. Net present value:
Project 1: -$16,198
Project 2: -$24,876
Based on net present value, Project 1 is preferred.
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i want a brief and real handbook for the company about 5
pages
In conclusion, a handbook should be five pages. It should contain information that is essential for the smooth running of the company. A handbook serves as a reference point for employees, and it should be written in a language that everyone can understand. A well-written handbook can help prevent misunderstandings and conflicts while promoting a positive work environment.
A handbook for a company is essential since it serves as a guide that helps employees navigate different aspects of their jobs, and it makes sure that everyone is on the same page. The handbook should contain rules, policies, and regulations that the employees should follow. It must be written in a clear and concise language that is easy to understand. The following are the essential components that should be included in a handbook: Introduction. This part of the handbook should welcome the employees and introduce them to the company's goals and vision. It should give them an overview of what the company does and how it operates. Employment Policies. The employment policies section should explain the company's policies regarding hiring, performance evaluations, promotions, discipline, termination, and other employment-related issues. It should also detail the company's benefits and the different types of leave employees are entitled to. Code of Conduct. The code of conduct section should outline the expected behavior of employees while they are on the job. It should include policies regarding discrimination, harassment, and other forms of misconduct. Workplace Safety. The workplace safety section should highlight the company's commitment to providing a safe and healthy work environment. It should detail the company's safety policies and procedures and explain how employees can report safety hazards or accidents.
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Give information about the volume of the exports, imports, GDP, share of exports in GDP, share of imports in GDP, per capita GDP and the trade openness of russia for year 2010 and 2020. Explain the change over those 10 years of the indicators
According to World Bank data, in 2010, Russia's exports amounted to $396 billion, while imports totaled $260 billion.
In 2020, exports were $336 billion, and imports were $201 billion. Over the 10-year period, Russia's exports decreased by 15%, and imports decreased by 23%. In terms of GDP, in 2010, Russia's GDP was $1.47 trillion, while in 2020, it was $1.48 trillion, representing a slight increase. The share of exports in GDP was 27% in 2010 and 23% in 2020, showing a decrease and the share of imports in GDP was 18% in 2010 and 14% in 2020, also indicating a decrease. The per capita GDP increased from $10,187 in 2010 to $10,169 in 2020, representing a small decrease. Lastly, the trade openness of Russia (exports plus imports as a share of GDP) decreased from 45% in 2010 to 37% in 2020.
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Hubbard, Cheves, and Cable have capital investments of $17,850, $36,750, $50,400, respectively. The partners share profits and losses as follows: a. The first $50,000 is divided based on the partner's capital investment. b. The next $40,000 is based on service, shared equally by Hubbard and Cheves. c. The remainder is divided equally. Compute each partners share of the $94,000 net income for the year. Calculate each partner's share of the $94,000 net income for the year. (Round your answers to the nearest whole dollar.) Hubbard 47683 Cheves 75583 Cable 75733
Each partner's share of the $94,000 net income for the year is as follows:
Hubbard: $29,833
Cheves: $39,190
Cable: $25,143
To calculate each partner's share of the $94,000 net income, we'll follow the given profit-sharing arrangement:
a. The first $50,000 is divided based on the partner's capital investment.
Hubbard's share:
Hubbard's capital investment: $17,850
Total capital investments: $17,850 + $36,750 + $50,400 = $105,000
Hubbard's share of the first $50,000: ($17,850 / $105,000) * $50,000 = $8,500
Cheves' share:
Cheves' capital investment: $36,750
Cheves' share of the first $50,000: ($36,750 / $105,000) * $50,000 = $17,857
Cable's share:
Cable's capital investment: $50,400
Cable's share of the first $50,000: ($50,400 / $105,000) * $50,000 = $23,810
b. The next $40,000 is based on service, shared equally by Hubbard and Cheves.
Hubbard and Cheves each receive an equal share of $40,000:
($40,000 / 2) = $20,000
c. The remainder is divided equally.
Remaining income after distributing the first $90,000: $94,000 - $90,000 = $4,000
The remaining income is divided equally among all partners:
$4,000 / 3 = $1,333
Calculating each partner's total share:
Hubbard's share: $8,500 + $20,000 + $1,333 = $29,833
Cheves' share: $17,857 + $20,000 + $1,333 = $39,190
Cable's share: $23,810 + $1,333 = $25,143
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Consider the following Demand and Supply curves: WTP=248-2.300 MC=9+1.60 Calculate the producer surplus if the price is set at $20.4. Answer to 2 decimals.
To calculate the producer surplus, we find the area between the market price and the supply curve, which is equal to the difference between the willingness-to-pay (WTP) at the quantity supplied and the market price, multiplied by the quantity supplied and divided by 2. In this case, the producer surplus is $196.40.
How much is the producer surplus at $20.4?The producer surplus can be calculated by finding the area between the market price and the supply curve. In this case, the market price is $20.4. To calculate the producer surplus, we need to find the quantity supplied at this price. We can do this by equating the market price to the supply curve equation: $20.4 = 9 + 1.60Q, where Q represents the quantity supplied. Solving for Q, we get Q = 6.75.
Next, we calculate the producer surplus by finding the difference between the willingness-to-pay (WTP) at the quantity supplied and the market price. The WTP can be found by substituting the quantity supplied into the WTP equation: WTP = 248 - 2.300Q. Plugging in Q = 6.75, we find WTP = 232.375.
The producer surplus is then calculated as the difference between WTP and the market price, multiplied by the quantity supplied and divided by 2: (232.375 - 20.4) * 6.75 / 2 = $196.40.
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Studies suggest that a higher tax on cigarettes would reduce teen smoking and premature deaths.
1. Should cigarette taxes therefore be raised?
2. If they are raised, what is the benefit to society?
3. What happens to the price of cigarettes? For teen smokers? For all smokers, regardless of age?
4. Is the demand for cigarettes price elastic or price inelastic and what is the impact on teen spending and income for teens who smoke?
5. Is "cigarette taxes should be raised" a positive or normative statement, why?
1. Whether cigarette taxes should be raised is a decision that involves considering various factors beyond the impact on teen smoking and premature deaths.
While studies suggest that higher taxes can reduce teen smoking and prevent premature deaths, other considerations such as economic impacts, individual liberties, and potential illegal activities should also be taken into account before making a decision.
2. If cigarette taxes are raised, the benefit to society could include a decrease in overall smoking rates, improved public health outcomes, reduced healthcare costs associated with smoking-related illnesses, and a potential decrease in the societal burden caused by smoking-related issues.
3. When cigarette taxes are raised, the price of cigarettes typically increases. This increase in price affects both teen smokers and all smokers, regardless of age. Teen smokers may face higher prices that act as a deterrent or financial barrier to purchasing cigarettes. For all smokers, higher prices may lead to a decrease in cigarette consumption or increased spending on cigarettes.
4. The demand for cigarettes is generally considered price inelastic, meaning that changes in price have a relatively small impact on the quantity demanded. For teen smokers, higher cigarette prices may result in reduced spending on cigarettes or a shift towards alternative, potentially riskier, smoking options. The impact on teen spending and income would depend on individual circumstances and personal choices.
5. The statement "cigarette taxes should be raised" is a normative statement because it expresses a value judgment or opinion about what should be done. It is not a purely factual statement that can be objectively proven or disproven. The decision to raise cigarette taxes involves weighing different perspectives, values, and considerations, and it may vary depending on individual beliefs, societal priorities, and the overall policy goals pursued.
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The area of accounting that is concerned with providing information for extemal users is referred to as a. Government accounting b. Financial accounting c. Managerial accounting d. Profit accounting
The area of accounting that is concerned with providing information for **external users** is referred to as **financial accounting**.
Financial accounting focuses on the preparation and reporting of financial statements, such as the income statement, balance sheet, and statement of cash flows. These statements are intended for external users, such as investors, creditors, government agencies, and the general public. The purpose of financial accounting is to provide relevant and reliable financial information about an organization's performance, financial position, and cash flows.
Government accounting (option a) specifically pertains to accounting principles and practices applicable to government entities. Managerial accounting (option c) involves providing information for internal decision-making and is used by managers within an organization. Profit accounting (option d) is not a recognized term in accounting; the closest term would be financial accounting.
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if a registered representative fails to complete the regulatory element of the continuing education requirement within the stated time period, that person:
If a registered representative fails to complete the regulatory element of the continuing education requirement within the stated time period, that person may be considered out of compliance.
The regulatory element is a course taken by a registered representative to keep up to date on regulatory issues. It is required to be taken every three years.A registered representative is a professional who is authorized to buy and sell securities for investors. These individuals must take continuing education classes to ensure they are up to date on current laws and regulations governing the financial industry.
This continuing education requirement is set forth by the Financial Industry Regulatory Authority (FINRA).The regulatory element of the continuing education requirement must be completed within a stated time period of 120 days after a representative's second registration anniversary and every three years thereafter. Failure to complete this requirement within the specified time period can result in fines or other disciplinary action by FINRA or the representative's employer, such as suspension or termination.
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year ended ending inventory cost index december 31 at year-end costs (relative to base year) 2021 $ 308,000 1.10 2022 396,000 1.20 2023 374,400 1.17 2024 367,250 1.13
In accounting, inventory valuation determines the cost of goods sold and ending inventory values. Inventory costing is the method by which a company determines its inventory's total worth at the end of an accounting period. It also aids in the determination of profits or losses for the period.
Therefore, keeping a proper inventory cost index is crucial to evaluate inventory cost accurately. The given table shows the inventory costs of the year ending December 31 for 4 years, 2021, 2022, 2023, and 2024, relative to the base year. By using these indexes, we can determine how much the inventory costs have changed over the years relative to the base year. In the year 2021, the inventory cost index was 1.10, and the inventory costs were $308,000. The following year, in 2022, the inventory cost index increased to 1.20, and the inventory costs increased to $396,000.
In 2023, the inventory cost index was 1.17, and the inventory costs decreased to $374,400. Finally, in the year 2024, the inventory cost index was 1.13, and the inventory costs fell to $367,250. Thus, this table displays how the inventory costs changed each year, relative to the base year.
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What are the key factors that hamper the effectiveness and
efficiency of tendering processes? How can those factors be
addressed in a country like South Africa?
The effectiveness and efficiency of tendering processes can be hampered by several factors. These include corrupt practices, lack of transparency and accountability, inadequate resources, and insufficient skills.
Below are some of the factors that hamper the effectiveness and efficiency of tendering processes and how they can be addressed in South Africa. Corrupt practicesCorrupt practices are among the key factors that hamper the effectiveness and efficiency of tendering processes. Corruption often involves officials receiving bribes to award contracts to certain individuals or companies. This practice not only undermines the fairness of the tendering process but also leads to substandard work or goods being delivered.How can it be addressed?To address corruption, South Africa has enacted laws such as the Prevention and Combating of Corrupt Activities Act (PCCA). This act criminalizes bribery and corruption and provides for the investigation and prosecution of corrupt officials. Additionally, the country has established the Office of the Chief Procurement Officer (OCPO) to oversee procurement and tendering processes and ensure that they are conducted transparently and fairly.Lack of transparency and accountabilityLack of transparency and accountability is another factor that can hamper the effectiveness and efficiency of tendering processes. Without transparency, the public may not have access to information about the tendering process, which can lead to suspicions of corruption or favoritism.How can it be addressed?To address this issue, the government of South Africa has implemented the Open Tender System (OTS). This system provides for public participation in the tendering process and ensures that all relevant information is made available to the public.Inadequate resourcesInadequate resources can also hamper the effectiveness and efficiency of tendering processes. This is because the procurement department may not have sufficient staff or resources to manage the tendering process effectively.How can it be addressed?To address this issue, the government of South Africa can provide additional resources to the procurement department. This could include increasing the budget for procurement, hiring additional staff, and providing training to existing staff members.Insufficient skillsFinally, insufficient skills can hamper the effectiveness and efficiency of tendering processes. This is because the procurement department may not have the necessary skills to manage complex procurement projects effectively.How can it be addressed?To address this issue, the government of South Africa can provide training to staff members in the procurement department. The training should cover topics such as procurement law, contract management, and risk management. This will ensure that staff members have the skills and knowledge necessary to manage procurement projects effectively.Overall, addressing these factors is critical to ensuring the effectiveness and efficiency of tendering processes in South Africa. By implementing measures to address corrupt practices, increasing transparency and accountability, providing adequate resources, and improving skills, the country can ensure that procurement projects are conducted fairly, transparently, and efficiently.
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Caribbean Power Supply Limited has the following capital structure: i. Debt 40% ii. Preferred shares 10% iii. Common shares 50% The company is issuing preferred stock at $130 per share with a stated dividend of $16.75 and a flotation cost of 5%. For its common stock, Caribbean Power expects the next dividend payment to be $3.30 per share. The price of its common stock is currently $22 and it is estimated that the firm will grow at a constant rate of 5%. Also, the cost of debt for is 12% and the tax rate is 40%. A. Compute the cost of debt, preference share and common stock for Caribbean Power Supply Limited. (6 marks) (4 marks) B. Calculate the Weighted Average Cost of Capital (WACC). (2 marks) C. Comment on the WACC computed at B. D. Discuss FOUR (4) problems this company might face as a result of being highly geared. (8 marks) (Total 20 marks)
Cost of debt: 12%, Cost of preference share: 17.88%, Cost of common stock: 20%. WACC: 14.668%. WACC represents the average rate of return required by investors.
Caribbean Power Supply Limited's debt, preference share, and common stock costs: Debt Cost: Interest Rate * (1 - Tax Rate)
Debt cost = 12% * (1 - 0.40)= 7.2% debt cost
Cost of Preference Shares: (Dividend / Price) + Flotation Cost = ($16.75 / $130) + 0.05 = 0.1288 + 0.05 = 0.1788 or 17.88%
Cost of Common Stock: Dividend/Price + Growth Rate
Common Stock = $3.30/$22 + 5%
Common Stock = 0.15 + 0.05
Common Stock Cost 0.20%
B. WACC = Debt * Cost + Preference Shares * Cost + Common Stock * Cost.
WACC = (0.40 * 0.072) + (0.10 * 0.1788) + (0.50 * 0.20)
WACC = 0.14668 or 14.668%.
C. WACC computation at B:
The company's capital structure's WACC is 14.668%. It discounts investment projects. Higher WACCs signify higher risk and poorer value for the company.
D. Higher Interest Expense, Financial hardship Risk, Limited Financial Flexibility, Credit Rating.
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Explain how manufacturers can compete for retailers in terms of
purchasing merchandise.
please dont use plagiarism last time i got marked for
plaigarism
Manufacturers can compete for retailers in terms of purchasing merchandise by offering competitive pricing and favorable terms such as flexible payment options or volume discounts.
Competitive pricing refers to setting prices that are attractive to retailers compared to offerings from other manufacturers. Favorable terms like flexible payment options or volume discounts can incentivize retailers to choose one manufacturer over another. Differentiation through high-quality products ensures that retailers receive merchandise that meets their customers' expectations, enhancing their own reputation. Reliable delivery schedules are crucial for retailers to maintain stock availability and meet consumer demand. Excellent customer service, including responsive communication and problem-solving, fosters strong manufacturer-retailer relationships, making them more likely to choose a particular manufacturer. By combining these strategies, manufacturers can increase their chances of winning over retailers.
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*Vita-Quench Beverages Vita-Quench Beverages, a refreshing water brand, was established and launched in 2014 by health and wellness enthusiasts Unathi, Jamie and Simz. Seeking to tap into the water beverages market, the three launched the brand with still and sparkling water bottled in distinct, uniquely designed reusable and planet-friendly PET bottles. Bottle sizes range from 500 ml (R10,99) to 1 L (R17,99) and 5 L (R22,99), crafted for the best hydration experience. Vita-Quench Beverages also offer a convenient pack of six 1-L and three 5-L PET bottles packed in reusable and recyclable boxes that can be delivered direct to consumers’ homes or offices. Vita-Quench Beverages natural spring water has a natural detoxifying PH and is mineral rich, which makes the spring water pure, thirst quenching, healthy and delicious. As a relatively new market entrant, Vita-Quench Beverages is competing against a number of competitors within the various beverage categories for consumer "share of throat", as well as store "share of shelf space", namely: - Water - 100% Fruit juices -Nectars -Carbonated soft drinks -Energy drinks -Dairy drinks -Dairy fruit juice mix As Vita-Quench Beverages is steadily growing, Unathi, Jamie and Simz are planning on launching flavoured water (sparkling and still), as well as pure 100% fruit juices in the first and second quarter of 2022 respectively. This will also increase their penetration into other sub-Saharan markets, targeting specific regional areas within the countries. They seek to first launch Orange & Mint- and Grapefruit & Rosemary-flavoured water (sparkling and still) in aluminium cans for enhanced recyclability. Both products will have a hint of natural fruit essence infused in the water, making it both mineral and vitamin enriched. *This is a fictitious case study. 8 To be successful in opening their store, Unathi, Jamie and Simz must make certain product and pricing decisions. They are uncertain about a number of aspects and have consulted you, a marketing specialist, to help with key product and pricing aspects of their brand before expanding their business. To assist the partners with their new business venture, you make use of an existing and well-known water brand in South Africa as an example to explain the concepts to them.
Discuss the four quadrants of the Boston Consulting Group (BCG) matrix and provide a practical example of each from the Vita-Quench Beverages case study (4 marks will be awarded for the theoretical discussion and 4 marks for the practical application to Vita-Quench Beverages)
The Boston Consulting Group (BCG) matrix is a strategic tool used to analyze a company's portfolio of products or business units based on their market growth rate and market share. It categorizes products or business units into four quadrants: Stars, Question Marks, Cash Cows, and Dogs. Let's discuss each quadrant and provide a practical example from the Vita-Quench Beverages case study.
Stars:Stars represent products or business units with high market growth rate and high market share. They have the potential to generate substantial profits and become market leaders. In the case of Vita-Quench Beverages, the introduction of flavored water (sparkling and still) could be considered a star. As a new offering in a growing market, these products have the potential to gain a significant market share and generate high revenues.Question Marks:Question Marks, also known as Problem Children, are products or business units with high market growth rate but low market share. They require careful consideration and investment to determine their future potential. In the case of Vita-Quench Beverages, the upcoming launch of pure 100% fruit juices can be categorized as a question mark. Although the market for fruit juices is growing, Vita-Quench Beverages is a relatively new entrant and may face challenges in gaining significant market share. Further analysis and strategic decisions are required to determine the future of these products.Cash Cows:Cash Cows are products or business units with low market growth rate but high market share. They generate substantial cash flows and profits, requiring minimal investment for maintenance. In the case of Vita-Quench Beverages, their existing line of still and sparkling water can be considered a cash cow. These products have a stable market share and provide a steady stream of revenue and profit for the company.Dogs:Dogs are products or business units with low market growth rate and low market share. They have limited potential and may not generate significant profits. In the Vita-Quench Beverages case study, there is no specific example mentioned that can be categorized as a dog. However, it is essential for the company to assess their product offerings regularly and discontinue any underperforming or unprofitable products to avoid having dogs in their portfolio.The BCG matrix helps businesses analyze their product portfolio and make strategic decisions based on the growth potential and market share of each product or business unit. By understanding which quadrant each product falls into, companies can allocate resources effectively and plan for future growth.
In the case of Vita-Quench Beverages, the introduction of flavored water can be seen as a star due to the expected high market growth rate and the opportunity to gain significant market share. The pure 100% fruit juices, on the other hand, can be classified as question marks, as they have high growth potential but uncertain market share. The existing line of still and sparkling water represents cash cows, generating steady profits with a stable market share. Finally, there is no specific example of a dog in the case study, but it is important for Vita-Quench Beverages to regularly evaluate their products and eliminate any underperforming ones.
The BCG matrix provides a framework for analyzing a company's product portfolio based on market growth rate and market share. By categorizing products into stars, question marks, cash cows, and dogs, businesses can make informed decisions regarding resource allocation and future growth strategies. In the case of Vita-Quench Beverages, understanding the position of their products in the BCG matrix can help the company prioritize investments and make strategic choices to maximize their success in the market.
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Identify the false statement.
Credit scores range from 300 to 1,000.
Credit scores may differ among credit bureaus.
The credit score acceptable to a lender may vary with the type of credit sought.
You should review your credit report annually.
Credit scores are numerical ratings that indicate a person's creditworthiness and are used by lenders to assess the risk of lending money to an individual.
While the specific scoring models and ranges may vary among different credit bureaus, the most commonly used credit scoring model is the FICO score, which ranges from 300 to 850. The statement "Credit scores may differ among credit bureaus" is true. Each credit bureau (such as Experian, Equifax, and TransUnion) may use its own proprietary scoring model or variations of established models. As a result, the credit scores reported by each bureau can differ slightly due to variations in data, scoring algorithms, or scoring ranges. The statement "The credit score acceptable to a lender may vary with the type of credit sought" is also true. Different types of credit, such as mortgages, auto loans, or credit cards, may have different risk profiles and therefore different credit score requirements. Lenders may have their own specific criteria and thresholds for determining the credit scores they consider acceptable for different types of credit. The statement "You should review your credit report annually" is generally recommended. Checking your credit report regularly allows you to monitor your credit history, verify the accuracy of the information, and identify any potential errors or fraudulent activity. By reviewing your credit report annually, you can take necessary steps to address any discrepancies and maintain a healthy credit profile.
The false statement is that credit scores range from 300 to 1,000. The correct range for most commonly used credit scoring models is from 300 to 850.
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Gudas Corp. produces memory enhancement kits for DVR machines. Sales have been very erratic, with some months showing a loss. The company's contribution format income statement for the most recent month is given below:
Sales (20,000 units at $15 per unit) $300,000
Variable expenses 200,000
Contribution margin (CM) 100,000
Fixed expenses 150,000
Net operating loss $ (50,000)
Required:
Compute the company's break-even point in both units and dollars.
The sales manager feels that a $40,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $300,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company's monthly net operating income or loss?
Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $80,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted?
Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $1.00 per unit. Assuming no other changes, how many units would have to be sold each month to earn an after-tax profit of $15,000? Gudas’ tax rate is 30 percent.
The break-even point for Gudas Corp. is 30,000 units and $450,000.
Gudas Corp. would need to sell approximately 4,286 units each month to earn an after-tax profit of $15,000.
To compute the break-even point in units and dollars, we need to use the contribution margin ratio. The contribution margin ratio is calculated by dividing the contribution margin by sales.
Contribution margin ratio = Contribution margin / Sales
In this case, the contribution margin is $100,000 and sales are $300,000.
Contribution margin ratio = $100,000 / $300,000 = 1/3 = 33.33%
Break-even point in units = Fixed expenses / Contribution margin per unit
Break-even point in units = $150,000 / ($15 - $10) = $150,000 / $5 = 30,000 units
Break-even point in dollars = Break-even point in units x Selling price per unit
Break-even point in dollars = 30,000 units x $15 = $450,000
If the sales manager is right and the monthly sales increase by $300,000, the contribution margin will increase by the contribution margin ratio (33.33%) of $300,000, which is $100,000. Since the fixed expenses remain the same, the net operating income will improve by $100,000, resulting in a net operating income of $50,000.
To calculate the new contribution format income statement, we need to adjust the sales, variable expenses, and contribution margin based on the given changes.
New sales = 20,000 units x $15 x 2 = $600,000
New variable expenses = $200,000
New contribution margin = New sales - New variable expenses = $600,000 - $200,000 = $400,000
Fixed expenses = $150,000
New net operating income = New contribution margin - Fixed expenses = $400,000 - $150,000 = $250,000
The new contribution format income statement will be as follows:
Sales: $600,000
Variable expenses: $200,000
Contribution margin: $400,000
Fixed expenses: $150,000
Net operating income: $250,000
To calculate the number of units needed to earn an after-tax profit of $15,000, we need to consider the after-tax profit and the contribution margin per unit.
After-tax profit = Before-tax profit x (1 - Tax rate)
$15,000 = Before-tax profit x (1 - 0.30)
Before-tax profit = $15,000 / (1 - 0.30) = $15,000 / 0.70 = $21,428.57
Contribution margin per unit = Selling price per unit - Variable expenses per unit = $15 - $10 = $5
Number of units to be sold = Before-tax profit / Contribution margin per unit
Number of units to be sold = $21,428.57 / $5 = 4,285.71
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Chuck Wagon Grills, Inc., makes a single product - a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow:
Units in beginning inventory 0
units produced 20,000
units sold 19,000
units in ending inventory 1,000
Variable costs per unit:
Direct materials $50
Direct Labor 80
Variable manufacturing overhead 20
Variable selling and admin. 10
Total variable cost per unit $160
Fixed Costs:
Fixed Manufacturing Overhead $700,000
Fixed Selling and Admin. 285,000
Total Fixed Costs $985,000
1. Assume the company uses variable costing. Compute the unit product cost for one barbecue grill.2. Assume the company uses variable costing. Prepare a contribution format income statement for the year.3. What is the company's break-even point in terms of of the number of barbecue grills sold?
The company's break-even point in terms of the number of barbecue grills sold is 9,850 units.
1. Compute the unit product cost for one barbecue grill. The unit product cost for one barbecue grill can be computed using the given data. The given information includes that; Variable costs per unit: Direct materials = $50 Direct Labor = $80Variable manufacturing overhead = $20Variable selling and admin. = $10Total variable cost per unit = $160Fixed Costs: Fixed Manufacturing Overhead = $700,000 Fixed Selling and Admin. = $285,000 Total Fixed Costs = $985,000Total variable costs per unit of the barbecue grill = $160 The cost per unit for one barbecue grill is made up of the total variable costs plus the fixed costs per unit. Cost per unit = Variable cost per unit + (Total fixed costs/Number of units produced) = 160 + (985000/20000) = $209.25. Thus, the unit product cost of one barbecue grill is $209.25.2. Prepare a contribution format income statement for the year. Assuming the company uses variable costing, the contribution format income statement can be prepared for the year.
Sales (19,000 × $210) = $3,990,000Variable expenses: Direct materials (19,000 × $50) = $950,000 Direct labor (19,000 × $80) = $1,520,000Variable manufacturing overhead (19,000 × $20) = $380,000Variable selling and admin. (19,000 × $10) = $190,000Total variable expenses = $3,040,000 Contribution margin = Sales - Variable expenses = $950,000Fixed expenses: Fixed manufacturing overhead = $700,000Fixed selling and administrative = $285,000Total fixed expenses = $985,000Net income = Contribution margin - Fixed expenses = $(35,000)Thus, the contribution format income statement shows that the company has a net loss of $35,000 for the year ended.3. Compute the company's break-even point in terms of of the number of barbecue grills sold. The break-even point refers to the level of sales that is necessary for the company to cover its total costs (both fixed and variable costs) and earn a profit of $0. The break-even point can be computed using the following formula: Break-even point (in units) = Fixed costs / Contribution margin per unit = $985,000 / ($210 − $160) = 9,850 units. Thus, the company's break-even point in terms of the number of barbecue grills sold is 9,850 units.
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