Answer:
Campus Stop, Inc.
Partial Income Statement
Sales revenue $323,300
Sales returns ($1,730)
Sales discounts and allowances ($2,270)
Net sales $319,300
Cost of goods sold ($172,870)
Gross profit $146,430
Gross profit margin = $146,430 / $319,300 = 45.86%
WHAT IS OPERANT CONDITIONG
Answer:
Operant conditioning is a type of associative learning process through which the strength of a behavior is modified by reinforcement or punishment. It is also a procedure that is used to bring about such learning.
Operant conditioning refers to the conditioning of behaviours and responses that are under the control of animals and human beings and are emitted voluntarily by them. The behaviour is learned, maintained or changed through its consequences called reinforcers.
Presented below is information for Marin Company.
1. Beginning-of-the-year Accounts Receivable balance was $23,100.
2. Net sales (all on account) for the year were $104,700. Marin does not offer cash discounts.
3. Collections on accounts receivable during the year were $85,400.
Marin is planning to factor some accounts receivable at the end of the year. Accounts totaling $13,900 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5%. The fair value of the recourse obligation is $1,075.
Required:
Prepare (summary) journal entries to record the items noted above.
Answer:
Debit Accounts Receivable for $104,700; and Credit Sales Revenue for $104,700.
Debit Cash for $85,400; and Credit Accounts Receivable for $85,400.
Explanation:
The (summary) journal entries to record the items noted will look as follows:
Particulars Debit ($) Credit ($)
Accounts Receivable 104,700
Sales Revenue 104,700
(To record net sales (all on account) for the year.)
Cash 85,400
Accounts Receivable 85,400
(Collections on accounts receivable during the year.)
Explain the role of secondary data in gaining customer insights
How loss on sale of sports material is entered in Income and Expenditure Account? If sports material book value is $120 but sold at $50?
Answer: $70
Explanation:
The amount of loss on sale of sports material that is entered in Income and Expenditure Account will be the difference between the sports material book value and the sales price. This will be:
= $120 - $50
= $70
Therefore, the loss on sale of sports material is $70.
Liang Company began operations in Year 1. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows.
Year 1
A. Sold $1,353,000 of merchandise (that had cost $979,100) on credit, terms n/30.
B. Wrote off $20,900 of uncollectible accounts receivable.
C. Received $669,200 cash in payment of accounts receivable.
D. In adjusting the accounts on December 31, the company estimated that 1.90% of accounts receivable would be uncollectible.
Year 2
E. Sold $1,544,700 of merchandise (that had cost $1,318,300) on credit, terms n/30.
F. Wrote off $27,000 of uncollectible accounts receivable.
G. Received $1,194,200 cash in payment of accounts receivable.
H. In adjusting the accounts on December 31, the company estimated that 1.90% of accounts receivable would be uncollectible.
Required:
Prepare journal entries to record Liang's 2016 and 2017 summarized transactions and its year-end adjustments to record bad debts expense. (The company uses the perpetual inventory system and it applies the allowance method for its accounts).
Answer:
2016
a. Dr Account receivable $1,353,000
Cr Sales revenue $1,353,000
Dr Cost of goods sold $979,100
Cr Inventory $979,100
b Dr Allowance for doubtful accounts $20,900
Cr Account receivable $20,900
c Dr Cash $669,200
Cr Account receivable $669,200
d Dr Bad debt expense $33,495
Cr Allowance for doubtful accounts $33,495
2017
e Dr Account receivable $1,544,700
Cr Sales revenue $1,544,700
Dr Cost of goods sold $1,318,300
Cr Inventory $1,318,300
f Dr Allowance for doubtful accounts $27,000
Cr Account receivable $27,000
Dr Cash $1,194,200
Cr Account receivable $1,194,200
h Dr Bad debt expense $33,147
Cr Allowance for doubtful accounts $33,147
Explanation:
Preparation of the journal entries to record Liang's 2016 and 2017 summarized transactions and its year-end adjustments to record bad debts expense
2016
a. Dr Account receivable $1,353,000
Cr Sales revenue $1,353,000
Dr Cost of goods sold $979,100
Cr Inventory $979,100
b Dr Allowance for doubtful accounts $20,900
Cr Account receivable $20,900
c Dr Cash $669,200
Cr Account receivable $669,200
d Dr Bad debt expense $33,495
Cr Allowance for doubtful accounts $33,495
($1,353,000-$669,200-$20,900=$662,900)
($662,900*1.90%+$20,900)
($12,595+$20,900=$33,495)
2017
e Dr Account receivable $1,544,700
Cr Sales revenue $1,544,700
Dr Cost of goods sold $1,318,300
Cr Inventory $1,318,300
f Dr Allowance for doubtful accounts $27,000
Cr Account receivable $27,000
Dr Cash $1,194,200
Cr Account receivable $1,194,200
h Dr Bad debt expense $33,147
Cr Allowance for doubtful accounts $33,147
($1,544,700+$662,900-$1,194,200-$27,000=$986,400)
($986,400*1.90%=$18,742)
($18,742+$27,000-$12,595=$33,147)
In wintry conditions, highway safety is improved by treating road services with substances that will provide traction and/or melt snow and ice. Sand and rock salt are two widely used substances. Recently, a combination of beet juice and rocksalt is being used in some parts of the country to treat road surfaces. Suppose you have been asked to provide a list of factors to consider for a switch from rocksalt alone to using a combination of beet juice and rocksalt. Name the major considerations you would take into account in making a decision in the following categories: cost considerations, environmental considerations, both positive and negative, and other considerations.
Answer:
There will be cost consideration, economic consideration, environmental consideration, human factors and social factors.
Explanation:
There should be most important consideration which the highway authorities should analyze is cost. The authorities should identify the additional cost which will need to be incurred in order to use the combination of beet juice and rock salt. There should be reliability considered that the road are not affected with the use of beet juice and there is no breakage on the roads. The environment is not affected with the use of these material.
Kingston Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information:
Product X Product Y
Required labor time per unit (hours) 2 3
Maximum demand (units) 6,000 8,000
Contribution margin per unit $5 $6
Contribution margin per labor hour $2.50 $2
If Kingston follows proper managerial accounting practices, which of the following production schedules should the company set?
Product A Product B
A. 0 units 8,000 units
B. 1,500 units 8,000 units
C. 6,000 units 0 units
D. 6,000 units 5,000 units
E. 6,000 units 8,000 units
A. Option A.
B. Option B.
C. Option C.
D. Option D.
E. Option E.
The following costs are relevant to the decision situation cited except:____.
a. the cost of hiring a full-time staff attorney, in a decision to establish an in-house legal department or retain the services of a prominent law firm.
b. the remodeling cost of existing office space, in a firm's decision to stay at its current location or move to a new building.
c. the long-term salary costs demanded by Joe Torrez (a superstar) and Rip Moran (an average player) in baseball contract negotiations, in a decision that determines the amounts by which ticket prices must be raised.
d. the cost to enhance an airline's Web site, in a decision to expand existing service to either Salt Lake City or Phoenix.
e. the commissions that could be earned by a salesperson, in a decision that involves salesperson compensation methods (i.e., commissions or flat monthly salaries).
Answer and Explanation:
In the case when Smith follows proper accounting practice with respect to the managerial accounting so the production schedules should the company set is
Product A Product B
D. 6,000 units 5,000 units
D. Option D
In addition to this,
The costs i.e not relevant for the decision purpose is
D. the cost i.e. incurred for increase a website of an airline in a decision to diversify inherent service to Salt Lake City or Phoenix.
On January 14, at the end of the second week of the year, the totals of Castle Company's payroll register showed that its store employees' wages amounted to $33,482 and that's warehouse wages amounted to $13,560. Withholdings consisted of federal income taxes, $5,110, employer's Social Security taxes at the rate of 6.2 percent, and employees' Social Security taxes at a rate of 6.2 percent. Both the employer's and employees' Social Security taxes are based on the first $118,500, and no employee has reached the limit. Additional withholdings were Medicare taxes at the rate of 1.45 percent on all earnings and charitable contributions withheld, $845.
Required:
a. Calculate the amount of Social Security and Medicare taxes to be withheld and write the general journal entry to record the payroll. Round answers to two decimal places.
b. Write the general journal entry to record the employer's payroll taxes assuming that the federal unemployment tax is 0.6 percent of the first $7,000, that the state unemployment tax is 5.4 percent of the same base, and that no employee has surpassed the $7,000 limit.
Answer:
a)
Dr Store wages expense 33,482
Dr Warehouse wages expense 13,560
Cr Federal income tax withholdings payable 5,110
Cr Social security taxes withheld payable 2,916.60
Cr Medicare taxes withheld payable 682.11
Cr Charitable contributions withheld payable 845
Cr Wages payable 37,488.29
b)
Dr Payroll taxes expense 6,421.23
Cr Social security taxes payable 2,916.60
Cr Medicare taxes payable 682.11
Cr SUTA taxes payable 2,540.27
Cr FUTA taxes payable 282.25
Exercise 9-11 Working Backwards from Labor Variances [LO9-5] The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below: Standard Hours Standard Rate Standard Cost Motor tune-up 2.50 $34.00 $85.00 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 54 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $ 350 F Labor spending variance $ 500 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)
Answer and Explanation:
The computation is shown below;
a. The number of actual hours spent on tune-ups is
as we know that
Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance
$500U = $350F + Labor Efficiency Variance
$500 = -$350 + Labor Efficiency Variance
Labor Efficiency Variance = $850
Now
Efficiency Variance = Standard Rate × (Actual Hours - Standard Hours )
$850 = 34 × (Actual hours - 2.5 × 54)
$850 = 34Actual Hours - $4,590
$5,440 = 34 actual hours
Actual Hour = 160 Hours
b. The actual hourly rate is
Labor Rate Variance = Actual hours × (Actual rate - Standard rate)
-350 = 160 × (Actual rate - $34)
-350 = 169 Actual rate - $5,440
$5,090 = 169 Actual rate
Actual rate = $30.12
Eagle Company used the following data to evaluate its current operating system. - sells items for $24 each - used a budgeted selling price of $24 per unit. Actual Budgeted Units sold 177,000 units 184,000 units Variable costs $1,090,000 $1,290,000 Fixed costs $804,000 $780,000 What is the static-budget variance of operating income
Answer:
$100,000 unfavorable
Explanation:
Given the above information,
Sales = Selling price per unit × unit sold
Actual sales = $24 × 177,000 units = $4,248,000
Budgeted sales = $24 × 184,000 units = $4,416,000
Operating income = Actual sales - Variable income - Fixed income
Actual operating income = $4,248,000 - $1,090,000 - $804,000 = $2,354,000
Budgeted operating income = $4,416,000 - $1,290,000 - $780,000 = $2,364,000
Therefore,
Static budget variance of operating income = Actual operating income - Budgeted operating income
= $2,354,000 - $2,364,000
= $100,000 unfavorable
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ect the degree of leverage that completes the following sentence. Thedegree of operating leverage (DOL) is the percentage change in EPS that results from a given percentage change in sales, and it equals the product of the degrees of operating and financial leverage. Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating: Praxis Corp. Three Waters Co. Axis Chemical Co. Degree of Operating Leverage (DOL) 2.0 3.0 3.0 Degree of Financial Leverage (DFL) 6.5 4.0 3.5 According to this information, which company would be considered the riskiest
Answer: Praxis Corp
Explanation:
To know the company that would be considered the riskiest, we've to calculate the degree of total leverage for each firm and this will be:
Praxis Corp:
Degree of total leverage = Degree of operating leverage × Degree of financial leverage
= 2.0 × 6.5
= 13.0
Three Waters Co.
Degree of total leverage = Degree of operating leverage × Degree of financial leverage
= 3.0 × 4.0
= 12.0
Axis Chemical Co.
Degree of total leverage = Degree of operating leverage × Degree of financial leverage
= 3.0 × 3.5
= 10.5
Based on the calculation, since the degree of total leverage for Praxis Corp is the highest, it simply means that it's the riskiest.
Bramble Corporation purchased machinery on January 1, 2022, at a cost of $300,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $35,000. The company is considering different depreciation methods that could be used for financial reporting purposes.
Required:
Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.
Answer:
Straight-line method
Year Depreciation Book value
1 $66,250 $233,750
2 $66,250 $167,500
3 $66,250 $101,250
4 $66,250 $35,000
Declining-balance method
Year Depreciation Book value
1 $150,000 $150,000
2 $75,000 $75,000
3 $37,500 $37,500
4 $2,500 $35,000
Mutual Company enters into a contract to employ Neil as an investment manager for two years. During the first year, Neil is often absent without explanation and when present fails to adequately monitor and manage Mutual’s investments.
Q1. Refer to Fact Pattern 17-A1. With respect to Mutual’s duties, Neil’s performance most likely
a. discharges Mutual from the contract.
b. has no effect on Mutual’s performance.
c. increases Mutual’s duties under the contract.
d. suspends Mutual’s duty to perform.
Q2. Refer to Fact Pattern 17-A1. Neil’s performance is most likely
a. a material breach.
b. a minor breach.
c. Mutual’s breach.
d. no breach.
Answer:
Q1 : a. discharges mutual from the contract.
Q2 : a. a material breach
Explanation:
Neil is hired by Mutual company for a two year contract. Neil has certain duties which he has to fulfill during the employment term. Neil is often absent without any proper explanation and reason. This is against the term of employment contract. When he is in the office he is not attentive and is not able to manage the mutual investments. Neil is doing a material breach since he is not fulfilling the basic requirements.
Zintendo, Inc., produces and sells a single product, the Zintendo Stitch gaming console, whose selling price is $400.00 per gaming console and whose variable costs are $224.00 per gaming console. The company's fixed costs are $5,935,750 per year. The current sales volume for the year ended 12/31/2020 is 36,300 gaming consoles.
Required:
a. Prepare a contribution margin income statement for the year ended 12/31/2020 at the current sales volume.
b. Determine the break-even point for the year.
c. What is the company's margin of safety for the year?
Answer and Explanation:
a. The preparation of the contribution margin income statement is presented below
Sales (36,300 × $400) $14,520,000
Less: variable cost (36,300 × $224) $8,131,200
Contribution margin $6,388,800
Less: fixed cost - $5,935,750
net income $453,050
b. The break even point is
In units
= Fixed cost ÷ contribution margin per unit
= $5,935,750 ÷ ($400 - $224)
= 33,726 units
In dollars
= Fixed cost ÷ contribution margin ratio
= $5,935,750 ÷ ($176 ÷ $400)
= $13,490,341
c. The margin of safety
In units
= Total sales units - break even units
= 36,300 - 33,726
= 2,574 units
In dollars
= Total sales - break even sales
= $14,520,000 - $13,490,341
= $1,029,659
Identify which economic indicator should be used to track each of the following. a. The overall size of the economy the unemployment rate real GDP nominal GDP real GDP growth b. Labor market performance inflation business confidence the unemployment rate consumer confidence c. The future trajectory of economic activity the employment cost index real GDP inflation annual growth of the S&P 500 d. Wages and benefits business confidence real GDP the employment cost index consumer confidence
Answer:
a. The overall size of the economy ⇒ real GDP
The real GDP is adjusted for inflation and so would show the overall size of the economy in more accurate terms.
b. Labor market performance ⇒ the unemployment rate
The unemployment rate is best used to show how the labor market is performing because it shows the amount of people who are employed and those who are not in a given period.
c. The future trajectory of economic activity ⇒ annual growth of the S&P 500
The S&P 500 shows the performance of 500 large companies in the U.S. Their performance can be used to anticipate the trajectory of future economic activity because they influence the economy due to their large size.
d. Wages and benefits ⇒ the employment cost
The employment cost shows the wages and benefits that have to be paid to labor.
Which of the following statements is not accurate descriptions of the business market? Mrs. Phillip, a retail buyer for Bloomingdale's, does all the shopping for her family at the same store. Wal-Mart has a contractual relationship with P&G to serve its customers efficiently. Goodyear tires deals globally with various suppliers of steel to make tires. Costco is a wholesale establishment that deals with various manufacturers.
Answer:
Mrs. Phillip, a retail buyer for Bloomingdale's, does all the shopping for her family at the same store.
Explanation:
The business market is the market where you can sell your product and services to the other businesses so it can be used as a raw material for the other business in order to manufacture the products. And, the other reason is to purchased the products and resell them.
So based on the given statements, the first option is considered as in the remaining statements there are business transactions but in this only one person i.e. retail buyer is considered
Here is a linear demand function: Q = 10 -0.5P. Find its price function by inverting the demand function. Then find its total revenue function by multiplying through by Q. The linear demand function Q = 400 -250P inverts into the price function P = 1.6 -0.004Q. Multiplying this by Q gives its total revenue function TR = 1.6Q -0.004. Evaluate the following expression.
Y = 5(2X + 3)2 -2X2
Answer:
[tex]P = 20 - 2Q[/tex]
Explanation:
[tex]Q = 10 - 0.5P[/tex]
Price function can be estimated by inverting the demand function.
[tex]Q = 10 - 0.5P \\\\0.5P = 10 - Q\\P = 10/0.5 - Q/0.5 \\P = 20 - 2Q[/tex]
This is the price function.
Total revenue function can be estimated using the given formula,
[tex]TR = P*Q \\ = (20 - 2Q) Q \\ = 20Q - 2Q^2[/tex]
The linear demand function is given by,
[tex]Q = 400 - 250P \\[/tex]
Price function is given by,
[tex]P = 1.6 - 0.004Q \\[/tex]
Total revenue function is thus given by,
[tex]TR = P*Q \\ = 1.6Q - 0.004Q^2[/tex]
[tex]Y = 5(2X+3)^2 - 2X^2 \\Y = 5(4X^2 + 9 + 12X) - 2X^2\\Y = 20X^2 + 45 + 60X - 2X^2\\Y = 18X^2 + 45 + 60X \\[/tex]
The derivative of Y with respect to x is,
[tex]dY/dX = 36X + 60\\[/tex]
Equating this equal to 0 we get,
[tex]36X + 60 = 0 \\36X = -60 \\X = -10/6 \\\\X= -1.66[/tex]
Raphael lives in Detroit and runs a business that sells boats. In an average year, he receives $793,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $430,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $15,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Raphael does not operate this boat business, he can work as a financial advisor, receive an annual salary of $50,000 with no additional monetary costs, and rent out his showroom at the $15,000 per year rate. No other costs are incurred in running this boat business.
Identify each of Manuel's costs in the following tab/e as either an implicit cost or an explicit cost of selling pianos.
a. The salary Manuel could earn if he worked as a financial advisor
b. The rental income Manuel could receive if he chose to rent out his showroom
c. The wholesale cost for the pianos that Manuel pays the manufacturer
d. The wages and utility bills that Manuel pays
Answer:
Implicit cost
The salary Manuel could earn if he worked as a financial advisor
b. The rental income Manuel could receive if he chose to rent out his showroom
explicit cost
c. The wholesale cost for the pianos that Manuel pays the manufacturer
d. The wages and utility bills that Manuel pays
Explanation:
Explicit cost includes the amount expended in running the business. They include rent , salary and cost of raw materials.
Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.
Only explicit cost is considered when calculating accounting profit while both explicit and implicit costs are considered in calculating economic profit.
Accounting profit= total revenue - explicit cost
Economic profit = accounting profit - implicit cost
If Manuel did not sell pianos, he would be working as a financial advisor, this is his next best option. Thus the salary he would have earned as a financial advisor is his explicit cost
If he did not use the showroom, he could have rented it out. Renting it out is his next best option. Thus the income from renting the showroom is his explicit cost
The wholesale cost of the pianos, wages and utility bills are monies actually expended in the course of running the business. Thus they are explicit costs
"Ayres Services acquired an asset for $80 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income $ 330 $ 350 $ 365 $ 400 Depreciation on the income statement 20 20 20 20 Depreciation on the tax return (25 ) (33 ) (15 ) (7 ) Taxable income $ 325 $ 337 $ 370 $ 413 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)"
a. The cumulative temporary book-tax difference for the depreciable asset are as follows:
December 31, 2021 = $60 million
December 31, 2022 = $40 million
December 31, 2023 = $20 million
December 31, 2024 = $0
b. The balance to be reported in the deferred tax liability account are as follows.
December 31, 2021 = $15 million
December 31, 2022 = $10 million
December 31, 2023 = $5 million
December 31, 2024 = $0
Explanation:
Note: See the attached excel file for the calculation of cumulative temporary book-tax difference for the depreciable asset and the balance to be reported in the deferred tax liability account for December 31 of years 2021, 2022, 2023 and 2024 in bold red color.
In the attached excel file, the following formula are used:
Cumulative Temporary differences at December 31 of the current year = Cumulative Temporary differences at December 31 of the previous year + (Depreciation on the tax return at December 31 of the current year - Depreciation on the income statement at December 31 of the current year)
Balance to be reported in deferred tax liability account at December 31 of the current year = Cumulative Temporary differences at December 31 of the current year * Tax rate
The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 56,000 Annual cost savings $ 16,000 Estimated salvage value $ 6,000 Life of the project 5 years Discount rate 10 % Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed investment is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Multiple Choice $34,000 $4,656 $3,726 $8,382
Answer: $8,382
Explanation:
First find the present value of the cash benefits which are the cost savings and the salvage value:
= (Cost savings * Present value interest factor of annuity, 5 years, 10%) + Salvage value / ( 1 + rate) ^ no of periods
= (16,000 * 3.7908) + 6,000 / ( 1 + 10%)⁵
= $64,378
Net Present value = Present value of benefits - Cost of investment
= 64,378 - 56,000
= $8,378
= $8,382 from options. Difference due to rounding errors.
A company's flexible budget for the range of 35,000 units to 45,000 units of production showed variable overhead costs of $3.80 per unit and fixed overhead costs of $74,000. The company incurred total overhead costs of $209,800 while operating at a volume of 40,000 units. The total controllable cost variance is:Multiple Choice$16,200 unfavorable.$10,000 favorable.$2,800 unfavorable.$2,800 favorable.$16,200 favorable.
Answer:
$16,200 favorable
Explanation:
The computation of the total controllable cost variance is shown below:
= Budgeted overhead - actual overhead
= (40,000 units × $3.80 + $74,000) - $209,800
= ($152,000 + $74,000) - $209,800
= $226,000 - $209,800
= $16,200 favorable
Hence, the total controllable cost variance is $16,200 favorable
The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $20 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 25%. The CFO has estimated next year's EBIT for three possible states of the world: $5.5 million with a 0.2 probability, $2.6 million with a 0.5 probability, and $600,000 with a 0.3 probability.
Required:
Calculate Neal's expected ROE, standard deviation, and coefficient of variation.
Answer:
Neal's expected ROE = 4.62%
Neal's standard deviation = 2.46%
Neal's coefficient of variation = 0.53
Explanation:
Note: See the attached excel file for the calculations of Neal's Expected ROE and Deviation.
From the attached excel, we can have:
Neal's expected ROE = Total expected ROE = 0.0462, or 4.62%
Neal's standard deviation = (Total Deviation)^0.5 = 0.00060736^0.5 = 0.0246, or 2.46%
Neal's coefficient of variation = Neal's standard deviation / Neal's expected ROE = 2.46% / 4.62% = 0.53
Step 1:
Enter the following entries for the month of August. A. Purchased raw materials on account: $3,100. B. Selling and Administrative expenses incurred and paid: $1,200. C. Used direct materials: $3,900. D. Used indirect materials: $300. E. Manufacturing wages incurred totaled $4,000, of which 90% was direct labor and 10% was indirect labor. F. Incurred other actual factory overhead on account: $1,300. G. Factory Overhead was allocated to Work in Process Inventory at a predetermined overhead allocation rate of 60% of Direct Labor costs incurred during August. H. The cost of product completed: $10,000. I. Sales on account: $17,500. The cost of the units sold was $9,500.
Step 2:
Adjust for over or underallocated overhead.
Once you have entered the journal entries in Step 1 above, prepare and enter the necessary adjusting entry to correct for the overallocated or underallocated Factory Overhead. This entry should be dated "August 31, 2017." For the "Description," enter "Journal Entry J."
Answer:
Step 1
Item A
Debit : Raw Materials $3,100
Credit : Accounts Payable $3,100
Item B
Debit : Selling and Administrative expenses $1,200
Credit : Cash $1,200
Item C
Debit : Work in Process - Direct Materials $3,900
Credit : Raw Materials $3,900
Item D
Debit : Work in Process -Indirect Materials $300
Credit : Raw Materials $300
Item E
Debit : Work in Process - Direct Labor $3,600
Debit : Work in Process - Indirect Labor $400
Credit : Wages Payable $4,000
Item F
Debit : Factory overheads $1,300
Credit : Accounts Payable $1,300
Item G
Debit : Work in Process - Overheads $2,160
Credit : Overheads $2,160
Item H
Debit : Finished Goods Inventory $10,000
Credit : Work in Process Inventory $10,000
Item I
Debit : Accounts Receivable $17,500
Debit : Cost of Sales $9,500
Credit : Sales Revenue $17,500
Credit : Inventory $9,500
Step 2
Date : August 31, 2017
Description : Journal Entry J
Debit : Overheads $160
Credit : Cost of Sales $160
Explanation:
For step 1
If expenses are incurred, Debit the expense and credit Cash if cash was paid or Credit Accounts Payable if there was no immediate cash payment.
Ensure all manufacturing costs incurred are accumulated in the appropriate Work in Process Account.
Remember to record the corresponding cost of sales journal following the sale of completed units.
For step 2
If Actual overheads > Applied overheads, we have overheads under-applied,
and if Applied overheads > Actual overheads, we have over-applied overheads
Hence determine amounts of Actual and Applied overheads first :
Actual overheads calculation :
Indirect materials $300
Indirect labor $400
Other overheads $1,300
Total $2,000
Applied overheads :
Applied overheads = $2,160
therefore,
Over-applied overheads = $2,160 - $2,000 = $160
The cost of sales is reduced by the amount of over-applied overheads
I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available: Standard Amount per Case Dark Chocolate Light Chocolate Standard Price per Pound Cocoa 12 lbs. 8 lbs. $7.25 Sugar 10 lbs. 14 lbs. 1.40 Standard labor time 0.50 hr. 0.60 hr. Dark Chocolate Light Chocolate Planned production 4,700 cases 11,000 cases Standard labor rate $15.50 per hr. $15.50 per hr. I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results: Dark Chocolate Light Chocolate Actual production (cases) 5,000 10,000 Actual Price per Pound Actual Pounds Purchased and Used Cocoa $7.33 140,300 Sugar 1.35 188,000 Actual Labor Rate Actual Labor Hours Used Dark chocolate $15.25 per hr. 2,360 Light chocolate 15.80 per hr. 6,120
Required:
1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
a. Direct materials price variance, direct materials quantity variance, and total variance.
b. Direct labor rate variance, direct labor time variance, and total variance.
2. The variance analyses should be based on the amounts at volumes. The budget must flex with the volume changes. If the volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the production. In this way, spending from volume changes can be separated from efficiency and price variances.
Explanation:
For DARK CHOCOLATE A. DIRECT LABOR RATE VARIANCE.= (Stadard Rate- Actual Rate) * Actual Hour DIRECT LABOR RATE VARIANCE.= (15.50-15.25) * 2360 DIRECT LABOR RATE VARIANCE.= $ 590 Favorable A. DIRECT LABOR TIME VARIANCE = ( Standard Hour - Actual Hour) * Standard Rate DIRECT LABOR TIME VARIANCE = (5000*0.50 - 2360) * 15.50 DIRECT LABOR TIME VARIANCE = ( 2500 - 2360) * 15.50 DIRECT LABOR TIME VARIANCE = $ 2170 Favorable A. DIRECT LABOR TOTAL VARIANCE= ( Standard Hour * Standard Rate - Actual Hour* Actual Rate) DIRECT LABOR TOTAL VARIANCE= ( 2500*15.50 - 2360*15.25) DIRECT LABOR TOTAL VARIANCE= $ 2760 Favorable For LIGHT CHOCOLATE A. DIRECT LABOR RATE VARIANCE.= (Stadard Rate- Actual Rate) * Actual Hour DIRECT LABOR RATE VARIANCE.= (15.50-15.80) * 6120 DIRECT LABOR RATE VARIANCE.= $ 1836 Unfavorable A. DIRECT LABOR TIME VARIANCE = ( Standard Hour - Actual Hour) * Standard Rate DIRECT LABOR TIME VARIANCE = (10000*0.60 - 6120) * 15.50 DIRECT LABOR TIME VARIANCE = ( 6000 - 6120) * 15.50 DIRECT LABOR.
Ron Santana is interested in buying the stock of First National Bank. While the bank's management expects no growth in the near future, Ron is attracted by the dividend income. Last year the bank paid a dividend of $5.65. If Ron requires a return of 14 percent on such stocks, what is the maximum price he should be willing to pay for a share of the bank's stock?
Answer:
the maximum price that willing to pay is $40.36
Explanation:
The computation of the maximum price that willing to pay is shown below:
= Annual dividend ÷ required rate of return
= $5.65 ÷ 14%
= $40.36
Hence, the maximum price that willing to pay is $40.36
we simply applied the above formula so that the correct price could come
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 10.5 percent for the next three years, with the growth rate falling off to a constant 5.4 percent thereafter. If the required return is 10.6 percent and the company just paid a dividend of $5.00, what is the current share price
Answer:
Current share price = $116.04
Explanation:
Note: See the attached file for the calculation of present values (PV) for year 1 to 3 dividends.
From the attached excel file, we have:
Previous year dividend in year 1 = Dividend just paid = $5
Total of dividends from year 1 to year 3 = $14.97289157241870
Year 3 dividend = $6.746163125
Therefore, we have:
Year 4 dividend = Year 3 dividend * (100% + Dividend growth rate in year 4) = $6.746163125 * (100% + 5.4%) = $7.11045593375
Share price at year 3 = Year 4 dividend / (Rate of return - Perpetual dividend growth rate) = $7.11045593375 / (10.6% - 5.4%) = $136.7395371875
PV of share price at year 3 = Price at year 3 / (100% + Required return)^Number of years = $136.7395371875 / (100% + 10.6%)^3 = $101.07150317234
Therefore, we have:
Current share price = Total of dividends from year 1 to year 3 + PV of share price at year 3 = $14.97289157241870 + $101.07150317234 = $116.04
Wildhorse Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 24,200 golf discs is:
Materials $ 12,342
Labor 36,542
Variable overhead 25,894
Fixed overhead 47,916
Total $122,694
Wildhorse also incurs 5% sales commission ($0.35) on each disc sold.
McGee Corporation offers Wildhorse $4.80 per disc for 4,800 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Wildhorse. If Wildhorse accepts the offer, its fixed overhead will increase from $47,916 to $53,006 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
(a) Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Reject
Order Accept
Order Net Income
Increase
(Decrease)
Revenues $ $ $
Materials
Labor
Variable overhead
Fixed overhead
Sales commissions
Net income $ $ $
(b) Should Wildhorse accept the special order?
Wildhorse should
reject/accept
the special order .
Answer:
Wildhorse Company
Incremental Analysis for the special order:
Sales Revenue (4,800 * $4.80) $23,040
Variable cost (4,800 * $3.09) 14,832
Contribution margin $8,208
Fixed overhead increase 5,090
Net Income $3,118
b) Wildhorse should accept the special order.
Explanation:
a) Data and Calculations:
Materials $ 12,342
Labor 36,542
Variable overhead 25,894
Total variable cost $74,778
Unit variable cost $3.09 ($74,778/24,200)
Fixed overhead 47,916
Total $122,694
Units produced = 24,200
Selling price per unit = $7
Additional cost:
Sales commission = $0.35 per disc
Special order for 4,800 discs at $4.80
Increase in fixed overhead $5,090 ($53,006 - $47,916)
Hazel Company allocates overhead based on direct labor hours. It allocates overhead costs of $16,200 to two different jobs as follows:
Job 1: (12 hours) = $8,100; Job 2: (12 hours) = $8,100
The production process for Job 2 was then automated. Now Job 2 requires only 3 hours of direct labor but 5 hours of mechanical processing. As a result, total overhead increases to $21,000. Select the incorrect statement from the following.
A. While the actual processing of Job 1 was not affected by automation, it received an increase of $9,900 in its overhead allocation.
B. The use of machine hours as the allocation base would significantly improve the overhead cost allocations.
C. The increased overhead costs associated with automation should be allocated to both jobs.
D. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated.
Answer:
Hazel Company
The incorrect statement is:
A. While the actual processing of Job 1 was not affected by automation, it received an increase of $9,900 in its overhead allocation.
Explanation:
Option A is the correct answer because Job 1's overhead cannot increase by $9,900. Therefore, this purported increase cannot be verified as correct. Most likely the overhead allocation of Job 1 will decrease since Job 2 has another basis for allocating overhead to it, which Job 1 does not incur. Overhead allocation using ABC system is more efficient than the traditional method of using a predetermined rate because overhead is now allocated based on consumption rather than using some arbitrary basis.
After the U.S. film Django Unchained was recut and released in China, it performed poorly, partly because Chinese filmgoers had already seen the unedited film on DVD. What disadvantage of competing globally does this situation reflect?
The situation of Django Unchained's release in China after a month tuning out to be a poor-performing one, mainly because of the fact disadvantage of global access when competing globally.
What is the significance of global competition?Global competition can be referred to or considered as a situation wherein a firm or an organization has a direct competition with the other players in the industry on a global scale. Liberalization leads to be an advantage for global competition, but not in all cases.
One of the main disadvantages that liberalization that global competition brings is the one of eased global access. This also led to failure of the film Django Unchained in China, which released a month in the country a month after its global release.
Therefore, the significance of global competition has been aforementioned.
Learn more about global competition here:
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