Answer:
$42.69
Explanation:
From the question above Metallica Bearings Inc. is expected to pay a dividend of $13.75 pet share for a period of 12 years
The dividend will increase by 5.5 percent per year
= 5.5/100
= 0.055
The required rate of return is 13.5 percent
= 13.5/100
= 0.135
The first step is to calculate the price at 11 years
Price at 11 years= 13.75/ 0.135-0.055
= 13.75/0.08
= $171.87
The next step in to find the current price by applying the following formular
Current share price= Future value/ (1+r)^n
= $171.875/ (1+0.135)^11
= $171.87/ 1.135^11
= $171.87/ 4.026
= $42.69
Current share price= $42.69
Hence the current share price is $42.69
Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $5.80 per standard direct labor-hour and fixed manufacturing overhead should be $3,087,000 per year.
The company’s product requires 4 pounds of material that has a standard cost of $12.50 per pound and 1.5 hours of direct labor time that has a standard rate of $13.90 per hour.The company planned to operate at a denominator activity level of 315,000 direct labor-hours and to produce 210,000 units of product during the most recent year. Actual activity and costs for the year were as follows:
Number of units produced 252,000
Actual direct labor-hours worked 409,500
Actual variable manufacturing overhead cost incurred $ 1,351,350
Actual fixed manufacturing overhead cost incurred $ 3,276,000
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.(Round your answers to 2 decimal places.)
Predetermined Overhead Rate = $15.60 per DLH
Variable Rate = $5.80 per DLH
FIxed Rate = $9.80 per DLH
3a. Compute the standard direct labor-hours allowed for the year’s production.
3b. Complete the following Manufacturing Overhead T-account for the year:
4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Answer:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.
total standard overhead rate = $15.60standard variable overhead rate = $5.80standard fixed overhead rate = $9.803a. Compute the standard direct labor-hours allowed for the year’s production.
1.5 direct labor hours x 252,000 units = 378,000 hours
3b. Complete the following Manufacturing Overhead T-account for the year:
Manufacturing overhead
Debit Credit
Actual variable cost $1,351,350 Applied variable cost $2,192,400
Actual fixed costs $3,276,000 Applied fixed costs $3,704,400
$1,269,450
Adjustment for over applied
overhead expense $1,269,450
0 0
4. Determine the reason for the underapplied or overapplied overhead from (3)
two different factors affected the overhead costs:
Actual labor hours were higher than budgeted, since 378,000 should have been used to produce the 252,000 units, but 409,500 were used instead. That results in an unfavorable variance of 31,500 labor hours (8.3% variance). Even though labor hour variance was unfavorable, the actual overhead costs incurred were much lower than expected. The favorable variance regarding overhead costs was much larger than the unfavorable variance in labor hours. The actual total overhead per labor hour = $11.30 vs. $15.60 (standard), which represents a 27.6% favorable variance.Explanation:
variable overhead $5.80 per direct labor hour
fixed overhead $3,087,000
each unit requires:
4 pounds of materials at standard cost of $12.50 per pound
1.5 direct labor hours at standard rate of $13.90 per hour
fixed overhead per direct labor hour = $9.80
total budgeted production 210,000 units
total budgeted direct labor hours 315,000
actual units produced 252,000
actual direct labor hours 409,500
actual variable manufacturing $1,351,350
actual fixed manufacturing $3,276,000
applied variable cost = $5.80 x 378,000 labor hours = $2,192,400
applied fixed costs = $9.80 x 378,000 labor hours = $3,704,400
Mindy, a manager at Savannah Grasse, observes that Mark is a slow learner and has not been able to grasp the nuances of his job responsibilities. She sees potential in Mark and decides to coach him. In this scenario, what role of a coach will Mindy be performing
Answer: Modelling
Explanation: By deciding to coach Mark, working one-on-one with him and teaching him the necessary skills required to perform his job well, Mindy is serving in the capacity of a role model to Mark. It has been known that modelling is often an effective way of coaching or teaching and reflection afterwards. It is much more than just showing as it allows for observation, collaboration and support.
XtraTorque Inc. is a leading engine oil manufacturer in the United States. The company manufactures oil that can withstand a broader range of temperature than any other engine oil brands available in the market. The company plans to expand its business into the Russian market because its product can maintain fluidity even at low temperatures. Which of the following organizational strategies should XtraTorque Inc. adopt?
A) Diversification strategy
B) Market differentiation strategy
C) Market development strategy
D) Market penetration strategy
Answer:
C) Market development strategy
Explanation:
Market development strategy defines that it is a marketing technique in which an company tries to promote an existing product to a new customer segment.
According to the given situation the company who is the head producer of engine oil in the U.S. Here the company produces oil which can resist a wider temperature range other than any brands of engine oil which is available in the marketplace. Now, the company wants to extend their business into the new market place that is Russian market, as its product can maintain fluidity even at low temperature so this indicates that the company adopting the market development strategy.
Suppose a stock had an initial price of $92 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $75.50. a. Compute the percentage total return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the dividend yield
Answer:
(a) Percentage return = -$14.20 ÷ $92 = -15.43%
(b) Dividend Yield = $2.30 ÷ $92 = 2.50%
Explanation:
Initial price per share= $92.00
Ending share price = $75.50
Capital loss = $75.50 - $92.00 = -$16.50
Dividend = $2.30
Net return = -$16.50 + $2.30 = -$14.20
(a) Percentage return = (-$14.20 ÷ $92) × 100% = -15.43%
(b) Dividend Yield = ($2.30 ÷ $92) × 100% = 2.50%
suppose dave's discount merchandise inventory account showed a balance of 8000 before the year end adjustments. The physical count of goods on hand totaled 7400. Dave uses a perpetual inventory system. To adjust the accounts, which entry would the company make
Answer:
Cost of goods sold DR 600
Merchandise inventory CR 600
Explanation:
A perpetual inventory system is a method of inventory management that is used in order to records real-time transactions of received or sold stock. In this system, based on the information provided the company would make the following entry
Cost of goods sold DR 600
Merchandise inventory CR 600
This is because there is a difference on physical goods on hand of 600, meaning that they sold that amount throughout the year. Which is made as a Cost of Goods Sold entry. The company also needs to enter the amount of goods that have been acquired by a distributor, wholesaler, or retailer from suppliers which would be the same.
A local government awards a landscaping company a contract worth $1.5 million per year for five years for maintaining public parks. The landscaping company will need to buy some new machinery before they can take on the contract. If the cost of capital is 6%, what is the most that this equipment could cost if the contract is to be worthwhile for the landscaping company
Answer:
The equipment should not cost more than $6,318,545.68
Explanation:
The most that the land scrapping equipment could cost is the present of the 1.5 million annuity discounted at 6% p.a.
Present Value of Annuity = A × ( 1- (1+r)^(-n))/r
A- 1,500,000, n- 5, r- 6%
=1, 500,000 × ((1.06)^(-5))/0.06
= $6,318,545.68
The equipment should not cost more than $6,318,545.68
Linguini Inc. adopted dollar-value LIFO (DVL) as of January 1, 2018, when it had an inventory of $841,000. Its inventory as of December 31, 2018, was $874,000 at year-end costs and the cost index was 1.15. What was DVL inventory on December 31, 2018
Answer:
760,000
Explanation:
First find ending inventory at base pricing:
$874,000/1.15 = 760,000
Calculate real dollar increase/decrease in quantity
760,000-841,000 = -81,000
Since it is a decrease in quantity, you use prior period cost index. Prior period is the base year so you just use 1.0 which means that -81,000 stays the same
so now it is 841,000-81,000=760,000
The dollar-value LIFO (DVL) inventory on December 31, 2018 will be 760,000.
What is dollar-value LIFO (DVL) inventory?The latest in, first out cost layering principle is a version on which the dollar-value LIFO method is based. In essence, the technology aggregates cost data for huge quantities of inventory, eliminating the need to create unique cost layers for each inventory item. Instead, pools of inventory goods are organized into layers.
Find ending stock at base prices first:
$874,000/1.15 = 760,000
Determine the actual dollar gain or decrease in the amount.
760,000-841,000 = -81,000
Using the preceding period cost index is appropriate because the quantity has decreased. Since the prior period is the base year, you only need to utilize 1.0, so that -81,000 remains the same.
Consequently, it is now 841,000-81,000=760,000.
To learn more about dollar-value LIFO (DVL) inventory
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Discount-Mart issues $19 million in bonds on January 1, 2021. The bonds have a seven-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 17,233,953 06/30/2021 $ 950,000 $ 1,034,037 $ 84,037 17,317,990 12/31/2021 950,000 1,039,079 89,079 17,407,069 06/30/2022 950,000 1,044,424 94,424 17,501,493 12/31/2022 950,000 1,050,090 100,090 17,601,583 What is the market annual rate of interest on the bonds
Answer: 12%
Explanation:
The semi annual market rate of interest on the bonds will be the interest expense divided by the carrying value i.e issue price of bond which is then multiplied by 100%. This will be mathematically expressed as:
= 1,034,037/17,233,953 × 100
= 0.06 × 100
= 6%
This implies that the semi annual market interest rate is 6%.
Since we are told to calculate the market annual rate of interest on the bonds, we multiply the value of 6% by 2 since 12 months make a year and we used 6 months for the calculation above which is semi annual. This will be:
= 6% × 2
= 12%
Therefore, the market annual rate of interest on the bonds is 12%
The concept of risk and return is subjective for different people, as well as for corporations.
Read and assess the following financial decisions. Keeping everything else constant, are the following actions good financial decisions? Base your decisions on the understanding of risk and return, solely from a theoretical finance perspective.
Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
Erin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Answer:
Risk and Return
1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
2. Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
3. rin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Explanation:
1. Joe's decision to invest in stock B is a good financial decision. Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns. Invariably, the investment with less standard deviation should win the vote. Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.
2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically. It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.
3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision. Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions. Who are the present managers of the fund? What systems are in place in the entity to guarantee similar future performance, all things being equal? What market's sentiments and information are available for consideration? These questions, and many others can be answered through a due diligence. Surely, "past performance is no guarantee of future results."
Salaries for professions (such as architect or medical doctor) that require a long period of study are typically higher than those for other jobs. The reasons for this are all of the following EXCEPT __________.a. students sacrifice a good deal of present incomeb. status deserves more reward in the form of wagesc. long periods of schooling incur greater current costsd. future income is worth less than present income
Answer:
d. future income is worth less than present income
Explanation:
Remember, since we want an exception to all the possible reasons for higher salaries of those in medical and architectural profession, we carefully examine the reasons given.
However, in no way is it because those of this profession (architect, medical doctors) would earn future income worth less than their present income a basis for their higher salaries than other jobs, since most often they earn more as they the years goes by in their profession.
Match the term within the parantheses that best matches each of the following description.
1. Expenditure on research and development
2. A bank loan
3. Listed on a stock exchange
4. Has limited liability
5. Responsible for bank relationships
6. Agency Cost
A. Investment decision
B. Financial asset
C. Public corporationd
D. Corporatione
E. The treasure
F. The cost resulting from conflicts of interest between managers and shareholders.
Answer:
The answer is
1. Expenditure on research and development (A. Investment decision)
2. A bank loan (B. Financial asset)
3. Listed on a stock exchange (C. Public corporation)
4. Has limited liability ( D. Corporation)
5. Responsible for bank relationships ( E. The treasure)
6. Agency Cost (F. The cost resulting from conflicts of interest between managers and shareholders)
Explanation:
1. Expenditure on research and development. (A. Investment decision. Investment decision relates to expenditure on a long-term goal.)
2. A bank loan (B. Financial asset. Businesses that obtain bank loans owns and controls it and makes the decision on how to use it)
3.Listed on a stock exchange( C. Public corporation. Companies that have their stocks traded on exchange are public companies.)
4. Has limited liability (D. corporation/partnership. No distinct separation between the owner and the business)
5. Responsible for bank relationships (E. The treasurer. This person maintains the relationship between the bank and business)
6. Agency Cost ( F. The cost resulting from conflicts of interest between shareholders and managers of the business. The managers of the business are known as the agents)
At the time a $450 petty cash fund is being replenished, the company's accountant finds vouchers totaling $350 and petty cash of $100. The vouchers include: postage, $90; business lunches, $135; delivery fees, $80; and office supplies, $45. Which of the following is not recorded when recognizing expenditures from the petty cash fund?a. Debit petty cash, $350b. Debit supplies, $45c. Debit postage expense, $90d. Credit petty cash, $350
Answer:
The entry that should not be recorded is debit petty cash, $300 . Option A.
Explanation:
Vouchers recorded for expenses:
Postage
Business lunches
Delivery fees
Office supplies
The journal entry when recognizing expenditures from the petty cash fund should be as under:
Accounts : Credit Debit
Postage $ 90
Business lunches $ 135
Delivery fees $ 80
Office supplies $ 45
Petty Cash $350
The entry that should not be recorded is debit petty cash, $300
Nikki, the design and development manager at Holden Outerwear, says she likes "taking something everyone does every day and doing it slightly different." A workplace that provides the freedom that Nikki promotes has a
Answer:
Democratic leadership style
Explanation:
Based on the information provided it seems that Nikki's workplace has a Democratic leadership style. This refers to a type of leadership style in which the members of the group take a participative role in the decision-making process. The phrase "taking something everyone does every day and doing it slightly different." shows that the company allows it's employees to make their own decisions as long as they get the desired results.
Consumption (household sector) spending is the largest component of:_______
a. Aggregate output
b. Aggregate income
c. Aggregate employment
d. Aggregate supply
e. Aggregate demand
Answer:
a. Aggregate output
Explanation:
Aggregate output can also be referred to as GDP. Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP calculated using the expenditure approach:
GDP = Consumption spending + Investment spending by businesses + Government Spending + Net Export
Consumption spending usually represents 70% of aggregate output.
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g Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes a. both the short run and the long run. b. the short run, but not the long run. c. the long run, but not the short run. d. neither the long run nor the short run.
Answer:
The correct answer is C.
Explanation:
GDP usually, is fixed in the short run. Thus, in the short-term, money supply will increase aggregate demand and prices will follow.
In the long term, however, real GDP (which is economic output that has been adjusted for price fluctuations), an increase in the money supply will create an increase in the GDP due to aggregate demand.
The US economy, for example, displays a strong positive correlation between the amount of money supplied and it's GDP growth between 1994 and 2009.
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Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF250,000 in 1 year. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge
Answer:
The question is missing some key features such the relevant forward rates which are found in the attached complete question:
The correct option is D,$ 255,750.00
Explanation:
The forward rate agreement stipulate that one Swiss Franc would be exchanged for $1.0230 in one year's time,if the forward rate agreement is settled for the value of SF 250,000 worth of export in a year' s time is calculated as below:
value of SF 250,000=250,000*$1.0230=$255,750.00
As a result, the correct options out of the multiple choices provided as found in the attached is option D with $ 255,750.00 as the worth of SF 250,000 using one year forward rate of $1.0230
The net income reported on the income statement for the current year was $261000. Depreciation was $39900. Account receivable and inventories decreased by $11800 and $34900, respectively. Prepaid expenses and accounts payable increased, respectively, by $1100 and $8300. How much cash was provided by operating activities?
Answer:
$ 354,800.00
Explanation:
The net cash amount provided by operating activities in the year is determined by adding depreciation to net income as well as the decrease in both accounts receivable and inventories.
There is also the need to to deduct increase in prepaid expenses and add the increase in accounts payable as done below:
net cash provided by operating activities=$261,000+$39,900+$11,800+$34,900-$1,100+$8,300=$354,800.00
A 22-year old, unmarried, new customer contacts you, explaining that he just inherited $10,000,000 and wishes to invest the money aggressively to produce superior returns. He is risk-tolerant and understands the use of leverage and shorting as ways of enhancing returns. For this client, the best recommendation would be a: A hedge fund B fund of hedge funds C growth fund D value fund
Answer:
B fund of hedge funds
Explanation:
The motive of the investor is to maximizing the return and minimizing the risk
The hedge fund refers to that fund in which the portfolio of investment is protected from the uncertainty of the market and at the same time it also generates the positive return when the market is at recession or in boom period
While on the other hand, the fund of the hedge fund is a portfolio or mix of hedge funds shares in which it is applied to any type of investment fund
According to the given situation, the new customers invest his money to generate high returns moreover he is also risk tolerant and finds the number of ways for enhancing the returns so for this situation, the best option fit is option B.
Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017 Estimated Overhead Expected Use of Cost Drivers per Activity Activity Cost Pools Ordering and receiving Food processing Packaging $94,582 479,085 13,100 orders 61,500 machine hours 1,395,280 428,000 labor hours For 2017, the company had 11,300 orders and used 51,200 machine hours, and labor hours totaled 491,000 Calculate the overhead rates for each activity. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Ordering and receiving Food processing Packaging 7.22 per order 7.79 per machine hour 3.26 per labor hour
What is the total overhead applied?
Total overhead applied $
Answer:
Total allocated overhead= $2,081,094
Explanation:
Giving the following information:
For 2017, the company had 11,300 orders and used 51,200 machine hours, and labor hours totaled 491,000
Overhead rates for each activity:
Ordering and receiving= $7.22 per order
Food processing= $7.79 per machine hour
Packaging= $3.26 per labor hour
To allocate overhead, we need to use the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Ordering and receiving= 7.22*11,300= $81,586
Food processing= 7.79*51,200= $398,848
Packaging= 3.26*491,000= $1,600,660
Total overhead= $2,081,094
Artville is deciding whether to purchase a new statue for the center of town. The statue will cost the city $17,000 and will only be purchased if the costs are covered. The city is asking for households to help cover the cost of the statue, but households are not forced to contribute.
Required:
a. If households are asked to contribute $5 each to help cover the cost of the statue, how many households will need to contribute?
b. If the population of Artville is 4,000 households, of which 3,000 households are expected to free ride, will the city be able to afford the statue if it charges each household $14?
Answer: a. $3,400 households
b. No.
Explanation:
a. The cost of the statue is $17,000 and each household is asked to contribute $5 to help cover the cost. To find out how many families one can divide the amount needed by the amount asked of the households,
= 17,000/5
= 3,400 households
If 3,400 households each pay $5 then the town of Artville will be able to afford the statue.
b. This question speaks to a social problem referred to a the Free-rider problem. This is when people in society benefit from something without contributing fairly towards the benefit they are accruing from the thing. 3,000 households out of 4,000 are expected to be free-riders. This means that only 1,000 will cover the cost of the statue.
If those 1,000 households pay the $14 required, the town would only raise,
= 1,000 * 14
=$14,000
$14,000 is less than the cost of the statue which is $17,000 and so the town of Artville will have to do without a statue as they simply cannot afford one.
Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $10,500 beginning one year from today. The interest rate on the note is 5%.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What amount did Canliss borrow
Answer:
The amount that Canliss borrowed is $45,459.51
Explanation:
The amount borrowed is the present value of $10,500 for five years using the discount factor applicable to each to each year as shown below
The formula for discount factor=1/(1+r)^n
r is the rate of interest on the loan which is 5%
n is the year relating to each cash flow ,for instance 1 for year one
present value of the loan=$10,500/(1+5%)^1+$10,500/(1+5%)^2+$10,500/(1+5%)^3+$10,500/(1+5%)^4+$10,500/(1+5%)^5=$45,459.51
Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows
Property Adjusted Basis Fair Market Value Percentage of The Worthington Corp. Stock Acquired
Gearty Building $80,000 $164,000 60%
Olinto Land 10,000 96,000 40%
The building was subject to a $20,000 mortgage that was assumed by The Worthington Corp. What was The Worthington Corp.'s basis in the building?
Answer:
$80,000
Explanation:
Since Worthington Corp. assumed the the $20,000 mortgage which the building was subject to, the Worthington Corp.'s basis in the building is the adjusted basis of the building.
Therefore, Worthington Corp.'s basis in the building is $80,000 which is the adjusted basis of the building.
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
Fixed Element Variable Element Actual Total
per Month per Customer Served for May
Revenue $5,000 $160,000
Employee salaries and wages $50,000 $1,100 $88,000
Travel expenses $600 $19,000
Other expenses $36,000 $34,500
When preparing its planning budget, the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.
Required:
1. What amount of revenue would be included in Adger's flexible budget for May?
2. What amount of employee salaries and wages would be included in Adger's flexible budget for May?
3. What amount of travel expenses would be included in Adger's flexible budget for May?
4. What amount of other expenses would be included in Adger's flexible budget for May?
5. What net operating income would appear in Adger's flexible budget for May?
Answer:
1. Total Revenue in May $ 175,000
2. Total Salaries & wages For May $ 88500
3. Total Travel Expenses for May $21,000
4. Other Expense $ 36,000
5. Operating Income $ 65,500
Explanation:
Given
Adger Corporation
Fixed Element Variable Element Actual Total
per Month per Customer Served for May
Revenue $5,000 $160,000
Employee Salaries
& wages $50,000 $1,100 $88,000
Travel expenses $600 $19,000
Other expenses $36,000 $34,500
There were 35 customers.
Revenue = $5000 per customer
We can easily calculate as we have been given the number of customers and the variable element of expense per customer.
1. Total Revenue in May = 5000 * 35= $ 175,000
Variable Salaries & wages = $ 1100 per customer
Total Variable Salaries & wages = $ 1100 *35= $ 38500
2. Total Salaries & wages For May = Variable + Fixed
= $ 38500 + $50,000= $ 88500
Travel expenses = $600per customer
3. Total Travel Expenses for May = $ 600 *35= $21,000
4. Other Expense = Fixed Expenses = $ 36,000 ( there are no variable expenses)
5. Operating Income= Revenue - Employee Salaries - Travel Expenses
= $ 175,000- $ 88500 - $ 21,000= $ 65,500
Other expenses are included in the net income statement not operating income statement.
Mifflin Co. reported the following for the current year.
Net sales $60,000
Cost of goods sold $38.000
Beginning balance in accounts receivable $14.000
Ending balance in accounts receivable $ 6,000
Compute (a) accounts receivable turnover and (b) days’ sales uncollected. Hint: Recall that accounts receivable turnover uses average accounts receivable, and days’ sales uncollected uses the ending balance in accounts receivable.
Can an object accelerate if it's moving with constant speed? Yup! Many people find this counter-intuitive at first because they forget that changes in the direction of motion of an object—even if the object is maintaining a constant speed—still count as acceleration.Acceleration is a change in velocity, either in its magnitude—i.e., speed—or in its direction, or both. In uniform circular motion, the direction of the velocity changes constantly, so there is always an associated acceleration, even though the speed might be constant. You experience this acceleration yourself when you turn a corner in your car—if you hold the wheel steady during a turn and move at constant speed, you are in uniform circular motion. What you notice is a sideways acceleration because you and the car are changing direction. The sharper the curve and the greater your speed, the more noticeable this acceleration will become. In this section we'll examine the direction and magnitude of that acceleration.The figure below shows an object moving in a circular path at constant speed. The direction of the instantaneous velocity is shown at two points along the path. Acceleration is in the direction of the change in velocity, which points directly toward the center of rotation—the center of the circular path. This direction is shown with the vector diagram in the figure. We call the acceleration of an object moving in uniform circular motion—resulting from a net external force—the centripetal acceleration
One-year Treasury securities yield 4.15%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 4.4%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities
Answer:
The yield today for 2-year Treasury securities is 4.27%
Explanation:
In order to calculate the yield today for 2-year Treasury securities we would have to calculate the following formula:
2-year treasury yield = [(1 + 1-yr treasury yield) * (1 + 1-yr treasury yield, 1 year from now)]1/2 - 1
= [(1 + 0.0415) * (1 + 0.044)]∧1/2 - 1
= [1.0873]∧0.5 - 1
= 1.0427 - 1 = 0.0427, or 4.27%
The yield today for 2-year Treasury securities is 4.27%
You would like to invest in one of the profitable business units of a multinational corporation. In a meeting with management, you explain that you'll only consider a unit categorized, according to the BCG matrix, as a question mark. Here are your choices:Unit A has revenue of $27 billion and a profit of $6 billion. While its product is based on a new technology that is rapidly increasing in sales, the product currently lags the market share of competitors.Unit B has revenue of $30 billion and a profit of $7 billion. Its market share is strong and growing. While its product is based on an outdated technology, the product has a loyal following for now.Which of the corporation's two profitable units meets your criterion?
Answer:
Unit A has revenue of $27 billion and a profit of $6 billion. While its product is based on a new technology that is rapidly increasing in sales, the product currently lags the market share of competitors.
Explanation:
According to the BCG Matrix, question marks are business units that operate in rapidly growing markets but currently only possess a low market share.
This results in a lot of cash being consumed by the business unit, but also the possibility of high growth. It is called a question mark because it is uncertain if the business unit will be successful or not. This means that they are very risky investments.
State Street Beverage Company issues $805,000 of 9%, 10-year bonds on March 31, 2017. The bonds pay interest on March 31 and September 30. Which of the following statements is true?
A) If the market rate of interest is 10%, the bonds will issue at a premium.
B) If the market rate of interest is 10%, the bonds will issue at a discount.
C) If the market rate of interest is 10%, the bonds will issue at par.
D) If the market rate of interest is 10%, the bonds will issue above par.
Answer:
Option (B) If the market rate of interest is 10%, the bonds will issue at a discount
Explanation:
Interest rate risk is defined as the risk changing which, interest rates will affect bond prices. When current interest rates are greater than a bond's coupon rate, the bond will be sold below its face value at a discount. When interest rates are less than the coupon rate, the bond can be sold at a premium--higher than the face value.
A 5-year corporate bond yields 10.70%. A 5-year municipal bond of equal risk yields 6.50%. Assume that the state tax rate is zero. At what federal tax rate are you indifferent between the two bonds? (Round your final answer to two decimal places.)
Answer:
The multiple choices are as follows:
a.
25.40%
b.
29.03%
c.
39.25%
d.
33.98%
e.
27.38%
The correct option is C,39.25% federal tax rate
Explanation:
In determining the federal tax that one would be indifferent in choosing between the two bonds, we equate the yield of the two bonds as follows with tax element being deducted from corporate bond yield:
6.50%=10.70%*(1-t)
The t is the tax rate which is the unknown
divide both sides by 10.70%
6.50%/10.70%=1-t
0.607476636 =1-t
t=1-0.607476636
t=0.392523364 =39.25%
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
Salaries $22,000
Travel 18,000
Professional fees 13,000
Interest on a short-term note 4,000
Martha begins the business on July 1 of the current year. If Marth elects \SS 195 trearment, determine her startup expenditure deduction for the current year.
Answer:
$3,700
Explanation:
The computation of startup expenditure deduction for the current year is shown below:-
According to the section 195, the tax payer is eligible for an immediate deduction of startup expenditure or 5,000 decreased amount that exceeds $50,000
The amount left over of start up expense is eligible for amortization over 180 months starting from the month when the tax payer business started
Immediate deduction = $5,000 - Start up cost in excess of $50,000
= $5,000 - $3,000
= $2,000
The $3,000 come from
= $53,000 - $50,000
= $3,000
now,
Amortized deduction = ((Total start up cost - Immediate deduction) ÷ 180 months) × Total number of months from beginning July to ending December
= (($53,000 - $2,000) ÷ 180) × 6 months
= 283.33 × 6
= $1,700 approx
and
Start up cost = Salary expenses + Travel expenses + Professional fees
= $22,000 + $18,000 + $13,000
= $53,000
finally
Total deduction in the current year = Immediate deduction + Amortized deductions
= $2,000 + $1,700
= $3,700
A university spent $1.3 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 30%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero.
Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first.
Approximately how many hours per year will the solar panels need to operate to enable this project to break even?
Answer:
It will take 6,534.31 hours per year for the solar panels to operate to enable this project to break even
Explanation:
Discount rate = 30% = 0.3
Looking at one hour of operation in each year = 200 kW x $0.30 Kw/hr
= $60 value of electricity per year
Compound interest factor for a discount rate of 30% = 3.3158
(taken from compound interest factor table or computed using formula ∑1/(1+r)^t , where r = 30%, and t = 1 to 30)
Present value of operating the solar panels for 1 hour per year = 60 × 3.3158 = $ 198.95
For break even it would need to run = 1.3 million ÷ 198.95
= 6,534.31 hours per year
