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
Consider the following data on U.S. GDP: Year Nominal GDP GDP Deflator (Billions of dollars) (Base year 2009) 2016 18,707 105.93 1996 8,073 73.18 The growth rate of nominal GDP between 1996 and 2016 was______, and the growth rate of the GDP deflator between 1996 and 2016 was:_______.
Answer:
Data on U.S. GDP
a) The growth rate of nominal GDP between 1996 and 2016 was 131.72%, calculated as follows:
= (2016 nominal GDP - 2009 nominal GDP) / 2009 nominal GDP x 100
= (18,707 - 8,073)/ 8,073 x 100
= 131.72%
b) The growth rate of the GDP deflator between 1996 and 2016 was 44.75%, calculated as follows:
= (2016 GDP deflator - 1996 GDP deflator)/ 1996 GDP deflator x 100
= (105.93 - 73.18)/73.18 x 100
= 44.75%
Explanation:
1. Data on U.S. GDP
Year Nominal GDP GDP Deflator (Billions of dollars) (Base year 2009)
2016 18,707 105.93
1996 8,073 73.18
2. According to wikipedia.com, "the GDP deflator (implicit price deflator) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year."
3. Nominal GDP is a way of assessing an economy's economic production. It includes the current prices of goods and services. The GDP measures the monetary value of goods and services produced in an economy within a given period.
4. Growth rate refers to the percentage change of a specific variable within a specific time period. It is calculated as the difference between the current year's variable and the base year's variable, divided by the base year's variable, and then multiplied by 100.
Sarah's Soothing Diapers, Inc. and Orville's Odorless Diapers, Inc. are duopolists, who have agreed to collude. Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period. But if Sarah cheated in the previous period, Orville will punish Sarah by cheating in the current period. Orville's strategy is referred to as a
Answer:
Find the answer in the attached as the system rejected the word
Explanation:
The strategy is a strategy adopted to get back at the other firm that had committed a wrong in the first place.
This is more like reciprocating the actions of the other firm by cheating in the current period in response to the other firm that cheated in the previous period.
The origin of the strategy means that this one that I done now is to repay you for that which you did earlier.
find attached as well.
e Department of Traffic Security of a city is considering the purchase of a new drone for aerial surveillance of traffic on its most congested streets. A similar purchase 4 years ago cost $950,000. At an interest rate of 7% per year, what is the equivalent value today of the previous $950,000 expenditure?
Answer:
The equivalent value of the expenditure today is = $1,245,256.21
Explanation:
The equivalent today of the 950,000 would be the future value compounded at 7% per year.
FV = PV × (1+r)^n
FV - ?, PV - value 4 years ago, n- number of years, r- rate of return
PV - 950,000, n- 4, r-7%
FV = 950,000 ×(1.07^4)= 1,245,256.21
The equivalent value of the expenditure today is = $1,245,256.21
The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.
A. Assuming the current market price of the stock reflects its value, what rate of return do Nogro’s investors require?
B. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?
C. What is the PVGO for this company?
D. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price?
E. What did you notice about the relationship between Nogro’s dividend payout policy and its price?
F. What do you think is the reason for such relationship?
Answer:
Check below for the solution.
Explanation:
A) Earning Per Share, EPS = $2
Dividend Pay out ratio = 50%
Required rate of return = (Expected Dividend next year / Current selling price) + Growth Rate
Expected Dividend per share next year = EPS x Dividends pay-out ratio
Expected Dividend per share next year = $2 x 50% = $2 * 0.5
Expected Dividend per share next year = $1
Return on Equity, ROE = EPS / Current selling price
ROE = $2 / $10 = 0.20 = 20%
Growth Rate = ROE x (1-Dividend pay-out ratio)
Growth Rate = 0.20 x (1-0.50) = 0.10 = 10%
Required Rate of Return = (Expected Dividend next year / Current selling price) + Growth Rate
Required Rate of Return = ($1 / $10) + 0.10 = 0.20 = 20%
B) If all the earnings are paid as dividends, there won’t be any amount left to invest for growth and hence there won’t be any growth in the company. Also, since the required Rate of Return is equal to its ROE, there won’t be any changes.
C) Present Value of Growth Opportunity (PVGO) = 0
This is because with all earnings paid out as dividends, there won’t be any growth and the required rate of return will be equal to the ROE.
D) Since the ROE is equal to required rate of return, there won’t be any impact of cutting down the dividends pay-out. The residual income with lesser pay-out ratio will be invested by the company in available projects that is expected to earn 20% and ROE is also same. Since, there is no changes in the earnings figures, the stock price would remain $10.
E) There is no relationship between Nogro’s dividend payout policy and its price as no impact is experienced in its share prices due to change in its dividend policy.
F) This is because the ROE and the required rate of return are equal.
"Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be A. $2,325. B. $2,000. C. $3,425. D. $1,425."
Answer:
Explanation:
The solution to the above problem is shown in the attached picture below. It is because of the arrangement i had ti use pen and book. Thank you
The bond has a coupon rate of 6.83 percent, it makes semiannual payments, and there are 4 months to the next coupon payment. A clean price of $1,049 and the par value is $1,000. What is the invoice price
Answer:
The invoice price for the bond is $1,060.38
Explanation:
Given the following:
PV= Par value = $1,000 ,
CV= Clean Price = $1,049
Coupon Rate per annum = 6.83%
To calculate the Semiannual Coupon Rate= Coupon Rate per annum/2= 3.415%
To calculate Semiannual Coupon= Semiannual Coupon Rate*PV
= 3.415% * $1,000 = $34.15
With an interest accured over 2 months, we calculate it thus:
Accrued Interest = $34.15 * 2/6 = $11.38
To calculate Invoice price:
Invoice Price = CP + Accrued Interest
Invoice Price = $1,049.00 + $11.38
Invoice Price = $1,060.38
Kelly received a $60,000 salary during 2017. Her federal income tax withholding rate was 20%, and the Social Security base amount for 2017 was $118,500.What is the total amount that her employer should have withheld in 2017?
A. $15,390
B. $16,590
C. $15,979
D. $6,849
Answer: B. $16,590
Explanation:
The FICA tax rate which is the combined Social Security and Medicare rate for 2017 was 7.65%.
Assuming a base of $118,500 this means that you are taxed on your first $118,500 in earnings.
Kelly only made $60,000 so the tax rate will apply to her $60,000.
Adding that to the 20% that she is due to pay on Federal Income tax the total amount her employer withheld was,
= (60,000 * 20%) + (60,000 * 7.65%)
= 12,000 + 4,590
= $16,590
Option B is correct.
You have an investment that in today's dollars returns 12% of your investment in year 1, 18% in year 2, 11% in year 3, and the remainder in year 4. Rounded to two places, what is the Duration of this investment
Answer:
The duration of this investment will be 14,005 years
Explanation:
Duration of investment= Sum of ( Percentage* TIme)
=( 1 x 12%) + (2 x 18%) + (3 x 11%) + (4 x 59%)
= 12+36+33+13,924
=14,005 years
Ivanna, who has three children under age 13, worked full-time while her spouse, Sergio, was attending college for nine months during the year. Ivanna earned $28,000 and incurred $9,100 of child care expenses. Ivanna and Sergio's credit for child and dependent care expenses is?
Answer:
$1,260
Explanation:
Remember, we are dealing with a case of a married couple. Therefore, we apply the tax credit rule patterning to legally married couples.
Note that the rule is restricted to the lesser of
- real expenses,
- $6,000 (in this case they have three children which implies they have more than two qualifying children),
- the total earned income of the lowest taxpayer in the family.
Since the rule gives an exception for students. We could assumed that Sergio earned $500 for each month he was attending college. That is 9 * $500 = $4,500; the Credit = $4,500 * 28%= 1,260
Based on the period Sergio attended college and the relevant tax laws, Sergio's credit is $1,260.
When a person is going to college, they are assumed to make $500 per month. Sergio's earnings are therefore:
= 500 x 9 months
= $4,500
With a joint Adjusted Gross Income of $28,000 for the both of them, they can get a tax credit of 28% of their earnings.
As Sergio is assumed to have made $4,500, the tax credit is:
= 28% x 4,500
= $1,260
In conclusion, Sergio's credit is $1,260.
Find out more at https://brainly.com/question/18801773.
During the current year, the following manufacturing activity took place for a company's products. The beginning work in process, 70% complete, was comprised of 10,000 units. Units started into production during the year totaled 150,000 units. A total of 140,000 units were completed during the year. The ending work in process, 25% complete, was comprised of 20,000 units. What was the number of equivalent units using the FIFO method
Answer:
Equivalent units= 145,000 units
Explanation:
Giving the following information:
The beginning work in process, 70% complete, was comprised of 10,000 units. Units started into production during the year totaled 150,000 units. A total of 140,000 units were completed during the year. The ending work in process, 25% complete, was comprised of 20,000 units.
We need to use the following structure:
Beginning work in process = beginning inventory* %incompleted
Units started and completed = units completed - beginning WIP
Ending work in process completed= Ending WIP* %completed
=Number of equivalent units
Beginning work in process = 10,000*0.3= 3,000
Units started and completed = 140,000 - 3,000= 137,000
Ending work in process completed= 20,000*0.25= 5,000
=145,000 units
At the beginning of the year, Quaker Company's liabilities equal $78,000. During the year, assets increase by $60,000, and at year-end assets equal $190,000. Liabilities decrease $14,000 during the year. What are the beginning and ending amounts of equity?
Answer:
$52,000 and $126,000
Explanation:
The computation of the beginning and ending amount of equity is as follows
Particulars Assets (A) Liabilities (L) Equity (A - L)
Beginning $130,000 $78,000 $52,000
Add: increase or less decreased
Change $60,000 -$14,000
Ending $190,000 $64,000 $126,000
We simply applied the accounting equation to find out the beginning and ending amounts of equity
Congress wishes to impose regulations on the insurance industry. What test would the United State Supreme Court use to determine whether such regulations would violate the substantive due process rights of insurance companies that would be subject to the regulations? What is the likely outcome of the case?
Answer:
Three part test.
The outcome: if the three requirements are not met, then there is not point the Government should interfere.
At the end, the law will be held.
Explanation:
In some cases, the courts are allowed to protect individual, company or business organization from Government interrupting with these individuals or business organization "fundamental right" and this is the "substantive due process rights " of insurance companies as mentioned in the question above.
The test that the United State Supreme Court can use to determine whether the regulations they want to enact would violate the substantive due process rights of insurance companies is what is known as the THREE PARR TEST.
THE THREE PART TEST has its root from cases such as that of Pasgraf V Long Island Railroad co. The three part test involves three main subjects and they are;
=> foreseeability: are the policies in which insurance companies work going to affect the consumers in the future?
=> proximity: what kind of relationship do the insurance companies have with there consumers?
=> fairness: are these policies just and fair?
CONCLUSION: if the three requirements are not met, then there is not point the Government should interfere.
Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes:
• A 12% increase in the quantity of horses demanded.
• A 14% decrease in the quantity of clubs demanded.
• A 28% increase in the quantity of diamonds demanded.
Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table.
Good Income Elasticity of Demand Normal or Inferior Good
Horses
Spades
Aces
Which of the following three goods is most likely to be classified as a luxury good?
a. Aces
b. Spades
c. Horses
Answer:
Horses - 0.75 - normal
Clubs- 0.875 - inferior
Diamonds - 1.75 - normal
Diamond is a luxury good
Explanation:
Income elasticity of demand measures the responsiveness of quantity demanded to changes in income of the consumer.
Income elasticity of demand = percentage change in demand / percentage change in income
Income elascitiy for horses = 12% / 16% =
Income elasticity of demand for spades = 14% / 16% = 0.875
Income elasticity of demand for diamonds 28% / 16% = 1.75
A normal good is a whose demand increases when income increases and falls when income falls.
An inferior good is a good whose demand increases when income falls and whose demand falls when income increases.
Horses and diamonds are normal goods because the demand for the goods increases with income while clubs are inferior goods because the demand for the goods falls when income rises.
A luxury good is a good whose demand rises more than the rise in income. The demands for diamonds increase more than the increase in income, so diamonds are luxury goods.
I hope my answer helps you
Why would the Lana Limited Corporation decide to issue stocks?
Timm Inc., a calendar year, accrual basis taxpayer, is being sued by a customer who was injured when she tripped over a loose carpet in Timm's retail store. Timm's auditors required the corporation to accrue a $500,000 contingent liability and current year expense. Which of the following statements is true?
a. Timm can deduct the $500,000 accrued expense.
b. Timm can never deduct the $500,000 expense.
c. Timm can deduct the expense in the year in which the liability becomes fixed and determinable.
d. Timm can deduct the expense in the year of payment.
Answer: d. Timm can deduct the expense in the year of payment.
Explanation:
A Contingent Liability refers to a liability that a company MIGHT incur if a future event happens. It is mostly often used for law suits in case a company has to pay damages. They will thus accrue the expense in readiness to pay it off should the need ever arise.
While Timm will record it in the books, there is no need to deduct it from the income yet. Timm should wait until the year they will have to pay to deduct it. That way the expense will be correctly apportioned to it's corresponding period.
Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,000,000 on March 1, $3,300,000 on June 1, and $5,000,000 on December 31. Arlington Company borrowed $2,000,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,000,000 note payable and an 11%, 4-year, $7,500,000 note payable. 96. What are the weighted-average accumulated expenditures
Answer:
$5,258,333
Explanation:
Arlington Company weighted-average accumulated expenditures
March 1 Expenditure $3,333,333
($4,000,000 ×10/12)
Add June 1 Expenditure $1,925,000
($3,300,000 ×7/12)
Add Dec 31 Expenditure $0
($5,000,000 ×0/12)
Weighted-average accumulated expenditures $5,258,333
($3,333,333+$1,925,000)
The Federal Reserve System (the 'Fed') was created by the Federal Reserve Act, passed by Congress in 1913, and began operations in 1914. Like all central banks, the Federal Reserve is a government agency. All of the following statements are true about the Fed except:
a. the Federal Reserve is the "lender of last resort.
b. it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
c. it focuses on making a profit like commercial banks.
d. it has the power to supervise and regulate banks.
Answer:
b. it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
Explanation:
This is generally what the federal reserve does, and they try to stop both deflation and inflation
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bonds have a carrying value of $990,000. We call these bonds prior to maturity on September 30. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.
Answer and Explanation:
The journal entry is shown below;
Bond payable $1,000,000
Loss on retirement of bond $20,000
To Discount on bond $10,000
To Cash $1,010,000
(Being the loss on retirement of bond is recorded)
For recording this we debited the bond payable and loss as it decrease the current liabilities and it increased the losses at the same time it decreased the discount and decreased the cash so the respective accounts are credited
Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the:_________
a. revenue effect plus redistribution effect.
b. protective effect plus revenue effect.
c. consumption effect plus redistribution effect.
d. production distortion effect plus consumption distortion effect.
e. None of the above.
Answer:
Option e. is correct
Explanation:
The Terms of Trade is equal to the average price of exports / by the average price of imports. The terms-of-trade refers to the relative price of exports in terms of imports.
Protective effect refers to the wasted resources due to production of good at a higher cost. Consumption effect refers to the loss to consumer due to higher price that leads to less consumption.
Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the protective effect plus consumption effect
There are many perfumes on the market, but Demeter, a superior brand of perfume, has memorable scents that leads to emotional ties. Which element of the marketing plan is being considered when the marketing manager decided initially to market the perfume in a limited number of very exclusive specialty stores?
Answer:
Place
Explanation:
The four P's of marketing is a number of tactics employed in a marketing plan to achieve better sales of a product. These four P's include; Price, Place, Promotion, and Product. The place factor takes note of the location where the target customers are most likely to be reached. To achieve better sales of a product, it is very important that the right location is chosen so that consumers who are interested in it can access it easily. For example, it would make no sense to sell grocery products in a boutique. That is not where the target customers are.
So, when the marketing manager of Demeter Perfumes decided to market the perfume in a limited number of very exclusive specialty stores, it is because that place is where the target market (most likely, high income earners), can be found easily.
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Net operating income $ 24,600 If the company sells 5,300 units, its net operating income should be closest to:
Answer:
Net operating income is $ 15,400.00
Explanation:
The company's operating income if it sells 5,300 units is calculated thus:
sales (5,300*$319,200/5,700) $296,800.00
variable expenses($188,100/5700*5300) ($174,900.00)
Contribution $ 121,900.00
Fixed expenses ($106,500.00)
Net operating expenses $ 15,400.00
The net operating expenses dropped when 5,300 units were sold because the higher the volume, the more the contribution towards covering fixed expenses
Answer:
Net operating income= $15,400
Explanation:
Giving the following information:
Sales (5,700 units) $319,200
Variable expenses 188,100
Contribution margin 131,100
Fixed expenses 106,500
Net operating income $ 24,600
Sales now= 5,300 units
First, we need to calculate the unitary contribution margin:
Unitary contribution margin= 131,100/5,700= $23
Contribution margin for 5,300:
Total contribution margin= 23*5,300= $121,900
Fixed costs= 106,500
Net operating income= $15,400
Which of the following are examples of hidden unemployment? Select the two correct answers below. Select all that apply: John is 15 years old and even though he wants to find summer job, he can't. Lisa cannot find the job she wants so she has stopped looking. Penny has a college degree in nursing, but currently has to work as a store clerk as it is the only available job in her small town. Rita is working in the job of her dreams.
Answer:
Lisa cannot find the job she wants so she has stopped looking. Penny has a college degree in nursing, but currently has to work as a store clerk as it is the only available job in her small town.Explanation:
Hidden Unemployment also known as Disguised Unemployment in simple terms refers to the following people; people who are not working and have given up on looking for work because they could not find any, people who have the skillset and determination to work full-time working only part time and people who are underemployed meaning that they are working a job that they are overqualified for.
Hidden Unemployment is considered hidden as it is not reflected in employment statistics.
Lisa could not find a job so she stopped looking. This is Hidden Unemployment and official figures will not even count her as unemployed because you need to be actively looking for work to be classified unemployed.
Penny is overqualified for the store clerk position she holds or rather she is qualified for a different profession. Employment statistics will however show her as employed.
During the most recent month, the following activity was recorded:_______.
a. Eleven thousand six hundred pounds of material were purchased at a cost of $2.90 per pound.
b. The company produced only 1,160 units, using 10,440 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
c. 564 hours of direct labor time were recorded at a total labor cost of $6,768.
Answer:
7000
Explanation:
Erosion can best be explained as the:
A. loss of current sales due to a new project being implemented.
B. loss of revenue due to employee theft.
C. additional income generated from the sales of a newly added product.
D. loss of revenue due to customer theft.
Answer:
A. loss of current sales due to a new project being implemented.
Explanation:
In business, erosion takes place when a new product or project competes with another product or project from the came company. This "internal" competition reduces the revenues and benefits from existing products or projects. It is basically a form of business cannibalization, where the left arm takes away from the right arm. E.g. newer smartphone models decrease the sales revenue from existing (older) models.
Total revenue is defined as a. price minus quantity sold. b. price divided by quantity sold. c. price multiplied by quantity sold. d. quantity divided by price sold. e. price plus quantity sold.
Answer:
c. price multiplied by quantity sold
Explanation:
The total revenue is the amount of money that a company earns from selling products and services. As it is the quantity that a business received from its sales, it is calculated by multiplying the price of a product for the number of units sold. According to this, the answer is that the total revenue is defined as price multiplied by quantity sold.
Economist A says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap. Government should either raise its _____________ or cut ___________________. I believe the government spending multiplier is ____________ than the tax multiplier, so I favor _____________________.
Answer:
The correct answer is:
Government should either raise its expenditures or cut taxes. I believe the government spending multiplier is greater than the tax multiplier, so I favor this policy.
Explanation:
To begin with, an "expansionary fiscal policy" represents the tool that a government has in order to give response to a recessionary context in where the economy is falling down by decreasing its production. That is why, that in this type of policy the actions that are to be taken comprehends the reduction of taxes that the public sector collects from the private sector and also to increase the public expenditures that the government has with the purpose to estimulate the demand and offer of goods.
17. A global strategy for a company would include a. Products tailored to local tastes and needs, with local sourcing. b. A standardized product available without any local responsiveness. c. Patents and copyrights that are designed to promote maximum innovation. d. All of the above.
Answer: b. A standardized product available without any local responsiveness.
Explanation:
A global strategy refers to when a company aims to expand across the globe. One of the strategies is known as Standardisation.
This is a policy where the company that hopes to expand decides that it wants to make a standard product that is the same the world over. By not making it available without local responsiveness ( differentiating it by adding local features to it), the company signals that they want their product to be the same around the world.
It is very useful to some companies such as Apple which has the iPhone around the world with no local customisation and Dominoes Pizza which aims to have their pizza taste the same the world over.
Government Spending
Consumer Expectations
Degree of Excess Capacity
Personal Income Tax Rates
Productivity
National Income Abroad
Business Taxes
Domestic Resource Availability
Prices of Imported Products
Profit Expectations on Investments
Answer the question based on the accompanying list of items related to aggregate demand or aggregate supply. A change in which factor is most likely to change both aggregate demand and aggregate supply?
Answer:
Business Taxes.
Explanation:
A change in business taxes is most likely to change both aggregate demand and aggregate supply.
Aggregate demand can be defined as the total amount of goods and services by consumers at a specific period of time and price level in an economy.
Aggregate supply can be defined as the total amount of goods and services an organization is willing to sell or provide to it's consumers at a specific price level.
When business taxes are imposed on businesses, such as manufacturing companies, these in turn affect the demand and supply framework (final goods and services).
Basically, business taxes causes shifts in demand and supply, which in turn affect the price and quantity of goods and services in an economy.
Hence, companies would either be forced to cut-down on the amount of goods and services provided, result to borrowing or downsizing their manpower. As a result of this, they won't be able to meet the demands of their consumers.
Proposal #2 would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash. It is estimated that establishing these collection centers would reduce the average collection time by 2 days.If the company currently averages $60,000 in collections per day, how many dollars will this suggested cash management system free up?If all freed up dollars would be used to pay down debt that has an interest rate of 5%, how much money could be saved each year in interest expense?Do the numbers suggest that this new system should be implemented if its total annual cost is $5200? Explain.
Answer: a. $120,000
b. $6,000
c. Yes
Explanation:
a. It is said that the collection centres would help reduce the collection time by 2 days and that every day $60,000 comes in.
If the proposal will reduce the amount of time taken to collect by 2 days then that means that the amount freed up is the amount that they would have collected in two days had it not been for the system.
That amount would be,
= $60,000 * 2
= $120,000
b. If they used this free up cash to pay off a debt that was accumulating 5% per year then the 5% will be saved.
The amount saved therefore is,
= 120,000 * 5%
= $6,000
By retiring a $120,000 that was accruing $6,000 a year, the proposal has enabled that $6,000 to be saved instead.
c. The cost of implementing this proposal is $5,200 per year and yet the savings it gives in interest is $6,000.
As the savings are higher than the cost, the number definitely suggest that the project should be implemented because it is more beneficial than it costs.
Mary offered to sell Mike several pieces of rare Chinese art at a very good price because they were duplicates in her own collection. Mike could not accept the offer at that time, but he did give Mary $500 in return for her promise to keep her offer open for three (3) weeks. Mike returned with the agreed-upon balance two weeks later to find that Mary already had sold the pieces she had offered to sell to him. Mary explained that she had been able to get a better price from another buyer. She offered to return Mike's $500 and insisted that this was all she was obligated to do. Is Mary right?
Answer: She is not.
Explanation:
It would seem as though that Mary got into a type of contract known as an Option Contract or more precisely, a Call Option Contract simply called a Call.
In this type on contract, a seller gives a buyer the right to buy a good or service at a certain price within a set period.
Mary agreed to sell the rare Chinese Art for a certain amount which Mike could not pay but she promised to give him 3 weeks to take it within which he can pay and collect the item.
Mike returned in 2 weeks which was within the range of time allowed and so she should have kept the offer open for the time she said she would.
She is wrong to believe that all she owes him is his down payment. She broke a contract.
