a) At the initial equilibrium, the price of good 1 (p1) is $10, the price of good 2 (p2) is $50, and the consumer's income (m) is $10,000. Using the demand equations, we can calculate the amounts demanded of both goods:
x1 = (1/4)(m/p1) = (1/4)($10,000/$10) = 250
x2 = (3/4)(m/p2) = (3/4)($10,000/$50) = 600
So, the consumer demands 250 units of good 1 and 600 units of good 2 at the initial equilibrium. To calculate the utility at this point, we can substitute these values into the utility function:
U(x1, x2) = x1^(1/4) * x2^(3/4)
U(250, 600) = 250^(1/4) * 600^(3/4) ≈ 183.55
b) If the price of good 1 increases to $20, the new amounts demanded can be calculated using the demand equations:
x1 = (1/4)(m/p1) = (1/4)($10,000/$20) = 500
x2 = (3/4)(m/p2) = (3/4)($10,000/$50) = 600
The new equilibrium level of utility can be calculated by substituting these values into the utility function:
U(x1, x2) = x1^(1/4) * x2^(3/4)
U(500, 600) = 500^(1/4) * 600^(3/4) ≈ 212.79
c) To determine how much money would be needed to compensate the consumer to afford their original bundle from part a), we need to calculate the expenditure at the new prices (p1 = $20, p2 = $50) for the original quantities (x1 = 250, x2 = 600). The expenditure can be calculated as:
Expenditure = p1 * x1 + p2 * x2
Expenditure = ($20 * 250) + ($50 * 600) = $35,000
Therefore, the consumer would need to be compensated with an additional $25,000 ($35,000 - $10,000) to afford their original bundle.
d) Given the new prices (p1 = $20, p2 = $50) and the consumer's income (m = $10,000 + $25,000), we can find the optimal consumption bundle using the demand equations:
x1 = (1/4)(m/p1) = (1/4)($35,000/$20) = 437.5
x2 = (3/4)(m/p2) = (3/4)($35,000/$50) = 787.5
The new equilibrium point is (437.5, 787.5).
e) The size of the substitution effect can be calculated as the difference between the new quantity demanded of good 1 after the price change and the initial quantity demanded at the original prices:
Substitution effect = x1(B) - x1(A) = 500 - 250 = 250
The size of the income effect can be calculated as the difference between the utility at the new equilibrium point and the utility at the initial equilibrium point:
Income effect = U(B) - U(A) ≈ 212.79 - 183.55 ≈ 29.24
f) Based on the results, we can
analyze the nature of good 1:
- Since the substitution effect is positive (250), it indicates that as the price of good 1 increases, the consumer substitutes away from good 1 and consumes more of good 2.
- The income effect is positive (29.24), suggesting that as the consumer's income increases (with compensation), they choose to consume more of both goods.
Considering these effects, we can conclude that good 1 is a normal good. As the consumer's income increases, their demand for good 1 increases, which aligns with the typical behavior of a normal good.
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what is the term for a business in which none of the co-owners is responsible for the debts or mistakes of the others?
The term for a business in which none of the co-owners is responsible for the debts or mistakes of the others is called a Limited Liability Company (LLC).
What is an LLC?
An LLC is a type of business organization where its owners are called members. LLC members cannot be held liable for any debts or obligations that are incurred by the company. In simple terms, the members have limited liability in the sense that they cannot be held personally liable for the company's obligations or debts. Additionally, each member's personal assets are protected in the event that the business is sued or fails.
In conclusion, if you are a member of an LLC and the company incurs debts or makes a mistake, then you are not held personally responsible for the debts or mistakes of the other members.
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Analysis of the balance of payments of the Netherlands for the last
available year. Is it a debtor or creditor country?"
To determine whether the Netherlands is a debtor or creditor country, we need to analyze its balance of payments. The balance of payments is a record of all economic transactions between residents of a country and the rest of the world over a specific period.
In the balance of payments, there are three main components: the current account, the capital account, and the financial account. The current account includes trade in goods and services, income from abroad, and transfers. The capital account covers transactions related to non-financial assets, and the financial account records financial investments and liabilities.
If a country has a current account surplus (i.e., the value of exports of goods, services, and income from abroad exceeds the value of imports and income paid to foreign entities), it indicates that the country is a net creditor. Conversely, if a country has a current account deficit, it suggests that the country is a net debtor.
Without specific data on the balance of payments of the Netherlands for the last available year, it is not possible to determine whether it is a debtor or creditor country. The balance of payments data would need to be analyzed to assess the current account balance and determine the overall status of the country as a debtor or creditor.
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Describe the competitive and economic factors that are driving
the globalization of some industries.
Technological advancements: With technological advancements, the world is becoming increasingly interconnected and complex.
E-commerce has made it possible for people to buy and sell goods and services from all around the world. Social media has made it easier for businesses to connect with customers and potential clients from around the world. Economies of scale: Globalization has opened up new markets for businesses to operate in.
With more consumers comes the potential for economies of scale. By producing more goods and services at a lower cost, businesses can increase their profits and gain a competitive edge. Free trade agreements: Free trade agreements have made it easier for businesses to operate in foreign markets.
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The trend analysis report of Marswell, Inc. is given below (in
millions):
2019
2018
2017
2016
2015
Net income
$650
$602
$460
$403
$401
Trend percentages
162%
150%
To calculate the trend percentages for the given net income values, you need a reference year. The trend percentage compares the value of a specific year to the reference year and expresses it as a percentage change.
Based on the provided information, it appears that the trend analysis report shows the net income values for Marswell, Inc. for the years 2015 to 2019. Additionally, the trend percentages are calculated based on the net income values. The trend percentages represent the percentage increase or decrease in net income compared to the base year. In this case, the base year seems to be 2015, which is assigned a value of 100%. The subsequent years' net income values are then calculated as a percentage of the base year. For example, the 2019 net income of $650 million represents a 162% increase compared to the base year (2015), while the 2018 net income of $602 million represents a 150% increase.
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the requirement that purchases be made from suppliers on an approved vendor list is an example of a
Control procedures are activities or steps that ensure that an organization's objectives are accomplished. Control procedures are designed to ensure that directives, policies, and procedures are carried out and objectives are achieved.
These control procedures can be classified into two categories: accounting and administrative.Accounting control proceduresThe procedures that ensure accurate and complete financial reports and that accounting records are protected from waste, fraud, and misuse are known as accounting control procedures. Accounting control procedures ensure that the financial information is correct and reliable.Administrative control proceduresThese are procedures that are intended to ensure that the organization's assets are safeguarded and that employees comply with established policies and procedures.
These procedures are intended to ensure that the organizational objectives are achieved.Example of control procedures in an organizationTo reduce the risk of theft, an organization can limit the amount of cash that is kept on the premises. Cash in excess of a predetermined amount can be removed from the premises at regular intervals. This ensures that the organization's financial assets are safeguarded.
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We consider a single-period model with three securities: the bank account whose price process is A(0) = A(1) = 1, and two stocks with price processes given by S1(0) = s for some s > 0, S1(1) = 1.3 in scenario ω1, 0.3 in scenario ω2, 0.3 in scenario ω3
and S2(0) = 1.1,
S2(1) = 1.6 in scenario ω1, 1.1 in scenario ω2, 0.6 in scenario ω3
(a) Find all risk neutral probabilities depending on s.
(b) Consider a model consisting only of the bank account and the first stock. Determine all risk-neutral probabilities (depending on the parameter s).
(c) Consider a model consisting only of the bank account and the second stock. Determine all risk-neutral probabilities.
(d) Let s = 0.9. Find an arbitrage opportunity for the model consisting of the three securities.
(e) In (d), is there an arbitrage opportunity if transaction costs of 10% apply on the transaction volume of the first stock (no transaction costs on the second stock and the bank account)
In the given single-period model with three securities, the risk-neutral probabilities depend on the parameter 's.' The risk-neutral probabilities for a model consisting of the bank account and the first stock, as well as for a model consisting of the bank account and the second stock, need to be determined. For the model with three securities and s = 0.9, an arbitrage opportunity exists. However, when transaction costs of 10% are applied to the transaction volume of the first stock, there is no longer an arbitrage opportunity.
(a) To find all risk-neutral probabilities depending on 's,' we need to assign probabilities to each scenario such that the expected return of each security is equal to the risk-free rate. By setting up equations using the given price processes and solving them, we can determine the risk-neutral probabilities for each scenario.
(b) For the model consisting of the bank account and the first stock, the risk-neutral probabilities can be calculated by considering the expected return of the stock equal to the risk-free rate. By setting up an equation using the given price processes and solving for the probabilities, we can determine the risk-neutral probabilities depending on the parameter 's.'
(c) Similarly, for the model consisting of the bank account and the second stock, the risk-neutral probabilities can be determined by equating the expected return of the stock to the risk-free rate. Solving the equation using the given price processes will provide the risk-neutral probabilities.
(d) When s = 0.9, it is possible to find an arbitrage opportunity by constructing a portfolio that yields a riskless profit. By taking appropriate positions in the three securities based on their prices and expected returns, one can exploit the mispricing and make a riskless profit.
(e) However, when transaction costs of 10% are applied to the transaction volume of the first stock, the arbitrage opportunity identified in (d) is no longer feasible. The transaction costs impact the profitability of the trade, making it unprofitable or less profitable. Therefore, with transaction costs applied, there is no longer an arbitrage opportunity in this scenario.
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A company's income before interest expense and income taxes is
$400,000, and its interest expense is $110,000. Its times interest
earned ratio is:
The given values are; Income before interest expense and income taxes = $400,000Interest expense = $110,000We are to calculate the times interest earned ratio.
Times Interest Earned Ratio:Times Interest Earned Ratio (TIE) or Interest Coverage Ratio measures the ability of a company to meet its financial obligations to pay the interest on its debt. It is a coverage ratio that tells how many times the company can cover its interest payments with its earnings before interest and taxes.
It is calculated as follows:TIE = Earnings before interest and taxes (EBIT) / Interest ExpenseWhere EBIT = Operating Income + Non-Operating Income – Non-Operating Expense TIE = $400,000 / $110,000TIE = 3.64 times (approx)Therefore, the times interest earned ratio is approximately 3.64 times.
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Consider a simple public good economy with three people and two goods: one public (x) and one private (y). Assume that one unit of public good can be produced with one unit of private good. Person 1's utility function is u₁(x,y) = logx + y₁, Person 2's utility function is u:(x,y) = 2logx + y₂, and Person 3's utility function is us(x,y) = 3logx + ys. a. (5 points) Find the optimal output of the public good by using Samuelson condition. b. (15 points) Find the tax shares by using Wicksell-Lindahl mechanism. c. (10 points) Comment on the efficiency and incentives properties of the Wicksell-Lindahl mechanism.
a. the optimal output of the public good is 1 unit. b. the tax shares for Person 1, Person 2, and Person 3 are 1/6, 1/3, and 1/2, respectively. c. the Wicksell-Lindahl mechanism promotes efficiency by aligning contributions with preferences and provides incentives for truthful revelation of preferences.
a. To find the optimal output of the public good using the Samuelson condition, we need to equate the marginal rate of substitution (MRS) of each individual with the marginal rate of transformation (MRT).
For Person 1: MRS₁ = -du₁/dy = 1/y₁
For Person 2: MRS₂ = -du₂/dy = 1/y₂
For Person 3: MRS₃ = -du₃/dy = 1/y₃
The MRT is 1 (since one unit of private good can produce one unit of public good).
Setting MRS₁ = MRS₂ = MRS₃ = MRT, we have:
1/y₁ = 1/y₂ = 1/y₃ = 1
Solving these equations, we find y₁ = y₂ = y₃ = 1.
Therefore, the optimal output of the public good is 1 unit.
b. To find the tax shares using the Wicksell-Lindahl mechanism, we need to determine the willingness to pay (WTP) for the public good by each individual.
The WTP for Person 1: WTP₁ = du₁/dx = 1/x
The WTP for Person 2: WTP₂ = du₂/dx = 2/x
The WTP for Person 3: WTP₃ = du₃/dx = 3/x
The total WTP is the sum of individual WTPs: WTP_total = WTP₁ + WTP₂ + WTP₃ = 1/x + 2/x + 3/x = 6/x
To determine the tax shares, we divide each individual's WTP by the total WTP:
Tax share for Person 1: τ₁ = (WTP₁ / WTP_total) = (1/x) / (6/x) = 1/6
Tax share for Person 2: τ₂ = (WTP₂ / WTP_total) = (2/x) / (6/x) = 2/6 = 1/3
Tax share for Person 3: τ₃ = (WTP₃ / WTP_total) = (3/x) / (6/x) = 3/6 = 1/2
Therefore, the tax shares for Person 1, Person 2, and Person 3 are 1/6, 1/3, and 1/2, respectively.
c. The Wicksell-Lindahl mechanism achieves efficiency in the provision of the public good by making individuals contribute taxes according to their willingness to pay. The mechanism takes into account the preferences of individuals and allocates the tax burden accordingly, ensuring that the public good is funded in an efficient manner.
Regarding incentives, the Wicksell-Lindahl mechanism provides individuals with the incentive to reveal their true preferences for the public good through their willingness to pay. Each individual has an incentive to honestly express their valuation of the public good since their tax burden is determined based on their willingness to pay. This mechanism avoids the free-rider problem often associated with public goods.
Overall, the Wicksell-Lindahl mechanism promotes efficiency by aligning contributions with preferences and provides incentives for truthful revelation of preferences, leading to an efficient allocation of resources for the provision of public goods.
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you establish a straddle on walmart using september call and put options with a strike price of $85. the call premium is $7.25 and the put premium is $8.00.
The maximum loss that may occur is limited to the $1,525 straddle cost.
A straddle is a market-neutral options trading technique used to benefit from high volatility. When market volatility is expected, this strategy is implemented. The strategy entails purchasing an equal number of puts and calls with the same strike price and expiration date.A straddle strategy can be used to trade Walmart stock using September call and put options with an $85 strike price and a call premium of $7.25 and a put premium of $8.00.The following is how you establish a straddle strategy:Buying 1 September 85 call option at $7.25 costs $725 (1 option contract = 100 shares)Buying 1 September 85 put option at $8.00 costs $800 (1 option contract = 100 shares)As a result, the overall cost of the straddle is $1,525 ($725 + $800).You would make a profit if the Walmart stock price rises above $96.25 or falls below $73.75, which is the $85 strike price plus or minus the total straddle cost of $15.25. The maximum loss that may occur is limited to the $1,525 straddle cost.
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On March 1, Bramble Inc. sells 1,100 common shares to its employees at $23 per share and lends the money to the employees to buy the new shares in exchange for a note receivable. The employees pay 45% of the price on the transaction date and pay the balance in one year.
(a)
Prepare the company’s necessary journal entry on March 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Mar. 1
select an account title for the journal entry on March 1
enter a debit amount
enter a credit amount
select an account title for the journal entry on March 1
enter a debit amount
enter a credit amount
select an account title for the journal entry on March 1
enter a debit amount
enter a credit amount
On March 1, Bramble Inc. records the sale of 1,100 common shares to its employees at $23 per share and lends them the money to purchase the shares. The employees pay 45% of the price on the transaction date, and the balance will be paid in one year. The necessary journal entry on March 1 is as follows: Cash (1,100 shares * $23 * 45%) 11,385 Notes Receivable 11,385 Common Stock 25,300 Additional Paid-in Capital (1,100 shares * $23 * 55%) 13,915
The journal entry records the transaction involving the sale of common shares to employees and the creation of a note receivable. The debit to Cash represents the partial payment received from employees, which is calculated as 1,100 shares multiplied by $23 per share, multiplied by 45%. The credit to Notes Receivable represents the amount owed by the employees for the remaining balance. The debit to Common Stock represents the par value of the shares issued, calculated as 1,100 shares multiplied by $23 per share. The credit to Additional Paid-in Capital represents the excess of the purchase price over the par value of the shares, calculated as 1,100 shares multiplied by $23 per share, multiplied by 55% (the remaining balance to be paid by the employees).
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Floren Corporation had the following transactions pertaining to temporary debt investments. Journalize the following transactions. 1) On January 1, 20X1, purchased 50 of the 8%, $1,000 Choate Co. bonds for $50,000 cash, at 100(%) plus brokerage fees of $900. Interest is payable semiannually on July 1 and January 1. Account Name Date Debit Credit 2) July 1, 20X1 received the semiannual interest from Choate Co. on the bonds. Date Credit Debit Account Name 3) December 31, 20x1, journalize the Adjusting Entry needed for the accrued interest on the bonds. Date Account Name Debit Credit 4) January 1, 20X2 received the semiannual interest from Choate Co. on the bonds. Date Account Name Debit Credit 5) July 1, 20X2 sold 30 of the Choate Co. bonds for at 110 (%) less $500 brokerage fee. (The interest had already been received) Account Name Date Credit Debit 6) What if the sale had occurred Oct 1, 20x2. That means that Floren held the bonds from the last interest payment until Oct 1. Record the sale. Date Account Name Debit Credit
On January 1, 20X1, they purchased 50 bonds for $50,000 cash plus brokerage fees. On July 1, 20X1, they received semiannual interest from Choate Co. On December 31, 20X1, an adjusting entry was made to accrue interest on the bonds. On January 1, 20X2, they received semiannual interest again. On July 1, 20X2, they sold 30 of the Choate Co. bonds, deducting a brokerage fee. Additionally, the hypothetical scenario of a sale occurring on October 1, 20X2, with Floren holding the bonds since the last interest payment, will be recorded.
1) On January 1, 20X1, the purchase of 50 Choate Co. bonds for $50,000 cash plus $900 brokerage fees will be recorded:
Debit: Temporary Debt Investments (Choate Co. Bonds) - $50,000
Debit: Brokerage Fees Expense - $900
Credit: Cash - $50,900
2) On July 1, 20X1, the receipt of semiannual interest from Choate Co. will be recorded:
Debit: Cash - Interest Received - $2,000 (50 bonds * $1,000 bond face value * 8% interest rate)
Credit: Interest Revenue - $2,000
3) On December 31, 20X1, an adjusting entry is made to accrue interest on the bonds for the period since the last interest payment. Assuming six months have passed:
Debit: Interest Receivable - $2,000 (50 bonds * $1,000 bond face value * 8% interest rate * 6/12)
Credit: Interest Revenue - $2,000
4) On January 1, 20X2, the receipt of semiannual interest from Choate Co. will be recorded, similar to the entry on July 1, 20X1.
5) On July 1, 20X2, the sale of 30 Choate Co. bonds for 110% of their value, deducting a $500 brokerage fee, will be recorded:
Debit: Cash - $33,000 (30 bonds * $1,000 bond face value * 110%)
Debit: Loss on Sale of Investments - $1,500 ($33,000 - $30,000)
Credit: Temporary Debt Investments (Choate Co. Bonds) - $30,000
Credit: Brokerage Fees Expense - $500
6) If the sale occurred on October 1, 20X2, with Floren holding the bonds since the last interest payment, the entry would be the same as the entry on July 1, 20X2.
These journal entries record the various transactions related to Floren Corporation's temporary debt investments in Choate Co. bonds.
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John Newton, an accountant, volunteered his service to Save Eagle Habitats, a nonprofit with a mission to protect and preserve eagle habitats throughout the United States. He spent 20 hours preparing budgets and financial statements for the nonprofit and 4 hours serving as a clerk in their gift shop. Newton normally gets $250 an hour for accounting services, and the nonprofit normally pays $8 an hour when it hires clerks. The journal entry(ies) to record Newton’s volunteer services is(are):
Group of answer choices
Program Expense $5,000 DR, Unrestricted Support $5,000 CR.
Support Expense – General & Management $5,000 DR, Unrestricted Support $5,000 CR.
Program Expense $5,000 DR, Support Expense – General & Management $32, Unrestricted Support $5,032.
Support Expense – General & Management $5,032 DR, Unrestricted Support $5,032 CR.
The journal entry to record Newton's volunteer services is:
**Program Expense | $5,000 DR
Unrestricted Support | $5,000 CR**
Explanation:
Volunteer services provided by John Newton should be recorded as program expenses in the financial statements of Save Eagle Habitats. In this case, John Newton spent 20 hours preparing budgets and financial statements for the nonprofit. Since his normal rate for accounting services is $250 per hour, the value of his volunteer services is 20 hours x $250/hour = $5,000.
The debit to Program Expense represents the recognition of the value of the volunteer services provided by John Newton. The credit to Unrestricted Support reflects the corresponding increase in the nonprofit's unrestricted support, recognizing the contribution of the volunteer services received.
The journal entry does not include Support Expense - General & Management or clerical services since those are not applicable to Newton's volunteer activities in this scenario.
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mills, and a school division tax of 3.475 mills. There is one local improvement levy for boulevard reconstruction which costs $5.65/ft. If the Kenos rent the property they would pay $1650/month. They would expect a 1% rent increase annually. They could invest the money they would spend on a down payment and additional costs if they purchase the property, at a rate of 1.95%. a. What is the monthly mortgage payment if they buy, and how does it compare to the monthly rent payment? b. State the total cost to buy the home. c. State the total cost to rent the home. d. Which option is cheaper over the 20 years? e. Would you advise the Kenos to purchase, or rent the home? Why? The Keno family is trying to decide whether to rent or buy a property they are interested in. The value of the property with 40 ft. frontage is $289,000. The property has an annual appreciation rate of 1.35%. If the Kenos buy the property, there are additional costs of about $23,000 they will have to pay. 4 They have saved $26,000 as a down payment. The bank would offer them a 20 year mortgage at an interest rate of 3.73% with monthly payments. The municipal mill rate in the area is 15.325 mills. There is an education tax of 7.525 mills, and a school division tax of 3.475 mills. There is one local improvement levy for boulevard reconstruction which costs $5.65/ft. If the Kenos rent the property they would pay $1650/month. They would expect a 1% rent increase annually. They could invest the money they would spend on a down payment and additional costs if they purchase the property, at a rate of 1.95%. a. What is the monthly mortgage payment if they buy, and how does it compare
a) Monthly mortgage payment if they buy: We can find out monthly mortgage payment if we use the loan amortization formula.Using the loan amortization formula, Monthly mortgage payment = $1,185.72
The monthly mortgage payment is cheaper than the monthly rent payment. The Kenos would pay $1650/month if they rent the home while they would pay $1,185.72/month if they buy the home.b) Total cost to buy the home:Additional costs they will have to pay if the Kenos buy the property = $23,000Total down payment = $26,000Mortgage payment for 20 years = $1,185.72 x 240 = $284,572.80Thus, the total cost to buy the home = $23,000 + $26,000 + $284,572.80 = $333,572.80c)
Total cost to rent the home: The total cost to rent the home for 20 years can be calculated by multiplying the monthly rent by the number of months in 20 years and adding the total of all rent increases. 1650 x 240 = $396,000 Advice for the Kenos:As renting is cheaper than buying the home over 20 years, I would advise the Kenos to rent the home instead of buying it.
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mrs. stewart came in to your retail pharmacy and wants to know what aisle your acid reflux medications are? you should:
If Mrs. Stewart came to the retail pharmacy and wants to know what aisle your acid reflux medications are, the pharmacist should guide her to the relevant aisle where the medication is available.
A retail pharmacy is a pharmacy that operates in a retail store. This type of pharmacy is intended to serve customers directly. Retail pharmacies are usually located in drugstores, grocery stores, and big-box stores like Walmart and Target.
Acid reflux medication is a medicine that is used to alleviate the symptoms of acid reflux. It is available over the counter or by prescription and works by reducing the amount of acid in the stomach.
When Mrs. Stewart came in to the retail pharmacy and asked where the acid reflux medication is available, the pharmacist should guide her to the relevant aisle where the medication is available. Also, the pharmacist can ask Mrs. Stewart if she needs help choosing a specific medication for acid reflux symptoms, and the pharmacist can also provide additional information about the medication, including its potential side effects, proper dosage, and how to take it.
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Lewin's Force-Field Theory of Change states that for a change to occur A The resistance to change must be higher than the forces for change. B The resistance to change must equal the forces for change. C The resistance to change must be lower than the forces for change. D The resistance to change is not a force to consider.
According to Lewin's Force-Field Theory of Change, the correct answer is B: The resistance to change must equal the forces for change.
Lewin's Force-Field Theory suggests that any change process involves two opposing forces: driving forces and restraining forces. Driving forces are the factors that push for change, such as the need for improvement or external pressures. Restraining forces, on the other hand, are the factors that resist change, such as fear of the unknown or a desire to maintain the status quo.
For change to occur successfully, Lewin proposed that the total driving forces must outweigh the total restraining forces. In other words, the forces for change need to be stronger than the forces against change.
However, it is important to note that this doesn't imply that the resistance to change is completely eliminated. Rather, it suggests that the resistance should be balanced by the forces pushing for change, creating an equilibrium that allows for successful change implementation.
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KHD has 1,500 bonds outstanding that are selling for $1,000 each. The common stock is priced at $26 a share and there are 36,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital? 29.3% 24.8% 45.7% 38.4%
To calculate the weight of common stock in the firm's weighted average cost of capital (WACC).
The weight of common stock is calculated as follows:
Weight of Common Stock = (Market Value of Common Stock) / (Total Market Value of Equity and Debt)
First, let's calculate the market value of the common stock:
Market Value of Common Stock = Number of Shares Outstanding * Price per Share
Market Value of Common Stock = 36,000 * $26
Market Value of Common Stock = $936,000
Next, let's calculate the total market value of equity and debt by considering the outstanding bonds:
Total Market Value of Equity and Debt = Market Value of Common Stock + Market Value of Bonds
Since we know the bonds are selling for $1,000 each, we can calculate the market value of the bonds:
Market Value of Bonds = Number of Bonds Outstanding * Price per Bond
Market Value of Bonds = 1,500 * $1,000
Market Value of Bonds = $1,500,000
Now, let's calculate the total market value of equity and debt:
Total Market Value of Equity and Debt = $936,000 + $1,500,000
Total Market Value of Equity and Debt = $2,436,000
Finally, we can calculate the weight of common stock:
Weight of Common Stock = $936,000 / $2,436,000
Weight of Common Stock = 0.384
Converting this to a percentage, the weight of the common stock as it relates to the firm's weighted average cost of capital is approximately 38.4%.
Therefore, the correct answer is 38.4%.
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PLS SHOW ALL WORKING steps WELL PLS
Problem 3-6 Future Value of a Tax Savings [LO3] On December 30, you decide to make a $2,000 charitable donation. a. If you are in the 20.5 percent federal tax bracket, how much will you save in taxes
To calculate how much you will save in taxes from a charitable donation, you need to determine the tax savings based on your federal tax bracket.
Given:
Donation amount: $2,000
Federal tax bracket: 20.5%
To calculate the tax savings, you can multiply the donation amount by the tax bracket rate:
Tax savings = Donation amount * Tax bracket rate
= $2,000 * 0.205
= $410
Therefore, you will save $410 in taxes from your $2,000 charitable donation, assuming a federal tax bracket of 20.5%.
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What does a decrease in the 'debt to assets' ratio indicate about a company? For reference, the ratio is calculated as 'total debt divided by total assets. OA. A decrease indicates an improvement in t
A decrease in the 'debt-to-assets ratio indicates an improvement in the financial position of a company. It suggests that the company has reduced its level of debt relative to its total assets, which can be seen as a positive sign of financial health and stability.
The 'debt-to-assets ratio measures the proportion of a company's assets that are financed by debt. When the ratio decreases, it means that the company has reduced its debt burden or increased its asset base. This indicates that the company has either paid off some of its debt or acquired additional assets without increasing its debt levels.
A lower 'debt to assets ratio is generally viewed positively because it signifies a lower risk of financial distress and indicates that the company has a healthier balance between its debt and assets. It suggests that the company has improved its ability to cover its financial obligations and is in a stronger position to generate profits and shareholder value.
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Steven and a friend incorporated a company with RM2 issued share capital and each holds an RM1 share. They have no intention to increase the paid-up capital of the company soon until the company is fully operationalized with the successful application of a franchise license in Active Water. They have asked you to invest money in their company through a loan capital with a promising return of 10%. Explain whether you will lend money to Steven and his friend’s company. (30 marks)
Please give more explanation, will give you a vote!!!
As an investor considering lending money to Steven and his friend's company, several factors need to be evaluated before making a decision.
Financial Stability: Since the company currently has a low issued share capital of RM2, it indicates limited financial resources and may raise concerns about its ability to meet financial obligations. It is crucial to assess the company's financial stability, including its cash flow projections, profitability, and ability to generate sufficient returns to repay the loan with interest.
Business Plan and Franchise License: Understanding the company's business plan and the potential success of obtaining a franchise license in Active Water is essential. Evaluate the market demand for the product, the competitive landscape, and the company's strategies for growth and profitability. The successful acquisition of a franchise license can positively impact the company's prospects and increase the likelihood of loan repayment.
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Who does a tax preparer contact if they suspect a client of
using H&R Block services for an unlawful purpose?
If a tax preparer suspects a client of using H&R Block services for an unlawful purpose, they should consider taking appropriate actions to address the situation. Here are some steps they can take:
1. Consult with a supervisor or manager within their organization: The tax preparer should discuss their concerns with a higher authority within their company, such as a supervisor or manager. They can seek guidance on how to proceed and report the issue.
2. They should contact appropriate legal authorities such as the Internal Revenue Service (IRS) or local law enforcement. The tax preparer should ensure they follow the proper reporting protocols to maintain their professional obligations and protect themselves from any potential legal issues.
3.Maintain client confidentiality: Throughout the process, the tax preparer should ensure they handle the situation with discretion and maintain client confidentiality to the extent permitted by law. Sharing information should be done according to the company's policies and legal obligations.
This are some steps that a tax prepare can take to suspect a client.
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Which is NOT a question managers should ask when assessing whether or not a course of action is ethical? a. Would I publicize my action? b. Is it legal? c. Will I get caught? d. Am I being honest?
The question that managers should NOT ask when assessing whether or not a course of action is ethical is: c. Will I get caught?
Ethical decision-making involves considering the moral implications and consequences of one's actions. When evaluating the ethical nature of a course of action, managers should focus on principles such as honesty, fairness, integrity, and the overall impact on stakeholders. Asking whether they will get caught shifts the focus from ethical considerations to personal consequences and potential punishment.
Directly considering the likelihood of getting caught suggests a disregard for ethical principles and a focus on self-interest rather than doing what is right. Ethical decision-making should be guided by a genuine commitment to ethical behavior, irrespective of the likelihood of being caught or facing consequences.
Instead, managers should ask questions such as:
a. Would I publicize my action? This question encourages managers to consider whether they would be comfortable with their actions being known by others, suggesting the importance of transparency and accountability.
b. Is it legal? Assessing the legality of an action is a fundamental aspect of ethical decision-making, as complying with laws and regulations is a minimum requirement.
d. Am I being honest? Honesty is a vital ethical principle, and questioning one's own honesty ensures integrity and truthfulness in decision-making.
In conclusion, while considering the likelihood of getting caught is not a relevant question for assessing the ethical nature of a course of action, managers should focus on questions related to transparency, legality, and personal integrity when making ethical decisions.
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Using ratios to decide between two stock investments 2 Assume that you are purchasing an investment and 3 have decided to invest in a company in the digital phone business. You have narrowed the choice to 4 5 Selected income statement data for the current year: 6 7 Best Digital Every Zone $420,115 8 Net sales (all on credit) $498,955 9 Cost of goods sold $210,000 $256,000 10 Interest expense $16,000 11 Net income $48,000 $74,000 12 13 Selected balance sheet and market price data at the end of the current year: 15 Best Digital Every Zone 16 Current assets: 17 Cash $25,000 $23,000 18 Short-term investments $42,000 $21,000 19 Current receivables, net $42,000 $52,000 20 Inventories $69,000 $105,000 21 Prepaid expenses $19,000 $14,000 22 Total current assets $197,000 $215,000 23 Total assets $268,000 $331,000 24 Total current liabilities. $102,000 $100,000 25 Total liabilities $102,000 $128,000 $15,000 26 Common stock, $1 par (15,000 shares) 27 $1 par (16,000 shares) $16,000 28 Total stockholders' equity $166,000 $203,000 29 Market price per share of common stock $48.00 $115.75 30 Dividends paid per common share $2.00 $1.80 31 32 Selected balance sheet data at the beginning of the current year: 33 34 Best Digital Every Zone 35 Balance sheet: 36 Current receivables, net $47,000 $56,000 37 Inventories $83,000 $92,000 38 Total assets $261,000 $274,000 39 Common stock, $1 par (15,000 shares) $15,000 40 $1 par (16,000 shares) $16,000 Your strategy is to invest in companies that have low price/earnings ratios but 42 appear to be in good shape financially. Assume that you have analyzed all other factors and that your decision depends on the results of ratio analysis 43 44 Requirement 45 1. Compute the following ratios for both companies for the current year, and decide which company's stock better fits your investment strategy. 46 a. Acid-test ratio 47 b. Inventory turnover 48 c. Days' sales in receivables 49 d. Debt ratio 50 e. Earnings per share of common stock 51 f.Price/earnings ratio 52 g. Dividend payout
To determine which company's stock better fits your investment strategy, we will compute the following ratios for both Best Digital and Every Zone using the provided financial data for the current year:
a. Acid-test ratio:
Acid-test ratio = (Cash + Short-term investments + Current receivables, net) / Current liabilities
For Best Digital:
Acid-test ratio = ($25,000 + $42,000 + $42,000) / $102,000
For Every Zone:
Acid-test ratio = ($23,000 + $21,000 + $52,000) / $100,000
b. Inventory turnover:
Inventory turnover = Cost of goods sold / Average inventory
For Best Digital:
Inventory turnover = $210,000 / (($83,000 + $69,000) / 2)
For Every Zone:
Inventory turnover = $256,000 / (($92,000 + $105,000) / 2)
c. Days' sales in receivables:
Days' sales in receivables = (Average accounts receivable / Net sales) * 365
For Best Digital:
Days' sales in receivables = (($47,000 + $42,000) / 2) / $498,955 * 365
For Every Zone:
Days' sales in receivables = (($56,000 + $52,000) / 2) / $420,115 * 365
d. Debt ratio:
Debt ratio = Total liabilities / Total assets
For Best Digital:
Debt ratio = $102,000 / $268,000
For Every Zone:
Debt ratio = $128,000 / $331,000
e. Earnings per share of common stock:
Earnings per share of common stock = Net income / Number of common shares
For Best Digital:
Earnings per share of common stock = $48,000 / 15,000 shares
For Every Zone:
Earnings per share of common stock = $74,000 / 16,000 shares
f. Price/earnings ratio:
Price/earnings ratio = Market price per share of common stock / Earnings per share of common stock
For Best Digital:
Price/earnings ratio = $48.00 / Earnings per share of common stock (calculated above)
For Every Zone:
Price/earnings ratio = $115.75 / Earnings per share of common stock (calculated above)
g. Dividend payout:
Dividend payout = Dividends paid per common share / Earnings per share of common stock
For Best Digital:
Dividend payout = $2.00 / Earnings per share of common stock (calculated above)
For Every Zone:
Dividend payout = $1.80 / Earnings per share of common stock (calculated above)
By comparing the above ratios for both companies, you can determine which company's stock better aligns with your investment strategy of low price/earnings ratios and financial stability.
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please state if financial accounting or managerial accounting
Which of the following is not correct regarding the Lean Production? O a. It is also known as Just in Time O b. It is an example of a traditional production method. Oc Production is based on customer
The statement "b. It is an example of a traditional production method" is not correct regarding Lean Production.
Lean Production is a concept derived from the principles of Lean Manufacturing and is associated with managerial accounting. It focuses on eliminating waste, improving efficiency, and maximizing value for the customer. Lean Production is characterized by practices such as just-in-time production, continuous improvement, and value stream mapping. It aims to streamline processes and reduce non-value-added activities.
The statement "b. It is an example of a traditional production method" is not correct regarding Lean Production.
Lean Production is a concept derived from managerial accounting rather than financial accounting. It focuses on eliminating waste, improving efficiency, and maximizing value for customers. It is also known as Just in Time (JIT) production, where production is based on customer demand to reduce inventory levels and increase responsiveness.
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18. Marketing channels are sets of co-dependent organizations participating in the process of making a product or service available for use or consumption. a): Yes b): No 19. Channel conflict is generated when one channel member's actions prevent another channel member from achieving its goal. a): True b): False
Yes, marketing channels are sets of co-dependent organizations that work together to make a product or service available for use or consumption. These organizations collaborate to ensure the efficient and effective distribution of goods or services from the producer to the end consumer. Marketing channels can include manufacturers, wholesalers, retailers, and various intermediaries involved in the movement of products or services.
b) True, channel conflict can indeed be generated when one channel member's actions prevent another channel member from achieving its goals. Channel conflict occurs when there are disagreements, tensions, or competition among channel members regarding various aspects of the distribution process. This conflict can arise due to differences in objectives, strategies, or interests. For example, if a manufacturer decides to sell directly to consumers, bypassing retailers, it can create conflict with the retailers who may feel threatened or undermined. Similarly, if a distributor offers special promotions exclusively to certain retailers, it may create conflict with other retailers who are excluded from such benefits. Managing channel conflict is crucial to maintain effective and cooperative marketing channels. Open communication, mutual understanding, and clear delineation of roles and responsibilities can help mitigate and resolve conflicts, ensuring the smooth functioning of the distribution process.
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Standard Inputs Quantity Direct materials 7.1 pounds Direct labour 0.8 hours Variable overheads 0.8 hours The company reported the following in 2022 May: 4 700 units Original budgeted output Actual output 4 500 units Actual direct labour hours 3610 hours Actual cost of direct labour $65 341 Purchases of raw materials Actual price paid for raw materials 36 500 pounds $186 150 34 150 pounds Raw materials used Actual variable overhead cost $24 909 Variable overhead is applied on the basis of direct labour hours. A. Compute the following: i. Direct materials quantity variance Direct materials price variance Direct materials total variance Direct labour efficiency variance Direct labour rate variance Direct labour total variance Variable overhead efficiency variance Variable overhead rate variance viii. State TWO (2) benefits of standard costing. What are TWO (2) limitations of standard costing? B. C. V. vi. vii. Standard Cost 5 per pound 17 per hour 7 per hour Standard Cost per Unit (S) 35.50 13.60 5.60 (2 marks) (3 marks) (1 mark) (2 marks) (3 marks) (1 mark) (2 marks) (2 marks) (2 marks) (2 marks)
Standard Cost per Unit (S) - $35.50, $13.60, $5.60 viii. Benefits of standard costing: - It enables the business to identify the weaknesses of the operations in the production and materials management sectors. - It is an important tool for performance evaluation.
A. Compute the following:
Direct materials quantity variance:
Direct Materials Quantity Variance = (Actual Quantity Used - Standard Quantity Allowed) x Standard Price
Direct Materials Quantity Variance = (34,150 lbs - 31,970 lbs) × $5.00 = $10,900 U.Direct materials price variance:
Direct Materials Price Variance = (Actual Price - Standard Price) x Actual Quantity Used
Direct Materials Price Variance = ($186,150 - $185,500) x 34,150 lbs = $22,110 U.
Direct materials total variance:Direct Materials Total Variance = Direct Materials Quantity Variance + Direct Materials Price Variance
Direct Materials Total Variance = $10,900 U + $22,110 U = $33,010 U.
Direct labour efficiency variance:Direct Labour Efficiency Variance = (Actual Hours - Standard Hours Allowed) x Standard RateDirect Labour Efficiency Variance = (3,610 hours - (4,500 units x 0.8 hours per unit)) x $17 per hour = $14,710 F
.Direct labour rate variance:
Direct Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Hours
Direct Labour Rate Variance = ($65,341/3,610 hours - $17) x 3,610 hours = $440 F.
Direct labour total variance:Direct Labour Total Variance = Direct Labour Efficiency Variance + Direct Labour Rate VarianceDirect Labour Total Variance = $14,710 F + $440 F = $14,270 F.Variable overhead efficiency variance:Variable Overhead Efficiency Variance = (Actual Hours - Standard Hours Allowed) x Standard Overhead RateVariable Overhead Efficiency Variance = (3,610 hours - (4,500 units x 0.8 hours per unit)) x $7 per hour = $5,090 U.
Variable overhead rate variance:Variable Overhead Rate Variance = (Actual Overhead Rate - Standard Overhead Rate) x Actual HoursVariable Overhead Rate Variance = ($24,909/3,610 hours - $7) x 3,610 hours = $2,133 F.Standard Cost:Direct materials - $5 per poundDirect labour - $17 per hourVariable overhead - $7 per hour
Standard Cost per Unit (S) - $35.50, $13.60, $5.60 viii. Benefits of standard costing: - It enables the business to identify the weaknesses of the operations in the production and materials management sectors. - It is an important tool for performance evaluation.
Limitations of standard costing: - It is expensive to implement and maintain. - It can lead to increased costs as a result of increased record-keeping and administration.
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Assume the spot price of the S&P 500 is 2250, its implied volatility is 18% per annum, and the current risk-free rate is 1.65% per annum (both compounded continuously). For a 2- month European option with a strike price of 2.200, N(d, )-0.6480, N(d₂ )-0.6204. Assume no dividends will be paid over the next 2-month period. You calculate the price of 2-month European options with a strike price of 2,200 based on the Black-Scholes Merton Model (BSM). All else being equal, a higher spot price will: Increase the value of the put and decrease the value of the call Increase the value of both the put and the call Decrease the value of both the put and the call Decrease the value of the put and increase the value of the call
All else being equal, a higher spot price will decrease the value of the put and increase the value of the call.
The value of a put option is inversely related to the spot price. As the spot price increases, the value of the put option decreases because it gives the holder the right to sell the underlying asset at a strike price lower than the current market price. With a higher spot price, the likelihood of the option being exercised and the holder selling the asset at a lower price decreases, resulting in a lower value for the put option.
On the other hand, the value of a call option is directly related to the spot price. As the spot price increases, the value of the call option increases because it gives the holder the right to buy the underlying asset at a strike price lower than the current market price. With a higher spot price, the likelihood of the option being exercised and the holder buying the asset at a lower price increases, resulting in a higher value for the call option.
Therefore, a higher spot price will decrease the value of the put option and increase the value of the call option according to the Black-Scholes Merton Model.
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E3-3B Das Manufacturing Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process—Cutting $2,900, Work in Process—Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred.
1. Purchased $64,300 of raw materials on account.
2. Incurred $48,500 of factory labor. (Credit Wages Payable.)
3. Incurred $73,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Cutting $16,400 and Assembly $9,900.
5. Used factory labor for Cutting $27,000 and Assembly $21,500.
6. Applied overhead at the rate of $22 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720.
7. Transferred goods costing $68,300 from the Cutting Department to the Assembly Department.
8. Transferred goods costing $136,000 from Assembly to Finished Goods.
9. Sold goods costing $154,000 for $205,000 on account. Instructions Journalize the transactions.
(Omit explanations.)
Here are the journal entries for the transactions of Das Manufacturing Company:
Purchased raw materials on account:
Raw Materials Inventory $64,300
Accounts Payable $64,300
Incurred factory labor:
Factory Labor Expense $48,500
Wages Payable $48,500
Incurred manufacturing overhead (partially paid):
Manufacturing Overhead $73,000
Accounts Payable $40,000
Cash $33,000
Requisitioned materials for Cutting and Assembly:
Work in Process—Cutting $16,400
Work in Process—Assembly $9,900
Raw Materials Inventory $26,300
Used factory labor for Cutting and Assembly:
Work in Process—Cutting $27,000
Work in Process—Assembly $21,500
Wages Payable $48,500
Applied overhead based on machine hours:
Work in Process—Cutting $36,960 (1,680 hours x $22)
Work in Process—Assembly $37,840 (1,720 hours x $22)
Manufacturing Overhead $74,800
Transferred goods from Cutting to Assembly:
Work in Process—Cutting $68,300
Work in Process—Assembly $68,300
Transferred goods from Assembly to Finished Goods:
Work in Process—Assembly $136,000
Finished Goods Inventory $136,000
Sold goods on account:
Accounts Receivable $205,000
Sales Revenue $205,000
Cost of Goods Sold $154,000
Finished Goods Inventory $154,000
These journal entries record the transactions for Das Manufacturing Company during the specified period. Please note that the accounts used in the entries are based on typical manufacturing accounting practices.
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11
Please answer the question
11. A dollar-denominated bond sold in France is called
A dollar-denominated bond sold in France is commonly referred to as a "Eurobond."
The term "Eurobond" is often used to refer to a bond denominated in a currency other than the currency of the country where it is issued. Despite the name, Eurobonds can be issued in various currencies, including the US dollar.
In the context of France, if a dollar-denominated bond is sold in the country, it can be referred to as a "Eurobond" due to the historical significance and widespread use of Eurobonds in the international financial markets.
The term originated in the 1960s when international bonds were issued in Europe, primarily in currencies such as the US dollar, Swiss franc, or British pound. These bonds were typically sold to investors across different countries, and the term "Eurobond" reflected their international nature.
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Cornerstone Inc.'s correlation with the market is 0.21 and its
variance is 0.36. What is Cornerstone Inc.'s beta if the variance
of market reurns is 0.02.
0.89 0.79 1.21 0.93 0.90
The answer is 0.89.
Beta is a measure of how much a stock's price moves in relation to the market. It is calculated by dividing the stock's volatility by the market's volatility. In this case, Cornerstone Inc.'s correlation with the market is 0.21 and its variance is 0.36. The variance of market returns is 0.02. To calculate beta, we need to use the following formula:
beta = correlation * (standard deviation of stock / standard deviation of market)
We know that the correlation is 0.21 and the standard deviation of the stock is 0.6. We can find the standard deviation of the market by taking the square root of the variance of the market, which is 0.14. Plugging these values into the formula, we get:
beta = 0.21 * (0.6 / 0.14) = 0.89
Therefore, Cornerstone Inc.'s beta is 0.89. This means that for every 1% increase in the market, Cornerstone Inc.'s stock price is expected to increase by 0.89%.
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Simodong Tiles is a medium distributor of marble tiles. Simodong identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2020: Activity Cost Driver Qty of Cost Driver Cost per Unit of cost Driver 600 $50 per order Number of Orders Placing and paying for orders of marble tiles Loads Moved 4,500 $35 per load Receiving and storage 1,700 $45 per Shipment Shipping of marble tiles to retailers Number of Shipments For 2020, Simodong buys 350,000 marble tiles at an average cost of $4 per tile and sells them to retailers at an average price of $6 per tile. Assume Simodong has no fixed costs and no inventories. 1. Calculate Simodong's operating income for 2020. 2. For 2021, retailers are demanding a 7% discount off the 2020 price. Snappy's suppliers are only willing to give a 5% discount. Simodong expects to sell the same quantity of marble tiles in 2021 as in 2020. If all other costs and cost-driver information remain the same, calculate Simodong's operating income for 2021. 3. Suppose further that Simodong decides to make changes in its ordering and receiving and storing practices. By placing long-run orders with its key suppliers, Simodong expects to reduce the number of orders to 250 and the cost per order to $30 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Snappy expects to reduce the number of loads moved to 4,200 and the cost per load moved to $35. Will Simodong achieve its target operating income of $1.30 per tile in 2021? Show your calculations.
Therefore, the cost per tile sold after implementing the changes is $1.93. Since the target cost per tile sold is $1.96 and the cost per tile sold after implementing the changes is $1.93, Simodong will achieve its target operating income of $1.30 per tile in 2021.
1. Calculation of Simodong's Operating Income for 2020:
The calculation of Simodong's Operating Income for 2020 is shown below:
Total Cost of Marble tiles purchased = Quantity of marble tiles purchased * Average cost of marble tiles purchased
= 350,000 tiles * $4
= $1,400,000
Total Revenue from sale of Marble tiles = Quantity of marble tiles sold * Average price of marble tiles sold
= 350,000 tiles * $6
= $2,100,000
Total Cost of marble tiles sold = Quantity of marble tiles sold * Average cost of marble tiles purchased
= 350,000 tiles * $4
= $1,400,000
Total Activity Cost for Ordering in 2020 = Quantity of Orders * Cost per Order
= 600 * $50
= $30,000
Total Activity Cost for Receiving and Storage in 2020 = Number of Loads Moved * Cost per Load
= 4,500 * $35
= $157,500
Total Activity Cost for Shipping in 2020 = Number of Shipments * Cost per Shipment
= 1,700 * $45
= $76,500
Total Operating Cost for 2020 = Total Activity Cost for Ordering + Total Activity Cost for Receiving and Storage + Total Activity Cost for Shipping
= $30,000 + $157,500 + $76,500
= $264,000
Operating Income for 2020 = Total Revenue from sale of Marble tiles - Total Cost of Marble tiles sold - Total Operating Cost for 2020
= $2,100,000 - $1,400,000 - $264,000
= $436,000
Therefore, the Operating Income for 2020 is $436,000.
2. Calculation of Simodong's Operating Income for 2021:
Given, Retailers demand a 7% discount off the 2020 price.
Suppliers are willing to give only a 5% discount.
Quantity of marble tiles sold in 2021 = Quantity of marble tiles sold in 2020
= 350,000 tiles.
The average price of Marble tiles in 2021
= $6 - 7% * $6
= $5.58.
The average cost of Marble tiles in 2021 = $4 - 5% * $4
= $3.80.
The Calculation of Simodong's Operating Income for 2021 is shown below:
Total Cost of Marble tiles purchased = Quantity of marble tiles purchased * Average cost of marble tiles purchased
= 350,000 tiles * $3.80
= $1,330,000.
Total Revenue from sale of Marble tiles = Quantity of marble tiles sold * Average price of marble tiles sold
= 350,000 tiles * $5.58
= $1,953,000.
Total Cost of marble tiles sold = Quantity of marble tiles sold * Average cost of marble tiles purchased
= 350,000 tiles * $3.80
= $1,330,000.
Total Activity Cost for Ordering in 2021 = Quantity of Orders * Cost per Order
= 250 * $30
= $7,500
Total Activity Cost for Receiving and Storage in 2021
= Number of Loads Moved * Cost per Load
= 4,200 * $35
= $147,000
Total Activity Cost for Shipping in 2021 = Number of Shipments * Cost per Shipment
= 1,700 * $45
= $76,500.
Total Operating Cost for 2021 = Total Activity Cost for Ordering + Total Activity Cost for Receiving and Storage + Total Activity Cost for Shipping
= $7,500 + $147,000 + $76,500
= $231,000Operating Income for 2021
= Total Revenue from sale of Marble tiles - Total Cost of Marble tiles sold - Total Operating Cost for 2021
= $1,953,000 - $1,330,000 - $231,000 = $392,000
Therefore, the Operating Income for 2021 is $392,000.3.
Calculation of Simodong's Target Operating Income in 2021:Given,Simodong's target Operating Income in 2021
= $1.30 per tile.
Quantity of Marble tiles sold in 2021
= 350,000 tiles.
The Calculation of Simodong's Target Operating Income in 2021 is shown below:
Total Cost of Marble tiles purchased = Quantity of marble tiles purchased * Average cost of marble tiles purchased
= 350,000 tiles * $3.80
= $1,330,000.
Total Revenue from sale of Marble tiles = Quantity of marble tiles sold * Average price of marble tiles sold
= 350,000 tiles * $6
= $2,100,000.
Target Operating Income for 2021 = Quantity of Marble tiles sold * Target Operating Income per Tile
= 350,000 tiles * $1.30
= $455,000.
Total Cost of Marble tiles sold = Total Operating Cost for 2021 + Target Operating Income for 2021
= $231,000 + $455,000 = $686,000.
Average cost per tile sold = Total Cost of Marble tiles sold / Quantity of Marble tiles sold
= $686,000 / 350,000
= $1.96.
Therefore, the target average cost per tile sold is $1.96.
The cost per tile sold after implementing the changes is calculated as follows:
Total Activity Cost for Ordering in 2021 = Quantity of Orders * Cost per Order
= 250 * $30
= $7,500.
Total Activity Cost for Receiving and Storage in 2021 = Number of Loads Moved * Cost per Load
= 4,200 * $35
= $147,000.
Total Operating Cost for 2021 = Total Activity Cost for Ordering + Total Activity Cost for Receiving and Storage
= $7,500 + $147,000
= $154,500.
Cost per tile sold after implementing the changes = Total Cost of Marble tiles sold / Quantity of Marble tiles sold
= ($154,500 + Target Operating Income for 2021) / 350,000
= ($154,500 + $455,000) / 350,000
= $1.93.
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