Answer:
A. 14%
B. NPV = $-4,761.19
C. 28%
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR can be calculated using a financial calculator:
Cash flow in year 0 = $-102,990
Cash flow each year from year one to five = $30,000
IRR = 14%
The net present value is the present value of after tax cash flows from an investment less the amount invested.
Npv can be calculated using a financial calculator:
Cash flow in year 0 = $-102,990
Cash flow each year from year one to five = $30,000
I = 16%
NPV = $-4,761.19
IRR if cash flow is $41,000
Cash flow in year 0 = $-102,990
Cash flow each year from year one to five = $41,000
IRR = 28%
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
I hope my answer helps you
David Douglas, an announcer from local WTJM radio, has approached you with an exciting offer. He is planning to interview a popular touring group on his radio show next week, and he would like to conduct the interview in your cafe. David would bring all the equipment and promote the event. He explains, "It would bring a lot of business to the cafe, and you would not have to do anything. I am very experienced in promoting and organizing events and would only charge you $250 to take care of it all! I promise you that your sales will increase at the event. Are you interested
Answer:
Yes interested in the offer of David Douglas
Explanation:
The David Douglas is an announcer on radio. It has viewership and audience listens to him. If the interviews are conducted with popular touring group at our cafe it will boost sales of cafe and good customer service will result in words of mouth marketing of cafe. Projected sales will be nearly $11,298 and after deducting the expenses the profit will be nearly $1200. This is an opportunity to promote cafe sales and should accept the offer.
The operations manager of a mail order house purchases double (D) and twin (T) beds for resale. Each double bed costs $500 and requires 100 cubic feet of storage space. Each twin bed costs $300 and requires 90 cubic feet of storage space. The manager has $75,000 to invest in beds this week, and her warehouse has 18,000 cubic feet available for storage. Profit for each double bed is $300 and for each twin bed is $150. The manager's goal is to maximize profits.
Required:
What is not a feasible solution?
Answer:
Please see below for answer
Explanation:
It would not be feasible to invest the entire $75,000 amount on making double beds. Although the profit margin for the double beds is twice that of twin beds, it also requires more storage space and the market demand for double beds may not be as high as the twin beds. Hence, making double beds and ignoring twin beds completely might not make as much profit due to not being sold to begin with.
A promise to make a gift for a charitable or educational purpose is unenforceable unless and until the institution to which to promise was made incurs obligations by relying on the promise. This exception is usually justified on the basis of either _____ or _____.
Answer:
This exception is usually justified on the basis of either promissory estoppel or public policy.
Explanation:
There are many Judicial devices and one of them is the Estoppel. In common law, there are legal systems which allow a court to use this device to prevent a person (corporate or individual) from making pronouncements or from defecting on their promise.
With regard to public policy, courts in recent cases have reached conclusions that pledges are legally enforceable regardless of whether or not the recipient of the promise has incurred liabilities based on the pledge, and that, the only way to ensure compliance with requirements of the law, a test of public policy is to ensure the promise is made good.
This thought holds true in Ohio where for example, a pledge has the same weight as a promissory note.
According to precedence established in Pennsylvania, any written promise can be enforced regardless of whether or not the pledger intends to be legally bound.
Cheers!
Le Son, Inc., has current liabilities of $11,700 an accounts receivable of $15,200. The firm has total assets of $43,400 and net fixed assets of $24,800. The owners' equity has a book value of $21,000. What is the amount of the net working capital
Answer:
Explanation:
These terms are culled from Balance sheet and Balance sheet have two sides, The Debit and Credit side. The debit side contain the Capital, Current Liabilities among others and The Credit side contain The Fixed asset and the Current asset
The amount of Net working capital is derived from Current asset - Current Liability
Net working capital = Current asset - Current Liability
Where Current asset = Total asset - Net Fixed asset= 43,400-24,800 = 18,600
Where Current Liability = 11,700
Therefore, Net working capital = $18,600 - $11,700 = $6,900
The amount of the net working capital = $6,900
Dell Computer buys computer chips from Intel for the purpose of making computers to be sold to consumers and other organizations. Dell is an example of which type of organizational buyer?
a. Intermediary
b. Producer
c. Wholesaler
d. Institution
Answer:
b. Producer.
Explanation:
Organizational buying deals with the process of purchasing products and services after duly identifying, evaluating and choosing which company to buy from.
Organizational buying is mainly classified into four categories, these are;
1. Producer.
2. Intermediary or Retailers.
3. Wholesaler.
4. Institution.
In this scenario, Dell Computer buys computer chips from Intel for the purpose of making computers to be sold to consumers and other organizations. Dell is an example of a producer organizational buyer because it bought computer chips, so it can be used to manufacture a computer.
Hence, the producers usually buy raw materials, components or other parts, from other manufacturers to use in producing goods for their consumers or end users.
The 2021 income statement of Adrian Express reports sales of $17,262,000, cost of goods sold of $10,624,000, and net income of $1,640,000. Balance sheet information is provided in the following table.
Adrian Express
Balance Sheets
December 31, 2018 and 2017
2018 2017
Assets
Current assets: 510,000 670,000
Cash 1,220,000 910,000
Accounts receivable 1,620,000 1,310,000
Inventory 4,710,000 4,150,000
Long-term assets
Total assets $8,060,000 $7,040,000
Liabilities and Stockholders' Equity
Current liabilities s $1,930,000 $1,570,000
Long-term liabilities 2,270,000 2,310,000
Common stock 1,820,000 1,820,000
Retained earning 2,040,000 1,340,000
Total liabilities and stockholders'
equity $8,060,000 $7,040,000
Industry averages for the following four risk ratios are as follows:
Average collection period 25 days
Average days in inventory 60 days
Current ratio 2 to 1
Debt to equity ratio 50%
Required:
Calculate the four risk ratios listed above for Adrian Express in 2018.
Answer:
Industry average Adrian Express
Average collection period 25 days 31 days
Average days in inventory 60 days 152 days
Current ratio 2 3.91
Debt to equity ratio 50% 109%
Explanation:
Average collection period = (average accounts receivable / total net credit sales) x 365 days = {[(1,620,000 + 1,310,000) / 2] / 17,262,000} x 365 days = 30.98 ≈ 31 days
Average days in inventory = 365 days / inventory turnover
inventory turnover = COGS / average inventory = 10,624,000 / [(4,710,000 4,150,000) / 2] = 2.4
Average days in inventory = 365 days / 2.4 = 152 days
Current ratio = current assets / current liabilities = (cash + accounts receivable + inventory) / $1,930,000 = ($1,220,000 + $1,620,000 + $4,710,000) / $1,930,000 = $7,550,000 / $1,930,000 =3.91
Debt to equity ratio = total liabilities / stockholders' equity = $4,200,000 / $3,860,000 = 1.09 or 109%
Use the In the News to answer three questions
IN THE NEWS Treasury Prices Fall with Improved Expectations Expectations of accelerated economic growth continue to boost yields on Treasury securities. The price of the Treasury's 2.0 percent 10-year bond fell $17.43 yesterday, from $843.88 to $826.45. The decline in the price of the treasury pushed the yield up from 2.37 percent to 2.42 percent. The 30-year bond also declined, increasing the yield from 2.96 to 3.00. Source: Market reports of January 6, 2017, What would the yield be on the 2.0 percent, $1,000, 10-year Treasury bond if the market price of the bonds were Instructions: Round your responses to two decimal places.
a. $1,000?
b. $800?
c. $1,200?
Answer:
2%
2.5%
1.67%
Explanation:
The yield can be computed using the yield formula which coupon payment divided by price.
The coupon payment=face value*coupon rate
face value is $1000
coupon rate is 2%
coupon payment=2%*$1000=$20
when price is $1000:
yield =$20/$1000=2%
when price is $800
yield=$20/$800=2.5%
when price is $1,200
yield =$20/$1,200=1.67%
In essence ,the lower the price the higher the yield as lower amount is invested in order to receive the same amount of annual coupon of $20
Which of the following is TRUE regarding journal entries: a) There are always only two accounts affected b) The total amount debited must equal the total amount credited c) Journal entries show debits on the right and credits on the left d) Journal entries show credits first, then debits
Answer: b) The total amount debited must equal the total amount credited
Explanation:
Journal entries on the debit side must always equal entries on the credit side. This is to fulfil the Accounting requirement of Double Entry where every entry in the books must have an equal and corresponding entry as well.
There can be multiple accounts represented in the journal entry but the amount on the credit side needs to balance with the amount on the debit side.
For example, a good to sold to Hillary by Trump for $30. Trump gives Hillary a discount of 10%. Trump will record that entry as,
DR Cash $27
DR Sales Discount $3
CR Accounts Receivable $30
Notice that the Debit side has 2 accounts but they still add up to the $30 on the Credit side.
Other things the same, an increase in the U.S. interest rate causes U.S. net capital outflow to a. rise, so supply in the market for foreign-currency exchange shifts right. b. rise, so demand in the market for foreign-currency exchange shifts right. c. fall, so supply in the market for foreign-currency exchange shifts left.
Answer:
b. rise, so demand in the market for foreign-currency exchange shifts right.
Explanation:
An increase in the interest rates leads to a rise in the capital outflow as savings and investment lead to more net capital outflow. This is the movement of the assets on the company and is considered to be bad for the economy and leads to undesirable changes in the supply of the foreign currency as a shift in the demands of the consumers. This may result in political and economic instability.An insurance company faces an ethical dilemma. A faulty computer program designed to evaluate insurance claims has been denying a high number of valid claims. A meeting has been arranged where senior management would decide how to handle the situation. The people at the table have varying views of what action to take and why.Han wants to report the error and reimburse the affected customers immediately because he believes he could end up being fired if the company's reputation suffers because of the issue. Jamila wants to report the error because it is the honest thing to do, and therefore necessary.After hearing his colleagues' opinions, Keith says he is willing to do whatever the more experienced managers in the group recommend.Several other managers believe the company should correct the problem going forward but not do anything about the customers who lost out on past payments.Assume the meeting ends with the managers deciding not to do anything about the customers who are owed money for past claims. Lori, an employee who was present in the meeting, disagrees with the decision and gives an anonymous tip to a newspaper reporter about the unethical behavior. Which of the following best describes the action taken by Lori?A) Unethical stanceB) WhistleblowingC) ShadowingD) RelativismE) Ethnocentrism
Answer: B) Whistleblowing
Explanation:
Whistleblowing is an act where someone in a company discloses unethical practices usually from the entity that they work in. It is a very risky thing to do because it could signal the end of one's career in a certain industry.
Whistleblowing however helps in contributing to entities staying ethical because they'd rather avoid the bad publicity that comes with it and this is why most companies have a whistleblowing policy to make it easier for people to come forward.
Whistleblowing can be done to the Government, the press or even the entity at fault itself.
Lori by giving an anonymous tip to the press about unethical behavior has engaged in Whistleblowing.
Examples of some well known Whistleblowers include, Edward Snowden and Chelsea Manning.
Oriole Corporation reported the following for 2020: net sales $1,235,200, cost of goods sold $721,800, selling and administrative expenses $338,600, and an unrealized holding gain on available-for-sale debt securities $15,700.
Required:
Prepare a statement of comprehensive income, using (a) the one statement format, and (b) the two statement format. (Ignore income taxes and EPS).
Answer:
In both formats, net income is equal to $190,500
Explanation:
(a) the one statement format
The single step statement format is an income statement format that shows only one category of income and only one category of expenses. From the question, this can be prepared as follow:
Income = Net sales + unrealized holding gain on available-for-sale debt securities = $1,235,200 + $15,700 = $1,250,900
Expenses = Cost of goods sold + Selling and administrative expenses = $721,800 + $338,600 = $1,060,400
Oriole Corporation
Statement of comprehensive income
Details Amount ($)
Income 1,250,900
Expenses 1,060,400
Net income 190,500
(b) the two statement format.
The two step statement format is an income statement format that uses two category to separate income accounts based on their function by showing gross profit and other income separately to arrive operating income, and also show selling and administrative expenses on its own. This can be prepared as follows:
Oriole Corporation
Statement of comprehensive income
Details Amount ($)
Net sales 1,235,200
Cost of goods sold (721,800)
Gross profit 513,400
Other income:
Available-for-sale debt securities gain 15,700
Operating income 529,100
Expenses:
Selling and administrative expenses (338,600)
Net income 190,500
Cash Flow Ratios Tracy Company reports the following amounts in its annual financial statements:_________.
Cash flow from operating activities $90,000 Capital expenditures $31,000*
Cash flow from investing activities (70,000) Average current assets 80,000
Cash flow from financing activities (10,000) Average current liabilities 60,000
Net income 44,000 Total assets 180,000
* This amount is a cash outflow.
a. Compute Tracy's free cash flow.
b. Compute Tracy's operating-cash-flow-to-current-liabilities ratio.
c. Compute Tracy's operating-cash-flow-to-capital-expenditures ratio.
Answer: a. $59,000. b. 1.5x. c. 2.9x
Explanation:
a) Tracy's Free cash flow will be calculated as:
= Cashflow from operating activities - Capital expenditures
= $90000 - $31000
=$59000
b) Tracy's operating cash flow to current liabilities ratio will be:
Operating cashflow ÷ Current liabilities
= $90000 ÷ $60000
= 1.5x
c) Tracy's operating cashflow to capital expenditures ratio will be:
= Operating cashflow ÷ capital expenditure
= $90000 ÷ $31000
= 2.90x
Culver Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,100 and the following divisional results. Division I II III IV Sales $250,000 $198,000 $499,000 $446,000 Cost of goods sold 198,000 191,000 298,000 254,000 Selling and administrative expenses 74,900 63,000 63,000 46,000 Income (loss) from operations $ (22,900) $ (56,000) $138,000 $146,000 Analysis reveals the following percentages of variable costs in each division. I II III IV Cost of goods sold 69 % 90 % 80 % 74 % Selling and administrative expenses 41 62 52 58 Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.
Answer:
Income after discontinuing operations from both departments 1 and 2 is greateri.e. $ 207 444 than income after discontinuing operations from department 1 . i.e. $ 172964
Explanation:
Option 1:
If the 1st division is discontinued. 50 % of the fixed costs and expenses will continue and included in irrelevant costs.
Culver Company
Income Statement
For the 1st Quarter 2017
Division II III IV Irrelevant Costs
Sales $198,000 $499,000 $446,000
Cost of G. Sold 191,000 298,000 254,000
V. COGS 90 % 80 % 74 %
V.COGS 171,900 238,400 187960
FIxed COGs 19,100 59600 66,040 30690
Selling &
Administrative Exps 63,000 63,000 46,000
Var. S& Admin Exps. 62% 52% 58%
Var. S& Admin Exps. 39060 32760 26,680
Fixed S.& Admin Exps 23940 30240 19320 24346
Income (loss) $ (56,000) $138,000 $146,000
Total Income = $ (56,000)+$138,000+$146,000-30690- 24346
Total Income= $ 172964
Option 2:
If both the 1st and 2nd division are discontinued. 50 % of the fixed costs and expenses are added under the section II.
Culver Company
Income Statement
For the 1st Quarter 2017
Division II III IV Irrelevant Costs
Sales $499,000 $446,000
Cost of G. Sold 298,000 254,000
V. COGS 80 % 74 %
V.COGS 238,400 187960
FIxed COGs 9,550 59600 66,040 30690
Selling &
Administrative Exps 63,000 46,000
Var. S& Admin Exps. 52% 58%
Var. S& Admin Exps. 32760 26,680
Fixed S.& Admin Exps 11970 30240 19320 24346
Income (loss) $138,000 $146,000
Total Income = $138,000+$146,000-30690- 24346- 9,550 - 11970
Total Income= $ 207 444
We calculate the fixed and variable costs by multiplying with the given percentages and subtracting it from the total .
Culver Company
Income Statement
For the 1st Quarter 2017
Division I II III IV
Sales $250,000 $198,000 $499,000 $446,000
Cost of G. Sold 198,000 191,000 298,000 254,000
V. COGS 69 % 90 % 80 % 74 %
V.COGS 136,620 171,900 238,400 187960
FIxed COGs 61,380 19,100 59600 66,040
Selling &
Administrative Exps 74,900 63,000 63,000 46,000
Var. S& Admin Exps. 41% 62% 52% 58%
Var. S& Admin Exps. 30,709 39060 32760 26,680
Fixed S.& Admin Exps 48691 23940 30240 19320
Income (loss) $ (22,900) $ (56,000) $138,000 $146,000
Universal Containers wants to provide a more consistent service experience to its customers and is evaluating the Service Cloud macro feature. Which three configurations must be made?
A. Users must use Lightning Experience. B. Publisher Actions used in the macros must be on the page layout.C. The Macros widget or utility must be added to the console.D. The Run Macros Permission must be granted to users.E. The Run Macros Action must be on the page layout.
Answer:
B. Publisher Actions used in the macros must be on the page layout.
C. The macros widget or utility must be added to the console
D. The run Macros permission must be granted to users.
Explanation:
The macros are a function which specifies how an input function should be mapped in the computer software to produce defined output. Macros are used to make tasks less repetitive. The macros can be used in service cloud. To use macros in service cloud the macros permission must be granted to all users, the macros widget must be added to the console and the macros must be on the page layout.
A store sells 20 ice cream bars per hour for $4 each, but on discount days, it sells 35 ice cream bars per hour for $3. Based on these two data points, what would be the slope for the relationship between the price and the quantity of ice cream sold?
Answer:
The slope for the relationship between the price and the quantity of ice cream sold would be of -1/15
Explanation:
In order to calculate the slope for the relationship between the price and the quantity of ice cream sold we would have to calculate the following formula:
Slope= change in yaxis( vertical)/change in xaxis(horizontal)
Slope= change in price/change in quantity demand
Slope=P2-P1/Q2-Q1
Slope=3-4/35-20
Slope=-1/15
The slope for the relationship between the price and the quantity of ice cream sold would be of -1/15
Engineering Wonders reports net income of $63 million. Included in that number is building depreciation expense of $5.3 million and a gain on the sale of land of $1.3 million. Records reveal decreases in accounts receivable, accounts payable, and inventory of $2.3 million, $3.3 million, and $4.3 million, respectively. What are Engineering Wonders' net cash flows from operating activities? (List cash outflows and any decrease in cash as negative amounts. Enter your answer in millions. (i.e., $10,000,000 should be entered as 10).)
Answer:
70.3
Explanation:
The calculation of net cash flows from operating activities is shown below:-
Engineering Wonders reports
Net cash flow from operating activities
Particulars Amount
Net income 63
Adjustment to reconcile net
income to net cash
flow from operating activities
Add: Depreciation expense 5.3
Less: Gain on sale of land 1.3
Add: Decrease in Accounts
receivable 2.3
Less: Decrease in accounts
payable 3.3
Add: Decrease in inventory 4.3
Net cash flow from operating
activities 70.3
Therefore the net cash flow from operating activities is 70.3.
Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facility or investment. Knowing how to think about events and situations will help the manager make that evaluation?
Countries with democratic regimes, market-based economic policies, and strong protection of property rights are more likely to attain high and sustained economic growth rates, and are thus a more attractive location for international business. The benefits, costs, and risks are associated with the political, economic, and legal systems of the country. The overall attractiveness of a country depends on balancing the benefits, costs, and risks.
Drag each item to the appropriate category of evaluations a manager must make when examining a country's attractiveness.
1. Middle-class population growth potential
2. First-mover advantages
3. Bribe payments
4. Unaxpestec political change
5. Infrastructure issuos
6. Resolving contract disputes
7. Free market economy
8. Economio uncertainty
A. Evaluate Benefits
B. Evaluate Costs
C. Evaluate Risks
Answer: Please refer to Explanation
Explanation:
When Evaluating a country's attractiveness for investment, there are several factors that should be evaluated. Key amongst them are, Benefits, Costs and Risks.
Under Benefits, the economy is evaluated based on the benefits it brings to the table. It's strengths and Opportunities. The goal is to see if these benefits present the company with adequate enough incentives to want to invest.
Under Costs, the cost of setting up and thriving is evaluated. What does the company have to pay and who do they have to pay it to in order to set up properly.
Under Threats, the factors that could adversely affect the company as a result of Investing in the country are evaluated. This is very important to know so that if need be, contingencies can be established.
Classifying the above.
1. Middle-class population growth potential. EVALUATE BENEFITS.
The middle class are the main purchasers of goods and services in the economy. In evaluating benefits the potential growth rate of the middle class should be evaluated.
2. First-mover advantages. EVALUATE BENEFITS.
Evaluating the potential benefits to be had from investing first in a country is part of Benefits Evaluation.
3. Bribe payments. EVALUATE COSTS.
Bribery payments are a cost when it comes to setting up in corrupt nations. They need to be evaluated as costs.
4. Unexpected political change. EVALUATE RISKS.
Under the evaluation of risks, this should be evaluated because a new Political leadership could have a different attitude to the company and this is a threat.
5. Infrastructure issues. EVALUATE COSTS.
Under the evaluation of cost there must be an evaluation of infrastructural issues in the country. If there are infrastructural challenges, the cost of setting up will be higher because depending on the infrastructure you'd have to bring in infrastructure from other areas and that would be expensive.
6. Resolving contract disputes. EVALUATE COSTS.
What are the costs of resolving contract disputes in the country. If they are favourable then the country is fine.
7. Free market economy. EVALUATE BENEFITS.
A free Market Economy is very useful to Entreprise. The type of economy needs to be evaluated therefore to see if it is a Free Market Economy that can benefit the company.
8. Economic uncertainty. EVALUATE RISKS.
How stable is the economy of the country in question. A country with an unstable Economy is one with a lot of Uncertainty and any company going in there will have to risk suffering losses if the Economy goes through peril.
A consumer has $130 in monthly income to be spent on two goods Z and B. The price of good Z (Pz) is $8.00. The Marginal Rate of Transformation (MRT) is equal to minus−2. That is 2 units of good B can be traded for 1 unit of good Z. What is the price of good B in $?
Answer:
Price of B is $4
Explanation:
Marginal rate of transformation is defined as the amount of a good x has to stop being produced inorder to produce a certain amount of a good y. Factors of production and technology used are assumed to be constant.
In this scenario the marginal rate of transformation is -2, that is 2 units of good B can be traded for 1 unit of good Z, mathematically
2 * Pb = Pz
Substitute price of Z
2* Pb = $8
Pb= 8 ÷ 2
On= $4
As discussed in the case and the text, W. L. Gore and Zappos adopted new organizational structures during periods of growth. In general, most firms follow a predictable pattern of structural change. Which of the following best exemplifies this pattern?
a. Simple to functional to multidivisional structures
b. Ambidextrous to functional to matrix structures
c. Functional to simple to matrix structures
d. Global to functional to multidivisional structures
e. Simple to matrix to functional structures
Answer: a. Simple to functional to multidivisional structures
Explanation:
An Organisational structure refers to how tasks flow in a company to enable them to achieve their goals.
As a company grows, they tend to go through different types of structures which fit their size and enable them to reach their goals better.
They generally start with the Simple Structure which is very common in smaller businesses. Here most decisions are centred on the owner. The owner as the proprietor is in charge of coming up with basically everything to push the business forward.
As the company grows they switch to a Functional Structure. This is when the company will be structured by function to enable better specialization and divisions of labour. Examples of separation by function include, IT Department, Marketing Department, Production Department etc.
If the growth continues the company finds it best to specialize even more and this is when Multidivisional Structures kick in. In a Multidivisonal Structure, the company divides itself into different divisions while maintaining a parent company. The Divisions are fairly independent and pursue different goals and products but all under the direction of the parent company. An example is Google splitting into divisions with Alphabet Inc being the Parent Company and Divisions such as Google, Calico, Deepmind and Waymo being created.
FICO is a. a company that analyzes consumer credit histories. b. a measure of your debt-to-income ratio. c. a special introductory interest rate on any purchases made during the holiday shopping season. d. a federal agency charged with monitoring consumer spending habits.
Answer: a. a company that analyzes consumer credit histories.
Explanation: The Fair Isaac Corporation (FICO) founded in 1956 by Bill Fair and Earl Isaac is a data analytics company and also the first company to offer a credit-risk model with a score. In other words, the FICO model is the primary method used for determining an individual's creditworthiness and in the provision of a credit rating or score.
They also offer credit scores for sales, either alone or as part of a package of products.
Bob Clarke Corporation has provided the following data from its activity-based costing system: Activities Estimated Overhead Cost Expected Activity Assembly $1,005,040 68,000 machine-hours Processing orders $102,500 2,000 orders Inspection $139,840 1,900 inspection-hours The company makes 450 hockey sticks a year, requiring a total of 710 machine-hours, 42 orders, and 12 inspection-hours per year. The product's direct materials cost is $36.42 per hockey stick and its direct labor cost is $30.16 per hockey stick. Required: 1. Calculate the unit product cost of one hockey stick according to the activity-based costing system (Round your final answer to two decimal places).
Answer:
Total Unit Cost= $ 96.65
Explanation:
Bob Clarke Corporation
Activities Estimated Overhead Cost Expected Activity
Assembly $1,005,040 68,000 machine-hours
Processing orders $102,500 2,000 orders
Inspection $139,840 1,900 inspection-hours
First we find the overhead rates using ABC costing method.
Overhead Rates= Estimated Overhead Cost/ Expected Activity
Assembly Rate= $1,005,040 /68,000 = $ 14.78 per machine-hours
Processing rate= $102,500 / 2,000= $ 51.25 per orders
Inspection Rate= $139,840/ 1,900= $ 73.6 per inspection-hours
Then we find the overhead costs applying the ABC Costing rates
Overhead Costs Of 450 Hockey
Assembly= 710 machine-hours, * $ 14.78= $10493.8
Processing=42 orders, *$ 51.25= $ 2152.5
Inspection= 12 inspection-hours*$ 73.6 = $ 883.2
Total Overhead Costs of 450 Hockey = $ 13529.5
Overhead Cost of One Hockey= 13529.5/450= 30.065= $ 30.07
Then the:
Product Cost
Direct materials cost is $36.42 per hockey stick
Direct labor cost is $30.16 per hockey stick
Overhead Costs is $ 30.07
Total Unit Cost= $ 96.65
You would like to combine a risky stock with a beta of 1.87 with U.S. Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in the risky stock
Answer:
46.5%
Explanation:
The treasury bills have zero beta as they have no systematic risk. Beta is used in the Capital asset pricing Model to demonstrate a relationship between systematic risk and rate of return.
Expected Return = Rf + Beta * Rp
The percentage that should be invested in the risky portfolio will be,
1 - 1 / Beta
1 - 1 / 1.87
= 46.5%
Bartel Corporation produces bar stools for restaurants.
1. For each of the following, indicate whether the cost would typically be considered direct or indirect cost for the cost object given.
A. Lubricants used on the bar stool manufacturing equipment.
B. The factory supervisor's salary for the bar stool factory.
C. The production labor wages for the bar stool assemblers.
D. Nails and screws used in the production of the bar stools.
E. Manufacturing costs for wood and steel used in the bar stools.
2. For each of the following, indicate whether the cost would typically be considered product or period cost for the cost object given.
A. Electricity costs to run the factory.
B. Accountant salaries.
C. Selling costs for the period.
D. Delivery costs to take the bicycles to stores.
E. Tires for the bicycles.
Answer: The answers are provided below
Explanation:
1. Direct cost are the major part of cost and can be traced to a cost object while indirect cost are typically small cost and difficult to trace to a specific cost object.
A. Lubricants used on the bar stool manufacturing equipment - indirect cost
B. The factory supervisor's salary for the bar stool factory - indirect cost
C. The production labor wages for the bar stool assemblers - direct cost
D. Nails and screws used in the production of the bar stools - direct cost
E. Manufacturing costs for wood and steel used in the bar stools - direct cost.
2. A manufacturer's product costs are direct labor, direct materials, and the manufacturing overhead that are used in making its products while the period costs are written as expenses in an accounting period. Period costs are associated with passage of time and examples include the general and administrative expenses, like rent, office supplies, office depreciation, and utilities
A. Electricity costs to run the factory - product cost
B. Accountant salaries - period cost
C. Selling costs for the period - period cost
D. Delivery costs to take the bicycles to stores - period cost
E. Tires for the bicycle - product cost
The following is a description of the conversion cycle of Central Production Limited:
The conversion cycle of the company is triggered by a report from the warehouse. When the quantity of an inventory item falls below a pre-set minimum level, the warehouse manager sends an online inventory status report to production department advising them to schedule a production batch run for the item.
Upon receipt of the report, the production clerk assesses the digital bill of materials and the route sheet files for the item to be produced and adds the production details to the online production schedule.
The system automatically adds a record to the open work order file and sends an online work order to the work centre supervisor’s computer and to the accounting clerk’s computer.
The work centre supervisor receives the work order from his computer and print hard-copy move tickets and materials requisitions for each production process. Production employees take the materials requisitions to store clerk and receives the materials and subassemblies needed to perform the production tasks. If additional materials beyond the standard amount is needed, the work centre supervisor prepares additional materials requisitions.
Production employees complete job time tickets after completing a production process to record the time spent on the job. The job time tickets are then sent together with the move tickets to the accounting department.
After releasing the materials into production, the store clerk updates the material inventory records and send the materials requisitions to accounting department. The clerk prepares a journal voucher and posts to the general ledger material control account at the end of each day.
The accounting clerk assesses the work orders and set up a work-in-process account for a production batch. Throughout the production period, the clerk also receives move tickets, job tickets, and materials requisitions, which he uses to post to the work-in-process account. At the end of each day, the accounting clerk prepares a digital journal voucher and post it to the general ledger work-in- process and finished goods control accounts.
Identify the risks exist in the conversion cycle of Central Production Limited. (10 marks, maximum 300 words)
Answer: Provided in the explanation section
Explanation:
Conversion Cycle is the cycle which track records for the arrangement of crude material to completed products.
Here on the best possible perspective all in all of the procedure:
1. Triger by distribution center dept ( Raw material Keeper)
2. Produnction chief updates the request to be finished and include further up and coming requests assuming any.
3.It will produce online request slip and straightforwardly post to chiefs tab + bookkeeper tab
4. Manager take material and issue to gathering dept ( abundance material necessity is given by his position too)
5. Time + work both finished card sare sent to Accountanct
6. When request finished Accountant update the WIP just as Inventory in books.
Hazard in the Conversion Cycle:
After receipt of material and charging it to FG as Inventory in books
- Risk is hindering of assets in overabundance keeping of stock, As material level down after a specific level automatc trigger alternative is set up, which cautions the productin withdraw. to decide the future prerequisite according to the productin request in hands ( Good control set up)
Second, Online workorder to Supervisior, All chief gets their no. of creation request ( to be finished on the web) - Good control set up
Third, Supervisor on hand, place the material prerequisite ( and if any overabundance necessity - " NO FURTHER APPROVAL" is made to store representative. here hazard is medium over the demand well beyond the Order indicates by the creation dept.
Fourthly, creation representatives itself are getting ready thier work tickets ( " NO AUTHENTICATION")- As tickets are finished by creation representatives itself control of information info or its endorsement is inadequate.
Fifth, Accountant decides himeslef the WIP , FG of the request over the crude information got as employment card, time card, material order Risk is bookkeeper simply need to verifiy the information from the information got from the creation L2 official as opposed to himself keep up the quantities of the activity.
From above it is anything but difficult to catch the degree of hazard at different level in the above procedure of Central creation Limited.
A chain of supermarkets specializing in gourmet food, has been using the average cost method to value its inventory. During the current year, the company changed to the first-in, first-out method of inventory valuation. The president of the company reasoned that this change was appropriate since it would more closely match the flow of physical goods. This change should be reported on the financial statements as A. Change in accounting estimate. B. Affecting only future periods. C. Cumulative-effect type accounting change. D. Correction of an error.
Answer: Affecting only future periods.
Explanation:
From the question, we are informed that a chain of supermarkets specializing in gourmet food, that has been using the average cost method to value its inventory changed to the FIFO method in the current year.
This change should be reported on the financial statements as a retroactive effect type of an accounting change. This is necessary because it affects future period and in order to maintain comparability and consistency.
Which of the following statements is CORRECT? a. If a company follows a policy of "matching maturities," this means that it matches its use of short-term debt with its use of long-term debt. b. If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt. c. Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased. d. Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing. e. Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.
Answer: d. Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
Explanation:
Using short term financing is generally considered to be an aggressive strategy and is more often than not frowned upon by investors.
This is because of the reputational risk involved. A company that keeps using short term financing gives off the impression that it is barely keeping afloat and therefore relying on short term loans to continue functioning.
Other risks involved include, short term loans are usually given in small quantities so they cannot be used effectively as they will bareky go anywhere in terms of investment and their payback installment schedule can be in weeks instead of months like long term financing which can be detrimental to survival.
This is as opposed to a Conservative Approach that uses long term financing to finance most of it's Working Capital.
Statement of Cash Flows—Indirect Method
The comparative balance sheet of Harris Industries Inc.
at December 31, 20Y4 and 20Y3, is as follows:
Dec. 31, 20Y4 Dec. 31, 20Y3
Assets
Cash $443,240 $360,920
Accounts receivable (net) 665,280 592,200
Inventories 887,880 1,022,560
Prepaid expenses 31,640 25,200
Land 302,400 302,400
Buildings 1,713,600 1,134,000
Accumulated depreciation—buildings (466,200) (414,540)
Machinery and equipment 781,200 781,200
Accumulated depreciation— (214,200) (191,520)
machinery and equipment
Patents 106,960 112,000
Total assets $4,251,800 $3,724,420
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)$837,480 $927,080
Dividends payable 32,760 25,200
Salaries payable 78,960 87,080
Mortgage note payable, due in nine years 224,000 0
Bonds payable 0 390,000
Common stock, $5 par 200,400 50,400
Paid-in capital: Excess of issue price 366,000 126,000
over par—common stock
Retained earnings 2,512,200 2,118,660
Total liabilities and stockholders' equity $4,251,800 $3,724,420
An examination of the income statement and the accounting records revealed the following additional information applicable to 20Y4:
Net income, $524,580.
Depreciation expense reported on the income statement: buildings, $51,660; machinery and equipment, $22,680.
Patent amortization reported on the income statement, $5,040.
A building was constructed for $579,600.
A mortgage note for $224,000 was issued for cash.
30,000 shares of common stock were issued at $13 in exchange for the bonds payable.
Cash dividends declared, $131,040.
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments
Answer:
Statement of Cash Flows
Cash flow From Operating Activities
Net income $524,580
Adjustment for Non Cash Items :
Depreciation expense - buildings $51,660
Depreciation expense - machinery and equipment $22,680
Patent amortization $5,040
Adjustments for Changes in Working Capital Items :
Increase in Accounts receivable -$73,080
Decrease in Inventories $134,680
Increase in Prepaid expenses -$6,400
Decrease in Accounts payable -$89,600
Net Cash From Investing Activities $569,540
Cash flow From Investing Activities
Buildings -$579,600
Net Cash From Investing Activities -$579,600
Cash flow From Financing Activities
Mortgage Note $224,000
Dividends Paid -$123,480
Net Cash From Financing Activities $100,520
Movement during the year $82,320
Cash and Cash Equivalents at beginning of the year $360,920
Cash and Cash Equivalents at end of the year $443,240
Explanation:
For Determination of Dividends Paid, open a Dividends Paid Account as follows :
Debit:
Cash (Balancing figure) 123,480
Balance c/d 32,760
Totals 156,240
Credit
Balance b/d 25,200
Dividends Declared 131,040
Totals 156,240
Public television periodically runs pledge drives to raise money. Only a small percentage of the people who benefit from public television are willing to pay. This low percentage of people willing to contribute illustrates a difficulty with:____________.
Answer
voluntary programs
Explanation:
voluntary programs or activities that are usually individual or people voluntarily participate in and they are not paid for it. sometimes, voluntary programs are made for profit and sometimes not for profit.
pledge drive is a vivid example of a voluntary program. sometimes, only some few public television are able to get donations to run their day to day program/activities. most times, the subscription will be an addition to others and also large source of revenue. most times the incentives to join and dangers of shirking is a problem affecting voluntary program
Management is considering using a new component that would increase the unit variable cost by $50. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected
Answer:
Because fixed costs will not change, the overall effect on the company's monthly net operating income will be equal to the contribution margin of the product once the new component is added.
Explanation:
The contribution margin is equal to: Revenue - Variable Costs.
We already know that the variable cost will be increased by $50 once new component is added, and that monthly sales are expected to increase by 500 units after that.
Depending on the price of the product, the amount sold, and the variable costs, we get the contribution margin, and this contribution margin will be exactly the same as the overall effect on the net operating income.
Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.)
Product A Product B
Number of units produced 11,500 units 1.700 units
Direct labor cost ($29 per DLH) 0.16 DLH per unit 0.24 DLH per unit
Direct materials cost $2.10 per unit $3.10 per unit
Activity Overhead costs
Machine setup $94,104
Materials handling 53,000
Quality control inspections 73.200
$220,304
Required
a. Using direct labor hours as the basis for assigning overhoad costs, determine the total production cost per unit for each product line.
b. If the market price for Product A is $28.68 and the market price for Product B is $58, determine the profit or loss per unit for each.
c. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to what is the cost per unit for Product A and for Product B?
Answer:
a. Product A $257,830 , Product B $57,086
b. Product A $71,990 , Product B $41,514
c. Hie, for this part of the question there is missing information regarding the Activities for the two Products for each Activity Center.
However the Procedure to deal with the required is explained below :
Step 1 : Determine the Overhead Absorption Rate for Each Activity Center
(We have three Activity Centers: Machine setup, Materials handling: Quality control inspections )
Overhead Absorption Rate = Total Overhead (for each) / Total Number of Activity
Step 2: Absorb the Costs in the products using the Rate for each cost center and the number of activity incurred in each cost center for the two Products
Overhead (Activity Center) = Overhead Absorption Rate× Activity Specific to the Product.
Step 3 : Determine the Total Costs
Total Cost for one Product would include the Total Costs for each Activity Center (which are your overheads) plus the Direct Labor and Direct Material Costs as Calculated in Part b.
Explanation:
Part a
Total Production Cost = Direct Costs + Indirect costs (overheads)
First determine the predetermined rate based on direct labor hours.
Total direct labor hours.
Product A (11,500×0.16) = 1,840
Product B (1.700×0.24) = 408
Total = 2,248
Predetermined rate = total overhead cost / total direct labor hours
= $220,304 / 2,248
= $98 per labor hour
Assigning Overhead Cost
Total Overhead Costs
Product A (1,840×$98) = 180,320
Product B (408×$98) = 39,984
Total = 220,304
Total Costs
Product A Product B
Direct labor cost
Product A ( 1,840×$29) 53,360
Product B (408×$29) 11,832
Direct materials cost
Product A ( 11,500×$2.10) 24,150
Product B (1.700×$3.10) 5,270
Overheads
Product A 180,320
Product B 39,984
Total Costs 257,830 57,086
Part b.
Profit = Selling Price - Expenses
Product A Product B
Sales
Product A ( 11,500×$28.68) 329,820
Product B (1.700×$58) 98,600
Manufacturing Costs (257,830) (57,086)
Profit 71,990 41,514
